When Gov. Jerry Brown released his balanced budget plan for 2018-19 last week, he cautioned that, despite the lack of deficit, California should stay vigilant in its fiscal responsibility and another recession could be looming.
The 2018-19 budget proposes spending $190.3 billion in total state funds that consist of $131.7 billion from the General Fund, $56.1 billion from special funds and $2.5 billion from bond funds. The governor’s proposal maintains a balanced budget for the foreseeable future under current projections and will increase the Rainy-Day Fund to the maximum amount permitted by the State Constitution, according to Brown’s office.
Brown wrote that the new proposal reflects collective priorities and, as in 2011, the No. 1 focus should be on fixing the state budget and keeping spending in line with revenue.
“In a volatile and uncertain world, fixing the budget is a perpetual struggle and one we must approach with wisdom,” Brown wrote. “California has faced 10 recessions since World War II, and we must prepare for the eleventh. Yes, we have had some very good years, and program spending has steadily increased. Let’s not blow it now. I urge you to debate this budget, reflect on the many uncertainties we face and fill the Rainy-Day Fund. In this way, we will avoid the drastic cutbacks suffered in previous downturns and keep faith with the people and our state on an even keel.”
The budget proposal fully implements the State’s K-12 school funding formula two years ahead of schedule and provides $4.6 billion for the first year of a 10-year transportation improvement plan. In contrast to the $27-billion budget gap in 2011, the new plan forecasts a strong one-time surplus, although the State will continue to face uncertainty in light of the recently enacted federal tax bill, the consequences of which have not yet been factored into the budget’s economic or revenue projections.
Despite increasing funding for education, health care and other core priorities, the budget plan continues to bank higher revenues into reserves and reduce debts and liabilities, according to the California Department of Finance’s online presentation of the budget plan.
Shortly after Brown released his proposal, elected officials, education leaders and various special-interest agencies issued statements, mostly in support of the plan but critical in some areas.
California Attorney General Xavier Becerra wrote that, with the proposal, Brown has shown his commitment to maintaining a prudent and balanced budget, while investing in programs that reflect California’s values.
“The Department of Justice has developed a strong track record of efficiently and effectively fighting for the people of California, from defending the civil rights of our most vulnerable populations to preserving the natural resources that make California a great place to live, work and raise a family,” Becerra wrote. “I look forward to working with Gov. Brown and the Legislature to ensure the hardworking men and women of the Department of Justice can do even more to promote public safety, enforce California’s laws and defend the state’s interests against federal overreach.”
Board of Equalization Vice Chair George Runner complimented Brown’s boosting of the State’s reserves but criticized his approach to taxes.
“It’s a smart move by the governor to boost the state’s Rainy-Day Fund, since, as he warns, the threat of a recession still looms, and California is still very much vulnerable to boom-and-bust budgeting,” Runner wrote. “However, since members of his own party are suddenly and surprisingly concerned about taxpayers, it would be great if the governor would use the budget process to work with Republicans to come up with ways to reduce the overall tax burden of California residents, which is very high. The governor could start by refunding the money to Californians who paid the now suspended fire-prevention fee, and by reconsidering the need for his catastrophic gas tax hike.”
Likewise, a statement by Board of Equalization 3rd District Member Jerome E. Horton, whose representation includes Signal Hill and Long Beach, focused on reforming taxes.
Horton added that the California Legislature should also repeal Proposition 209, which eliminated affirmative action, and increase state employee salaries by 5 percent as a way of stimulating the economy as well as employment of women and minorities at the executive levels of government.
“To offset the costs, the Legislature can redirect existing unproductive tax credits and/or toll the above mentioned tax credits for one year, pending performance,” Horton wrote.
The budget proposal also calls for $134.3 million in funding for voting systems, a move that election officials applauded.
“We are encouraged by the governor’s inclusion of funding for voting system upgrades and replacement in the proposed budget,” wrote Dean C. Logan, president of the California Association of Clerks and Election Officials. “It is a significant move in the right direction for the State to begin funding critical infrastructure for secure, transparent elections in California.”
Logan added that it is incumbent upon counties and election officials to provide the electorate with options for voting that are responsive to voter behavior and advancements in technology.
“At the same time, we must be diligent and adaptive in responding to security threats and the need to appropriately protect voter data,” Logan wrote. “The funding included in the governor’s proposed budget signals the spirit of collaboration needed to ensure the integrity of our elections.”
California Secretary of State Alex Padilla also commended Brown for proposing funding for new voting methods.
“I applaud Gov. Brown for including $134.3 million for new voting systems in his state budget proposal,” Padilla wrote. “Gov. Brown is once again leading the way. This is an essential and timely investment in our democracy. Aging voting systems are one of the gravest threats to the integrity of our elections. It has been over 15 years since Congress approved significant funding for voting systems to help improve election administration. We have a responsibility to modernize our voting equipment to ensure the security of our elections, to expand voting opportunities and to improve disability and language access. Gov. Brown clearly understands that an investment in voting systems is an investment in the voter experience and the health of our democracy.”
Rainy-Day Fund
California voters approved Proposition 2 in 2014, establishing a constitutional goal of reserving 10 percent of tax revenues in a Rainy-Day Fund. By the end of the current (2017-18) fiscal year, that fund will have a total balance of $8.4 billion, or 65 percent of the constitutional target. Brown’s new budget proposes a $3.5-billion supplemental payment in addition to the constitutionally mandated transfer to the Rainy-Day Fund. The two payments would increase the total fund to $13.5 billion, according to the California Department of Finance.
Although it supported the governor’s additional investment into the Rainy-Day Fund, the California branch of the National Federation of Independent Business (NFIB) was critical of Brown for not doing more for small businesses.
