Discretionary expense9/20/2023 ![]() The reserve for schools and community colleges has increased from zero in 2019‑20 to nearly $10 billion-or nearly 10 percent of their funding-under the Governor’s estimates in 2022‑23. Strongly Consider Building More Reserves. While multiyear revenue and expenditure forecasts are imprecise, committing to spending above anticipated resources carries considerable risk. By planning to have a negative balance in the SFEU, the administration assumes that next year revenues will be higher than anticipated, costs will be lower than anticipated, taxes will be increased, or reductions will be required. Despite these improved revenues, the administration’s multiyear estimates reflect negative balances in the Special Fund for Economic Uncertainties (SFEU) in 2023‑24 (and throughout the rest of their forecast) due to proposed spending exceeding estimated resources. Whereas we often noted previously that the administration’s multiyear revenue estimates appear to be fairly cautious, we characterize this year’s estimates as a middle of the road among potential outcomes. Multiyear Revenue Projections Are Reasonable, but New Spending Proposals Exceed Administration’s Estimates of the Budget’s Capacity. This room in part reflects $12.5 billion in proposals for revenue reductions and SAL exclusions. In 2022‑23, the Governor’s budget reflects $5.7 billion in room-meaning appropriations subject to the limit are under the limit by this amount in this year. ![]() The Governor’s budget does not include a proposal to address these excess revenues, but the administration states it plans to put forward a plan to address these requirements at the May Revision. The Governor’s budget shows excess revenues of $2.6 billion across 2020‑‑22. How Does the Governor Address the State Appropriations Limit (SAL) Requirement? The SAL limits how the Legislature can use revenues that exceed a specific threshold. ![]() The figure below displays the major budgetary decisions that the Governor made in allocating state discretionary funds. ![]() (These ongoing proposals would increase to $5.2 billion by 2025‑26.) In addition, the Governor’s budget allocates nearly $13 billion in discretionary spending for schools and community colleges (which we exclude from the surplus because these amounts are constitutionally required). The Governor also proposes using $6.2 billion to reduce revenues and $2 billion for ongoing spending increases. The Governor proposes spending about 60 percent of discretionary resources, or $17.3 billion, on a one‑time or temporary basis for a variety of programmatic expansions. How Much in Discretionary Resources Does the Governor Allocate? We estimate the Governor had a $29 billion surplus to allocate in the 2022‑23 budget process. ![]()
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