State Budget Gimmicks

As blog readers will know, the governor - as the state constitution requires - presented his budget proposal for 2024-25 in January. As always, he sounded very authoritative in his presentation. But there were a lot of loose ends that weren't apparent.

One of these loose ends is the budget treatment of K-14 under Prop 98 which is based on various formulas approved by voters. K-14 absorbs over 40% of the general fund budget so how it is handled affects other elements of the budget, especially the discretionary portion that includes UC. 

Because of the delay in income tax receipts for 2022 taxes caused by federal and state temporary policies related to wildfires, it was difficult to estimate what revenues would be when the current budget was approved. As it turned out, revenues were significantly overestimated, leading to an overpayment to K-14. The governor was reluctant to take back funding that had already been allocated. But allowing K-14 do keep the overage would create greater K-14 liabilities going forward, so the governor proposed a gimmicky way around the Prop 98 rules. The Legislative Analyst's Office (LAO) has raised questions about this approach.*

How the legislature will eventually deal with the problem is unknown at this point. But indirectly, these Prop 98 pressures put an additional squeeze on UC, which is already slated for a "deferral" of payments that would be due this coming fiscal year under the "compact" with the governor.

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*https://lao.ca.gov/reports/2024/4840/Governors-Prop-98-Funding-Maneuver-021524.pdf; https://lao.ca.gov/reports/2024/4839/Prop98-K12-Budget-021524.pdf.