Brown Warns Of Additional Shortfall At State Budget Forum

SACRAMENTO (CBS 5 / KCBS / AP) – Gov.-elect Jerry Brown projected a budget shortfall of $28.1 billion at a budget forum Wednesday, higher than earlier estimates of $25.4 billion.

Brown convened a budget forum with state lawmakers and local government officials to “try to get on the same page” about the state’s fiscal problem. He said he doesn’t expect to reach any agreements unless leaders of the diverse state understand the problem.

The dialogue was one he pledged during his campaign and marks a different approach from Gov. Arnold Schwarzenegger after he was elected in 2003.

The nonpartisan Legislative Analyst’s Office has projected a $25.4 billion shortfall through June 2012. Brown released figures that show the state stands to lose another $2.7 billion from potential changes to the federal estate tax.

KCBS’ Doug Sovern Reports:

Earlier, Brown announced he would retain Ana Matosantos as the director of the Department of Finance.

During Wednesday’s forum, a couple hundred elected officials and reporters listened to a lengthy lecture on the state’s budget woes. Brown acted as the forum’s moderator and introduced various officials’ Power Point presentations.

Brown said there would have to be several painful and difficult cuts to balance the state’s books and that his goal is to get everyone on the same page in order to debate solutions in what he called a, “sensible and intelligent way.”

The state’s Democratic leadership said they believe the state doesn’t spend too much, but that it doesn’t bring in enough revenue. Republicans didn’t agree, but are on the same page when it comes to the need to create more jobs to reduce unemployment.

Brown said the recession is ending and that we’re at the, “bottom of the ascendancy of a very slow recovery.”

A second forum focused on education was scheduled for Tuesday in Los Angeles.

Wednesday’s dialogue is the opening act of fulfilling a promise he made during the gubernatorial campaign to educate Californians about the scope of the budget dilemma. The state is not taking in enough tax revenue to cover its spending commitments to schools, colleges, parks, and health care and social service programs.

At the same time, voters have rejected tax increases and approved ballot initiatives that have limited the tools available to lawmakers, including prohibiting them from borrowing money from local governments.

Brown’s series of public forums marks a different approach from Gov. Arnold Schwarzenegger after he was elected during the 2003 recall election. Shortly after, Schwarzenegger asked voters to allow the state to borrow billions of dollars to close a shortfall then estimated at roughly $16 billion and reduced the vehicle license fee, costing the state an estimated $6 billion a year in revenue.

Budget analysts speaking during Brown’s forum said California will be even more strapped for cash next year. Temporary increases in the sales and income taxes and the vehicle license fee will end this year, leaving a hole of $8.3 billion. Federal stimulus money that the state had relied on to shore up education and other programs also will run out.

Panelists tried to impress on the audience the magnitude of the problem. In comparing the latest recession to three earlier downturns, Legislative Analyst Mac Taylor noted that job loss was much more dramatic than before.

California’s unemployment rate is 12.4 percent and has been at or near that level since August 2009.

As a result, Taylor projected it will take eight years for employment to recover to the same level it was when the recession began three years ago.

“If we all pull together, if we call give a bit, maybe a lot sometimes, I think we can pull it off,” Brown said.

Brown was governor from 1975 to 1983 before the era of term limits. He returns to a much different Capitol, where partisanship has prevented the state from addressing the structural imbalance between revenues and spending. Lawmakers noted that he has the unenviable task of navigating a deep ideological divide to build consensus on the budget.

He also takes over as voters impose new budget rules, including lowering the legislative vote from two-thirds to simple majority for passing the annual spending plan.

Democrats wasted no time suggesting that tax increases have to be part of the solution. Assembly Speaker John Perez, D-Los Angeles, resurrected a proposal for an oil severance tax that could generate over $1 billion for the state.

Assembly Minority Leader Connie Conway said after the forum that taxes were not on the table for her. She and Republican Sen. Sam Blakeslee of San Luis Obispo asked Brown to focus on attracting jobs back to the state and to reduce regulation as a way to help businesses grow.

Freshman Assemblyman Tim Donnelly, a conservative Republican from Twin Peaks, asked Brown whether he would deport illegal immigrants who are currently in the state’s prison systems so the state can save money while relieve some of the overcrowding in prisons.

Brown said Schwarzenegger proposed such a move and it wasn’t well-received. However, he said it raised some questions about the federal government’s role.

“I would say generally, that everything should be on the table and everyone should be at the table to talk about it,” Brown said.

San Francisco Democratic Sen. Mark Leno, chair of the Senate Budget Committee, said an obvious move would be to extend temporary taxes, which are set to expire next year. He said such a proposal, if approved by two-thirds of the Legislature, should be put before the voters this spring to maximize revenues.

“It would be the potential end of the state of California if we think we’re going to make $30 billion in honest cuts,” Leno said. “The state can’t sustain it. We wouldn’t have an educational system, we wouldn’t have a public safety system, we wouldn’t have a social safety net.”

While three of the four legislative leaders joined Brown on stage, Senate Minority Leader Bob Dutton, R-Rancho Cucamonga, chose to sit in the audience. He said afterward that he was not boycotting, only that he believed the forum was meant to educate local government officials.

“God gave me one mouth and two ears OK. I should be listening more than I talk,” Dutton said.

(© 2010 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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