SAN FRANCISCO Jan 14 California's spending and
revenue are "roughly in balance," the state's budget watchdog
said on Monday in a report reviewing the budget plan which
Governor Jerry Brown unveiled last week.
The Democratic governor on Thursday delivered some rare good
news in his spending plan for the state's fiscal year beginning
in July, saying California's budget deficit is gone after years
of financial troubles, which allows for increased spending on
education and healthcare.
The report by the Legislative Analyst's office also struck
an optimistic tone.
"Over the past several years, each January Governor's budget
has included billions of dollars in proposed solutions -
expenditure reductions, revenue increases, borrowing and other
actions - in order to close budget shortfalls," the report said.
"Now, however, the state has reached a point where its
underlying expenditures and revenues are roughly in balance."
"With the exception of education funding, the remainder of
state General Fund spending reflects a baseline budget," the
report added. "This means that state-supported program and
service levels established in 2012-13 generally continue 'as is'
in 2013-14. Under our and the administration's fiscal forecasts,
this situation would likely continue into 2014-15."
A report by the Legislative Analyst's Office in November
predicted the government of the most populous U.S. state would
face a $1.9 billion budget gap in its next fiscal year instead
of the surplus Brown expects.
The office's report on Monday also applauded Brown's vow to
hold down most state spending. Some Democrats would like to
increase spending after years of steep cuts. Democrats gained a
supermajority of seats the legislature in November and can
override Republican attempts to block bills for tax increases.
"The governor's emphasis on fiscal discipline ... is
commendable, especially in light of the risks and pressures that
the state still faces," the report said.
"We note that there are still considerable risks to revenue
estimates given uncertainty surrounding federal fiscal policy
and the volatility inherent in our revenue system," the report
Brown said California has to hold down most spending due to
uncertainty about the direction of talks in Washington over the
federal budget and the economic recovery. He also is concerned
about potential increases in healthcare costs and lawsuits that
could block parts of the state budget.
Under Brown's budget plan, spending in the upcoming year is
set to rise $4.7 billion from the current 2012-13 budget.
Schools and universities will get a $4 billion boost, health
spending will rise $1.2 billion, while transfers to local
governments will drop $2.1 billion.
Brown also wants to put $1 billion in a rainy-day fund, pay
down internal loans used to help close budget gaps over the past
decade and put the state in a position where it can post
surpluses in future fiscal years.
While California's finances appear to be stabilizing, in
part thanks to tax increases approved by voters in November, the
state will still face serious budget challenges, the Legislative
Analyst's Office said in its report.
The report said California would have a slim reserve
following the next fiscal year under Brown's plan, noting the
state "would still have no sizable reserve at the end of 2016-17
and would not have begun the process of addressing huge unfunded
liabilities associated with the teachers' retirement system and
state retiree health benefits."
"As such, the state faces daunting budget choices even in a
much-improved fiscal environment," the report said.