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Budget Update

Yesterday, Governor Brown and Democratic lawmakers agreed on a budget plan that does not include a special election on taxes, but rather relies on assumed tax revenues. After having their initial proposal vetoed by Brown, legislators have refocused to find common ground in order to close the remaining $9.8 billion deficit.

The new bill assumes the state will generate $4 billion in additional revenue for FY2011-2012 based on stronger than expected tax receipts in May and June of this year. However, if this anticipated revenue does not materialize by early 2012, automatic triggers will be set into place, implementing an additional $2.5 billion in further cuts. For instance, the UC and Cal-state system will see $150 million in further reductions, totaling $650 million each. If increased revenues are not met, this will trigger another $100 million in cuts for higher education.

Comparisons of the vetoed bill and proposed budget plan:

How it differs: assumed $4 billion in tax revenue, 1.06% sales tax increase swap redirects money to the local government for “realignment” rather than state.

What stays the same: $200 million in Amazon online tax enforcement, $300 million from increase of $12 per vehicle DMV registration fee, $2.8 billion deferral to K-12 and community colleges.

What is eliminated: $1 billion in revenue from First 5 commissions, $700 million in federal funds for Medi-Cal errors.

Both the Senate and Assembly are expected to vote this afternoon. If the budget passes and is deemed balanced by the Department of Finance, legislators will be paid and the state will have a budget for the new fiscal year. Brown’s Department of Finance Director Ana Matosantos will decide in January whether revenues and the economy are strong enough to resist further cuts.

Read more from the Sacramento Bee and the Los Angeles Times.

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