Summary of the Governor’s May Revise Proposed Budget for 2019-20
The Governor’s Proposed May Revise has nearly $3.2 billion in new revenues. For the most part they are constitutionally committed to debt reduction, increasing reserves and increased school spending.
$15 billion is dedicated to paying down debt, building up reserves and paying down unfunded liabilities (i.e. retirement accounts). This is an increase of $1.4 billion from January.
General Fund Revenues are up 3.1% compared to the prior year; income and sales tax revenues are up over 4% while corporate income tax revenues are down about 4%.
State General Fund expenditures are up by 2.8%. Spending on higher education is up 5.4%, and on K-12 education, spending is up by about 1%. Spending on Business, Consumer and Housing is up 277% and Transportation by 42% and Health and Human Services spending is up 14%. Corrections spending are up 1%.
· $10 million to develop a Master Plan for Universal Preschool, 30,000 new slots for preschool
· Child Care: $157 million in increased spending for child care, 14,000 new slots
· $600 million in new funding for construction of full day kindergarten facilities
· The proposed new California Earned Income Tax Credit for low-income families with young children would be increased from $500 to $1,000.
· $25 million for childhood trauma screenings
· An additional $10 million for home visiting services -- $90 million in total funding
· An expansion of California’s Paid Family Leave from 6 weeks to 8 weeks.
· $50 million for Child Savings Accounts pilot programs to help pay for college education
Education – K-12
· $102 billion for K-12 education, of which $59 billion is state General Fund. The Prop 98 guarantee is $81 billion for 2019-20.
· $696 million is allocated for Special Education
· $90 million to provide loan forgiveness for new teachers working in shortage areas like rural, inner city and STEM education
· $45 million for better teacher training
· Reduced CalSTRS contribution rate from 18.13% to 16.7% for school districts
· Prevents Charter School cherry picking (if any)
· Per capita school funding has increased by $5000 over the past 8 years
· Total is $36 billion
· UC educates 270,000 undergraduates on 10 campuses; they received budget augmentations of $400 million
· CSU educates 410,000 undergraduates across 23 campuses: they received budget augmentations of $560 million, including $15 million to address food and shelter insecurity – i.e. homelessness and not enough to eat.
· California Community Colleges educate 2.1 million students on 115 campuses.
Health and Human Services
· Total funding is $160 billion of which $41 billion is General Fund.
· Premium assistance will be offered in Covered California to make coverage more affordable for individuals with incomes between 200 and 600% of FPL. The individual mandate/shared responsibility will be restored in California with the revenues used to support increased premium assistance. 75% of the funds will be used for those between 400 and 600% of FPL who currently get no financial help.
· $122 million to build a stronger health care workforce in rural regions, behavioral health and primary care.
· An additional $120 million for physician and dentists loan repayment on condition that they see at least 30% MediCal patients in their practice. An additional $100 million to build up local mental health workforces.
· The MediCal caseload will fall by 2.4% to 13 million in the current year and stay about the same next year. Spending will be $102 billion ($23 billion General Fund). Spending on the ACA expansion population will be $19 billion ($2 billion General Fund).
· Prop 56 revenues ($1.25 billion) will be used for provider rate increases, loan repayment pilots, value based payment program and behavioral health integration.
· The $3 billion increase in state General Fund spending is due 1/3rd to expiration of the state MCO tax, 1/3rd to increased costs per eligible, and 1/3rd to a shift in timing of payments.
· Full scope MedCal coverage for low income undocumented young adults 18-26 at a cost of $98 million ($74 million General Fund).
· Redirection of county indigent health savings.
· Savings of $393 million in 2022-23 from negotiating drug prices on behalf of all Medi-Cal beneficiaries.
· $120 million for Whole Person Care Pilots that integrate and coordinate behavioral health, housing, social services and physical health. Chronically mentally ill homeless will benefit from this, depending on county implementation.
· $50 million decrease in CalWorks (TANF) due to lower caseload.
· $18 million decrease in SSI due to lower caseload
· $151 million increase in IHSS due to higher case load and more services for the frail elderly.
