Legislative Analyst Sees Brown’s Big Revised-Budget Boost and Raises Him $3.1 Billion

Thursday, May 21, 2015
(photo: Reuters)

California is going to be plenty spoiled by the time forces that are driving the state’s burgeoning budget surplus end. But what a ride.

One week after Governor Jerry Brown unveiled his revised $115.3-billion budget proposal (pdf), adding $6.7 billion in revenue to his January proposal, the independent Legislative Analyst’s Office (LAO) tacked on another $3.1 billion.

But, just so there’s no misunderstanding, the LAO included a caveat: “No one can reliably predict many of the key variables that affect California finances, especially stock prices (which are unpredictable even in the near term).”

That said, the Analyst projected the state would clean up collecting capital gains taxes from wealthier individuals. That’s been the story so far in 2015, and they are sticking to it. “We are clearly on the upward slope of the state’s revenue roller coaster,” the Analyst warned, without explicitly saying some folks might lose their lunch or suffer heart palpitations on the way down.

K-12 and the “rainy-day fund” were the main beneficiaries of Governor Brown’s revised May budget, much of that dictated by existing law. There was money for a working-poor tax credit, the courts, higher education, and paying down some of the state’s crushing debt obligation, but not much was done to restore the billions cut from the social safety net after the economy crashed half a dozen years ago.

Another big-ticket item, the crumbling road infrastructure, is, by the government’s own reckoning, badly underfunded again in the proposed budget. Advocates for more home-care worker pay, higher Medi-Cal reimbursement rates and health coverage for more than a limited number of illegal immigrants were disappointed.

The proposal settles, for now, the dispute between Governor Brown and University of California President Janet Napolitano over funding and a tuition freeze. Brown gets a tuition freeze for two years, not five, and Napolitano agreed to certain reforms that will lower operational costs. Napolitano and the UC Regents were planning on a 28% tuition increase over five years.

The earned-income tax credit is earmarked for individuals without dependents who make less than $6,580 and those with three or more dependents earning under $13,870. That would cost the state $380 million a year and benefit an estimated 800,000 people.

The proposal also offered amnesty to drivers who lost their licenses after not paying tickets and astronomical, cascading fees. From 2006-2013, California suspended 4.3 million licenses, averaging more than 500,000 a year for eight years. Only 71,000 of the licenses were restored. Penalties and fees run into hundreds of dollars; this proposal let’s offenders settle up for half.

The governor will take another crack at the budget in June with a final revised version that goes to the Legislature for their consideration. Lawmakers will pass a budget later in the year, Brown will sign it and then we’ll wait around for the next recession which, the governor warned, is probably “around the corner.”

–Ken Broder


To Learn More:

Analyst Predicts California Revenue Will Exceed Revised Budget Estimate by $3 Billion (by Jim Miller, Sacramento Bee)

Revised California Budget Spends More on Education (by Sharon Bernstein, Reuters)

California Budget: Gov. Jerry Brown Unveils State Earned Income Tax Credit and UC Tuition Deal (by Jessica Calefati and Josh Richman, San Jose Mercury News)

Schools Win Big in Revised California Budget (by Nick Cahill, Courthouse News Service)

May Revision: LAO Revenue Outlook (Legislative Analyst’s Office)

2015-16 May Revision (Office of the Governor) (pdf)

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