California Faces Possible Mid-Year Budget Cuts

SACRAMENTO, Calif. – The state of California’s fiscal situation remains in the doldrums, with the state controller’s office reporting that October revenues fell well below expectations, perhaps further necessitating the need for mid-year cuts, officials said.

Controller John Chiang (D) said California’s cash balance, receipts and disbursements in October, showing revenues came in $810.5 million below projections outlined in the Fiscal Year 2011-2012 state budget.

“October’s poor revenues capped a very disappointing first four months of the fiscal year,” Chiang said. “Unless revenues and expenditures begin to track with projections, the State will face increasing cash pressure in the months ahead.”

The latest numbers brings California’s total revenue shortfall this fiscal year to $1.5 billion. Meanwhile, expenditures for the year are over projections by $1.7 billion, the financial statement indicates.

The state’s lackluster fiscal situation raises the possibility of cuts particularly to health and human services programs, including Medi-Cal, the state’s Medicaid program for the poor.

That is because the $86 billion FY 2011-2012 budget passed by the Democratic-led state Legislature and signed by Gov. Jerry Brown (D) in June relied on an assumption that state coffers would realize $4 billion in new revenue over what previously was expected through June 2012.

For the fiscal year, if state revenues are found to be at least $1 billion short of expectations automatic spending cuts would be triggered, becoming effective Jan. 1, 2012.

Whether the cuts will be triggered will be determined by upcoming revenue projections from the nonpartisan Legislative Analyst’s Office (LAO) and the governor’s Department of Finance.

For the fiscal year that ended June 30, California had a cash deficit of $8.2 billion. The combined current year cash deficit stands at $20.3 billion, the controller’s office said, noting that those deficits are being covered with $14.9 billion of internal borrowing and $5.4 billion of external borrowing.

The controller’s October Statement of Cash Receipts and Disbursements is available at this link.