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First Look: Restrained Budget Proposal Reflects Uncertainty About Federal Commitments and Economic Conditions

Publication date: 
February, 2017

Executive Summary

On January 10, Governor Jerry Brown released a proposed 2017-18 budget that reflects both deep uncertainty about looming federal actions and a tempered economic and fiscal outlook for the state. The Governor forecasts revenues that are $5.8 billion lower — over a three-year period — than previously projected and proposes taking steps to address a $1.6 billion projected shortfall for 2017-18. (This gap would be even larger but for the Administration’s assumption that some state General Fund costs will decrease in 2017-18. For example, the Governor proposes to change how the state and counties share the cost of the In-Home Supportive Services (IHSS) program, with the result that the state would save roughly $600 million in 2017-18, while counties’ costs, in the aggregate, would increase by a like amount.) The Governor’s proposal assumes current federal policies and funding levels, even as the Affordable Care Act and other federal programs face the prospect of cuts with President-elect Trump taking office.

As part of addressing the deficit that his Administration foresees, the Governor proposes to rescind several one-year spending commitments that had been part of the 2016-17 budget agreement, including $400 million for affordable housing programs and $300 million for renovation of state office buildings. The Governor also proposes to “pause” a multiyear plan for reinvesting the state’s child care system.

The Governor’s proposal calls for continued funding of the California Earned Income Tax Credit (CalEITC) and also reflects the state’s increased minimum wage. However, this restrained budget proposal contains no additional investments in the welfare-to-work system (CalWORKs) or in basic income support for low-income seniors and people with disabilities (SSI/SSP). In addition, the Governor’s budget does not include proposals to address California’s affordable housing crisis.