PAYDAY Workforce Solutions Blog

No new taxes due to state budget healthy reserve

On Jul 10, 2014

California taxpayers have something to celebrate. A balanced state budget healthy reserve means no new taxes or tax increases. The newly passed $156 billion budget gets signed mid-July 2014 by Governor Edmund G. Brown Jr. and hits some pretty sweet spots for Californians.

California Budget Sweet Spots

California’s fiscal year opens with a hefty budget reserve of more than $2 billion, the first time in more than 10 years.

The $156 billion budget is focused on paying down $10 billion in debt.

The State Teachers Retirement System benefits from the new budget, getting the first payment in a long-term funding stabilization plan.

Fast-growing revenues fueled this year’s back-to-black fiscal plan. State revenues are up by $7 billion from just two years ago, when voters approved income and sales tax increases with Proposition 30. Economic growth in the state’s wealthiest sections has also helped fill the coffers.

Spending ‘Triggers’

Spending ‘triggers’ will be tripped if tax benchmarks exceed budget expectations, possibly allowing for even more debt repayment and bolstering public services in preschool, home health care, welfare, and libraries.

There will be millions in new funding for Medi-Cal, the low-income health care program, although reimbursement rates for health care providers won’t increase.

How It Happened

The budget came in smelling like a rose this year in large part because of healthy revenue growth, but also thanks to Proposition 25 passed in 2010. That changed the budget vote approval threshold to a simple majority rather than the two-thirds supermajority previously required.

Republicans were frozen out of budget negotiations and Democrats came to an effective agreement.

Trailer Bills to the Rescue

The budget bill included more than 1,400 pages in 16 “trailer bills” that rode in on the budget’s coattails to change state laws in various areas. The trailer bills will give the Coastal Commission new authority to assess penalties for violations of coastal access, expand the marine oil spill cleanup fund, and remove the requirement for undocumented residents to present an affidavit stating they don’t have proof of legal residency just to get a driver’s license.

Hot Debate Over High Speed Rail Development

The biggest debate during budget formation was over cap-and-trade auction revenues, with the Governor and Legislature wrangling over how to spend the billions they’re estimated to produce through the year 2020.

The California Chamber of Commerce is suing the Air Resources Board for what they believe to be illegal cap-and-trade revenue-raising auction, claiming it violates Proposition 13, the amendment to California’s Constitution that limits the real estate tax rate.

Governor Brown wanted one-third of the auction revenues to support high-speed rail development, with the balance used for energy efficiency initiatives such as electric vehicles, energy efficiency upgrades to state buildings, and vehicle use reductions. But Democrats pushed for a reduction to the high-speed rail allocation and got more allocated to affordable housing and transit.

Happy Politicians

Among the politicians pleased with the budget are Assembly Budget Vice Chairwoman Nancy Skinner (D-Berkeley) and Assembly Budget Vice Chair Jeff Gorell (R-Camarillo), who are both happy about the surplus. Skinner is happy about paying down the state’s debt, but Gorell’s less so, saying the reserves are good but the budget missed the marks on education and public safety. Republicans are unhappy about the $68 million allocated toward high-speed rail development.
Whether they like or dislike the new 2014-2015 budget, there’s no denying that it indicates a healthy trend toward debt reduction and improved health and welfare programs when many other states are cutting theirs. It also shows the governor and legislature are able to work together on a reasonable spending plan.

Contact PAYDAY for more assitance in regards of the lack of tax increases.

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