In mid-May, Governor Jerry Brown released his 16th and final “May Revision” to his initial January budget proposal; it included updated revenue information and relatively modest proposed changes. The single biggest change is that the governor now proposes total budget spending of $137.6 billion in the General Fund for the 2018–19 fiscal year. This amounts to an increase of nearly $6 billion from his budget proposal released in January. The spending proposal totals $199.3 billion inclusive of bonds and special funds, which are restricted for specific purposes.
As expected, Governor Brown continued to advocate fiercely for fiscal restraint despite a budget surplus that the Legislative Analyst’s Office estimates could be as much as $4.1 billion more than the governor’s projections. Governor Brown proposes to dedicate most of the higher revenues to pay one-time costs and to add to the state’s “rainy day fund” (i.e., essentially a state savings account established by voters at the urging of Governor Brown to keep funds available to soften the blow when state revenues drop due to economic downturns). Governor Brown is proposing that $3.2 billion of the surplus go into the rainy day fund, increasing the fund to nearly $14 billion.
Democratic lawmakers are eager to secure ongoing spending to support a host of programs, among them expanding health coverage for the uninsured, increasing monthly payments for recipients of CalWORKs and extending access to child care for low-income parents.
I. Highlights of the Governor’s May Revisions
| • • • $1.5 Billion in Additional Funding for Schools and Community Colleges |
| • • • • • • Proposition 98 ensures schools and community colleges receive an additional $1.3 billion. |
| • • • • • • Proposition 2 ensures $211 million is spent to pay down schools-related debt. |
| |
| • • • $1.6 Billion More for Medi-Cal |
| |
| • • • $4.1 Billion in Discretionary Spending |
• • • • • • Approximately $1 billion to increase the Special Fund for Economic Uncertainties (fund total is now $3.2
• • • • • • billion). |
| • • • • • • $3.2 Billion to New Spending |
| • • • • • • • • • $2.8 billion for mostly one-time purposes, and roughly $400 million in ongoing commitments, including: |
| • • • • • • • • • • • • $1 billion on infrastructure |
| • • • • • • • • • • • • • • • To help cover deferred maintenance, flood control projects and state office building needs. |
| • • • • • • • • • • • • $389 million on mental health |
• • • • • • • • • • • • • • • To include county mental health services funding for children, support services for the homeless
• • • • • • • • • • • • • • • with mental illnesses and support for graduate medical education for psychiatric programs
• • • • • • • • • • • • • • • at the University of California. |
| • • • • • • • • • • • • $309 million to address homelessness |
| • • • • • • • • • • • • • • • To include housing support and one-time emergency homeless aid block grants. |
| • • • • • • • • • • • • $232 million to criminal justice |
• • • • • • • • • • • • • • • To provide increased compensation for correctional officers and parole agents, and increased
• • • • • • • • • • • • • • • training for state correctional staff. |
| • • • • • • • • • • • • $93 million for wildfire response. |
| • • • • • • • • • • • • $110 million for parks. |
| • • • • • • • • • • • • $60 million to cover expansion of the Earned Income Tax Credit. |
II. Health and Human Services
The May Revision boosted California’s Health and Human Services Agency budget amount to $158.7 billion (General Fund total $38.9 billion; combined total $119.8 billion for other funds), an increase of $1.5 billion compared with the January budget proposal.
Detailed analysis of the Health and Human Services budget is available at: http://www.ebudget.ca.gov/2018-19/pdf/Revised/BudgetSummary/HealthandHumanServices.pdf
III. Reaction of Legislative Leadership
Senate Pro Tem Toni Atkins: “California’s economy is growing, and revenue projections are strong, but we cannot afford complacency or carelessness. Too many families have been left out of our resurgence, and recent history reminds us that we need to be prepared for a sudden downturn. The governor’s updated proposal provides a strong starting point. Senate Democrats support the administration’s proposals to fill the rainy day fund, expand the Earned Income Tax Credit, and invest in infrastructure, mental health and homelessness programs. We’re also pleased that our investments in education will continue to increase this budget year. We have a solid framework in place to build for the future. But we also have to lift up the families that are struggling now.”
Speaker Anthony Rendon: “Governor Brown’s May Revision shows that the state budget is stronger now than it has ever been, with record reserves and a growing economy that is now the fifth largest in the world. Under the governor’s plan, next year’s budget reserves would be larger than the entire general fund budget in 34 other states. As we finalize the budget, the Assembly will prioritize investments that expand access and improve affordability in our healthcare system, and that help cities and counties address the growing homelessness crisis. The budget also must address the needs of CSU and UC students, faculty and staff. They have made the case for funding to stabilize tuition rates, address rising costs and enroll more California students. We have heard them. We look forward to working with the governor and the Senate in passing another balanced, on-time budget by June 15.”
Senate Republican Leader Patricia Bates: “While it is clear that the state cannot afford to go on a spending spree, I do hope that the final budget the governor signs this year will fund priorities such as expanding efforts on infrastructure and homelessness. There must be a focus on addressing our growing public safety crisis. We should eliminate the rape kit testing backlog and increase efforts by the state Department of Justice to remove guns from dangerous individuals.”
Assembly Republican Leader Brian Dahle: “With the multibillion-dollar surplus, our state should focus on investing rather than spending. That means paying down state debts, building our rainy day reserves and preparing our state’s infrastructure for the future. Obviously, I’d like to see taxpayers get that money back, but once the government gets ahold of your money, it’s impossible to get them to let go.”
IV. Legislative Conference Committee Reconciliation
The respective leaders of the Assembly and Senate released their selections for Budget Conference Committee members late last week. The ten-member bicameral Conference Committee will be tasked with reconciling their respective spending plans and submitting a proposal to Governor Brown by the midnight June 15 constitutional deadline. Additional closed-door negotiations among leadership and the governor’s office will also be taking place.
The Senate and Assembly both predict higher tax revenues than the more conservative figures used by Governor Brown to calculate his budget. The Senate and Assembly proposals are working from higher projected revenue estimates than Governor Brown is, and have built in approximately $2.7 billion more in tax receipts than the governor has.
The Assembly and Senate have significant differences among themselves and with Governor Brown going into the Conference Committee:
| • • • Assembly Democrats want $1 billion more in spending than do their Senate colleagues. |
| • • • Legislative Democrats want more money allocated to help address: |
| • • • • • • Homelessness |
| • • • • • • Healthcare and other social services programs. |
| • • • • • • Welfare cash grant increases for the aged, blind and disabled. |
| • • • • • • Subsidized child care for the working poor. |
| • • • • • • Increased funding for community colleges and universities. |
V. Next Steps
The governor and legislative Democratic leaders will negotiate a final budget with input from the Conference Committee. By June 15, we expect the Legislature to send Governor Brown a 2018–19 spending plan with essentially all funding decisions agreed to. The governor will sign the budget—his 16th and final budget—before the 2018–19 fiscal year begins on July 1, 2018. Once signed, the new spending plan will take effect on July 1, 2018.