Tuesday, June 27, 2017

Governor Signs New Budget

Gov. Brown has signed the state budget for 2017-18. It apparently is virtually, if not totally, unchanged from his deal with the Democratic legislative leaders. No line-item vetoes are mentioned in the news release that announced the signing. []

There are now two reserves related to the state's General Fund that have to be considered in examining the health of the budget. The regular reserve for the current budget year shows a deficit of $2.9 billion. The rainy day reserve shows a surplus of $1.8 billion. So there is a combined deficit this year of $1.0 billion. Total reserves at the end of this year are estimated to be about 6.7% of total spending (which is not a lot). It was supposed to reach 7.7% when the current budget was signed a year ago.

For next year, the regular reserve in the General Fund increases and shows a surplus of $0.8 billion. The rainy day fund increases (shows a surplus) and has a surplus of $1.8 billion. So there is a combined surplus of $2.6 billion. The combined reserve as a percent of total spending is 8.7% by the end of the coming fiscal year. That's more than this year, but still not a lot should there be an economic downturn. The table all the way down summarizes the budget data.

As for the UC budget, there are no surprises. Below in italics is the text from the budget summary:

University of California

• General Fund Augmentations—An increase of $136.5 million ongoing, including a base augmentation of $131.2 million proposed in the Governor’s Budget and an increase of $5 million to support 500 additional graduate students in 2017‑18.

• Cost Structure Commitments—A set‑aside of $50 million General Fund from the UC base augmentation. The release of this $50 million is conditioned on certification by the Director of Finance that the UC has: 1) achieved commitments made in the agreement with the Governor related to activity‑based costing and target enrollment of transfer students, 2) adopted recommendations made by the State Auditor to the UC Board of Regents and UC Office of the President, 3) eliminated certain benefits for UC senior managers, and 4) committed to disclose additional information as part
of the annual budget process.

• Office of the President—A separate item of appropriation of $348.8 million for the Office of the President, with a corresponding reduction in UC's base funds, conditioned on the Office of the President certifying in writing to the Director of Finance that there will be no campus assessment for support of its operations in 2017‑18 and that overall campus revenues will be greater in 2017‑18 than in 2016‑17.

• One‑Time Funding—One‑time funds totaling $175.6 million, including $169 million in Proposition 2 debt funds, which will be used for unfunded retirement liabilities; $2 million General Fund for equal employment opportunity programs; $2.5 million General Fund to encourage campuses to become “hunger free campuses;” $2 million General Fund for grants to marine mammal stranding networks; and $100,000 General Fund for grants for whale disentanglement activities.

Budget Summary

$millions                     2016-17           2017-18 
Starting regular   
reserve                        $4,504            $1,622 

Revenue &
transfers                    $118,539          $125,880

Spending                     $121,421          $125,096

Ending regular
reserve                        $1,622            $2,406

 Surplus/deficit              -$2,882             +$784 
Rainy Day reserve
 Starting                     $4,874             $6,713
 Ending                       $6,713             $8,486 
 Surplus/deficit             +$1,839            +$1,773 
Combined reserves             $8,335            $10,852

Combined surplus/
deficit                      -$1,043            +$2,557

Combined reserves
as % of spending                6.7%               8.7%
Source: and
Note: We will await comments from the Legislative Analyst's Office. In July, we will have the cash statement for the current fiscal year from the state controller.

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