Revenues Outlined in Guv’s Tax Plan Disputed by LAO

Governor Brown is doing all he can to hype his tax initiative, which he has proposed in order to raise $7 billion annually in revenues. When he announced his budget, Brown stated he was really committed to paying back the wall of debt and eliminating the deficit, which he argues could be accomplished through the approval of his measure. Then the governor laid out the threats, noting that he would be forced to pull additional trigger cuts if the initiative does not succeed. The Administration’s new budget is a $92.6 billion spending plan and experts have called it the largest ransom note in California political history due to the consequences that have been outlined if Brown doesn’t get his way on the initiative.

However, it’s now been revealed that the LAO and the Department of Finance don’t see eye-to-eye on the amount of revenues the tax proposal will actually generate. According to the LAO’s analysis, the initiative would only raise $4.8 billion, which is $2.1 billion less than what the governor has put forth. The discrepancy in numbers is notable because it could mean deeper cuts or the need for even more revenues. In a joint letter, Legislative Analyst Marc Taylor comments, “The volatility described above makes it difficult to forecast this measure's state revenue gains from high-income taxpayers. As a result, the estimates from our two offices of this measure's annual revenue increases vary."

If the governor’s initiative does in fact take in less revenue than projected by the Administration, it could undercut his promises to CSAC. Brown recently convinced CSAC to drop its own initiative, which was a competing plan that sought to secure funding for realignment. One of the governor’s points of persuasion was that his initiative would have a broader coalition of support and raise more revenue.

On the topic of local government, the governor also made a few comments during his press conference about the release of his budget. He outlined that he wishes to expand realignment and commented, “We should be giving more discretion to cities, counties, and school districts [...] local democracy is as responsive and vigorous as state democracy.”
 
The governor was also asked about redevelopment and he reiterated previous statements made by administration officials. But he did note, “I understand concerns about economic development.” The governor went on to say he cut out redevelopment because the state is short of money, not because he dislikes RDAs. He posited that other services simply must trump the need for redevelopment and that the money has to come from somewhere, noting the state was in a box.

If you haven’t seen it, you can read the governor’s budget here.