LOS ANGELES - The California Legislative Analyst's Office released a mostly rosy review of Gov. Jerry Brown's proposed budget for fiscal year 2014-15, saying it focuses on the right goals.
"The governor's emphasis on debt repayment is a prudent one," legislative analyst Mac Taylor wrote in the LAO's budget overview, released on Monday. "Overall, the Governor's proposal would place California on an even stronger fiscal footing, continuing California's budgetary progress."
Taylor noted that the state has made substantial progress in recent years in addressing its prior budgetary problems, progress boosted by a recovering economy, increased revenues from Proposition 30, a soaring stock market, and the legislature's decisions to make few new ongoing spending commitments.
"We're pleased that the Analyst agrees with the Governor's principal priorities of continuing to pay down debt and save for a rainy day," Brown's finance director, Michael Cohen, said in a statement.
Brown's $106.8 billion spending plan, which leaked a day early on Thursday, includes early retirement of the state's deficit financing bonds, adding $1.6 billion to the rainy day fund, and paying down the state's debt and liabilities.
The early repayment of the economic recovery bonds, as the deficit bonds are called, would free up sales tax resources now dedicated to bond repayment to support the general fund beginning in 2015-16, the report said. Adding to the rainy day fund would build a strong precedent for accumulating reserves.
"In general, setting aside money for a rainy day is exactly what the state should be doing when revenues are soaring, as they are now," Taylor wrote. "With regard to another difficult budgetary issue for California — addressing the large unfunded liabilities of the state's teachers' retirement system — we suggest that the state set aside funds beginning this year in anticipation of a future long-term funding plan."
The LAO views the governor's spending plan as a "reasonable mix" of one-time and ongoing spending. The plan includes retiring $6.2 billion in outstanding K-14 deferrals, which analysts say would eliminate the largest component of the school and community college wall of debt by the end of 2014-15.
The office remains concerned about the governor's higher education budget plan, which is similar to last year. Most of the proposals relate to unallocated base budget increases, with no specified expectations with regards to operations, facilities, or performance and no enrollment expectations.
Concerns remain that this plan would lead to less responsiveness from the segments in meeting state priorities, as well as diminished state guidance and oversight.
When Brown presents his revised budget plan to the legislature in May, the LAO said there is a significant possibility that 2013-14 and even 2014-15 revenue estimates will rise by a few billion dollars.
"In order to keep the state on a sound fiscal footing, we advise the legislature to make only limited and targeted ongoing program commitments from additional revenues that may be identified this spring," the report said.
The LAO is a nonpartisan government agency that has been providing fiscal and policy advice to the California Legislature since 1941.