The Surgical Approach

The Legislative Analyst's Office (LAO) has now published its first comments on the governor's May Revise budget proposal.* Blog readers will have seen our write ups on the May Revise.** LAO might have challenged the governor's underlying economic assumptions with regard to the budget, but it didn't.

More pessimistic assumptions would have aggravated the situation; more optimistic assumptions would have provided room for less drastic responses. The likely reason for relying the LAO's reliance on the governor's assumptions is that the possible range of economic outcomes is very wide. There is thus little point in proposing adjustments. However, the legislature might still take a more optimistic view if it wants to avoid some pain immediately.

LAO says it's a good idea for the state to continue to seek more federal aid. It's hard to quarrel with that comment. But just as the economic assumptions are subject to wide variance, so are the political assumptions. The governor has built his proposal so that some cuts would be reduced if more aid is received. However, as we have noted in earlier posts, the budget may well receive another revision over the summer after income tax receipts - normally due in April but this time postponed to July - come in. Possibly, Congress will act on additional aid between now and then. And, possibly, more economic data will suggest what the future may hold.

In the end, the LAO simply presents what the governor has proposed in its own words. It points out that to the extent that the state puts in less to CALPERS and CALSTRS now, more will be needed in the future. There is no mention of the UC pension because the state takes the view that the UC pension is the responsibility of the Regents, not the state - whatever that proposition is supposed to mean.

LAO goes along with the governor's presentation of the cuts to UC and CSU as being a flat 10%, although - as we pointed out - the governor's official document shows UC receiving a cut of over 14% from this year to the next. But the LAO - after lumping UC and CSU with the judicial branch and state civil servant pay - suggests the legislature take a more "surgical approach," although it doesn't describe the surgery. Presumably, if some elements in that money pool get "more" than the supposedly flat amount, other elements will get less. Who will be among the lucky ones and who will get more cuts is not part of the LAO's analysis at this point. In any case, the LAO promises more guidance on the potential surgery "in the coming days and weeks."
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*https://lao.ca.gov/Publications/Report/4232
**http://uclafacultyassociation.blogspot.com/2020/05/the-grim-may-revise.html and http://uclafacultyassociation.blogspot.com/2020/05/uc-general-fund-budget-sliced-by-eighth.html