Overall Summary of the Governor’s Proposed May, 2020-21 Budget Revise
California entered the year with a $21 billion Rainy Day Surplus and projections for a $5 billion surplus in the coming year. The Corona Virus has dried up state revenues and increased state expenses.
Personal incomes will be down by 9% in the coming year, and the state’s personal income taxes, sales taxes and corporate income taxes will be down by 20-25%. Medi-Cal enrollment is projected to increase by 2 million persons; TANF cash grant recipients are expected to double to over 700,000; 4.4 million are newly eligible for UI (Unemployment Insurance). “Unemployment insurance benefits in 2020-21 are estimated to be $43.8 billion, which is 650 percent higher than the $5.8 billion estimated in the Governor's Budget. This is primarily supported by federal funding, federal loans, and employer taxes.”
The combination of all of the above puts the state $54 billion in the hole in the May Revise. To get to a balanced budget as required by state law, the Governor proposes the following:
Cancelled expansions ($8.4 billion) means that the Governor proposed an increase in January and is now canceling the proposals; other reductions means your program is being cut. Reserves ($8.8 billion) means the Governor is spending from the Rainy Day Fund. Borrowing and transfers and deferrals ($10.4 billion) means the Governor is proposing to take money from your account and pay it back later with interest when the economy gets back on its feet. New revenues ($.4 billion) means some of next year’s taxes go up; this is primarily a suspension of the “net operating loss” deduction for large employers for the next few years. Federal funds ($8.3 billion) mean the allocation of the state share of the new federal funds under the CARES Act, etc. Trigger ($14 billion) means your program gets cut and if the US House and Senate agree on new revenues for state and local governments, it may get restored to the extent they agree to help state and local governments. As a general rule, state General Funds are being cut by 10%; for example General Funds to K-12 public schools, colleges and universities and state employees are all proposed to be cut by 10% absent federal action on relief for state and local governments. There are some offsets by the new federal stimulus funds.
The federal government through the Care Acts 1 and 2 and the Families First Act has put $186 billion into the California economy either directly to individuals ($115 billion) or through the state government ($71 billion). To understand the difference, if you got a stimulus check or your small business is getting a PPP loan/grant, that is direct to you or your employer to keep you on the payroll. If you are getting a UI check because you have been laid off, that is through the state government.
So small businesses in California will be getting $71 billion through the SBA under CARES Act. Individuals in California will be getting $74 billion in economic stimulus checks and UI benefits, etc. Schools in K-12 will be getting $2 billion. Colleges and universities will be getting $1.8 billion. Cities and counties will get $4.2 billion. Hospitals and other medical providers will get $5.3 billion. Food banks will get $3 billion to feed the hungry.
The proposed budget will allocate the state’s share of federal relief funds as follows:
K-12 schools will get $4 billion. State programs like public health (Covid 19 testing), first responders, programs for the sick and vulnerable will receive $3.8 billion. County public health (Covid 19 testing and contact tracing), mental health and social services for the mentally ill and vulnerable will get $1.3 billion. Local governments will get $.45 billion for police and fire and their services to the homeless.
Prepared by: Lucien Wulsin
Dated: 5/15/20