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California Community Colleges—Managing Cash in a Time of State Payment Deferrals

December 18, 2020 - To help address the state’s large budget deficit as estimated in June 2020, the 2020-21 budget package deferred a substantial amount of General Fund payments to schools and the California Community Colleges (CCC). In this post, we (1) provide background on community college cash flow and cash management, (2) describe the community college deferrals included in the state’s 2020-21 budget package, (3) explain how the CCC Chancellor’s Office is implementing these deferrals, (4) discuss how community college districts are responding, and (5) present options for the Legislature to consider, particularly given the improved budget outlook.

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The 2021-22 Budget: CalWORKs Fiscal Outlook

December 8, 2020 - In this post, we describe our most recent forecast for California Work Opportunity and Responsibility to Kids (CalWORKs) program costs and discuss recent caseload trends. With this post we intend to provide information but do not include any explicit recommendations to the Legislature. This post is part of our 2021-2022 Fiscal Outlook series of publications.

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The 2021-22 Budget: State Correctional Population Outlook

November 19, 2020 - In this analysis, we (1) provide an overview of the state correctional population; (2) discuss our projections of the population through 2024-25, and (3) comment on how changes in the sizes of these populations could impact state correctional costs in both the near and long term. Specifically, we estimate that the number of inmates, parolees, and wards in the state’s correctional system will significantly decline due to two main factors—operational changes that the California Department of Corrections and Rehabilitation (CDCR) has taken to mitigate the spread of COVID-19 and various policy changes recently enacted that will further reduce the size of the state correctional population in the long term. We also estimate that these population declines will substantially slow the expected growth in CDCR’s overall projected costs through 2024-25—partially through the closure of five prisons. This publication is part of our The 2021-22 Budget: California’s Fiscal Outlook series.

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The 2021-22 Budget: Medi-Cal Fiscal Outlook

November 18, 2020 - Medi‑Cal, the state’s Medicaid program, provides health care coverage to about 13 million of the state’s low‑income residents. Medi‑Cal costs generally are shared between the federal and state governments. In a typical year, the General Fund covers a little more than 20 percent of total Medi‑Cal costs, with federal funds and other state and local funds respectively covering the remaining 65 percent and 15 percent of total costs. In this web post, we describe the major factors that we expect to drive changes in General Fund spending in Medi‑Cal over the near term—in 2020‑21 and 2021‑22—and over the longer term through 2024‑25. We also describe a number of key assumptions that we made in our spending projections.

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Update on School District Budgets

November 16, 2020 - This post provides an update on the fiscal condition of California’s school districts as the state begins the process for developing its 2021-22 budget.

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An Analysis of University Reserves

November 10, 2020 - The coronavirus disease 2019 (COVID-19) pandemic, the shift to campuses operating re-motely, the economic downturn, and state funding reductions have created fiscal challenges for the California State University (CSU) and the University of California (UC). To help address these challenges, the 2020-21 Budget Act signaled the Legislature’s intent that the universities begin drawing down their core reserves for academic programs. Prior to the pandemic, the most recent data available showed that core reserves totaled $1.7 billion at CSU and $1.2 billion at UC. CSU and UC also plan to use their noncore reserves to maintain their self-supporting pro-grams (such as housing and parking), which have lost revenue due to remote operations. Importantly, though the state viewed the universities’ reserves as a budget tool for mitigating funding reductions this year, state law is silent on the level of reserves CSU and UC are to carry, the purposes of those reserves, and the interaction of those reserves with the state’s reserves. We encourage the Legislature to set clearer expectations regarding the state’s and the segments’ responsibilities for building reserves for future economic uncertainties. Developing a specific policy in this area would benefit from further analysis, as the reserve levels required to respond to any future situation would depend upon many factors (including the magnitude of a future economic downturn and the likelihood the state reduces funding for the universities).

Updated 12/10/20: This post has been updated to reflect new reserve levels at UC Santa Barbara.

