A new survey by the Public Policy Institute of California shows strong public support for Governor Brown’s proposals for erasing the state's $25 million budget deficit, just days after he defended them in his State of the State address. Two-thirds of those surveyed say a special election on Brown's tax and fee proposal is a good idea, and a majority say they would vote in favor of it. A very strong majority (over 70%) favor the Governor's proposal to shift tax dollars and fees to local governments to take on the responsibility of running certain programs. Two-thirds favor the Governor’s proposal to eliminate local redevelopment agencies.
Read more about the PPIC survey.
California currently faces a $25.4 billion budget shortfall (an $8.2 billion deficit for the current fiscal year plus an estimated $17.2 billion gap for 2011-12). Governor Brown proposes to bridge this shortfall by: (1) reducing state spending by $12.5 billion, (2) raising $14 billion by extending taxes, and (3) borrowing $1.9 billion from special funds and other resources. (The $3 billion dollar difference is due to a $2 billion increase in education spending due to Proposition 98 as a result of the increased revenues to the state, as well as a proposed $1 billion budget reserve for 2011-12.) Fortunately,
none of the proposed tax increases directly impact real estate!
With regard to the tax extensions, the Governor proposes submitting to the voters in a June 2011 special election a ballot proposition which – if approved – would extend four temporary tax increases adopted by the Legislature in February 2009 for an additional five years. These tax increases are: (1) a 0.25% personal income tax surcharge, (2) a reduction in the dependent exemption credit to the same level as the personal exemption credit, (3) a 0.5% vehicle license fee increase, and (4) a 1% sales tax increase.
It should be noted that the Governor’s budget is just a proposal and may not be the one eventually approved. C.A.R. will continue to monitor the ongoing budget negotiations and keep you informed.