CAG Update - Legislature Announce Joint Budget Plan

Posted By: Touda Bentatou Legislative,

This afternoon Legislative leaders announced that the State Senate and State Assembly have reached agreement on a budget package that would form the basis for their negotiations with Governor Gavin Newsom. Most importantly, there is an agreement between the houses to protect K-12 education funding. We will provide a more detailed update on the specifics of the agreement later, but the overall architecture of the plan reflects the budget package adopted by the Senate Budget and Fiscal Review committee in their hearing last week. We provided an extensive review of that package in an update that you received on Thursday, May 28.

Recall that the Senate plan had the state relying on the use of reserves, and the assumption that additional federal relief funds would be forthcoming and allow us to avoid the dramatic cuts proposed in the Governor’s May Revision. With respect to K-12 education funding, that plan instead implemented a budget trigger, in case federal funds did not arrive, that would have increased the deferral of payments to local education agencies, rather than making direct cuts.

The Legislature is noting that their joint plan will also make use of reserves to avoid many cuts now, and that their plan will ensure “full funding of K-14 schools”. The use of the phrase “full funding” should not be construed as meaning that this budget will be painless for schools, but instead is likely a reference to the use of deferred payments rather than direct cuts to LCFF and other programs

It is important to note that today’s announcement only focuses on the Legislature’s plan for the budget. Tomorrow the Assembly Budget Subcommittee on Budget Process Oversight and Program Evaluation, chaired by Assembly Member Phil Ting who is also the overall budget chair, is slated to hold a hearing. It seems likely that this joint version of the budget plan will come up for review in that hearing.

Now that this joint Legislative budget plan is agreed upon, we expect that the “Big 3” conversations among the President Pro Tempore of the Senate, the Speaker of the Assembly and the Governor will begin. It is in those conversations that the differences between this plan and the Governor’s May Revision will be resolved. Remember that the Legislature is required to approve a balanced budget and submit that budget to the Governor by the June 15 Constitutional deadline.

We will continue to track developments on the budget, and will have another update soon on the joint budget plan’s additional details. In the meantime, and as always, if you have any questions feel free to contact any of the partners or staff at Capitol Advisors.