Thursday, January 10, 2013

Thoughts on the (Yawn) Governor's Budget Proposal

Well, that was boring.  First time in years that the Governor's budget proposal didn't include huge budget cutting or a major new proposal which makes sense because it is his 3rd budget and he has already laid out much of his policy vision. 

And with Prop. 30 passing and the economy hasn't thrown any major surprises over the last year, the budget is more or less balanced along the lines of last year.  So no need for new slashing, and no new money for major initiatives or restoring old cuts. 

The big story is going to be the weighted student funding formula that would direct most of the new funding to schools with lots of english language learners and poor kids.  That was initially proposed last year, but implementation was contingent on increased overall funding - which meant Prop. 30 passing.  I am a little surprised that opponents of Prop. 30 didn't use the weighted-student funding proposal more in their campaign against the taxes (something like "Jerry Brown's tax increase won't increase funding for all schools, politicians and bureaucrats will choose which schools get the extra funding and some schools will be left out.  Do you trust Sacramento to treat your community fairly...")  I wouldn't be surprised to see Democrats lower the vote thresholds for school parcel taxes to help ease resistance from suburban school districts that will be harmed by the weighted student funding formula.  This issue has huge implications for the Valley, and still has to overcome a lot of resistance, so I will be watching this issue closely.  

People most often ask me about the economic and revenue forecast in the budget.  I think it is a little optimistic, but not unreasonable, and it is important to note that their forecast optimistically assumed the 2% payroll tax cut would be extended for 2013.  That assumption obviously turned out to be wrong, and will have an effect on future forecasts for the May revision.  My initial estimate is that revenues are probably going to be $1-2 billion less than their projections, a little larger than the budget's reserve.   

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