The Governor’s 2017-18 January Budget Proposal

February 6, 2017


Just days after the Legislature returned to Sacramento from the fall interim, Governor Jerry Brown released his 2017-18 January Budget Proposal, effectively ending speculation of the administration’s revenue projections and priorities for the coming year. The following is ACSA’s analysis of the education components of the governor’s budget proposal.

Overview

Gov. Brown’s budget proposes a flat funded General Fund budget plan of $122.5 billion, a 0.2 percent decline from the current fiscal year. As a result, this year’s investments in K-12 public education are relatively modest compared to the year-over-year augmentations schools have received since the November 2012 passage of Proposition 30, the temporary income and sales tax initiative. The budget proposes to fund the Proposition 98 minimum guarantee at $73.5 billion, a $500 million downward adjustment to the 2016-17 funding levels in an effort to not over-appropriate the minimum guarantee.

As it has become customary in the previous budget proposals, the governor calls for fiscal discipline and restraint while issuing several warnings of risks to the state’s economy. Governor Brown’s budget recognizes the historic volatility and fluctuations in public school finance largely because of the state’s over-reliance on personal income taxes (and capital gains) from its wealthiest taxpayers. As a result, the governor emphasizes there is a heightened “uncertainty” and “unpredictability” of our revenue system.

Compared to the 2016 Budget Act signed last June, the administration notes that the state is experiencing a modest deficit as a result of a $5.8 billion decline in its revenue forecast for 2015-16 through 2017-18. To close the budget deficit and rebuild the state’s operating reserve, the budget proposes various solutions, including technical adjustments to the Proposition 98 minimum funding guarantee; eliminating one-time uncommitted funds for affordable housing ($400 million) and state office building retrofits ($300 million). The Governor also limits spending proposals to keep spending flat in 2017-18 by pausing rate increases for child care and preschool, as well as not providing the Middle Class Scholarships to any new students.

Consequently, Gov.Brown’s budget seeks to achieve a balance between meeting some of the state’s priorities with limited ongoing resources, while recognizing the volatility of the state’s predominant revenue stream. This “boom and bust” trend in the state’s revenues prompted the passage of Proposition 2 by California voters in November, 2014 to set aside money in the state’s reserve. By the end of 2017-18, the state’s Rainy Day Fund could have a total balance of $7.9 billion, or 63 percent of the constitutional goal of having 10 percent of tax revenues in the Rainy Day Fund. Unlike past years, at this point the governor is not proposing any deposits be made to the state’s reserves.

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Download ACSA's Response to the Gov's January Budget Proposal

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