May Revision of the Budget: Continue Saving for the Future as Surplus Grows

Posted: 5/16/2018

Governor Jerry Brown released his May Revise of the Budget on May 11th, 2018. ACSS Legislative Advocate Ted Toppin provides relevant analysis and insight of the May Revise that may be of interest to managers, supervisors and other excluded state employees:

“The state continues to generate revenue at unprecedented levels and now it is coming in faster. In January, the surplus was predicted to be $6 billion. The surplus now is expected to be $9 billion.

The May Revise proposes saving for the future. In January, the Governor proposed to put an additional $4.4 billion into the state rainy day fund, topping it out at $13.8 billion – the constitutional limit. In the May Revise, he socks another $3.3 billion into a different reserve account.

Budget negotiations between the Administration and the Legislature will now heat up. The Governor will urge restraint. Legislators of both parties will push for billions of dollars in additional spending. Ultimately, you can expect the Governor to agree to modest increased spending while keeping his rainy day reserves. Regardless, the Legislature will pass a budget by June 15 and the Governor will sign it by June 30.

Here’s what the May Revise says about issues important to ACSS members:

State Employee Compensation

The January budget proposal included $1.2 billion ($589.5 million General Fund) for:

  • increased employee compensation
  • health care costs for active state employees
  • retiree health care prefunding for active employees

The May Revise decreases this amount by $8.1 million to reflect:

  • corrections to 2019 health rates
  • natural changes to enrollment in health and dental plan
  • updated employment information for salary increases
  • updated employment information for salary increases
  • revised pay increases for judges
  • updated costs related to the salary survey estimates for the California Highway Patrol (Bargaining Unit 5)

State CalPERS Contribution

The state’s contribution – $6.2 billion – to CalPERS is down slightly ($18 million) from the January estimate. The decline in the revise is mainly driven by:

  • CalPERS’ higher than expected investment return in 2016-17
  • the benefit of the state’s additional $6 billion pension payment in 2017-18
  • higher than projected enrollment of members under the Public Employees' Pension Reform Act of 2013, who have lower benefit formulas

Overall, pension reforms are beginning to reduce costs. The May Revise proposes no additional pension reforms.

State Health Care/Retiree Health Care

The May Revise makes no changes to the expected costs of providing state employees and state retirees health care.

State Employee Position Increases

The May Revise also reports that there is expected to be an additional 3,878 position in state government next year for a total of 210,767 in FY 2018-19.”

The Governor’s complete budget summary and draft budget can be found here: www.ebudget.ca.gov.