On January 10, Governor Jerry Brown released a proposed 2018-19 budget that prioritizes building up reserves amid deep uncertainty about looming federal budget proposals, the impacts of the recently enacted federal tax bill, and future economic conditions. The Governor forecasts revenues that are $4.2 billion higher (over a three-year “budget window” from 2016-17 to 2018-19) than previously projected in the 2017-18 budget enacted last June, driven largely by continued economic growth. The Governor’s budget assumes no changes to current federal policies and funding levels and is not yet able to account for the potential impacts of the Republican tax bill passed in late December.
The Governor’s proposed budget reflects some notable advances, such as providing funding to fully implement the Local Control Funding Formula for K-12 education (designed to direct additional resources to disadvantaged students), continuing to invest in early education and higher education, and creating a home visiting pilot program that would offer a range of supports for families participating in welfare-to-work (CalWORKs). In addition, the proposal maintains resources to address the impact of federal actions targeting the state’s immigrant residents. Yet, the Governor also places a heavy emphasis on building California’s reserves. He proposes making a one-time supplemental deposit of $3.5 billion to the state’s rainy day fund, in addition to the $1.5 billion required by Proposition 2 (2014). This proposed $5.0 billion deposit would raise the rainy day fund balance to the Prop. 2 maximum of 10 percent of General Fund tax revenues.