Jerry Brown's Legacy: A $6.1 Billion Budget Surplus in California

Tricia Pearson
January 14, 2018

Alas, Brown's comparatively disciplined approach on reserves is likely as good as the state can hope for, given the Legislature's disregard for fiscal responsibility.

"The rate of growth in these spending areas is not sustainable in the future and diverts revenue that could be invested in education, transportation and truly addressing the causes of our highest-in-the-nation poverty rate", Rob Lapsley, president of the California Business Roundtable, said after Brown released his budget proposal. "Let's not blow it now".

Brown must sign a budget by June 30, giving him and lawmakers about five months to negotiate on spending priorities. Even so, Brown, a Democrat, told lawmakers that the state needs to be prudent, warning of an eventual economic downturn as well as impacts of new federal policies.

One of the biggest goals involves filling the Rainy Day Fund with a $3.5 billion supplemental payment plus a constitutionally required transfer.

Brown also pledged to fill the state's Rainy Day Fund to its constitutional target with an infusion of $3.5 billion, bringing the fund's total to $13.5 billion.

"The amount and timing of revenues generated from the new taxes are uncertain and will depend on various factors including local regulations, and cannabis price and consumption changes in a legal environment", Brown's budget says.

Brown is using some of a projected surplus to speed up the full funding of his 2013 education reform, the Local Control Funding Formula.

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Still, government officials warned employees to re-assess their own withholding to avoid upsetting their personal tax plans. The GAO has said Wyden's request must go through its usual review process before a decision to proceed is made.

Brown's budget includes $18.7 billion for transportation programs and improvements, up from the $18.1 billion allocated previous year, a modest 3 percent increase. But half of future additional funding would be tied to enrollment size; a quarter would depend on how many students receive state financial aid based on being from low-income families; and the remaining quarter would be tied to the number of degrees and certificates granted and the share of students who completed them within three years. From this recent low, funding has grown substantially, and is projected to grow to $78.3 billion in 2018-19 - an increase of $31 billion (66 percent) in seven years. While spending has increased sharply, from $130.9 billion in 2011-12 to a proposed $190.3 billion for 2018-19, it has actually dropped fractionally in relation to personal income.

The budget proposes the creation of the first wholly online community college in California.

California would create its own online community college under Brown's plan, costing about $120 million to get it up and running. As the new formula is implemented, no district will receive less funding than now provided.

Still, both pension funds are considered seriously underfunded because they owe tens of billions of dollars more in benefits than they have on hand.

Brown's pension law required public employees hired after January 1, 2013 to contribute more money toward their retirements and capped their benefits by eliminating generous benefits the state gave to public workers during the dot-com boom. They noted that the governor's plan does not include specific funding for UC's plan to add 2,000 California undergraduates in fall 2018 and its desire to add 500 more graduate students.

Given these funding increases, the budget reflects flat tuition and expects the universities and community colleges to continue to improve their students' success. It also uses revenue from California's recently-increased tobacco tax to boost pay for home-health providers. California continues to be the national leader among states in implementing the optional expansion of ACA with almost 3.9 million Californians covered in 2018-19.

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