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:
https://twitter.com/CAgovernor/status/1215702508590354433
or:
https://www.pscp.tv/w/1gqGvgQmBVjJB

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

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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

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Public School Stabilization Account (PSSA)

   Beginning                      0        524

   Ending                       524        487

     Surplus/Deficit           +524        -37

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Safety Net Reserve (SNR)

   Beginning                    900        900

   Ending                       900        900 

     Surplus/Deficit              0          0

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Budget Stabilization Account (BSA)

   Beginning                 14,358*    16,018

   Ending                    16,018     17,977

     Surplus/Deficit         +1,660     +1,959

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Total Reserves (GF+PSSA+SNR+BSA)

   Beginning                 23,755     22,676

   Ending                    22,676     23,150

     Surplus/Deficit         -1,079       +474 

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Ending Reserves as a Percent of Expenditures

                               15.1%      15.1%

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*http://www.ebudget.ca.gov/2019-20/pdf/Enacted/BudgetSummary/SummaryCharts.pdf (p. 10)

Source: http://www.ebudget.ca.gov/FullBudgetSummary.pdf (p.18)