Governor's Budget Revision Continues To Target Redevelopment For Elimination

On May 16, 2011, Governor Brown issued his May Revise to the State's budget. The revision reflects an assumed $6.6B in projected increased State revenues. The Governor rejected an "all-cuts" solution for the remaining $9.6B projected deficit and moved away from his campaign pledge of "no new taxes without voter approval". The Governor now proposes that the Legislature approve his Budget with tax increase extensions with a state-wide voter ratification later in the year. This maneuver would allow the tax extensions to remain in effect beyond their July 1, 2011 expiration date. Here are some highlights:

• Five-year extension of the current 6% state sales tax and current 1.15% vehicle licensing fee
• Delay of reinstatement of the one-quarter percent surcharge on income until 2012
• Elimination of 5,500 state jobs and 43 boards and commissions
• Closure of 70 state parks
• Increased General Fund spending by over $4B
• Limiting, rather than eliminating, enterprise tax zone credits for employers (credit limited to new hires)
• Elimination of Redevelopment Agencies' funding beyond existing debt service payments and other approved expenses

The League of California Cities and the California Redevelopment Association continue to battle on behalf of redevelopment and have encouraged legislators to instead adopt SB 286 (a proposed "comprehensive redevelopment reform package"), and SB 450 which proposes reforms to redevelopment agency affordable housing programs. The League and the CRA have also proposed voluntary contributions by Redevelopment Agencies to schools in exchange for extensions of their life spans.

Republicans in the Legislature last week proposed a plan without tax-increase extensions, and some argue that with the new projected revenues there is less reason to rely on increased taxes to close the deficit gap. On June 10, 2011, however, the State's redistricting map will be released, which may "free" some existing members of the Legislature to vote for tax-increase extensions.

The May Revision proposes using a small amount of the increased projected revenues to pay down what the Governor describes as the State's "wall of debt".

The Governor is asking the Legislature to act by June 1, 2011. Legislators are not paid if they do not approve a budget by June 15, 2011.