Restoring Balance, Reinvesting in the Future: The California Budget in 2013

January 8, 2013

As we embark on 2013, California faces a moment of unique opportunity. The state’s economy is beginning to rebound from the Great Recession, while the significant new revenues approved by voters this past November have California poised to emerge from years of severe budget deficits.

The key word here is “poised,” as the Legislative Analyst’s Office (LAO) projects the state to face a $2 billion deficit this year, with future budgets moving into the black by 2014-15. The good news is that a $2 billion shortfall pales in comparison to the deficits of the past decade, which means that we are not likely to see the kinds of deep programmatic cuts made in recent years. The bad news is that the state is digging out of a deep hole, with revenues still significantly short of pre-recession levels. For the current fiscal year (2012-13), General Fund revenues as a share of the state’s economy are down by almost one-sixth from prior to the start of the Great Recession.

Meanwhile, other serious challenges remain. Poverty and long-term unemployment are high. The gap between high- and low-wage earners has widened dramatically over the past generation. In addition, the deep budget cuts of recent years have frayed the social safety net and battered other public systems and services that underpin a strong economy and a high quality of life.

So, while there are signs that California is turning the corner and emerging from the Great Recession and its impacts, the near-term outlook for many families and communities remains tenuous. State leaders, advocates, and stakeholders around the state will confront challenging trade-offs in 2013 between ensuring fiscal stability and reinvesting in the future.

Turning the corner. Restoring balance. Reinvesting in the future. These are themes that will run through the California Budget Project’s work during 2013 and beyond, as we seek to foster a budget policy debate that is broadly inclusive and fact-based. We often remind people that budgets are about values and priorities. The list of items needing to be prioritized is perhaps longer than a $2 billion deficit will allow: investing in education, health care, workforce development, infrastructure, and other public programs and services that position the state for a robust recovery and long-term economic growth.

A multiyear, balanced approach that accounts for 2013 budget realities while drawing on options on both the revenue and spending sides of the ledger will be critical to maintaining stability in the state’s fiscal situation and fostering a bright economic future for California.

— Chris Hoene

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Statement: The California Budget Project on the Release of Governor Jerry Brown’s May Revision

May 14, 2012

The California Budget Project, a nonpartisan public policy research group, released the following statement today from Senior Policy Analyst Scott Graves in response to the release of Governor Jerry Brown’s May Revision to his proposed 2012-13 budget:

“California’s economy continues to slowly recover from the Great Recession. However, lower-than-anticipated tax collections in recent months add significantly to the challenges the state faces in closing the budget gap. For example, the Governor’s May Revision projects lower-than-expected corporate tax revenues, due in part to the massive corporate tax breaks enacted in recent years.

“The May Revision highlights the need for significant additional revenues to help address the budget shortfall. Without a balanced approach to addressing the budget gap – one that includes additional revenues – we face even deeper cuts to schools, colleges, and other core public structures that are essential to the lives of all Californians. The tax measure the Governor plans to put before voters in November provides a reasonable, sound approach to stabilizing the state budget and creating a foundation on which to rebuild going forward.

“To the extent that cuts are made to address the budget gap, such reductions should be carefully targeted so they don’t endanger vulnerable families, children, and seniors, who have already borne the brunt of recent years’ budget cuts. With many families still struggling in the wake of the worst recession in the post-World War II era, we are concerned that the Governor’s May Revision deepens his proposed cuts to the state’s safety net, while also making significant reductions to child care and other programs and supports that help Californians prepare for and keep jobs.

“In the coming weeks, the state’s leaders should work to bridge the budget gap while ensuring sufficient support for the public structures and systems that provide the foundation for our quality of life and a strong economy.”

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Child Care Is Critical for Parents Struggling To Find or Hold On to Jobs

February 7, 2011

Safe and stable child care is essential to low- and moderate-income parents’ ability to find and hold on to jobs. It’s also expensive. As we show in our Making Ends Meet report, which estimates how much it costs to raise a family in California, the cost of care for two children takes up about 20 percent of a single-parent family’s basic budget – the amount needed to cover essential needs without public or private assistance. That equates to more than $1,000 per month for child care in many counties, a cost that is clearly prohibitive for low- and moderate-income families.

