California Budget Challenge 2018

The challenge continues to have shifted from mitigating deep program cuts and tax increases to making choices that will keep California moving in a positive direction. The state has an astounding $7 billion surplus this year, primarily due to higher-than-expected revenue, and the challenge will be deciding the best way to spend the additional funds.

This differs with the Budget Challenge published seven years ago, which presented users with a deficit of over $25 billion and a handful of choices that no one liked. Essentially all expenditure lines were cut substantially during the Recession, and the state has worked to restore funding as the economy recovered.

Budget changes made this year are critical as the state continues to focus on its priorities, such as education, counteracting poverty, and housing - all while navigating the uncertain federal landscape. Governor Jerry Brown, in his last proposed budget ahead of the November 2018 election, wants to set aside $3.5 billion from the surplus for the Rainy Day Fund (on top of the constitutionally required deposit of $1.5 billion) to help buffer the state economy against the next economic downturn. This would bring the fund to $13.5 billion, which is 100% of the constitutional limit of about 10% of General Fund revenues.

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