· Developmental Services cares for 330,000 individuals with developmental services through Regional Centers; the last of the state Developmental Centers is closing and transitioning to community based care. Rate reforms and increases of $330 million ($200 million General Fund) to improve performance and accountability of Regional Centers.
· Department of Public Health receives $3.3 billion, of which $224 million is state General Fund
· State Hospitals are primarily for those committed by the court system, such as the criminally insane or those being evaluated under court orders for fitness to stand trial; treatment population has declined to 6530 individuals.
· Homelessness is on the rise driven by the run up in rents, the lack of affordable housing, and the decline in new homes being built. It has now reached the level of homelessness during the Great Recession and the portion and percentage that is unsheltered is at its highest point ever.
· California has responded by approving new state bonds to build new housing for veterans and the homeless and by beefing up its treatment of mental illness and substance use disorders under the ACA and the Whole Person pilots.
· The May Revise adds $1 billion to these efforts: $650 for local governments emergency homeless aid, $120 million for expanded Whole Person Care Pilots, $150 million for more and better trained mental health professionals participating in these efforts, $25 million for SSI advocacy, and $4o million for college student rapid rehousing.
· $1.75 billion to spur the building of new housing
o Infill infrastructure
o Expanded state tax credits paired with underused state tax credits
o Demonstration projects for more affordable mixed income projects on excess state lands
· Population is declining to 126,700 prisoners in state prisons
· Shift to inmate rehabilitation and reentry planning and treatment, including substance abuse, education and employment training
· $71 million in May Revise and $162 million ongoing for integrated substance use disorder treatment programs. Including medication assisted treatment and cognitive behavioral treatment.
· $3.5 billion for inmate health care including $114 million in the May Revise for the reforms and spending requested by the receiver
· Shift of incarceration and treatment of juveniles from Corrections Deaprtment to Health and Human Services
· Consolidation of victim’s relief programs into a new single state Department
· California is now the world’s 5th largest at $3 trillion, and it’s population is about 40 million. Its state (General and Special Fund) spending is roughly $213 billion or about 7% of state GDP. Our per capita personal income is about $65,000, and we pay about 6.88% in state taxes.
· Projections are that US growth rate will slow from 2.9% last year to 2% by 2022.
· Worker’s wages and salaries grew by 5.3% in CA last year, and inflation by 3.7%, with housing inflation running at over 5% (twice the national rate) as the biggest contributor. The rise in energy prices was the next largest contributor both in CA and the nation. California’s exports are increasing while the nation’s next exports are declining.
· The main risks to the California economic outlook have intensified, including a stock market correction(s), federal policy, slower global growth, and an eventual U.S. recession. Structural vulnerabilities such as large federal deficits, increased risks from natural disasters, an aging population, and increasing consumer debt levels may hamper a response to shocks.
· California and the federal government pursue radically different policy objectives, with respect to environmental protection, health care access, and openness to global markets. The state chose to expand health care access through the federal Medicaid program, as well as other policy choices that are partially paid for by the federal government. The state is a globally significant producer of multiple agricultural goods, technology and other industries are globally competitive. Attempts by the federal government to change these policies could reverse progress and harm California's economy.
California Earned Income Tax Credit: The 2015 Budget enacted the state’s first-ever Earned Income Tax Credit to help working families in California. The EITC was expanded as part of the 2017 and 2018 Budgets, and is expected to provide $400 million of credits to around 2 million households in 2018.
The May Revision proposes to significantly expand the credit. The newly expanded credit will be available to roughly 3 million households in total, and will approximately triple the amount of credits provided from $400 million to about $1.2 billion. The expansion will:
· Provide a $1,000 credit for every family that otherwise qualifies for the credit and has at least one child under the age of 6.
· Increase the maximum eligible earned income to $30,000 so that those working up to full-time at the 2022 minimum wage of $15 per hour will be eligible for the credit.
· Change the structure of the credit so that it phases out more gradually, providing a more substantial credit for many eligible families.
Prepared by: Lucien Wulsin