Key Facts About the Governor’s Proposed Budget, Part 1: Voters Boost Revenues by More Than $7 Billion in 2013-14

Last week, we published our initial analysis of Governor Jerry Brown’s proposed 2013-14 budget. To highlight some of the most important aspects of this proposal — and the context for it — today we’re launching a brief chart series, Key Facts About the Governor’s Proposed Budget. This first post looks at the impact of the new revenues approved by California’s voters this past November.

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The Governor’s proposed 2013-14 budget shows that California is poised to turn the corner on years of severe budget shortfalls. One of the biggest factors contributing to this positive trajectory is voters’ approval of two revenue measures — Propositions 30 and 39 — last November. Proposition 30 increased personal income tax rates on very-high-income Californians for seven years and raised the state’s sales tax rate by one-quarter cent for four years. Proposition 39 ended a corporate tax break that primarily benefited a relatively small number of (mostly large) multistate firms.

State finance officials project that the two measures combined will raise $7.2 billion in 2013-14 (the fiscal year that begins July 1), accounting for more than 7 percent of total General Fund tax collections. In other words, had Propositions 30 and 39 not passed, 2013-14 tax collections would fall from $97 billion to less than $90 billion.

In addition to significantly lowering revenues for 2013-14, defeat of both ballot measures would have caused revenues in the current fiscal year (2012-13) to drop by nearly $6 billion. What would have been the impact of such a large revenue decline? The 2012-13 budget agreement passed last June provides an answer: Lawmakers approved roughly $6 billion in spending reductions to be implemented on January 1 of this year if voters had rejected Proposition 30, with public schools, community colleges, and universities bearing the brunt of these “trigger” cuts. (Proposition 30’s revenues were assumed in the 2012-13 spending plan; Proposition 39’s were not.) Moreover, it’s reasonable to assume that, in the absence of other revenue options, a comparable level of reductions would have been carried over to the 2013-14 fiscal year — and perhaps beyond.

Much work remains to be done in rebuilding the foundations of a strong California economy and healthy communities in the wake of the Great Recession and years of state spending cuts. But for now, thanks to California voters, the state budget has been stabilized and provides a platform for reinvesting in education and other public systems and services that are essential to all Californians.

— Scott Graves

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