Governor’s Proposed Budget

Tomorrow the CA Department of Finance will release the “Governor’s Proposed Budget” for the 2022-23 fiscal year that commences July 1. At nearly 300 pages, it is one of two documents providing deep insight into the state government.* I’ve been reading them for nearly two decades now and offer a few tips:

  • Pay little attention to forecasts of General Fund revenues. A forecast in January 2022 of tax revenues that are significantly dependent upon the behavior of stock markets from July 2022 to June 2023 is inherently unreliable.
  • Pay lots of attention to:
    • Reserves, which as the last budget were $25.2 billion, and the Stress Test, which illustrates what happens to revenues when stock markets decline. Last year’s Stress Test indicated revenue losses over three years from a market correction such as that of 2001-03 would exceed $100 billion, or four times Reserves.
    • Annual spending per K-12 pupil, which as of the last budget had doubled over 10 years to $21,500.
    • Health and Human Services caseloads, which account for the largest share of spending including federal funds.
    • Annual spending on pension and other post-employment costs, which doubled over the past decade.
    • Schedule 4 salaries for Corrections employees, which a compensation study that GFC commissioned makes clear were unnecessarily boosted last June.
    • The shares of General Fund spending allocated to UC, CSU and the Judicial Branch, which have been losing ground to other categories of spending.
    • The level of spending that will go to corporate and union service providers who, believe it or not, are permitted to donate to lawmakers who authorize that spending and are not required to disclose donations until after the budget is enacted.**
    • Any discussion about value for money. E.g., the last budget boosted spending to address homelessness, so I will be looking for a discussion about what has and hasn’t worked. Likewise, some school districts are laying off teachers despite a big increase in spending on schools, and health providers are earning record amounts without a clear improvement in the health of Medi-Cal enrollees.

*The other is the Comprehensive Annual Financial Report (CAFR), but the state hasn’t issued one of those since 2019.
**GFC supports immediate disclosure of political donations and a ban on political donations from enterprises whose employees, shareholders or members do business with the state.