2018 Budget Conference Committee Hearings Begin

The work of the Budget Conference Committees began this week with an overview hearing to discuss differences between the two houses and Administration. Assembly Member Philip Ting, chair of the Budget Conference Committee, provided highlights of the Assembly Budget during his opening comments and announced the Committee’s intent to reconcile the differences by the end of next week. Senator Holly Mitchell’s opening comments were simply “Let’s rock and roll”.

Mac Taylor from the Legislative Analyst’s Office (LAO) walked the legislature through their Conference Committee Overview. Key areas discussed are noted below:

Revenues. The LAO noted the Legislature’s adoption of the LAO’s revenue estimates. There’s a slight difference between both houses, resulting from the Assembly not adopting the LAO’s corporate tax revenue estimate; however both houses adopted revenues just shy of $3 billion over the Administration’s estimate.

Reserves. Both houses took action consistent with the Administration’s action to fully fund the Rainy Day Fund at the constitutional target. Above that, the Senate dedicated $1 billion and created a new safety net reserve intended to stabilize any decreases to safety net programs in the event of a recession. The Assembly took a different approach and created a new reserve to hold funds until the end of the fiscal year, where the funds would then be transferred into the Rainy Day Fund if unused. The LAO noted the healthy level of reserves could withstand a mild recession and in the even of a larger economic downturn, could provide time for adjustments.

Spending. The LAO acknowledged the differences between the approach of both houses and the Administration in the balance of one-time spending versus ongoing commitments. One-third of the Senate’s expenditures are for one-time obligations compared to one-half of the Assembly’s commitments. He further indicated major ongoing commitments by both houses that would grow over time, which include CalWORKs for the Senate and health expansion costs for the Assembly. The LAO recommended an approach that balances ongoing commitments with increased reserves.

Amy Costa from the Department of Finance raised serious concerns with the adoption of the LAO’s revenue estimates due to the volatile nature of both the personal income tax and corporate gains. As a result, many of the augmentations will likely note be supported by the Administration given the revenues.

A second hearing was held on Thursday and focused on K-12 and Higher Education. The Conference Committee is expected to reconvene on Monday, June 4 and move to health and human services items next. The LAO Overview of HHS items and Conference Committee agenda can be found here.