Legislation Update April: State Budget

Governor Brown says budget hole probably $1 billion or more larger than he projected in January. The governor’s January budget proposal assumed a roughly $9 billion deficit. However, he was quoted yesterday during a speech that he thinks the budget hole is larger by $1 billion, or more. We know his Department of Finance is busy drafting the final elements of the Governor’s May Revision, which is scheduled to be released on or before May 15.

The governor has been lamenting to the press in recent weeks over his disappointment in the legislature to follow his wishes that they act before March to make some cuts in the budget. Legislative leaders have been unwilling to go along with early cuts saying they will wait until they have a better picture on state revenues before deciding to make reductions.

Last week, the State Controller released data showing the state’s March tax revenues missed projections, leaving the state about 2% behind projections in the budget (approximately $1 billion). April is a high volume tax collection month and state officials are holding out hope the revenue will materialize. Additionally, folks are looking at the recent IPO of Facebook stock, which could be a boondoggle with capital gains tax revenue. We will keep you posted.

Governor’s TK proposal kicked out of the budget – Based on the actions of the Senate Budget subcommittee this past week, it is highly likely the governor’s TK proposal will not be part of the final budget package. On Thursday, the Senate Budget Subcommittee on Education Finance voted to reject the governor’s proposal. Because the Assembly budget subcommittee has already taken the same action, it appears the Governor’s proposed elimination of the TK mandate will not be in either the Senate or Assembly versions of the budget. For the governor to get his TK proposal into the budget, he will have to make a big push in the final ‘Big 5’ negotiations with legislative leaders. Given the relative perceived importance of the program in his overall budget, we suspect the governor has bigger priorities.

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