California’s child care programs offer a solution for tens of thousands of families in which parents are working, looking for work, or participating in training. These programs help families access safe, reliable, and affordable child care and serve more than 300,000 children every month, as we point out in our new chartbook, Key Facts About Child Care and Development Programs in California. However, the Governor’s Proposed 2011-12 Budget includes deep cuts to child care, including shifting potentially hundreds of dollars in costs each month to low- and moderate-income families. These proposed cuts would reduce total funding for California’s child care and development programs – which also include state preschool and afterschool – by more than 18 percent between 2010-11 and 2011-12, with almost all of the impact falling on child care programs. In fact, preschool and afterschool funding would remain essentially flat in 2011-12 compared to recent years, after adjusting for inflation. As the Legislature seeks a balanced approach to closing the budget gap, we hope that policymakers will adopt “solutions” that recognize that child care assistance is more important than ever as parents struggle to find or hold on to jobs in the wake of the Great Recession.

– Scott Graves

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Proposed Spending Reductions Target Health and Human Services Programs

January 18, 2011

As promised, we’re digging deeper into the Governor’s Proposed 2011-12 spending plan. As we noted last week, the proposed spending reductions would have a disproportionate impact on health and human services programs. In fact, over half (52.8 percent) the combined total of 2010-11 and 2011-12 spending reductions affect health and human services programs. In contrast, these programs accounted for 30.4 percent of budgeted 2010-11 General Fund spending.

CalWORKs, the state’s highly successful welfare-to-work program, would be cut by $1.5 billion, a reduction of more than a quarter. Proposed policy changes include an unprecedented 13 percent reduction in cash aid payments. In their analysis of the budget, the Legislative Analyst’s Office notes that, “the state has never reduced grants by more than 6 percent before” and that grants “would be the lowest level in decades relative to the FPL.” The Governor would also use $947 million of federal TANF funds to support the Cal Grants program, which provides student financial aid. These costs were previously paid out of the state’s General Fund. The proposed shift would leave families with fewer dollars to make ends meet and diminished access to job training and other services aimed at helping them move from welfare to work.

Last week, we lauded the Governor’s proposals for striking a balance between spending reductions and revenue increases. Unfortunately, the proposed spending cuts are far less balanced, leaving hundreds of thousands of Californians to face a precarious future in the still tumultuous waters of a struggling economy.

– Jean Ross

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The Good, the Not-So-Good, and a Few Concerns: The Governor’s Proposed 2011-12 Budget

January 14, 2011

Per our last blog post, we here at the CBP have been in “huddle down” mode, reading through the budget and other organization’s analyses of the budget, and trying to assess the impact of the budget within its broader economic context. We will be releasing our signature budget “chartbook” at a briefing on February 3 at 10:00 a.m. in Room 100 of the Legislative Office Building at 1020 N Street in Sacramento. We will be sending out more information on the briefing as soon as we come up with a catchy title for this year’s chartbook (suggestions welcome!). Now that we have had several days to reflect, here are a few observations.

The Good

The Governor’s proposals:

  • Offer a balanced approach, with roughly equal shares of the “solutions” coming on the revenue and expenditure sides of the budget in contrast to the “cuts-only” budgets of recent years.
  • If enacted, would place the state on a glide path to a (temporarily) balanced budget.
  • To shift program responsibility and money to local governments, if done smartly, can encourage stability, innovation, and investment in prevention.
  • To end state subsidies for local economic development efforts that, according to independent research, produce few if any jobs and little “bang for the buck,” is a refreshing steps towards improving accountability and transparency.

The Not-So-Good

The Proposed Budget:

  • Targets a disproportionate share of the cuts to programs and institutions that low-income families rely on to help make ends meet. The impact of the proposed cuts at the street level will be magnified by the loss of federal matching funds, which can double or triple the impact of lost state dollars.
  • Would make cuts that are permanent – while most of the proposed revenues are temporary – making the Governor’s proposal less balanced over time. Moreover, as noted by the Legislative Analyst, “absent a place to replace these taxes, there could be a substantial fiscal ‘cliff’ for the General Fund after the five-year period” and the temporary tax increases expire.
  • Would leave many Californians, including the 230,000 children who would lose cash aid through the CalWORKs Program, with few options in a still struggling economy where jobs are scarce.

A Few Concerns

Our top-line response is that the Governor’s proposals provide a good starting point. As the debate moves toward the Legislature, here are a few areas of initial concern:

  • The potential for achieving innovation and efficiency under realignment may be lost if local governments are reluctant to invest the upfront effort and resources due to a lack of certainty over long-term funding. The solution: a permanent shift of responsibility should be coupled with a permanent funding stream.
  • Additional reductions to health and human services programs will compound prior years’ reductions, magnifying the impact on families and communities, as well as service delivery systems. In particular, we would urge the Legislature to carefully examine how the proposed changes to health programs will affect the state’s ability to implement the new federal health reform law.
  • The devil is always in the details. The Governor’s realignment proposal, in particular, is extraordinarily complex. We’ll have more to say in upcoming days and weeks as we learn more and dig deeper.

– Jean Ross

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