Fiscal cliff could undermine promise to eliminate California deficits with Prop 30 revenues

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Governor Jerry Brown's Administration is trying to put the finishing touches on California’s state budget, due to the legislature by January 10th.

But the small army of civil servants who devise that plan have to hold off for now.

They can't finish the state budget until the federal government decides what to do about the "fiscal cliff," says H.D. Palmer with the state Department of Finance. 

"If we do in fact go over the cliff and there’s not a timely solution to it, then the odds are very likely that the United States economy would go into recession for the first half of 2013," says Palmer.

The state's non-partisan Legislative Analyst projects that a recession could cost California an estimated $11 billion in tax revenues over the next couple years.  

"Which, in football parlance, would be seriously negative yardage for the state’s budget," Palmer adds. 

That's enough negative yardage to nearly wipe out the projected $12 billion in revenues California’s projected to reap from the Proposition 30 state sales and income tax increases that take effect on New Year's Day.

State lawmakers may have to make more spending cuts and take longer to pay down debt.

Automatic federal spending cuts would also cost California’s public school and universities $455 mllion next year, while California’s aerospace industry could bear the brunt of a $50 billion cut to defense spending that takes effect next year if Congress and President Obama can't agree on another way to reign in costs.


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