Brown submits May Revise budget

by Wayne Lusvardi | May 14, 2014 10:44 am

Yesterday, Gov. Jerry Brown submitted the May Revision of his 2014-15 budget[1] proposal with a mixture of line-item revisions. Most  were budges that only moved the budget slightly. The fiscal year begins July 1. Over his January budget proposal, Brown increased the overall General Fund operating budget by $1 billion to $107.8 billion[2].

Budging the Budget 

One of the most minuscule budges of the governor’s touted “good news” budget[3] was $450 million over three years to partly close the $70 billion underfunded portion[4] of the California State Teachers’ Retirement System. That comes to $150 million per year, which reduces the liability by an infinistesimal 0.002 percent of the pension fund shortfall. However, this would increase to $5 billion[5] per year mainly from higher contributions from teachers in future years. But such contributions first would require agreement by the powerful California Teachers Association and California Federation of Teachers unions. Brown announced another “good news” part of the budget is that Medi-Cal funding has been increased by $1.2 billion, or 4 percent of the $29.6 billion Medi-Cal line item. That increase would plug an expected 45 percent increase in recipients. The California Healthline news site reported[6]:

“California officials had estimated that one million to two million additional residents would enroll in Medi-Cal through the end of 2014, but about 1.9 million consumers already had registered for the program by the end of March and an additional 900,000 applications are pending.

“The state is responsible for paying half the cost of new Medi-Cal beneficiaries who qualified for the program before the Affordable Care Act went into effect. California Department of Health Care Services spokesperson Anthony Cava said the state still is determining how many of the new Medi-Cal beneficiaries were previously eligible.”

The number of Medi-Cal recipients now comes to about 30 percent of all Californians. That confirms the U.S. Census Bureau’s study released last November[7] that, when cost-of-living is taken in to account, California has the country’s highest poverty rate, at 23.8 percent of residents.

Rainy-day fund

Brown’s budget also includes his well advertised “rainy-day fund,” which would set aside  $1.8 billion for a contingency reserve. That comes to 1.67 percent of the General Fund budget. However, for the first 15 years of the rainy-day fund,  half of the annual revenues set aside will go to paying down what Brown calls the Wall of Debt. So that will water down the “rainy day” fund even more. In addition, any portion of capital gains taxes collected that exceed 8 percent of General Fund revenues would go towards the rainy-day fund. For fiscal year 2014-15, that would mean any capital gains revenues higher than $9.3 billion. So if Silicon Valley has a really great year and state capital gains revenues come to $10.3 billion, as projected, then an additional $1 billion would go into the rainy-day fund. But the question is whether the Legislature and the governor have the will to not spend the money. In 2004, Proposition 58[8] created the Budget Stabilization Account of 3 percent set asides per year from the General Fund and the Special Fund for Economic Uncertainties.  These two funds have been on the books for years but the willingness to save instead of spend hasn’t been there.

Drought relief

The governor proposes increasing by $142 million[9] funding authorized under Senate Bill 103[10] for emergency drought programs. SB103 is the State Budget Act of 2013.  So the $142 million is a fudged carryover of money shifted from the 2013 budget. Back in February, Brown mostly just redefined[11] $687.4 billion in pre-existing programs and federal fund transfers as a “drought aid package.” Of that, 81 percent came from prior water bond funding, 7 percent from FEMA programs, 5 percent from shifting state cap and trade air pollution taxes collected from large industries to drought relief projects, and 2 percent from prior Assembly Bills 21 and 118.

Trudging the Budget

Brown’s budget would reduce the $14.8 billion remaining of what he calls the Wall of Debt by 2017. However, that reduction does not address the entire $340 billion in debt , deferred payments, and other liabilities tallied by the Legislative Analyst[12].                    Figure INT-02: Budget Plan Would Eliminate the Wall of Debt

	2010-11	2013-14	2014-15	2017-18
Deferred payments to schools and community colleges	$10.4	$6.1	$0.0	$0.0
Economic Recovery Bonds (stimulus)	7.1	3.9	0.0	0.0
Loans from Special Funds	5.1	3.9	2.9	0.0
Unpaid costs to local governments, schools and community colleges for state mandates	4.3	6.7	6.6	0.0
Underfunding of Proposition 98	3.0	2.4	1.8	0.0
Borrowing from local governments (Proposition 1A)	1.9	0.0	0.0	0.0
Deferred Medi-Cal Costs	1.2	1.8	2.2	0.0
Deferral of state payroll costs from June to July	0.8	0.8	0.8	0.0
Deferred payments to Cal-PERS	0.5	0.4	0.4	0.0
Borrowing from transportation funds (Proposition 42).	0.4	0.2	0.1	0.0
TOTAL	$34.7	$26.2	$14.8	$0.0
Data Source: http://www.ebudget.ca.gov/FullBudgetSummary.pdf[13]

Source URL: https://calwatchdog.com/2014/05/14/brown-submits-may-revise-budget/

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