Gov. Edmund G. Brown released his revised budget request for fiscal year 2014-15 that begins July 1. Health care and debt retirement remain high priorities in Brown’s proposal.
This action follows on his agreement with legislative leaders to modify the criteria and use of a Rainy Day Fund that will appear on the November ballot.
The governor’s Finance Department is estimating that 2014-15 revenues will be about $107 billion, an increase of about $900 million over the January forecast. However, current year (2013-14) revenues are expected to be about $2 billion more than January’s forecast.
The fiscal office attributes this to “higher-than-expected personal income tax withholding, partnership income and dividend income. These revenues are associated with higher annual bonus payments and one-time shifts due to federal tax policy changes in 2012.” Consequently, this growth is not projected into the future.
The Legislative Analyst Office’s latest revenue estimate is similar to the governor’s. Although it is $2.5 billion more, that difference occurs over four fiscal years.
The largest bump ($1.2 billion) in the budget revision is for health-care coverage provided through Medi-Cal.
Last year, the state’s adoption of the optional expansion of Medi‑Cal under the Affordable Care Act represented a major new spending commitment. Federal health-care reform will provide coverage for another 1 million people through Covered California and Medi‑Cal combined.
Medi‑Cal enrollment is now expected to rise from 7.9 million before implementation to 11.5 million in 2014‑15. This is a 46-percent increase and Medi‑Cal will now cover about 30 percent of the state’s population. This surge in coverage has brought significantly higher state costs. However, the federal government does share these costs.
The drought continues to drain the state’s budget. In his revision, Brown is proposing another $142 million in drought‑related expenditures to reflect higher costs in firefighting, emergency response, enforcement, monitoring, wildlife preservation, food assistance and other critical activities.
The major debt issue is a recommendation for the state, in partnership with school districts and teachers, to strengthen the state’s teacher retirement fund (California State Teachers’ Retirement System). The proposal recommends increased contributions over a 30-year period. The first year would be $450 million and it would grow to more than $5 billion annually in about six years.
LAO reaction to the proposal was very supportive and it considers this issue the major one confronting the legislature. “The governor deserves considerable credit for this bold proposal that advances an important discussion. We recommend that the legislature use the governor’s plan as a starting point and adopt a comprehensive, long-term funding program for CalSTRS this year. As we have pointed out in legislative testimony, the costs to address this difficult problem only grow the longer the state waits.”
The governor’s proposed budget also continues the reduction of other state debt from nearly $35 billion in 2010-11 to elimination in 2017-18. This repays deferments to school districts, and loans from special funds, as well as underfunding of education based on Proposition 98.
