Budget Hardball - Part 2

Yesterday, we posted an item indicating that the legislature apparently has decided to pass its own budget rather than tinker with the governor's May Revise.* The legislature's budget - apparently now worked out between the assembly and senate - assumes federal monies with be forthcoming but has cuts if those monies fail to appear. In contrast, the May Revise assumed no federal monies but undid cuts if it arrived.

Under Prop 25, the legislature has to pass a "balanced" budget by June 15. Because of other rules, it has to make available that budget a few days earlier. So there is a budget bill. "Balance" is simply a paper concept - it has to "balance" on paper (and with the right assumptions, virtually any budget can be made to "balance"). In addition, "balance" need not involve income = outflow, the common sense meaning of the term. The Legislative Analyst's Office (LAO) has prepared some material about the legislature's budget.** But we really don't have a macro view of how it compares with the May Revise.

However, a recent document from the LAO suggests that UC  would have a cut of $400 million if federal money doesn't arrive (relative to what is not clear from the document) and most - but not all of that reduction would be restored if it does (which the legislature assumes). See the table below:

[Click on image to enlarge and clarify.]

As we have noted earlier, the state actually has a lot of cash that has built up beyond the so-called rainy day fund. So if a budget is put into place based on assumptions that prove to be too optimistic, the state can go for awhile drawing down its cash and hoping for better days ahead. That may be the implicit legislative approach.

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*http://uclafacultyassociation.blogspot.com/2020/06/budget-hardball.html
**https://lao.ca.gov/handouts/FO/2020/Overview-of-the-Legislature%E2%80%99s-2020-21-Budget-Package.pdf