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Local News

California’s Projected Budget Deficit Could Trigger Billions of Dollars in Midyear Cuts

Effects of a $3.7 billion gap in December are likely to trickle down, but so far local governments have been faring better than expected

California looks to be $3.7 billion below revenue projections in December, which could trigger billions of dollars in midyear cuts to education, detention facilities and social services if numbers don’t improve by then, according to Legislative Analyst Mac Taylor.

Gov. Jerry Brown’s biggest plan for boosting revenue never came to fruition, as Republicans blocked a tax measure from going on the ballot.

There would most likely cuts to K-12 and higher education. State community college fees would increase $10 per unit, and the University of California and California State University systems could lose $100 million, the Los Angeles Times has reported.

Taylor works with the Public Policy Institute of California and is a nonpartisan legislative analyst for the state. Even with the December cuts, he projects that California will have to budget around a $13 billion shortfall next year, according to news reports.

The news comes in the wake of first-quarter financial statements from local governments that show a less-dire situation.

Millions of dollars have been saved through a soft hiring freeze and employee salary and benefit concessions for Santa Barbara County, and it actually expects to end the year with a positive variance from the budget. A few departments are expected to have a deficit, though, mainly mental health services and workers compensation insurance.

However, Brown’s realignment plan, which pushes more responsibility, is expected to have a significant financial impact, although it’s unknown whether it will be positive or negative. There’s concern about whether the state will provide enough funding for the added responsibility, which includes state inmates being released to county jails and probation programs.

The city of Santa Barbara’s quarterly financial report showed sales and transient occupancy tax revenues above estimates. In fact, the TOT tax, or bed tax, is expected to surpass the budgeted amount by 6 percent by the end of the fiscal year in June.

Some costs come early in the year, such as public safety overtime for Fourth of July and Fiesta celebrations, so the city is $1.6 million over budget as of Sept. 30, according to staff.

The general fund, which includes the bulk of expenses, has received $20.5 million of the expected $101.3 million for the year and spent $27.47 million. Last year, the city spent $26.796 million by Sept. 30.

The city of Goleta also expects higher-than-expected sales tax and bed tax revenues. Expenses are within allocated budgets, and the City Council voted to add a patrol position back to its contract with the Santa Barbara County Sheriff’s Department because of savings from labor group concessions. Staff members also recommended letting employees cash out up to 20 hours of vacation leave, since it would reduce the compensated leave liability of the city.

The Santa Barbara Unified School District hasn’t yet presented a first-quarter report, but departing superintendent of business operations Eric Smith helped the district with its unification, securing $6 million in additional annual revenue. His team also advocated a conservative budget, but expects flat funding going into the next school year.

“The budget is bleak, but we have a plan,” district Superintendent David Cash said in a statement. “While we hope we don’t have to implement the plan, which includes furlough days, we remain hopeful that the Legislature will decide that children in California matter and we will not be held hostage. We will not have full understanding of the entire budget for this year, 2011-2012, and 2012-2013 until mid-January 2012.”

Even if the state does pull the “trigger” and cut funding further, the district has negotiated up to 10 furlough days with the Santa Barbara Teachers Association and the California School Employees Association, which would save the district millions of dollars.

Both the UC and CSU systems would be hit with additional cuts if state revenue numbers don’t improve by December.

The CSU system has had tuition fee increases every year for almost the past decade. From 2006 to the current year, full-time resident undergraduate tuition has increased to $5,472 from $2,520 for one academic year. The CSU Board of Trustees voted recently to raise that another $498, or 9 percent, for next fall, which will bring the cost up to $5,970. Students protested the meeting in Long Beach and, when they stormed the doors to try and get into the meeting, many were tear gassed by police, the Los Angeles Times reported.

Those fees don’t include campus-based mandatory fees, out-of-state fees or graduate student fees, which can account for thousands of dollars more per year. Cal Poly, San Luis Obispo has an additional $2,439 in fees, making this year’s fees equal $7,911.

The UC Regents have often increased tuition prices over the years as well, but President Mark Yudof has said that fees won’t increase during the current school year even if the state budget “trigger” is pulled and the system loses $100 million in December, the Sacramento Bee reported. However, the Regents approved 8 percent and 9.6 percent increases that took effect this fall, boosting tuition up by almost $2,000 more than it was last fall.

Noozhawk staff writer Giana Magnoli can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

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