“Gov. Brown proposed a record-setting $190-billion budget while offering no reforms or relief for small-business owners,” wrote NFIB California Policy & Communications Director Shawn Lewis. “While we applaud the governor for investing additional dollars into our Rainy-Day Fund, much more can be done immediately to support struggling small businesses and the working families who operate them.”
Assembly Budget Committee Vice Chair Jay Obernolte criticized how the surplus is being handled.
“The good news is that California currently has a substantial budget surplus. Unfortunately, this illustrates the fact that Californians pay too much in taxes,” Obernolte wrote. “In a perfect world, the surplus would be returned to taxpayers. Failing that, we owe it to Californians to spend their money wisely. I’m pleased that the governor agrees we must continue to set aside money for the Rainy-Day Fund, but we still need to do more to prepare for future downturns. The surplus should be used to fund one-time investments in our State’s infrastructure— not on new programs that commit the State to future ongoing spending.”
Education funding
Five years ago, the State enacted the K-12 Local Control Funding Formula to increase support for California’s neediest students and restore local district flexibility over how money is utilized in schools. With Brown’s plan proposing $3 billion in new funding for the formula, the budget will reach full implementation of the formula two years ahead of schedule. In an effort to improve transparency and student achievement, the budget proposes that school districts be required to create a link between their local accountability plans and their budgets to account for how this increased funding is being spent.
Ten years ago, the minimum guarantee of funding for K-14 schools was $56.6 billion, and it decreased to $47.3 billion in 2011-12 at the height of the state’s budget troubles. Now, funding has grown substantially and is expected to increase to $78.3 billion in the upcoming fiscal year.
For K-12 education, funding levels for 2018-19 will grow by about $4,600 per student above 2011-12 amounts.
Seventieth District Assemblymember Patrick O’Donnell, who chairs the Assembly Education Committee, praised Brown’s fiscal responsibility but called for more efforts to fund K-12 career technical education (CTE) programs.
The assemblymember from Long Beach wrote that he thanked Brown for recognizing the importance of K-12 CTE, but, at the same time, the proposal to shift responsibility for the program to the California Community College Chancellor’s Office is a step in the wrong direction.
“CTE is a critical component of robust K-12 education programs designed to ensure that students are well prepared for both college and a career,” O’Donnell wrote. “Dedicated state funding for K-12 CTE programs is essential to the ongoing success of these important programs. This is a top priority for me this session. I look forward to a collaborative effort with my colleagues in the Legislature to develop a responsible budget that prioritizes the needs of our students— successful students will build a successful state.”
Republican Assemblymember Rocky Chavez also commended Brown’s focus on education.
“California must continue building for our future, and I fully believe that starts with education,” Chavez wrote. “I am proud that the Local-Control Funding Formula will be completely funded and am glad an online community college for working Californians has been made a priority.”
Higher-education spending
The college to which Chavez referred would be created as the first completely online community college in the state, providing a new affordable pathway to higher wages through credentials for residents who do not currently access the California community-college system.
Brown’s plan proposes a total boost of $570 million (4 percent) for community colleges, including a new funding approach that encourages institutions of higher learning to enroll underrepresented students and rewards colleges for improving students’ ability to earn degrees or certificates.
“As the new formula is implemented, no district will receive less funding than currently provided,” according to the budget summary from Brown’s office. “Included in the community-colleges budget increase is $46 million for the first year of implementation for Assembly Bill 19, which allows colleges to waive tuition for first-time, full-time students.”
The budget also again increases state support for the University of California and the California State University by 3 percent.
“Since the end of the Great Recession, the University of California has received $1.2 billion in new funding, and the California State University (CSU) has received $1.6 billion,” according to the budget summary. “Over the same time period, funding for state financial aid that primarily supports low-income and first-generation students has increased by $623 million to a total of $2.3 billion. Given these funding increases, the budget reflects flat tuition and expects the universities and community colleges to continue to improve their students’ success. With no tuition increases this year, university tuition, adjusted for inflation, will be below 2011-12 levels.”
Cal State Long Beach President Jane Close Conoley, whose campus received a record 103,000 applications for the 2018 fall semester, called the increase “modest” but added that the governor’s multi-year plan to provide incremental increases has brought stability to the university’s budget-making process.
Conoley added that, as qualified students are rejected, it is important to bear in mind the dire warning that by 2030, the state will face a shortfall of 1.1 million college-degree holders, according to the Public Policy Institute of California.
“In short, the economy is unforgiving to those who lack a college degree,” she wrote. “If lawmakers truly believe in the goal to make college available to every eligible high school graduate or community-college transfer student living in their districts, they will need to devise a more robust funding plan and renew the State’s commitment to fully funding public higher education, keeping it affordable and accessible to all qualified students.”
Long Beach City College Superintendent-President Reagan F. Romali stated that she is pleased that the budget proposal increases funding for community colleges in general and addresses a longstanding issue with the state funding formula that will benefit residents within the Long Beach Community College District.
Other funding
Brown’s proposal also provides funds to increase healthcare coverage to low-income Californians under the federal Affordable Care Act (ACA), and its summary notes that California continues to be the national leader among states in implementing the optional expansion of ACA with nearly 3.9 million residents covered in 2018-19.
Additionally, the plan reflects the first full year of funding under the Road Repair and Accountability Act of 2017 (Senate Bill 1), which provides long-term funding for state and local transportation infrastructure, with $55 billion in new funding over the next 10 years.
The summary also indicates that the $35 billion “Wall of Debt” from 2011 has been reduced to less than $6 billion.
The full summary of the Governor’s budget proposal is available at ebudget.ca.gov.
