California budget balances fiscal conservancy, social responsibility

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California Gov. Jerry Brown announced his $122.6 billion budget proposal, which attempts to balance conservative fiscal policy with funding for social aid and health care programs.


The plan calls for increased spending in education, health care and infrastructure, but also plans for contributions to the state’s emergency fund and payments to state debt.


“When Governor Brown took office, the state faced a massive $26.6 billion budget deficit and estimated annual shortfalls of roughly $20 billion,” the governor’s office said in a statement. “These deficits, built up over a decade, have now been eliminated by a combination of budget cuts, temporary taxes and the recovering economy.”


The governor’s budget calls for a supplemental deposit of $2 billion to the state’s rainy day fund. Additionally, the new budget would increase education spending by $10,591 per student. A transportation package would increase infrastructure spending by $36 billion and provide $380 million in funding for the Earned Income Tax Credit for low-income working families.


California lawmakers will debate Gov. Jerry Brown’s budget proposal, which advocates fiscal conservancy balance any social aid programs.


A looming budget hole

As The Los Angeles Times reported, Brown has cautioned the state’s budget must also include a restructuring of the tax health insurers must pay on Medi-Cal, the state’s medical assistance program.

The state’s previous health tax only applied to plans participating in Medi-Cal, but the state was forced to expand the tax to all health care plans, even those without Medi-Cal patients, or risk losing federal funding. Under the governor’s proposal, a tax reform package would replace the old system, expanding the tax base while also providing a net reduction in taxes paid the health care industry. Additional funding for Medi-Cal patients would be provided through the state’s general fund.


According to the Times, the change should allow $1.1 billion in tax revenue to fund pre-determined health care programs.


Social welfare and fiscal conservancy

Despite the presence of some social welfare programs in the state’s budget, the governor cautioned the state shouldn’t over exert its budget in social spending. In a letter to the state’s general assembly announcing his budget proposal, the governor cautioned even a mild recession could negatively impact California’s fiscal security. He also recounted the significant budgetary deficit that was in place when he took office.


“The governor cautioned even a mild recession could negatively impact California’s fiscal security.”

“Given the wide disparities that exist in our state and the millions who struggle in one form or another, understandably there will be proposals to fund a variety of worthwhile programs,” Brown wrote. “But it would be short-sighted in the extreme to now embark upon a host of new spending only to see massive cuts when the next recession hits.”

As the San Francisco Chronicle reported, the governor’s spending plan is higher than in previous years, but still lacks the social services spending many lawmakers would like to see. In fact, many lawmakers and policy advocates have pointed to a report from the state’s nonpartisan Legislative Analyst’s Office that predicted a $3.6 billion surplus for the state this year as evidence state spending could be more liberal.


Senate President pro Tempore Kevin de Leon has already requested $200 million in aid for homelessness, the Chronicle noted. He has also called for $2 billion in state bonds to construct new housing projects for those experiencing homelessness. Other lawmakers have called for increased spending on early education and programs for the developmentally disabled.


How Questica can help

State governments faced with complicated budgetary juggling should contact Questica to learn how comprehensive budgeting software can contribute to sound financial decisions that allow for social programs while also maintaining financial strength.


Through its public sector platform, Questica provides real-time monitoring for all areas of the budget. The flexible software allows for forecasting of scenarios over multiple years to see how factors such as staffing changes, increased departmental spending or increased tax revenue may affect the general budget down the road.


Through the Capital Improvement Planning module, Questica can help state governments considering an increase in infrastructure investment identify costs and establish financial goals for individual departments. The Salary/ Position Planning module allows for precise envisioning of the costs associated with staffing for any new projects or programs, as well as the ongoing compensation costs associated with the current employees.  Additionally, the Performance tracking module helps governments monitor specific goals or targets related to new programs, such as increased preventive care programs, reduced homelessness or expanded educational opportunities. Such tracking can help a state ensure dollars being spent are helping to deliver on its overall goals and objectives.


Contact Questica today to learn how public sector budgeting software can help create sounder state budgets.