Tuesday, May 8, 2012

The Bare Bones Era - 2012: Reality Lost in California Political Spin

State Controller John Chiang has released General Fund cash flow figures for the 2011-12 Fiscal Year through April. That leaves just two months remaining to estimate what actual cash revenue may come in during this fiscal year. So in the spirit of wishing to help the apparent helpless, let me offer the following estimates to State Officials:

This is pretty straightforward as we only have to estimate two more months.

Compared to the 2011-12 Adopted Budget, General Fund cash revenue will be between $3.1 and $7.1 billion less.

Compared to Jerry Brown's January Estimate, General Fund cash revenue in will be between $4.3 and $8.3 billion less.

In other words, the actual revenue shortage two months from now can be estimated to a range that is, itself, nearly 5% to 10% of the annual budget.

As noted in the previous post, experts are telling us to shift to a two year budget cycle. Comparing the known margin of error committed by Brown's Department of Finance, it appears that by using a two-year budget cycle instead of revenue estimates for the adopted budget being off by 6%, they'll likely be off by 11%.

Many involved in budgeting were taught to use the most conservative estimate for revenue and then budget disbursements accordingly.  They would find the April 2012 situation ... odd? Through April this fiscal year cash disbursements have exceeded cash revenue by $14.6 billion. Of course, last year at this time cash disbursements had exceeded cash revenue by $9.8 billion. Somehow they made it work by the end of the fiscal year. So it's all good, right?

Governor Brown is out selling his initiative to increase taxes on the poorest workers and the richest among us. The official title and summary indicates it would generate in 2012-13 between $4.8 billion to $6.9 billion. Looking at the April cash numbers, doesn't seem like enough money to avoid further significant cuts in the budget. But Brown has convinced many union members - teachers, nurses, state employees - that it is enough to avoid major cuts. So it's all good, right?

 Even though voters have demanded the Legislature adopt a balanced budget by June 15, we know they won't even talk much about it until after the June 5 primary election. We know what they will adopt will be balanced like last year by using "overly optimistic" projected revenues and, unlike last year, assume voter approval of Brown's proposed tax increase on the poorest workers and the richest among us.

If, by next January, that political spin hasn't worked out, the November General Election will be behind us and the next one will be nearly two years off. So if need be, we can lay off large numbers of teachers, nurses, and state employees.

No comments: