SAN FRANCISCO – California Gov. Jerry Brown’s revised general fund budget proposal released Tuesday cuts general fund spending by $1.3 billion from his January proposal amid lower revenue forecasts.
The governor’s new budget should help somewhat temper potential spending by some lawmakers chomping at the bit after state revenues through April came in around $4.5 billion higher than projected.
“Everybody wants to see more spending, that is what this place is, a big spending machine,” Brown said during a press conference Tuesday announcing the revise. “I am the backstop.”
The governor’s new general fund spending plan of $96.4 billion for fiscal 2014 is 1.3% drop from his $97.7 billion proposal in January. State general fund expenditures would still be 3.6% higher than last year’s $93 billion budget.
Brown released his initial budget in January that put the state in the unusual position of working with a balanced budget after years of severe budget gaps.
The lower revenue forecast for the next fiscal year is due mainly to recent actions by the Federal government, including eliminating the 2% payroll tax reduction and the impact on the so-called “sequestration” – across the board U.S. government cuts – on state workers, according to the governor.
Brown’s spending plan projects revenue in the current fiscal year ending June 30 to increase only $2.8 billion compared to his January budget proposal, and to decline $1.8 billion in fiscal 2014 from those January projections. Because of a voter proposition that forces the state to spend a certain amount of its tax take on education, new revenue is largely slated for schools and universities in the new proposal.
The spending plan also includes a $1.1 billion reserve.
The governor has also proposed cutting what he likes to call California’s “wall of debt” – various liabilities the state has collected over the years through deferrals and borrowing – to $27 billion this fiscal year from $35 billion, and then to $4.7 billion by the end of fiscal 2017.
Brown’s spending plan also cuts general fund debt service in fiscal 2014 by more than $140 million to $5.7 billion compared to his January budget. The Department of Finance said this is due to projected premium from future bond sales next year, a smaller spring bond sale than expected and savings from spring refundings.
The budget also assumes a more than $30 million increase in debt service cost due to a lower Build America Bond subsidy payment because of the federal sequester.
For the current fiscal year, the governor said general fund debt service will fall by $292 million compared to his earlier budget to $4.7 billion due to the same reasons he lowered next year’s expectations.
Since taking office, Brown’s administration has pushed departments to use unspent bond proceeds before selling more bonds, which has contributed to lower bond issuance. The Department of Finance said unspent bond proceeds have dropped to $4.4 billion as of the end of March compared to $7.3 billion in April last year.
Standard & Poor’s upgraded California to A from A-minus in January, and Fitch Ratings upped its outlook on the state to positive with an A-minus rating in March. Moody’s Investors Service rates the state’s general obligation bonds A1.