Goeo iefes $15.7 Bo Bge Pobe
Revenues Down Since January, but Proposition
98 Obligations Are Up.
In January, the
projected that the state needed to address a budget problem o $9.2 billion to balancethe 2012-13 General Fund budget. In the May Revision, the administration estimates that this budgetproblem has increased to $15.7 billion. Te increase mainly results rom lower revenue projections,which have the counterintuitive eect o increasing the state’s Proposition 98 minimum guarantee orschools and community colleges in 2012-13.
May Revision Projects $1
Billion Reserve i Governor’s Proposals Are Adopted.
Te May Revisionincludes a ew billion dollars o additional expenditure reductions and other budget-balancing actionsto address the larger budget problem and assumes passage o the Governor’s revised tax initiative,which is expected to generate more tax revenue than the original tax initiative measure he included inhis January budget plan. Te Governor also has updated his trigger cut proposals—which continue tobe heavily ocused on schools—to take eect i voters reject the tax proposal. In total, theadministration estimates that its May Revision package would address the $15.7 billion projectedbudget problem and leave the state with a $1 billion reserve at the end o 2012-13. Te administrationalso estimates the plan would leave the state with a small structural surplus in the coming ew yearsand make progress in reducing what the Governor has termed the state’s “wall” o budgetary debts.
reee Foes resobe, b reeeope Eses ae ue
Budget Problem Likely Somewhat Larger Tan Governor Estimates.
We nd the Governor’s May Revision economic and revenue orecasts to be reasonable. Our 2011-12 and 2012-13 revenue estimatesare just a ew hundred million dollars below the administration’ in each year. We are concerned,however, that the administration is overstating the amount o property tax revenues rom ormerredevelopment agencies (RDAs) that will be distributed to schools in 2011-12 and 2012-13. Our roughestimate is that this causes the state’s budget problem to be around $900 million greater than assumedby the administration because these lower property tax revenue distributions would increase the state’s“workload budget” Proposition 98 obligations.
Estimate or RDA Liquid Asset Shi Highly Uncertain.
One o the largest May Revision proposalsis to strengthen the state’s authority to expedite the transer o the ormer RDAs’ liquid assets (cash) tolocal governments, including school and community college districts. Te administration estimatesthat the proposal would generate $1.4 billion o General Fund benet in 2012-13 and $600 millionin 2013-14 by reducing General Fund Proposition 98 obligations. We nd that the administration’sestimate o liquid assets available or distribution is subject to considerable uncertainty. While it ispossible that schools will receive more than is estimated (generating greater General Fund benet), itis more likely that schools would receive signicantly lower amounts in 2012-13 (generating much lessGeneral Fund benet). Part o our concern relates to the likelihood that lawsuits will delay distributiono these unds.