Capitol Alert: Analyst puts California's deficit at nearly $13 billion

California would impose $2 billion in mid-year "trigger" cuts next month, mostly through K-12 school reductions, under a new revenue forecast issued this morning by the nonpartisan Legislative Analyst's Office. The LAO also said the deficit for the year beginning July 1, 2012 would be nearly $13 billion.

The analyst's report is not the sole determinant of whether the state will impose those cuts, but it is one of two tools the Department of Finance must rely upon before deciding whether to slash spending. The finance department will issue its own forecast in December.

The Analyst said the state will not receive $3.7 billion of the $4 billion revenue bump that Gov. Jerry Brown and lawmakers optimistically relied upon to help close the budget in June. The enacted budget projected the state would receive $88.5 billion in revenues and transfers; the analyst says it will only get $84.8 billion.

The Department of Finance said this week that California was running $1.3 billion behind revenue projections for the first four months of the fiscal year, from July to October. State Controller John Chiang pegged the revenue shortfall at $1.5 billion.

If Finance issues a projection next month similar to the analyst's, the state must cut K-12 funding by $1.4 billion. It must also slash University of California and California State University systems by $100 million each. The state's developmental services program would lose $110 million, while In-Home Supportive Services would see a $100 million reduction.

The Legislature and governor could still intervene before those cuts take place in January and February. The K-12 cut would be the most controversial, given the priority voters place on public education, the influence of K-12 advocates and the fact that 143 of the state's 1,032 school districts are in financial jeopardy.

Brown and lawmakers said in June that K-12 districts should absorb a mid-year cut by shortening the school year in the spring. Based on their initial math, a $1.1 billion trigger reduction in classroom funding would amount to roughly five days of school.

As part of the budget deal, the California Teachers Association won job protections that ensure districts do not lay off teachers, as well as an assurance that any school-year reduction be negotiated with local unions. That prompted school boards and administrators to lobby the governor for more flexibility in how they absorb mid-year cuts.

"There was a strong assertion when this budget was wrapped together that we would probably never see the triggers pulled and, as a consequence, districts were not really given the kind of tools they needed to prepare for this kind of reduction," said Kevin Gordon, a lobbyist for school districts. "I fully expect the governor and legislative leaders to reshuffle the deck on this trigger mechanism so it doesn't hit schools so hard."

The analyst says that impacts would vary across districts. While some have enough reserves to survive the cut, others may rely on cuts to non-classroom staff or even seek an emergency state loan.