California Gov. Gavin Newsom released his proposed May budget revision for the 2023-24 fiscal year May 12.
Newsom’s revised proposal now accounts for a projected $31.5 billion “shortfall,” or deficit, an increase from the governor’s January budget, which estimated approximately $22.5 billion in deficit, according to the May revision. Dan Lindheim, campus professor at the Goldman School of Public Policy, noted that the biggest change from the governor’s January budget is an estimated decrease in personal income tax revenue for the 2023-24 fiscal year.
“They’re expecting that higher-income people who account for much of the state’s personal income revenue will declare less income because of declines in investment income,” Lindheim said. “When you have a progressive tax system, personal income tax revenues go up and down when the economy goes up and down.”
According to Lindheim, this highlights the importance of substantial reserves in California.
According to the state’s budget fact sheet, the May revision maintains its strong support for K-12 education, and state and local governments are continuing to fund housing and homelessness prevention programs.
Additionally, the May revision maintains its January budget proposal of a 5% base increase in funding for the UC and CSU systems, according to the budget fact sheet.
In a press release, UC President Michael Drake stated that this budget will provide funding for the “urgent priorities” that the governor and university share, including increased undergraduate and graduate enrollment, additional student housing, increasing on-campus student resources and increased faculty and staff hiring.
According to the budget fact sheet, $498 million in current and planned General Fund support for UC campus projects, including campus’s clean energy campus project, will be shifted to UC-issued bonds and there will be an increase of $33.3 million in ongoing general fund to support underlying debt on the bonds.
Bond funds, according to Lindheim, are restricted for a specific purpose. Rather than using general funding, which is now proposed to have a budget shortfall, a portion of higher education construction will be funded from bond funds.
President of Children Now and campus political science lecturer Ted Lempert noted that despite changes in state budgeting in the May revision, higher education remains fortunate.
“One thing that changed is financing for student housing from general funding to bond funding,” Lempert said. “Overall, the budget is still strong for higher education considering a difficult year.”
Considering the decline in personal income tax revenue from last year, when the economy was stronger, Lempert noted, higher education’s base budget remains protected while California expects a tax deficit this year.
Campus spokesperson Dan Mogulof noted that while campus is appreciative of the proposed increase in state general funding and tuition revenues, it is “insufficient” in meeting campus expenditures.
“Given these circumstances, we will implement a conservative budget process for fiscal year 2023-24 that reflects the reality of cost increases continuing to outpace growth in tuition and state support funding,” Mogulof said in a press release.
Ultimately, according to Lindheim, the estimates for how the 2022-23 fiscal year will end are still unknown, and the reality of the 2023-24 fiscal budget year has yet to be realized.
“Fortunately, (Newsom) had the option to transfer some spending from general fund to non general fund spending,” Lindheim said. “Going forward, future governments or future governors may not have those options if the economy is still not as robust as it was believed to be a year ago.”
