California 2017-2018 Proposed Budget

Budget Highlights:

“The proposed 2017-18 state budget is $179.5 billion.  It includes $122.5 billion General Fund, $54.6 billion special funds, and $2.4 billion bond funds.”

“State revenues, which had surged during several years of the recovery, are now beginning to lag expectations. Consequently, the budget — which remained precariously balanced even in the strongest revenue years — now faces a deficit of almost $2 billion if action is not taken.”

“The state has $240 billion in long‑term costs, debts, and liabilities. The vast majority of these liabilities — $236 billion — are related to retirement costs of state and University of California employees.”

Governor Brown’s Main Proposals to Balance the Budget:

Adjust Proposition 98 (Approved by voters in 1988; requires a minimum percentage of the state budget to be spent on K-12 education):  Redirect $1.7 billion from Proposition 98 expenditure to general operations expenditure, bringing the school expenditure to its mandated minimum level.

Recapture 2016 Spending Allocations:  Eliminate the authority to spend $0.9 billion from the one-time spending package approved in the 2016-1017 budget; mainly, eliminate a $400 million set-aside for affordable housing and a $300 million transfer to modernize state office buildings.

Slow spending growth by $0.6 billion:  Pause rate increases for child care, eliminate Middle Class Scholarships to new students, and discontinue submission of a variety of spending proposals from state departments.

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Suggestions Not in This Budget:

California budgets skirt around the edges of deficit problems.  This is in part because legislators do the same, by failing to take decisive action on key issues that drive precarious budgets.  Two of these issues public employees' expenditures and proliferation of state agencies.  Remedies would require tough action, such as:

Restructure public employees’ salaries and pensions to completely eliminate the state’s $240 billion in long-term costs, debts, and liabilities, the vast majority of which ($236 billion) are related to costs of state and University of California employees.

Do more than shuffle projected revenues between thousands of programs.  Eliminate programs that do not constitute essential services.  This will slow the state’s insatiable need for taxing its residents, as well as leave more money in the private sector that can be used for business investments and job creation. 

Budget Summary:

Main expenditures from the operating budget are Proposition 98 and Non-Proposition 98 expenditures.  Proposition 98 expenditures cover the vast California public education system, and Non-Proposition 98 cover most everything else.  California's numerous "capital funds" cover the rest of the rest.  Here is a summary, in millions:

Prior Year Balance                                          $1,027.00
Revenues and Transfers                             $124,027.00
Total Resources Available                          $125,054.00
 
Non-Proposition 98 Expenditures              $71,169.00
Proposition 98 Expenditures                        $51,351.00
Total Expenditures                                      $122,520.00
 
Fund Balance                                                   $2,534.00
Reserve for Liquidation of Encumbrances      $980.00
Special Fund for Economic Uncertainties     $1,554.00
Stabilization/Rainy Day Fund                       $7,869.00