Governor’s Update and Associated Budget

05-May-2013

Governor Jerry Brown released his May Revision of the California State Budget for 2013-14 today (full budget summary attached). His Revision reflects $2.8 billion in higher revenues for 2012-2013 and $1.3 billion in lower revenues for 2013-2014. The Governor's budget acknowledges that personal income tax (PIT) receipts in January were $4.9 higher than expected. He attributes this to individuals making their tax payments earlier to avoid any federal tax changes in 2013 and modest income growth in California. Due to federal spending cuts and the sunset of the payroll tax holiday the outlook for 2013-2014 is weaker and recovery is expected to be slower than the January Budget forecast. The budget maintains a $1.1 billion reserve.

The Governor continues to emphasize the risks and liabilities that the state must address that include an uncertain economic growth, court orders such as prison overcrowding, rising health care costs due to health care reform, court challenges such as the injunction of the 10% Medi-Cal provider rate cut, unpaid debt from special funds, local governments and Prop. 98 and state employee retirement and health care costs. He continues to hold fast to his goal of remaining fiscally prudent to ensure the state budget remains balanced.

The Governor emphasized his investment in schools by providing an additional $2.9 billion in funding for education. These additional dollars are considered one-time funds to be used to reduce the deferral of payments to schools and support the implementation of Common Core. His May Revision makes modest modifications to the January budget proposal which proposed to revamp the Local Control Funding Formula for schools.

The May Revision proposes a path for state-based health care expansion while having counties take on some additional funding responsibilities in human service programs. The budget proposes to enhance the state's role in health care while moving counties into a larger role in CalWORKS. Other changes in the May Revision related to health care include the delay of expansion of Medi-Cal managed care for Dual-Eligibles to January, 2014 and modifications to the managed care organization tax.

The Governor is proposing to strengthen the state's economic development programs to bolster the business environment and reintegrate people into the workforce by revamping enterprise zone and hiring credit programs. In addition, the Governor proposes $48 million in additional funds for CalWORKS for job training and subsidized employment opportunities.

The May Revision proposes some adjustments to corrections including changes to the 2011 corrections realignment plan through a proposed shared responsibility for long-term offenders between the state and the counties. The May Revise also includes an additional $72 million (for a total of $107 million) in SB 678 funding for county probation departments because of additional responsibilities incurred due to helping the state in reducing its prison populations (see page 41 of the attached summary).Other significant proposals include the expansion of fire camp capacity and implementing drug interdiction initiatives.

The Budget will now be reviewed by the Legislature and must be passed by June 15th.

Lindsay Gullahorn
Legislative Analyst, Capitol Advocacy


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