The Enacted State Budget

We now have "enacted budget" summary figures from the California Dept. of Finance, although full details have not yet been published. You might ask whether it isn't a bit late to have such figures since the state budget for fiscal year 2021-22 was ostensibly passed and signed in late June. It's true that the legislature passed a "budget" in mid-June, thus meeting the constitutional deadline and avoiding a loss of pay for legislators. But that budget was a kind of placeholder. Under court decisions, the legislature gets to decide what a "budget" is.

The Democratic leaders and the governor continued negotiating after the mid-June "budget" was signed and since that time a series of budget bills have been passed and signed. The governor in some cases has been holding news conferences for the signings, particularly with an eye on the recall election that is now scheduled for September 14th. 

So, even though a full budget was not in place on July 1, enough was done to keep the state government functioning and paying its bills, unlike the situations that often prevailed before Jerry Brown took office when lack of a budget deal could lead to fiscal crises.

Two tables below depict the broad highlights of the enacted budget.

Table 1, showing the evolution of last year's 2020-21 budget makes the following points:

• When the budget was first signed, total reserves on hand connected to the general fund were estimated to be about $19.5 billion and were expected to fall during the fiscal year by $4.5 billion, i.e., a deficit during the year of $4.5 billion was projected. 
• By the time of the enactment of this year's budget, last year's total budget reserves had in fact risen (not fallen) to $42.9 billion. Instead of a deficit, we had a surplus of well over $20 billion.
• This surplus resulted from an unanticipated increase in revenue combined with a lesser increase in spending during the year now behind us.

Table 2, showing the evolution of this year's 2021-22 budget (so far) indicates that even with a further increase in spending and a projected deficit of $14.6 billion (i.e., a running down of reserves accumulated during the previous year), we are forecast to end the year with $28.3 billion in total reserves. That's more than we had at the start of the prior year. Also, as a percentage of spending, reserves at the end of the current year will be above where they were at the end of last year.

Of course, we can't go on indefinitely running down total reserves without getting into fiscal trouble. Former governor Jerry Brown recently warned that something was likely to go wrong within maybe two years because of the volatile nature of state revenues. See https://archive.org/details/vaccine-lottery-prize-7-1-21/Brown+on+budget.mp4.

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Table 1

 

Source: California Dept. of Finance. Data Available at http://www.ebudget.ca.gov/; Legislative Analyst’s Office. Data Available at https://lao.ca.gov/reports/2020/4297/fiscal-outlook-111820.pdf; https://lao.ca.gov/Publications/Detail/4445.   

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Table 2

Note: June 2021 figures from the legislature do not coincide precisely with LAO’s analysis of those figures. LAO’s data are used except for Public School reserve. July 1, 2021 Public School reserve is the governor’s figure. June 30, 2022 Public School reserve is from the legislature.

Source: California Dept. of Finance. Data Available at http://www.ebudget.ca.gov/; Legislative Analyst’s Office. Data Available at https://lao.ca.gov/reports/2020/4297/fiscal-outlook-111820.pdf; https://lao.ca.gov/Publications/Detail/4445; California State Assembly. Data available at https://sbud.senate.ca.gov/sites/sbud.senate.ca.gov/files/Legislature%27s%20Version%20Summary%20FINAL.docx.pdf.

ADDITIONAL NOTE: All figures were quickly obtained by yours truly and are subject to correction.