Thursday, May 9, 2019

The May Revise

The governor’s new budget was announced this morning. Below is a table summarizing topline data for the General Fund (GF), using the governor’s (Department of Finance’s) estimates.

Despite what the governor said about a “surplus,” the budget shows a net drop in total reserves of about $1 billion, a deficit. It has to be said that while $1 billion seems like a lot of money, budget projections can easily be moved up or down by more than that amount by economic perturbations. Some would argue that paying down debt is equivalent to putting more money into reserves. (It appears that the budgeteers have gotten rid of the “Safety Net Reserve” which was created for technical reasons. It has probably been folded into the Rainy Day Fund.) 

The usual reminder: A budget proposal is not a budget. The legislature enacts the budget. The governor can sign or veto it or apply line-item vetoes. When all that happens, we have an enacted budget.

                   LAO    January   May Revise
$Million         11/18   Governor     Governor
& Transfers   $145,065   $142,618     $143,839
Expenditures  $139,373   $144,191     $147,033
Deficit        +$5,692    -$1,573      -$3,194
Regular GF
 7/1/19        $10,281     $5,240       $6,224
 6/30/20       $15,973     $3,667       $3,030
 Deficit       +$5,692    -$1,573      -$3,194
Safety Net
 7/1/19           $200       $900            -
 6/30/20          $200       $900            -
 Deficit            $0         $0            -
Rainy Day
Fund (BSA)
 7/1/19        $13,768    $13,535      $14,358
 6/30/20       $14,513    $15,302      $16,515
 Deficit         +$745    +$1,767      +$2,157
Total Reserve
 Deficit       +$6,437      +$194      -$1,037

  7/1/19       $24,249    $19,675      $20,582
  6/30/20      $30,686    $19,869      $19,545
  Deficit      +$6,437      +$194      -$1,037*
Note 1: The LAO's November 2018 estimate is essentially a workload budget, i.e., a budget that just continues existing programs and taxes.
*Note 2: $389 million is to be deposited to a special reserve for K-12. If that reserve is viewed as connected to the General Fund, the deficit would be reduced to -$648 million.

The budget contains additional one-time funding of about $32 million added for UC:

• Retirement Program—The May Revision includes $25 million one-time General Fund to support the UC Retirement Program.

• UC San Francisco Dyslexia Center Pilot Program—$3.5 million one-time General Fund to support a pilot dyslexia screening and early intervention program operated through the UC San Francisco Dyslexia Center. These funds will enable the Center to deploy the Application for Readiness In Schools and Learning Evaluation, provide curriculum support, train staff on potential educational interventions, and collect data for a report on outcomes.

• Support for Students Experiencing Homelessness—Building upon the Governor's Budget investment of $15 million ongoing General Fund to address student food and housing insecurity, the May Revision proposes $3.5 million ongoing General Fund to support rapid rehousing of homeless and housing insecure students.

• Other Programs—The May Revision updates the assumed out-year costs to support the UC legal immigration services program from an average of $1.3 million per year to an average of $1.7 million per year. The May Revision continues to reflect $1 million ongoing General Fund to support the UC Davis Firearms Violence Research Center beginning in 2021-22.

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