The California Legislature will vote today on a “junior budget bill” that pulls back about $1.6 billion in previously approved state spending. Assembly Bill 106 (also Senate Bill 106) modifies the Budget Acts of 2022 and 2023 to stop unspent funds from going out the door, a quick action that was recommended by the Legislative Analyst’s Office as a “use it or lose it” opportunity to reduce California’s significant budget shortfall.
One useful thing about a budget shortfall is that it shines a spotlight on some of the questionable places that state lawmakers throw your money when the budget is flush. For example, the Assembly Budget Committee’s analysis found that they could reduce the $900,000 they had authorized to “support the COVID-19 website,” cancel $11.9 million for a pilot program called “Healthier at Home,” and pull back $8.8 million of a $10 million allocation to an “undersubscribed” program to persuade older Californians to join up with CalVolunteers.
But even $1.6 billion in savings is a drop in the bucket compared to California’s budget shortfall, officially estimated most recently at $73 billion by the Legislative Analyst and $38 billion by the Newsom administration’s Department of Finance. AB/SB 106 is one piece of the “Early Action Agreement” announced by the governor and legislative leaders on April 4, which is said to reduce the budget problem by $17.3 billion.
If it seems a little sketchy to find $17.3 billion of savings with only $1.6 billion in budget cuts, that’s because it is a little sketchy. The “Early Action Agreement” claims $3.6 billion in “reductions,” but that includes $762.5 million from not counting the salaries of vacant positions, and another $532.5 saved by something described as “Withdraw Elimination of Two-week Fee-for-Service Checkwrite Hold.”
The rest of the $17.3 billion is mostly found in accounting gimmicks. “Delays” produce $3.1 billion in savings, “deferrals” are good for another $2.1 billion, and “fund shifts” somehow reduce the budget shortfall by $3.4 billion. Additional borrowing from special funds will give the General Fund another $1.4 billion.
All of these tricks can be described as chickens that will come home to roost in future budget years, which are projected to have their own significant budget shortfalls, according to both the Department of Finance and the Legislative Analyst’s Office.
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The Early Action Agreement contains only one item under “revenue,” and that’s $3.8 billion from the Managed Care Organization tax that helps to fund the Medi-Cal program. The general fund will take some of the money from that tax.
It appears there’s not much appetite for tax increases in Sacramento right now. The razor-thin margin by which Proposition 1 was approved by voters in March has certainly sent a signal that Californians are not in the mood to give the state more of their money.
The governor and state lawmakers are planning to use about half of the reserves in the “rainy day” fund to cover part of the budget shortfall. In order to do this, however, the governor must declare a “budget emergency.”
In fact, there is no emergency. California’s budget shortfall is the result of overpromised spending and lower-than-projected revenue from tax collections. It’s good to finally see state lawmakers scrutinizing every item in past budgets and reviewing programs to discover what isn’t working. That should become a regular part of the budget process.
