State Budget Surplus! Let the Celebrations Begin?

By Rebecca Gonzales, Director of Government Relations and Political Affairs

For the first time in many years, the state budget will have a surplus! Governor Brown’s proposed budget reflects $6.3 billion in unanticipated revenues from 2012-13 to 2014-15. This has mainly resulted from an increase in revenues from the personal income tax, which benefitted from a strong real estate market and gains in the stock market.

So, after years of deep budget cuts, is it time to celebrate? Well, not quite yet. Since the governor took office he has had several goals, including eliminating the budget deficit and paying off state debt. The first goal has been accomplished and now the governor wants to aggressively pay off state debt. Paying off state debt is important, but it must be balanced with the immediate needs of the state’s poorest residents.

Not to say that there weren’t some winners in this year’s budget. Because of the Proposition 98 funding guarantee for K-12 schools, schools have been the biggest winners in this year’s budget and will receive $6.3 billion more. The governor has also proposed to pay off $6.4 billion in deferred debt to the schools and community colleges. There is also additional money for school repairs and money is included to implement the new Local Control Funding Formula (LCFF) which focuses on targeting schools with a high number of English Learners (EL), students on free and reduced lunch, and foster youth.

Higher education also received budget augmentations. UC and CSU will see a 4.2 percent funding increase, which is tied to a previous agreement with the administration to hold down tuition and fee increases and to show improved student success. Community colleges will see their funding increase by 11.4 percent.

An area of the budget that has traditionally suffered in bad times is the budget for health and human services. The budget does fund a small increase in CalWORKs grants that was agreed to in last year’s budget. The budget also funds increases in the Medi-Cal population which was dictated by Federal Healthcare Reform, but other than that, it does not make any major program increases. This is despite the fact that the state’s poorest residents have seen deep cuts to subsidized child care, cuts to the grant levels, time limits and services in the CalWORKs program, and cuts to optional (but vitally important) benefits in the Medi-Cal program.

Prison spending has also been an area of concern. The state has been under a court order to reduce our prison population because of inadequate health care. The state has reduced our population by realigning nonserious, nonsexual, and nonviolent offenders to county jails but the reduction in the state prison population has not been enough to lift the court order.

The governor’s budget assumes that the state will receive an additional two-year court extension to reduce our prison population while also proposing $500 million more for prison facilities. There is also $81 million in state funding for rehabilitation programs, including substance abuse and mental health services, but only if we receive the court extension. If the extension is not granted, this funding will be used to increase prison capacity. 

Lastly, Governor Brown proposes to restructure our rainy day fund, which requires the legislature to pass a constitutional amendment that must be passed by the voters on the November 2014 ballot. We do have a current rainy day fund that the voters approved in 2004 (Proposition 58). The governor has found fault with the current structure of the fund because he feels it is inadequate to guard against the cyclical nature of our economy.

Budget negotiations will commence in late February and continue until the June 15 constitutional deadline.

We will continue to advocate that the state use a portion of the budget surplus to reinvest in our local communities.