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An Analysis of University Cash Management Issues

November 10, 2020 - In contrast to the state, the California State University and the University of California typically do not face cash timing issues. The universities also tend to have relatively larger cash cushions, which have allowed them over time to invest more of their cash in long-term investment accounts and even assist the state in managing its cash challenges. The coronavirus disease 2019 (COVID-19) pandemic and recession, however, have changed these dynamics. While the state has a larger cash cushion compared to previous recessions, the pandemic has resulted in notable revenue declines at campuses, which have weakened their cash positions. To weather the reduction in revenues, the universities have implemented, or are considering, internal borrowing and transfers, shifting more money back into short-term investment accounts, and issuing bonds to help cover operating costs. These actions will help the universities meet the unprecedented challenges wrought by the pandemic, but they come with trade-offs and risks. Given these developments, monitoring the universities’ fiscal condition over the coming years will be especially important for the Legislature.

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Update on COVID-19 Spending in California

November 5, 2020 - This post provides a high-level summary of state and federal funds provided to date to respond to the coronavirus disease 2019 (COVID-19). In this post we discuss: (1) the authorities, at both the state and federal levels, for COVID-19 spending; (2) the state, federal, and other funding sources for COVID-19 spending; and (3) the amounts of COVID-19 spending authorized so far, organized by different purposes and program areas.

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The 2020-21 Spending Plan: Proposition 98 and K-12 Education

October 29, 2020 - This post summarizes overall Proposition 98 funding and K-12 education spending in the 2020-21 budget package. It is part of our Spending Plan series, which contains posts focused on each major sector of the state budget.

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The 2020-21 Spending Plan: Human Services

October 23, 2020 - This post summarizes the state’s 2020-21 spending package for major human services programs. It is part of our Spending Plan series, which contains posts focused on each major sector of the state budget.

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The 2020-21 Spending Plan: Judiciary and Criminal Justice

October 22, 2020 - This post provides an overview of the major judiciary and criminal justice proposals approved as part of the 2020-21 budget package. The 2020 21 budget provides $15.9 billion from the General Fund for judicial and criminal justice programs, including support for program operations and capital outlay projects. This is a decrease of $207 million, or 1.3 percent, below the revised 2019 20 spending level.

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State Wildfire Response Costs Estimated to Be Higher Than Budgeted

October 19, 2020 - This post discusses the administration’s recent notice to the Legislature, which estimates state emergency costs of $1.3 billion to fight this year’s wildfires. Provides context on the extreme wildfire season of 2020, as well as implications for the state budget.

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The 2020-21 Spending Plan: Higher Education

October 16, 2020 - This post summarizes the state’s 2020-21 spending package for higher education. It is part of our Spending Plan series, which contains posts focused on each major sector of the state budget. In this post, we cover spending for the California Community Colleges, California State University, University of California, and student financial aid. The EdBudget part of our website contains dozens of tables providing more detail about the 2020-21 education budget package.

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DMV Shift to Online Services Due to COVID-19

October 16, 2020 - Provides an overview of the recent expansion of online services at the Department of Motor Vehicles, including the creation of the Virtual Field Office, as well as potential fiscal and service implications of this expansion and other issues for legislative consideration.

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The 2020-21 Spending Plan: Health Budget and Policy

October 15, 2020 - From the General Fund, the 2020-21 spending plan provides $26.7 billion for health programs—an increase of 3 percent over estimated 2019-20 General Fund spending for these programs. The year-over-year net increase in General Fund spending is largely due to the projected COVID-19-related increase in the Medi-Cal caseload. The post describes major health-related actions (both policy actions and various budget adjustments) adopted by the Legislature as part of its 2020-21 spending plan. These actions include the offsetting of what would otherwise be General Fund costs with (1) revenues from the federally approved reauthorized tax on managed care organizations and (2) federal Medicaid funds that are being provided to the state at an enhanced level during the term of the public health emergency.