Tuesday night, California received its budget.

It wasn’t the budget that Governor Brown had been working towards. It lacked bi-partisan support. It failed to secure a public vote on tax extensions. It didn’t include constitutional protections for his realignment strategy.

What it did do was call for the elimination of redevelopment agencies, anticipate increased revenues brought about by a recovering economy, and established predetermined and automatic cuts should those revenues not be actualized.

State Treasurer Bill Lockyer lauded the budget as substantial, important, and “a very important step forward.”


In the opinion of Mr. Lockyer, the budget is “financeable.”

The budget deal was a compilation of as many as 10 bills and dozens of compromises and promises. It was proposed, negotiated, and passed in less than 48 hours. Its effects on local government remain to be seen as some of the unpopular cuts (which some are saying are illegal) will head to court once the Governor signs them.

Redevelopment agencies, as we have known them, are eliminated. The long-term impact on realignment is unsettled, since funding for the shift is not guaranteed in the constitution. Those topics are discussed in other articles published today by PublicCEO.

But the budget deal as a whole is an interesting undertaking. It assumes the economy will continue improving, and those improvements will lead to increased revenues. That trend was revealed in recent months in a series of cash flow analyses from the State Controller’s office. In May, the state received $408 million more in revenue than was expected; in April, revenues were up $397 million.

Should revenues stagnate or fall short of anticipated levels, the budget package included three bills outlining automatically “triggered” cuts.

AB 114, would cut nearly $1.8 billion from education, should revenues be $2 billion lower than anticipated. SB 73 would cut as much as $200 million from Health and Human Services. And AB 121 gives the department of finance the power to make up to $2.5 billion in spending reductions.

The potential for additional cuts to education roiled Lt. Governor Gavin Newsom. In a statement he said, “Student fees at our public universities have more than doubled in the last 10 years. Tens of thousands of students have had the door to higher education slammed in their face(sic). And those lucky enough to attend one of California’s 33 public universities are paying more and getting less.”