Approved by voters more than two years ago, Proposition 2 created a rainy-day reserve that can only be tapped if the governor declares a “fiscal emergency.” That hasn’t happened yet, and the fund will total an estimated $6.7 billion by June 30.
Yet the Legislature’s nonpartisan fiscal analyst reported Thursday that, based on low revenue estimates in Gov. Jerry Brown’s January budget proposal, declaring a fiscal emergency for the coming fiscal year “seems available” as an option should Brown be so inclined.
He’s not, his office said.
“These circumstances can be dealt with by controlling spending. They don’t rise to the level of budget emergency of the kind we saw during the depths of the recession,” Department of Finance spokesman H.D. Palmer said.
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Brown’s proposed budget projects a $1.6 billion shortfall through June 2018 unless lawmakers act. His plan includes $3.2 billion in actions to close the gap, leaving $1.6 billion to cover unexpected costs or roll into the following year.
In its report Thursday, the analyst’s office said a fiscal emergency declaration seems to be an option because money available for the fiscal year that begins July 1 is $2.1 billion lower than the adjusted budget for the year ending June 30. A $2 billion transfer from the Proposition 2 reserve would cover the projected shortfall and then some.
“In theory, if the governor were to call a fiscal emergency, the Legislature could appropriate about $2 billion of (rainy-day reserve) funds with a majority vote of both houses,” the analyst’s office wrote. “However, the governor has not called a fiscal emergency and, as such, the Legislature is precluded from using this option.”
The analyst’s fiscal emergency conclusion ramped up its ongoing difference with the Brown administration over revenue. In January, the analyst’s office wrote that Brown’s proposed budget probably understates California income tax collections by billions of dollars.