Legislative Budget

Reports indicate that the legislature - now both houses - have produced a budget plan that assumes the federal government will provide the state with desired cash. The governor's budget, in contrast, assumes the money won't arrive, but restores some cuts (automatically) if it does. Unfortunately, the Legislative Analyst's Office (LAO) has yet to provide a detailed, side-by-side, comparison. (When the state senate came out with a budget earlier, LAO's analysis was cursory, as we noted on this blog.) So, exactly what happens to UC is not clear from available reports.

Although the state constitution requires a "balanced" budget to be enacted by the legislature by June 15, it needs only to be balanced on paper as the legislature defines it. So if the legislature makes unrealistically optimistic assumptions, in practice what happens is that state cash reserves are drained faster than what the paper budget projected. As we have noted in prior posts, state cash includes a lot more than just the official "rainy day" fund. Essentially, IOUs are dropped into funds maintained by the state outside the general fund that are earmarked for special purposes.

Newsom could veto the legislative budget. In principle, the legislature could reinstate it by a supermajority vote. He could concede to the legislature. He could work out some compromise. We could revisit the bad old days of no budget as of July 1 if the governor vetoed the budget and the legislature did not override the veto. Some kind of compromise with the tilt closer to the legislature's approach seems the most likely outcome (to yours truly). The governor has tended to back down over the issue of local governments ignoring lockdown rules, so it seems likely he will back down in a confrontation with the legislature.

Below is a recent report:

Legislature consolidates power before budget negotiations with Newsom

CalMatters/WhatMatters, 6-4-20

The Assembly and Senate threw their weight behind a joint budget proposal Wednesday, shoring up their political power as they head into the final stretch of negotiations with Newsom. They expect to reach an agreement with the governor early next week.

Key pieces of Newsom’s May budget proposal that lawmakers rejected: 

Slashing $14 billion from schools, health care and safety net programs unless the federal government sends funds by July 1. The Legislature’s proposal assumes federal funding will arrive — and if it doesn’t, limits cuts to $7 billion by drawing on reserves.

Maintaining executive power to spend billions of dollars on the coronavirus pandemic. Their plan would involve lawmakers in those spending decisions, at least through Aug. 31. 

Cutting aid for undocumented immigrants. Lawmakers want to expand Medi-Cal to provide government-funded health care for undocumented seniors and extend a tax credit to undocumented residents with a child under 6...

Full story at https://us11.campaign-archive.com/?e=cd8ca92ba1&u=5f4af3af825368013c58e4547&id=8c21e84cb5 [Scroll down.]