With potential recession looming, California estimates $25-billion deficit next year
California will lay off over 2,200 more workers, including more than 1,000 teachers, to plug a $25-billion budget gap during the 2014–15 state fiscal year, Gov. Jerry Brown said on Thursday.
Brown said California’s budget deficit would be reduced by $1.3 billion and the state would avoid having to sell bonds to pay for what it wants to do in public education, health care and infrastructure projects.
“I’m a true believer in the power of the people. What we’re doing is people putting their best foot forward to get this done,” he said in a speech to the Economic Development Association of San Diego.
But when asked what would happen to the public employee retirement funds, he declined to answer.
When the state’s public retirement system was reformed in 2011, the state legislature had cut $1 billion from the fund to help close the state’s long-term revenue shortfall. The state has more than $18 billion in unfunded pension liabilities, including about $8 billion owed to teachers and other public workers.
Brown said California’s debt to GDP ratio of 9.8%, well above the average of 6%, still indicates a strong credit rating.
The governor said he plans to make pension cuts to the university pension fund and the public employee retirement system, which would “save our system from what could have been a very serious threat to our credit rating.”
State Controller John Chiang said California needs to ‘take a hard look’ at how it has allocated its resources and whether other states with larger deficits are also doing the same.
“It’s not a secret that we have to do it, but I’m more convinced than ever that California is going to solve this problem eventually,” he said.
He acknowledged that some states are doing it better than they are.
“If you look at the states that are doing better, they’re all doing it in terms of their budget,” he said.
Brown noted he has budgeted $5 billion in tax increases over the first two years, and asked whether California will ask voters for approval to raise taxes. He said he was making no promises.
“We’re going to be putting a lot of