Governor Brown releases May Revise

On Tuesday, May 13, 2014, Governor Brown released a revised $156.2 billion budget plan proposing to spend the bulk of the state’s windfall on paying down debts, increasing the rainy day fund, and vastly expanding the state’s Medi-Cal program.

The May Revision reflects the state’s best projection of revenues for the coming fiscal year and replaces the $154.9 billion spending plan proposed in January, which included modest increases for social services programs and billions of dollars to address long-term debt.

Some highlights of the Governor’s revised plan include:

  • Establishing a ‘Rainy Day Fund’: A recent agreement with legislative leaders of both parties will create greater stability to the state’s finances in years to come.  The Rainy Day Fund will allow the state to save for the future while paying down debts and unfunded liabilities. The proposal is expected to go before voters in November 2014.
  • Bonds and Savings: Sets aside $1.6 billion to make the final payment on the Economic Recovery Bonds and add another $1.6 billion for the Rainy Day Fund not attached to the voter initiative.
  • Shoring up Teacher Pensions: Proposes a plan of shared responsibility among the state, school districts and teachers to shore up the State Teachers' Retirement System. The increased contributions in the first year from all three parties total about $450 million, but would grow thereafter to more than $5 billion annually in 2020-21. The plan would eliminate the unfunded liability in approximately 30 years.
  • Implementing Federal Health Care Reform: Compared to what was projected in the January budget, 1.4 million more people will be covered through Medi-Cal, at a cost of an additional $1.2 billion. Enrollment is now expected to rise from 7.9 million in 2012-13 to 11.5 million in 2014-15, for a total cost increase of $2.4 billion.
  • Increasing Funds for Drought Response: Provides an additional $142 million ($121 million General Fund) in drought-related expenditures to reflect necessary spending on firefighting, emergency response, water management, wildlife preservation and food assistance.
  • Paying Down Debts and Liabilities: The Governor's January Budget proposed to reduce the “Wall of Debt” by more than $11 billion this year and fully eliminate it by 2017-18. The proposal will completely pay off all remaining deferrals to schools and the Economic Recovery Bonds this year. The May Revision includes an additional $100 million to repay a portion of existing mandate reimbursement claims that have been owed to local governments since at least 2004.

When Governor Brown took office, the state faced a massive $26.6 billion budget deficit and estimated annual shortfalls of roughly $20 billion. These deficits, built up over a decade, have now been eliminated by a combination of budget cuts, temporary taxes and the recovering economy.

In the next few weeks, the Legislature will be busy with budget hearings before voting on the final budget before the constitutional deadline of midnight on June 15, 2014.

Additional details on the May Revision can be found here.



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