May Budget Revise: Oliver Twist vs. Great Expectations
By Sheila KuehlIn Charles Dickens' early and dark novel, Oliver Twist, an orphan is condemned to the poorhouse and forced to labor for an undertaker. He escapes to London only to be recruited into a gang of child pickpockets. The book presents an unrelenting view of poverty and the social ills that come with it. Dickens' much later novel, Great Expectations, in contrast, sets out a more hopeful view of what could happen if a poor orphan got a little help, set a course for himself, and chose good over evil. The new proposed budget presented by the Governor to the Legislature in May, after April tax revenues were tallied, generally dubbed "The May Revise", presented the same sort of choices for the Governor and the Legislature, with the choice greatly dependent on whose revenue projections would gain acceptance.
In January of this year, after years of budget agony, the state experienced the first bump in revenue in recent history: $4 billion dollars more than expected in the month of January, alone. The influx of new taxes continued throughout the next few months, such that revenues by the end of April were expected to accrue at least $4.6 billion over the Governor's January expectations.
The question facing decision makers in the May Revision of the budget: how to allocate the extra cash. The answer from Gov. Brown: I want to make sure there's nothing for you to allocate--we're really still in poverty, so damp down those great expectations. In fact, he insisted, to the bewilderment of onlookers, on reducing those expectations.
When More Leads To Less
In the proposed January budget, the Administration had projected personal income growth of about 4.3% over that of 2012-13. However, the Governor reduced that projection in the May Revise to a growth factor of only 2.2%. The Governor explained this change by saying that he had failed to take account of the expiration of the payroll tax reduction, as well as the continuing lack of a federal budget, which would deeply affect the state.
The May Revise also accrued Prop 30 (the new tax measures) revenues to the year that tax liabilities were incurred, rather than the current year (2012-2013 at the time of the May