California Projects $8 Billion ‘May Revise’ Budget Surplus

May 11, 2018

Even as California’s booming economy pumps money into state coffers at unprecedented levels, Gov. Jerry Brown is once again proposing a budget plan that seeks to limit permanent increases in new spending.

His latest plan is to place the bulk of an $8.8 billion surplus into rainy-day reserves and one-time investments.

“As Isaac Newton observed: What goes up must come down,” Brown said Friday at the state Capitol, urging the Legislature not to squander the state’s fiscal health. “Let’s not blow it now.”

The governor released his $138 billion “May Revise” budget proposal on Friday, an update of his $132 billion January spending plan.

The new surplus of $8.8 billion is up over January’s $6.1 billion projection. Brown proposed to place more than $7 billion of that surplus into the state’s two reserve accounts: its operating reserve and the Rainy Day Fund created by voters in 2014.

The Rainy Day Fund would grow to $13.8 billion under the proposed budget.

State finance director Michael Cohen said there remains the need for these reserve funds to pay for unexpected expenses such as wildfires, floods — “name your apocalyptic event,” Cohen said.

The governor urged lawmakers to invest in these reserves, citing volatile capital-gains revenues, which he said are at highs now but could plummet in coming years.

“It can get giddy at the peak,” Brown said. “I'm trying to leave the most responsible budget for the next governor.”

Assembly Republican Leader Brian Dahle’s response to Brown’s revised budget was to urge investing the surplus by paying down debt, shoring up reserves and focusing on infrastructure.

“Obviously, I’d like to see taxpayers get that money back, but once the government gets ahold of your money, it’s impossible to get them to let go,” Dahle wrote.

The budget proposal calls for some increases in spending, such as an additional $3 billion, above current levels, for K-12 schools and community colleges.

However, the budget holds University of California and California State University increases steady at the proposed 3 percent hike from January.

Proposition 98, which requires a minimum guarantee be spent on K-12 schools, is at $78.4 billion in the budget, an all-time high.

Brown’s budget also proposes to place a $2 billion “No Place Like Home” homelessness bond on the November ballot. It would pay to build affordable housing and shelters. A law of the same name was previously signed by the governor, but money has not been spent due to legal challenges.

Cohen said first-quarter revenues from legalized cannabis were lower than expected, although he anticipates growth as more businesses acquire licenses.

The total state funds in the proposed budget are $199.3 billion, in addition to $106.6 billion federal funds.