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LAO May Revise

LAO May Revise

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Published by Jbrownie Heimes

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Published by: Jbrownie Heimes on May 18, 2012
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05/18/2012

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The 2012-13 Budget:
Overview of theMay Revision
May 18, 2012Mac TaylorLislativ Analyst
 
2012-13 BudgeT
2LegislativeAnalyst’sOfce
www.lao.ca.gov
 
2012-13 BudgeT
www.lao.ca.gov
LegislativeAnalyst’sOfce
3
ExEcutivE Summary
Goeo iefes $15.7 Bo Bge Pobe
Revenues Down Since January, but Proposition
 
98 Obligations Are Up.
In January, the
2012-13Governor’s Budget 
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 eect 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 eect 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.
reee Foes resobe, b reeeope Eses ae ue
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 transer 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 benet 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 benet), itis more likely that schools would receive signicantly lower amounts in 2012-13 (generating much lessGeneral Fund benet). Part o our concern relates to the likelihood that lawsuits will delay distributiono these unds.

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