Highlights and Analysis of the Governor's 2014-15 May Revision

Monday, May 19, 2014

View Complete Analysis (pdf)

Executive Summary

The Governor’s May Revision provides a good framework for the budget. It retains a rational focus on addressing past debts and future liabilities, and building a rainy-day reserve. However, it is far from perfect as it still embraces the ill-conceived High Speed Rail boondoggle (see Transportation page 26); misuses funds from the new “Cap and Trade” tax that will hurt California’s economy by increasing energy and gas costs; and fails to adequately fund the local public safety realignment that has shifted tens of thousands of felons into our local jails and neighborhoods.

Despite complaints from legislative Democrats, public employee unions, and their related spending interest groups, it is by no means an austere budget. General Fund spending reaches a new record high at nearly $108 billion, and is $11.5 billion higher than last year’s enacted budget. Spending for the state’s Medi-Cal program grows by $2.5 billion over two years as 2.7 million new people join the rolls driven by more generous eligibility rules and outreach efforts related to Obamacare (see Health page 21). State welfare grants are increased and the In-Home Supportive Services program expands as California continues to support one of, if not the most generous government social “safety net” systems in the nation (see California Safety Net Facts page 39).

Unfortunately, despite the record-high revenues and spending levels proposed by the Governor, there will never be enough generosity to satisfy some, as the Democrat chair of the Senate Budget Committee illustrated when he recently said, “It's time to start thinking about the need to extend the Proposition 30 tax increases that voters approved in 2012” – this despite Gov. Jerry Brown’s promise that the $6 billion in sales tax boosts and income tax hikes would disappear by the end of 2018.1 The Chair went on to warn that the plan for a new state rainy day reserve fund could cause financial problems in the future. "If we have $10 billion in reserve, how do we go to the voters in two or three years and say we have to extend their (Prop. 30) tax increase?"

The Legislature recently approved sending a bi-partisan Rainy Day Fund proposal to voters on the November 2014 ballot (see Rainy Day Fund page 7) that would protect the state from overspending in high tax revenue years and reduce the need for tax increases and spending cuts when revenues inevitably drop. Ironically, the day before passing the Rainy Day Fund measure, the leader of the Senate Democrats proposed to undermine the Governor’s current rainy day reserve by pulling out $1.3 billion for more state spending in this year’s budget plan.

Spending other people’s money for whatever cause you believe in is not altruistic. Spending irresponsibly in a manner that returns California to a new era of budget deficits is not leadership. California is a state with one-party rule, and should legislative Democrats repeat the past mistakes of spending money we don’t have in order please interest groups that will never be satisfied, it will be disastrous for all the people of California.

View Complete Analysis (pdf)