The state of California is known to have a massive economic potential. However, the state has been beleaguered by several budget shortfalls. These shortfalls have been experienced during the tenure of Arnold Schwarzenegger as governor. The first shortfall was experienced during the 2008/2009 budget. The budget ended up being delayed for over 2 months. Finally, the $126 billion budget was passed on 8 October 2010 after a delay of 100 days. The 2008/2008 fiscal year operated under a budget gap that totalled to $21 billion. This research paper will address the California budget crisis that occurred in the 2010-2011 fiscal year (Analyst, 2010).
California has been operating beyond its own means for several years. There are several reasons that can be attributed to the budget crisis of the 2010-2011 fiscal year. Firstly, California engaged in extensive short term borrowing in the previous years. These short term remedies eventually led to such long term problems as budget deficits. The California government used quick fixes to try and resolve the financial issues that arose from declining revenue. For the last several decades, the state of California has been wallowing in debt (Gerston and Christensen, 2011).
The government assumed that the already existing debts and any future debts incurred would be covered with future profits. However, what the government needed to do was determine how to minimize the state’s expenditure and focus on ways of increasing the state’s revenue.
According to the Legislative Analysts Office (LAO), the shortfall in the 2010/2011 budget was $18.9 billion. The principle reasons that resulted to this shortfall include; the state’s inability to arrive at solutions prescribed from the previous budget and the expiration of many budget solutions that were temporary and one-time. These had been brought forward from the previous budget. Additionally, adverse ruling by the courts also resulted in the shortfall. Consequently, there was a significant decline in the state’s revenue.
The residents of California had to bear the brunt of the shortfall in their budget. The citizens had to deal with reduced incomes and increased prices of basic products and services. Additionally, the tax rates were increased in a failed attempt to leverage the situation. As the situation worsened, the governor was compelled to declare a fiscal emergency. This was on 8th January 2010 (Calbom, 2010).
The governor called a special session of the legislator. The purpose of this session was to determine remedial measures to alleviate the situation. Several remedial measures were proposed to mitigate the shortfall in the budget. The first proposition by the governor was to reduce the number of state programs. The fewer the number of state programs the less the expenses incurred by the state. Therefore,more money would be saved and channeled to higher priorty programs.
Additionally, he proposed that state funds should be shifted so as to pay the general fund expenses. In order to solve the budget shortfall problem, the governor further proposed that the state should request for additional federal funds and increased flexibility. Increased flexibility would ensure that the state majorly dictates how the federal funds are appropriated (Sidlow, Henschen, Gerston and Christensen, 2011).
It is from such an experience that states get to learn the essence of proper budgeting policies. The adverse effects of shortfalls in the budget are detrimental to the economy of the state and the livelihood of the citizens.
References
Analyst, C. L. J. L. B. C. L. (2010). 2010-2011 Budget: Transportation. CN: Legislative Analyst’s Office.
Calbom, L. (2010). Recovery Act: California’s Use of Funds and Efforts to Ensure Accountability: Congressional Testimony. NY: DIANE Publishing Company.
Gerston, L. N., & Christensen, T. (2011). California Politics and Government: A Practical Approach.Stanford,CT: Cengage Learning.
Sidlow, E. I., Henschen, B., Gerston, L. N., & Christensen, T. (2011). Govt3, California Edition + Political Science Coursemate With Ebook Printed Access Card. Stanford,CT: Cengage Learning.