The 2016-17 Budget

California Spending Plan

Evolution of the Budget

January Budget Proposed Over $10 Billion Reserve. On January 7, 2016 the Governor presented his 2016–17 budget proposal to the Legislature. The budget included $168 billion of state spending, including $123 billion in General Fund spending and $45 billion in special fund spending. The administration’s January revenue estimates for 2015–16 and 2016–17 were up by billions of dollars compared to the prior year’s budget act. After satisfying constitutional requirements for higher reserves and spending on education, the Governor proposed $3.1 billion in extra reserve deposits, resulting in total reserves of $10.2 billion. The Governor also proposed some new spending commitments, in particular $2.3 billion for one–time infrastructure spending.

May Revision: Lower Revenues, Lower Required Reserves and Debt Payments. April 2016 state revenues fell short of projections. As a result, relative to the Governor’s January budget proposal, the May Revision reflected a net $1.9 billion lower revenue estimate across 2014–15, 2015–16, and 2016–17 combined. Largely as a result, the administration’s estimate of required reserve deposits and debt payments under Proposition 2 were $1.6 billion lower in the May Revision relative to the Governor’s budget. Meanwhile, relative to January, the administration’s estimate of the Proposition 98 minimum guarantee was higher by a combined $626 million ($389 million General Fund) over 2014–15, 2015–16, and 2016–17.

Final Budget Package Included $8.5 Billion Reserve. The Legislature passed the final budget package on June 15, 2016. Total reserves in the final budget package were lower by only $36 million compared to the Governor’s proposal in May. Various choices were made to shift spending priorities compared to the Governor’s proposal. Budget savings resulted from (1) reduced spending on state office buildings, (2) shifting funding for the construction of local jails from General Fund to bond funds, and (3) reduced retiree health spending due to lower than expected healthcare costs. Correspondingly, the final budget deal reflected higher spending for repealing the MFG policy and various public safety programs. Subsequent changes made after the budget bill was signed by the Governor will likely result in higher reserves than those assumed in the budget package.

Budget Package Signed by Governor. The Governor signed the 2016–17 Budget Act and other budget–related bills on June 27, 2016; July 1, 2016; September 13, 2016; and September 14, 2016. These bills are detailed in Figure 8. The Governor did not veto any appropriations in the 2016–17 Budget Act.