California Spending Plan

(Final Version)

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. In general, it reflects budgetary actions that the Legislature has taken through September 2017. In some cases, as noted, we discuss budget actions approved by the Legislature after June 15, 2017. In late July, for example, the Legislature passed and the Governor approved, an extension of authority for the Air Resources Board to implement the state’s cap‑and‑trade program from 2020 to 2030.

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	Enacted 2017-18	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.

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	Enacted 2017-18	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 Enacted
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 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 have $2.6 billion more in available resources compared to spending in 2017‑18, with that $2.6 billion excess used to build reserves in the two accounts.