Governor’s Revised Budget Plan Saves Money for Rainy Day; No New Taxes

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Last week, Governor Edmund G. Brown Jr. released a revised version of his state budget proposal for 2018–19. The Governor’s final budget continues to show fiscal prudence, adding more than $13 billion to the state’s rainy day fund and using projected billions in additional revenues for one-time spending.

“We’re nearing the longest economic recovery in modern history, and as Isaac Newton observed: What goes up must come down,” said Governor Brown. “This is a time to save for our future, not to make pricey promises we can’t keep. I said it before and I’ll say it again: Let’s not blow it now.”

Education

The budget proposal increases K–12 school funding by about $4,600 per student compared to 2011–12 levels. The state will fully implement the Local Control Funding Formula, an allocation that eliminates most categorical funding programs in favor of aiming supplemental funding toward poor students, English learners and children in foster care.

The May Revision maintains the 3% increase in funding for higher education proposed in January (2% for the University of California and 1% for the California State University), while continuing to keep tuition levels unchanged at both systems.

Since the end of the Great Recession, the UC system has received $1.2 billion in funding, the CSU system has received $1.6 billion, and community colleges have received $2.4 billion.

In addition, the May Revision provides each university system with $100 million in new, one-time funding for deferred maintenance.

The revised budget also refines the state’s California Online College plan and the new funding formula for community colleges.

K–12 Workforce Program

As in January, the Governor proposes $200 million to support K–12 career technical education programs that are aligned with needed skills for industry and regional workforce development efforts.

The May Revision clarifies elements of the Strong Workforce Program. It calls for technical assistance providers and workforce pathway coordinators, and additional resources to administer regional grants.

Rainy Day Reserve

The May Revision maintains the January budget commitment to fully fill the rainy day reserve fund created by voters in 2014. The administration projects the fund will have a total balance of $9.4 billion by the end of the current fiscal year, growing to $13.8 billion by the end of 2018–19.

The budget also proposes to direct an extra $3.2 billion into the state’s traditional budget reserve fund.

New Revenues

Since January, the state’s revenue projections have increased. Now California anticipates $8 billion in higher revenues through 2018–19.

The administration reports the increased revenue will enable the state to keep its existing commitments to increase funding for Medi-Cal, Cal Grants, child care, In-Home Supportive Services and foster care reform, among other programs.

The revised budget proposes allocating the majority of the remaining funds for one-time expenditures in three areas:

• Infrastructure: $2 billion to help offset huge liabilities from years of deferred maintenance for universities, courts, state facilities and flood control.

• Homelessness: $359 million to help local governments across the state bridge the gap until new funding flows from new housing bills signed by Governor Brown last year.

• Mental health services: $312 million for programs that help people with mental illness, including training for mental health professionals and early identification of mental health problems. This includes $254 million to help counties serve youth with mental illness.

In addition, to help address the state’s housing shortage, the May Revision also proposes to place the $2 billion “No Place Like Home” bond on the November ballot, which would expand housing opportunities for Californians with mental illness.

Climate Change

To date, the state has appropriated $6.5 billion in cap-and-trade auction proceeds to various programs. Earlier this year, the administration allocated $1.25 billion in cap-and-trade auction funds to continue the state’s efforts to reduce greenhouse gas emissions and combat climate change.

The May Revision proposes $96 million, which includes additional auction proceeds and other funds, to implement the Forest Carbon Plan and take other actions to protect California’s forests against the increasing threat of disastrous wildfires. This $96 million is on top of $160 million proposed in January’s cap-and-trade expenditure plan to support forest improvements and fire protection.

For details on the Governor’s May Revision, visit www.ebudget.ca.gov.

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