Summary and Analysis of the Governor’s Proposed May Revise Budget
The Governor’s May Revise Budget reports $8 billion in additional revenues over three years. He proposes to pay down debt, to put funds in the state’s Rainy Day fund to offset revenue losses in the next recession and to make one-time expenditures on needed infrastructure improvements.
The May Revise Budget projects increased revenues due to higher income, sales tax, corporate tax and local property tax receipts due to the state’s economic growth. Personal income tax receipts are up about $4 billion over two years; sales tax receipts are up $700 million over two years, and corporate taxes are up $1.5 billion over two years. The budget expects that the growth of all three will decline over the next three years even absent a recession. The budget document notes we are in the midst of the 2nd longest economic growth cycle ever and unemployment is at historic lows; a recession is inevitable; its timing and depth is unknown.
The Governor proposes a $2 billion one-time increase in infrastructure spending to deal with up to $20 billion in deferred maintenance.
He proposes to use $1.7 billion to pay down state debts.
He proposes to fill the state’s “Rainy Day” fund to 100%.
He proposes an additional $359 million to address the state’s homelessness crisis and proposes an additional $312 million for county mental health, and additional spending for K-12 education and for higher education.
K-12 Education: The Governor proposes total funding of $96 billion ($57.4 billion in General Fund). The May Revise would add $320 million in new base funding and $286 million in new one time funding. The total increase for schools in the new fiscal year would be $5 billion, of which $1.8 billion would be state General Fund.
Higher Education: The Budget includes total funding of $33.9 billion ($18.8 billion General Fund and local property tax and $15.1 billion other funds) for all higher education entities in 2018-19.
· California’s Community Colleges are the largest system of higher education in the nation, serving roughly one-quarter of the nation's community college students, or approximately 2.1 million students. The May Revision proposes $104 million one-time Proposition 98 General Fund to provide one-time discretionary resources to community college districts.
· UC educates 270,000 undergraduate and graduate students and receives the highest state subsidy per student among the state’s three public higher education segments. UC is proposed to receive an increase of $100 million one-time General Fund to support deferred maintenance projects, and an increase of $55 million one-time General Fund to support psychiatric graduate medical education programs serving Medically Underserved Areas in rural California.
· CSU serves over 470,000 students across 23 campuses. It will receive an increase of $100 million one-time General Fund to support deferred maintenance projects.
Health and Human Services: The May Revision includes $158.7 billion ($38.9 billion General Fund and $119.8 billion other funds) for all health and human services programs, an increase of $1.5 billion General Fund compared to the Governor's Budget.
· The May Revision proposes placing the No Place Like Home program on the November 2018 ballot. No Place Like Home program allocates $2 billion from Mental Health Services Act funds to provide housing for individuals who are in need of mental health services and are experiencing homeless or at risk of homelessness.
· The May Revision repays counties approximately $254 million plus interest for repealed state mandates related to services provided by counties to seriously emotionally disturbed children.
· The May Revision proposes a one-time augmentation of $50 million to provide counties with targeted funding for multi-disciplinary teams to support intensive outreach, treatment and related services for homeless persons with mental illness.
· A recent audit by HHS is expected to result in the disallowance of approximately $180.7 million in federal Medi-Cal claims for county specialty mental health services. These funds will initially be paid by the state in 2018-19 with repayments from counties occurring over the next four years to prevent the removal of significant local funds from the mental health delivery system in a single year.
· Medi-Cal budgeting shortfall -- $287 million in a $104 billion budget.
· Homeless Services – an increase of $47 million General Fund in the May Revise
o Cal Works Housing Support
o Cal Works Homeless Assistance Program
o Home Safe Pilot Program
Prepared by: Lucien Wulsin