Outgoing Governor Schwarzenegger has called a Special Session on the "new" budget deficit for 12/6/10. As expected the budget delayed for more then 100 days did not even make it to the new year before the wheels publicly came off.  It is estimated that the State has a budget deficit of about $6.8 Billion in the current fiscal year ending 6/30/11 and an expected deficit for 2010-11 of about $18 billion. The deficit grows since some of the temporary tax increases approved two years ago will expire in 2011. Governor-Elect Brown has concurred with the calling for a Special Session. This Special Session will begin when the Legislature meets for its initial session that normally includes just the swearing in of newly elected members and organization issues.

 

It remains to be seen how much is accomplished in December since the Assembly and Senator Dem. Leadership can wait to negotiate with Gov-Elect Brown in January rather than feel obligated to strike a deal with Schwarzenegger. To-date Brown has sounded more Republican than Democrat on the fiscal situation saying we need to live within our means and any new taxes will need voter approval.

 

As a result of the passage of Prop. 25 the budget can be adopted by a majority vote rather than the prior 2/3rds requirement. The passage of Prop. 26 requiring a 2/3rds vote on taxes disguised as fees is all that more important. We will have to remain vigilant on any effort to attack optional benefits under Medi-Cal or any attempt to cap the benefits at ceratin dollar amounts per type of DME/supply per beneficiary.

 

As usual, it's difficult to predict the timing of what will happen and when. Pressure to make mid-year adjustments may still be dictated by a cash crunch, but since the budget year clock is ticking if you don't do something relatively quickly the ability to save money in the current fiscal year evaporates.

 

We will keep you informed of any developments.