Tuesday, April 7, 2015
The tangled budgetary web
LAO presents 4 of 5 revenue scenarios in which the net effect of the rainy day fund requirement and the Prop 98 requirement leads to a negative balance in the general fund. The governor, in his upcoming May revision, needs to avoid such a negative balance. And, as it turns out in the 4 scenarios, even the end-of-year sum of the regular reserve plus the rainy day fund is below what the governor projected in his January 2015 budget proposal for 2015-16.
(As we have noted in prior posts, the governor's January budget included a revised estimate of the current year's budget, i.e., for 2014-15, which showed falling total reserves - a deficit in common parlance but not necessarily in Sacramento-speak - for this year followed by increased total reserves for next year - a surplus. The new LAO estimates don't show what happens to total reserves during this year, but it appears at least in the 4 scenarios, there would likely be a deficit next year on a total reserves basis.)
The LAO then suggests in general terms either that for next year, there would have to be actual cuts in non-Prop 98 spending (which includes UC), or a variety of artful accounting "adjustments" that would get around the Prop 98 and rainy day fund requirements.
The LAO's analysis is at http://lao.ca.gov/reports/2015/budget/scenarios/may-revision-scenarios-040715.pdf