governor’s Budget
May Revision 2008-09
Introduction
California’s structural budget deficit persists. Slower rates of economic growth,
softening state revenues and increased costs have widened California’s budget gap.
In January, the projected deficit for 2008‑09 was $14.5 billion. Left unaddressed,
the projected gap would grow to $24.3 billion based on updated revenue projections,
revised caseload estimates and higher costs. The single largest factor contributing
to the increase in the projected budget gap is a $6.0 billion decrease in estimated
General Fund revenues. Other factors include increased program costs, higher estimates
of growth and costs of living adjustments, and erosion of savings due to delays in the
adoption of reduction proposals. (See Figure INT‑01).
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Defining the Budget Gap
(Dollars in Millions)
Figure INT-01
governor’s Budget May Revision 2008-09
Introduction
2
A productive Special Session of the Legislature made a down payment to address the
budget deficit; now, the remaining budget gap is $17.2 billion.
The Governor’s January Budget proposed difficult but necessary changes to address the
state’s structural budget deficit. Specifically, it proposed spending restraint, including an
average 10‑percent reduction in the budget of almost every program, while protecting
essential state services and the sale of authorized Economic Recovery Bonds to provide
additional revenues. It also proposed budget reform to provide necessary tools to bring
spending and revenues into alignment and to ensure the state does not spend beyond its
means in future years. See Figure INT‑02 below.
The May Revision proposes a combination of spending reductions and revenue solutions
to address the budget gap and to provide for a responsible reserve of $2 billion, and it
does so without raising taxes. It