Alert December 22, 2010

California Governor-Elect Warns of Budgetary Austerity

California Governor-elect Jerry Brown is expected to deliver his proposed budget by January 10, 2011. To mitigate the anticipated emotional reaction, Brown has been making the rounds, describing to key constituents the severity of California’s economic crisis and the cuts that may be necessary for the state to survive.

At a recent speech in Los Angeles to an audience of educators, Brown warned “if you’re in a car, fasten your seat belt … it’s going to be a rough ride, but we’ll get through it.”

The California Legislative Analyst’s Office (“LAO”) recently projected a general fund budget deficit of $28 billion over the next 18 months. According to the LAO, the upcoming deficit is a direct consequence of the short-term solutions used to balance the last three state budgets, such as short-term borrowing.

Due to the passage of Proposition 25 in November 2010, the new budget will require only a simple majority vote to pass the Legislature. However, a two-thirds vote is still required for many legislative actions, including any tax increases or to place a proposition on the ballot.