State Spending Plan
July 12, 2017

The 2017-18 Budget

California Spending Plan

(Preliminary)


Each year, our office publishes the California Spending Plan to summarize the annual state budget. This publication discusses the 2017-18 Budget Act and other major budget actions approved in 2017. This online post is the first, preliminary version of this publication, based on the June 2017 budget package, most of which was signed into law on June 27, 2017. Later this fall, we will release an updated final version of this publication, which will reflect actions taken later in the legislative session.


Budget Overview


State Spending

Figure 1 displays the administration’s June 2017 estimates of total state and federal spending in the 2017-18 budget package. As shown in the figure, the budget assumed total state spending of $180 billion (excluding federal and bond funds), an increase of 7 percent over revised totals for 2016-17. General Fund spending in the budget package is $125.1 billion—an increase of $3.7 billion, or 3 percent, over the revised 2016-17 level. Special fund spending increased $8.5 billion, or 18 percent, over the revised 2016-17 level, largely as a result in increased special fund spending related to transportation and Medi-Cal.

Figure 1

Total State and Federal Fund Expenditures

(Dollars in Millions)

Revised

Enacted 2017-18

Change From 2016-17

2015-16

2016-17

Amount

Percent

General Fund

$114,465

$121,421

$125,096

$3,675

3%

Special funds

42,100

46,343

54,891

8,547

18

Budget Totals

$156,565

$167,765

$179,987

$12,222

7%

Selected bond funds

$3,644

$6,573

$3,269

-$3,303

-50%

Federal funds

90,690

96,195

107,498

11,303

12

Note: Reflects administration estimates of budgetary actions through June 2017.

General Fund Revenues

Figure 2 displays the administration’s revenue projections as incorporated into the June 2017 budget package. The administration projects $125.9 billion in General Fund revenues and transfers in 2017-18, a 6 percent increase over revised 2016-17 estimates. The state’s “Big Three” General Fund taxes—the personal income tax (PIT), sales and use tax, and corporation tax—are projected to increase 5 percent.

Figure 2

General Fund Revenue Estimates

(Dollars in Millions)

Revised

Enacted 2017-18

Change From 2016-17

2015-16

2016-17

Amount

Percent

Personal income tax

$78,735

$83,161

$88,821

$5,660

7%

Sales and use tax

24,871

24,494

24,470

-25

Corporation tax

10,460

10,210

10,894

684

7

Subtotals, “Big Three Taxes”

($114,066)

($117,865)

($124,185)

($6,320)

(5%)

Insurance tax

$2,562

$2,483

$2,538

$55

2%

Other revenues

2,236

1,706

1,453

-253

-15

Transfer to BSA

-2,093

-3,014

-1,773

1,241

-41

Other transfers and loans

-1,111

-501

-522

-21

4

Totals, Revenues and Transfers

$115,661

$118,539

$125,880

$7,341

6%

Note: Reflects administration’s revenue projections, as incorporated into the 2017-18 state budget plan in June 2017.

BSA = Budget Stabilization Account.

The PIT estimate for 2017-18 reflects a $140 million revenue loss associated with the expansion of the state Earned Income Tax Credit (EITC) to self-employment income and taxpayers with incomes of up to $22,300.

The Condition of the General Fund

Figure 3 summarizes the condition of the General Fund under the revenue and spending assumptions in the June 2017 budget package, as estimated by the Department of Finance. This shows that estimated state General Fund revenues ($125.9 billion) exceed total General Fund expenditures ($125.1 billion).

Figure 3

General Fund Summary

(In Millions)

2016-17
Revised

2017-18
Proposed

Prior-year fund balance

$4,504

$1,622

Revenues and transfers

118,539

125,880

Expenditures

121,421

125,096

Ending fund balance

$1,622

$2,406

Encumbrances

980

980

SFEU balance

642

1,426

Reserves

SFEU balance

$642

$1,426

BSA balance

6,713

8,486

Total Reserves

$7,355

$9,912

SFEU = Special Fund for Economic Uncertainties (the General Fund’s discretionary budget reserve); and

BSA = Budget Stablization Account (the General Fund’s mandatory budget reserve).

As shown in Figure 3, the June 2017 budget package assumed that 2017-18 will end with $9.9 billion in total reserves, as of June 2017. This consists of: (1) $1.4 billion in the state’s discretionary reserve, the Special Fund for Economic Uncertainties (SFEU), and (2) $8.5 billion in the state’s mandatory reserve, the Budget Stabilization Account, which is governed by the terms of Proposition 2 (2014). This is an increase of about $2.6 billion in total reserves compared to revised 2016-17 levels. This essentially means the General Fund is projected to collect $2.6 billion more in revenue than it spends in 2017-18, with that $2.6 billion excess deposited to the two reserve accounts.