State officials last week reached an agreement on a 2017-18 budget that they say maintains fiscal prudence, supports working families, increases money for schools, reduces pension liabilities and repairs infrastructure in light of the federal government’s uncertain actions.
Governor Edmund G. Brown Jr., Senate President pro Tempore Kevin de León and Assembly Speaker Anthony Rendon announced their agreement on June 13.
“This budget keeps California on a sound fiscal path and continues to support struggling families and make investments in our schools,” Brown said. “We’ve come together on this balanced and progressive budget, and I’m confident that we can do the same to extend our critical cap-and-trade program.”
De León said the state budget will keep California strong, protect its fiscal stability and empower communities at a time when Washington is “determined to undermine them.”
“This budget makes historic investments in health care, education and childcare, and lays down a multi-billion-dollar investment to start fixing our roads and infrastructure,” he said. “This is how government works— by the people and for the people.”
Rendon called it a budget that does things for people, not to people.
“It is a combination of fiscal responsibility, including the biggest reserves in state history, major spending improvements to fight poverty and improve education, and significant reforms stemming from our strong oversight of the Board of Equalization and the University of California,” Rendon said.
Under the agreement, officials say, the State continues to plan and save for tougher times ahead. It adds $1.8 billion to the state’s Rainy Day Fund, now at $8.5 billion, which is 66 percent of the constitutional target.
“However, with the federal government contemplating actions that could send the state budget into turmoil— including defunding health care for millions of Californians, ending deductions for state taxes and eliminating funding for organizations like Planned Parenthood— uncertainty remains,” according to the governor’s website.
State officials say the budget expands California’s Earned Income Tax Credit (EITC) to support more working families, including self-employed parents, aligned with the federal EITC. It also expands income ranges to help families working up to full-time at the newly increased minimum-wage benefit from the program and makes more than 1 million more households eligible to claim the credit, which almost 400,000 households claimed in the 2015 tax year.
Officials expect funding for K-14 schools to increase by $3.1 billion over the revised 2016-17 level to $74.5 billion in 2017-18, which is an increase of $1 billion since January and $27.3 billion over six years, or 58 percent. The governor’s website states that schools would receive an additional $1.4 billion next year for the Local Control Funding Formula, which would increase the formula’s implementation to 97-percent complete.
“The budget also includes a total of $14.5 billion General Fund for higher education, with additional funds provided in the next year to expand capacity for California students at the state’s public institutions, create guided pathways for students to earn degrees and credentials and keep the costs of attendance low for students and their families,” Brown’s website states. “Additionally, it holds the University of California accountable for implementing needed reforms to its cost structure so that the system remains sustainable over the long term.”
In a step that is expected to save the State $11 billion over the next 20 years while continuing to reduce unfunded liabilities and stabilize state contribution rates, the budget also includes supplemental payments to the California Public Employees’ Retirement System (CalPERS) with a loan from the Surplus Money Investment Fund. The State will achieve those savings and reduce the liabilities by leveraging existing resources, without the cost or risk of external borrowing, according to Brown’s website.
The budget seeks to repair infrastructure by accelerating $2.8 billion toward improving commutes, fixing roads, strengthening overpasses and bridges, and building mass transit.
Per the budget, the State will also continue its significant investments in the Medi-Cal program— including new revenue from Proposition 56, the Tobacco Tax Increase Initiative— to serve millions of people who rely on the program for health care.
Seventieth District Assemblymember Patrick O’Donnell (D-Long Beach) called the budget fiscally responsible and educationally sound.
“We continue to build a prudent reserve while increasing funds to support working families,” O’Donnell said. “As a parent, teacher and chair of the Assembly Education Committee, I applaud increased funding to support classrooms across our state. Boosting the Local Control Funding Formula by $1.4 billion will help our schools continue achievement gains. The $50-million increase for our after-school programs are long overdue and will prevent closures. Protecting the Middle Class Scholarship will ensure our middle-class families are able to contribute to our economy.”
The Assemblymember said that, despite the gains in the budget, there is more work to do next year to address the teacher shortage and expand access to career technical-education programs.
“Quality teachers matter in student success,” he said. “The supply of new teachers is at a 12-year low, and enrollment in educator-preparation programs has dropped by more than 70 percent over the last decade. The budget provides $11 million for the California Educator Development Program, but much more is needed. The budget continues the Career Technical Education Grant Program by $200 million for one more year. In order to provide students with career choices and to meet workforce needs, we must develop a long-term funding solution.”
O’Donnell said he plans to conduct hearings this fall to investigate that need.
As with most proposed budgets, not everyone sang its praises.
Tom Scott, executive director of the National Federation of Independent Business—California, said the budget disregards small businesses.
“At a time when small businesses across the state are seeing their budgets tighten with rising minimum wage, transportation and healthcare costs, today the legislature passed yet another historic spending plan, totaling a record $183.2 billion,” Scott said. “Although this budget continues to make important investments into our State Rainy Day Fund, it more broadly ignores the underlying uncertainty of our small-business economic engine with record spending and zero budget reforms or transparency. Small-business owners and all taxpayers continue to pay more but get less in return. Most recently, Sacramento treated working families like ATMs by raising their gas and car taxes, yet we see little, if any, new spending to expand or build new roads.”
Scott said the budget also decimates many taxpayer rights by gutting the elected Board of Equalization of its authority to hear tax appeals, which will leave small-business owners no independent recourse to dispute egregious tax bills and penalties.
“It is very difficult to have faith in this state budget when the process has become completely polluted with trailer bills such as this, which have no place in the budget,” Scott said, “and should instead be discussed in open-policy committee proceedings.”
