Introduction
Achieving Balance in 2007-08 and 2008-09

If the Budget Stabilization Act had been in effect since 1998, the state would not have developed a structural budget deficit. It is possible, even likely, that there would be some deficit in years such as this one. However, in that event the Act would have triggered automatic reductions in spending early in the year. Because such mid-year reductions do not usually achieve a full year's worth of savings, under the provisions of the Act, they would remain in effect into the subsequent year, or until superseded by a new budget or other statutory change enacted by the Legislature.

The Budget proposes a very similar approach to achieving balance this year and next. Specifically, the Budget proposes numerous statutory changes to reduce spending to take effect by March 1, 2008. In order to achieve this ambitious timeline and to avoid a current-year cash shortfall, the Governor has declared a fiscal emergency and called a special session pursuant to Proposition 58 (see textbox for background).


PROPOSITION 58
 Proposition 58 was approved by the voters in 2004. It requires the Legislature to enact a balanced budget and it authorizes the Governor to declare a fiscal emergency and call a special session of the Legislature to address it when a significant budget shortfall looms. The Governor declared such an emergency this year. The measures he is proposing to address the emergency are described below. Under the Proposition, the Legislature has 45 days to act on these measures or they are prevented from acting on other bills or adjourning.

In addition to the ten-percent reductions, the budget also proposes to sell the $3.3 billion of authorized Economic Recovery Bonds (ERB's) and to suspend the pre-payment of ERBs scheduled for 2008-09. Figure INT-03 summarizes the major changes proposed to balance the budget.
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CHAPTER HIGHLIGHTS for Introduction Back to Top

 Origin of the Structural Deficit
 The Fiscal Crisis of 2003-04 and the Workout Plan of 2004-05
 Reforming the Budget Process, the Budget Stabilization Act
 The State Faces a $14.5 Billion Deficit in 2008-09
image of black pointing arrowAchieving Balance in 2007-08 and 2008-09

BUDGET OVERVIEW Back to Top
Budget-Balancing Reductions
In order to close the $14.5 billion budget gap, the proposed Governor's Budget includes 10-percent across-the-board reductions to all General Fund departments and programs, Boards, Commissions, and elected offices-including the legislative and judicial branches-except where such a reduction is in conflict with the state constitution or impractical. This statewide across-the-board reduction approach touches nearly every General Fund program in every department within each branch of state government. While these reductions present numerous challenges to implement, this across-the-board reduction approach is designed to protect essential services by spreading reductions as evenly as possible so that no single program is singled out for severe reductions. Reductions to General Fund budgets not under the control of the Administration are proposed as unallocated reductions. The unallocated General Fund reductions apply to the judicial and legislative branches of government and other entities such as the University of California and some very small executive branch entities.

PRINTABLE BUDGET DOCUMENTS Back to Top
Budget Summary - Introduction (pdf * - 231K) -
Provides this entire Introduction Chapter in pdf format.