Jerry Brown says a recession is inevitable
Gov. Jerry Brown released his revised budget proposal Thursday. What do we know?
How much money is there?
Proposed state general and special fund spending in the budget year beginning July 1 would total about $180 billion. Compared to January, the plan reflects a $2.5 billion increase in estimated revenue through June 2018 and $1.5 billion more spending.
Those estimates are lower than what Brown and lawmakers assumed when they approved the current budget last June. And it’s significantly under November revenue projections by the Legislature’s nonpartisan fiscal analyst in an “economic growth” scenario.
The plan closes an estimated $2 billion shortfall between spending and revenue by pulling back $300 million in last year’s budget to pay for state office buildings, as well as other measures.
Is there money to fix the spillways at Oroville Dam?
The revised budget does not include any specific money for spillway repairs. Oroville Dam and other parts of the sprawling State Water Project are off-budget, with water contractors obligated to cover water supply costs.
The spillways, though, also serve a major flood-control purpose – an expense the state has helped pay for on other projects. An administration official said Thursday the state hopes the federal government will come through with money to pay for the $275 million worth of work.
Would more money go to my child’s classroom?
The revision included an unexpected boost in state school funding, about $1.1 billion. It almost doubles the amount of money for the local control funding formula, from $744 million to $1.4 billion.
Will there be more spots for state-funded childcare?
Legislative Democrats and their allies were not pleased when Brown’s January plan froze a June 2016 deal to increase child-care provider rates and add 2,959 state preschool slots.
Thursday’s revision, citing “modest General Fund improvement,” restores the planned spending, which totals about $210 million.
Will tuition go up at the University of California and California State University?
California’s public university systems both recently voted to raise tuition for the first time in six years: Annual tuition is set to increase by $282, or 2.5 percent, at the University of California, and by $270, or 5 percent, at California State University this fall.
That will not change because of the budget revision. Unlike in past years, Brown does not propose “buying out” the tuition hikes with more general fund money.
But not everyone should expect their tuition costs to go up. Cal Grant-eligible students – generally those from families that make less than about $74,000 per year – will see state financial aid increase to match what UC and CSU are charging.
Wealthier Californians will likely to have dig deeper. Brown still wants to phase out the Middle Class Scholarship, a relatively new grant program for students from families making up to $150,000 annually that is particularly popular in the Assembly.
Brown also slapped UC on the wrist for a recent state audit that slammed the university’s Office of the President for spending excessively and maintaining secret reserves. The state will withhold $50 million from UC’s appropriation until it makes progress on the auditor’s recommendations and takes other steps to increase budget transparency and enroll more transfer students.
Do programs for the old, sick and disabled get more money?
Brown’s January proposal eliminated a seven-county pilot project to coordinate health and social services. That meant the demise of a cost-sharing arrangement for a half-million elderly and disabled participants in the In-Home Supportive Services program, saddling all counties with about $600 million in new costs.
Thursday’s plan includes more than $1 billion in state assistance over five years to reduce that hit, with $400 million in 2017-18. As the state help phases out, administration officials expect other revenue to help ease the county impact.
Does the budget include more money to raise Medi-Cal provider rates?
Doctors and dentists that spent millions to help pass Proposition 56 last fall won’t be happy with Thursday’s revision. It continues to direct about $1.3 billion in tobacco-tax revenue to overall Medi-Cal expenses through June 2018 instead of using the money to raise Medi-Cal provider reimbursement rates.
The Legislative Analyst’s Office has said the governor’s plan “could be problematic” and face a court challenge over allegations that it illegally uses Proposition 56 money to supplant existing Medi-Cal funding. Brown, though, said lawmakers otherwise will have to find cuts elsewhere.
How about Washington?
California has embraced the Affordable Care Act. Thursday’s plan assumes – despite efforts to the contrary by President Donald Trump and others – that the state will receive $17 billion in federal money next year to pay for the Affordable Care Act’s optional Medi-Cal expansion as well as billions more in subsidies for people who buy health insurance through Covered California.
The revised also plan tacks on $6 million and 31 positions to the state’s legal fight against various Trump initiatives.
How will it affect my state pension?
The state will pay $5.8 billion in 2017-18 to cover state employee pension obligations, an amount that will grow to an estimated $9.2 billion by 2023-24.
To take a bite out of the state’s unfunded pension liability, Thursday’s plan calls for making a $6 billion supplemental payment to CalPERs, the mammoth retirement fund. Money for the payment would be borrowed from another fund – the surplus money investment fund – overseen by Treasurer John Chiang.
Officials say the loan would end up saving the state about $11 billion. How’s that? The surplus fund earns 1 percent return while CalPERS expects a 7 percent average return, officials said.
Paying off the $6 billion loan, meanwhile, shouldn’t impact state services. About half of the debt payback – for employees whose salary and benefits come from the main general fund – would come from the voter-approved rainy-day reserve. Money to pay off the rest of the loan would come from the dozens of special funds that cover the compensation for thousands of employees at the Department of Water Resources and other state agencies.
Is he saving any money in case disaster strikes or the economy goes south?
The reserve would increase to $8.5 billion by June 2018 under the plan.