S&P Concerned About Fixing State’s Finances

Since income tax revenues are behind by $2 billion for the month of April, Standard and Poor’s is bringing up concerns. Moreover, S&P is also concerned about a ruling by a judge, which states that the lawmakers’ pay cannot be withheld by the state controller.

The budget for the month of May is billions behind because the April revenues added up to approximately $7.1 billion but the state’s estimate was $9 billion. This is according to Governor Jerry Brown while he organizes his May budget revise.

Based on income figures reported by Controller John Chiang, Brown gave a warning by last week that the revenues will be short by $1 billion or $2 billion than the estimate. Also last week, the Legislative Analyst’s Office stated that revenue is $3.5 billion behind than Brown’s fiscal year estimate.

The planned budget for the current fiscal year by Brown totaled $92.6 billion. Furthermore, he proposed that people who annually earn $250,000 or more will have higher income taxes and also add a quarter cent to the sales tax.

Standard and Poor’s is more worried about a ruling by a Sacramento judge in the previous month.

According to Judge David Brown, Chiang went beyond his authority after withholding the lawmakers’ pay because they did not pass a budget punctually. The lawmakers actually passed a budget but Brown did not permit it because it was out-of-balance.

As a result, Chiang made a decision that there had been no budget passed so he withheld the pay for the lawmakers under Proposition 25, which permits a majority vote of the Legislature to pass a budget. Moreover, it states that lawmakers would lose their pay if they do not punctually pass a budget.

The lawmakers filed a lawsuit claiming it was a problem on separation of powers and they want their pay. Judge Brown granted their claim.

Standard and Poor’s is still concerned that the lawmakers are not willing to make the restriction, increase the taxes, or both to solve the state’s finances.

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