Friday, January 10, 2020

Governor's State Budget Proposal

Our prior posting dealt with the UC portion of the governor's budget proposal that was released today. Below we look at the overall state budget. It might be noted that in contrast to Jerry Brown's budget release news conferences, Gov. Newsom makes a point to be in command of the budgetary details and talks for a much longer time. Brown would turn the conference over to his budget director for any details. Some pundits have argued that there is a need for more focus by Newsom, particularly if in the future the economy sours.

You can see the budget news conference at:

In any event, the overall budget outlook is summarized in the table below. As a result of the Brown period, there is now a proliferation of reserves associated with the general fund. You have to add all of them up to look at the overall level. The change in reserves in total is a measure of the surplus or deficit of the general fund. The current budget (for 2019-20) is, by the governor's estimates, running a deficit of about a billion dollars. The proposed budget would run a surplus of about half a billion. Total reserves are about 15% of spending. If there were to be an economic downturn, the state would have about a year or so to adjust. Undoubtedly, that adjustment, as has occurred in the past, would especially hit elements of the budget that are more discretionary than others. UC, in part because it has the tuition mechanism, would likely be hit.

Below is a summary table:

General Fund (GF) Budget ($ Millions)

                            2019-20    2020-21
GF Beginning Reserve         $8,477      5,234
GF Revenue & transfers      146,486    151,635
GF Expenditures             149,749    153,083
GF Surplus/Deficit           -3,263     -1,448
GF Ending Reserve             5,234      3,786
Public School Stabilization Account (PSSA)
   Beginning                      0        524
   Ending                       524        487
     Surplus/Deficit           +524        -37
Safety Net Reserve (SNR)
   Beginning                    900        900
   Ending                       900        900 
     Surplus/Deficit              0          0
Budget Stabilization Account (BSA)
   Beginning                 14,358*    16,018
   Ending                    16,018     17,977
     Surplus/Deficit         +1,660     +1,959
Total Reserves (GF+PSSA+SNR+BSA)
   Beginning                 23,755     22,676
   Ending                    22,676     23,150
     Surplus/Deficit         -1,079       +474 
Ending Reserves as a Percent of Expenditures
                               15.1%      15.1%

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