The 2017-18 Budget

California Spending Plan

(Final Version)

Evolution of the Budget

January Budget Proposed $3.2 Billion in Budget Solutions. In preparing the 2017‑18 budget, the administration concluded that the state’s fiscal condition has worsened. In January, the administration’s estimates suggested that, absent new budget solutions, the state faced a budget deficit of $1.6 billion at the end of 2017‑18. To address this, the Governor’s Budget included more than $3.2 billion in actions to reduce General Fund spending growth. The most significant of these actions was related to the Proposition 98 minimum funding guarantee for schools and community colleges. The Governor’s Budget also eliminated a $400 million set‑aside for affordable housing, cancelled a scheduled transfer of $300 million for the replacement of state office buildings, and delayed child care rate augmentations.

May Revision: Higher Revenues, More Spending for Schools. Relative to January, the administration’s estimates of revenues associated with the “Big Three” state taxes were up $2.1 billion across 2015‑16, 2016‑17, and 2017‑18 combined. In addition to required spending increases under the Proposition 98 minimum guarantee, the May Revision proposed a discretionary increase of $1.6 billion for schools and community colleges across the three fiscal years. This resulted in $2.2 billion in proposed increases for schools and community colleges over the period. The Governor also proposed other discretionary increases, including $400 million in assistance to counties to offset some of their cost increases associated with the termination of the Coordinated Care Initiative (CCI).

Final Budget Package Includes $9.9 Billion Reserve. The Legislature passed the final budget package on June 15, 2017. Total reserves in the final budget package were about $200 million lower than reserves proposed by the Governor in the May Revision. The budget package also reflected various choices that shifted spending priorities compared to the Governor’s proposal. Budget savings resulted from (1) shifting nearly $1 billion funding for the renovation and replacement of state office buildings from General Fund to bond funds, and (2) counting $398 million in repayments of weight fee loans toward Proposition 2, which freed up a like amount of General Fund resources. Correspondingly, the final budget deal reflects higher spending for provider rates and reimbursements in Medi‑Cal, an expansion of the state EITC program, and additional augmentations for UC and CSU. The final budget plan also reflects a long‑standing interpretation of the state appropriation’s limit with some limited modifications and does not include a significant change in the limit proposed by the Governor in his January budget proposal.

Budget Package Signed by Governor. The Governor signed the 2017‑18 Budget Act and other budget‑related bills between June 27, 2017 and September 28, 2017. These bills are detailed in Figure 5. The Governor did not veto any appropriations in the 2017‑18 Budget Act.