Introduction
A
year ago, the state aced an immediate $26.6 billion budget shortall and utureestimated annual gaps o $20 billion.
The state’s scal challenges were exacerbatedby an unprecedented level o debts, deerrals, and budgetary obligations accumulatedover the prior decade.The 2011 Budget Act made substantial progress in returning the state to scal stability,but more work remains.
The Governor’s Budget estimated that the state aced a$9.2 billion budget problem or 2012‑13.
The May Revision, however, estimates that theproblem has increased to $15.7 billion as a result o a reduced revenue outlook, highercosts to und schools, and decisions by the ederal government and courts to blockbudget cuts.The May Revision builds upon the key principles underlying the enacted 2011‑12 Budgetand the Governor’s Budget protecting education and public saety programs, makinggovernment more ecient and less costly, moving government closer to the people,and paying down debt.
While requiring more dicult cuts than originally anticipated,the May Revision will restore scal balance and make Caliornia more attractive orbusiness, investment, and the creation o jobs.
May Revision – 2012-13
Introduction
Substantial Progress Has Been Made
The enacted 2011‑12 Budget substantially shrank the state’s ongoing decit and rejectedthe past approach o over‑relying on one‑time solutions.The 2011‑12 Budget refected the ollowing:Passing an on‑time budget that avoided the gimmicks o prior budgets.Closing more than hal o the state's ongoing budget shortall.
A year ago, the gapstood at about $20 billion; it is now estimated to have shrunk to about $8 billion.Realigning public saety programs to bring government closer to the people.Eliminating redevelopment agencies to increase unding or schools, police, re,and other core local services.Making tough cuts across state government to reduce General Fund spending asa share o the economy to its lowest level since 1972‑73.
State SupplementaryPayment grants were reduced to 1983 levels.
CalWORKs grants were reduced tobelow 1987 levels.
General Fund support or the state’s universities was cut bynearly 25 percent.
General Fund support or the state’s courts was cut by about20 percent.
The Williamson Act subventions were eliminated, and the child care anddependent tax credit was eliminated.Protecting education, public saety, and other core state services to theextent possible.Reducing the state’s cash‑fow borrowing, and saving hundreds o millions o dollarsin short and long‑term borrowing costs.Improving management o the state’s inrastructure projects by committing availablecash to shovel‑ready projects and avoiding unnecessary debt.Through the budget and executive action, the Administration has ocused on shrinkingstate government and making it more ecient.
These changes will help the state keep itsbudget balanced or the long term.
Progress includes:Reducing the state workorce by more than 30,000 positions on a permanent basis.
The state workorce is at its lowest level as a share o the state’s population inalmost a decade.
Caliornia already had the nation’s th lowest level o governmentemployment in 2010.
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Introduction
May Revision – 2012-13
Launching a downsizing plan or the Caliornia Department o Correctionsand Rehabilitation.
The plan is a long‑term strategy to save billions o dollars,conorm the prison system to post‑realignment population changes, satisythe U.S.
Supreme Court’s order requiring reduced crowding, end ederal courtoversight in health care and other areas, and improve rehabilitation programsto reduce recidivism.
It will reverse the trend o prison spending consuming agrowing percentage o the General Fund budget
— rom 11 percent to 7.5 percent.Eliminating 20 boards, commissions, task orces, oces, and departments.
The Governor’s Budget and the May Revision combined propose to eliminate morethan 60 additional entities and programs.Reorganizing state government to improve the management and coordinationo government activities, acilitate urther eciencies and reduce costs.
The Administration submitted its reorganization plan to the Legislature on May 3.
The plan cuts the number o state agencies rom 12 to 10 and consolidates andaligns related programs and departments.
The 2012-13 Budget Shortfall
In January, the budget shortall was estimated to be $9.2 billion.
The May Revisionestimates that the gap has increased to $15.7 billion.
Absent actions to eliminatethe structural gap between revenues and expenditures, the state would ace aboutan $8 billion budget shortall each year.
As shown in Figure INT‑01, the ongoingbudget problem is much smaller than what the state aced just over a year ago.
The May Revision proposes to close the remaining gap.The $6.5 billion increase in the size o the 2012‑13 budget problem is largely attributableto three actors:
Prior Revenue Forecast Was Too High ($4.3 billion)
—
Finance’s January orecastwas too reliant on strong April and June 2011 receipts, which have now been wipedout by weak nal payments received in April 2012.
The May Revision continues toproject a modest economic recovery.
Proposition 98 Spending Increases ($2.4 billion)
—
Proposition 98 unding or K‑14education relies on year‑to‑year changes in revenues.
Under the revenue orecast,2011‑12 revenues have decreased ($3.1 billion), and 2012‑13 revenues, while lowerthan in January, are increasing by 5.9 percent.
The resulting year‑over‑year increase
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Gov. Jerry Brown's May budget revision summary 2012-2013
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