Though the state still faces financial risks ahead, California's spending and revenues are "roughly in balance," the state's top fiscal analyst confirmed Monday in a new review of Gov. Jerry Brown's budget.
The nonpartisan Legislative Analyst's Office in November had forecast a $1.9 billion deficit, while Brown said Thursday that the imbalance had been wiped out. The Analyst's Office said the governor had assumed about $1 billion more in tax revenue between July 2011 and June 2014, as well as $1 billion more from eliminating redevelopment agencies and new clean energy revenues.
Brown also assumed the state would repay $500 million less back to state special funds and assumes nearly $700 million from health-related taxes on managed care plans and hospitals to help build a $1 billion reserve.
The Analyst's Office praised the governor for holding the line on non-education expenses "in light of the risks and pressures that the state still faces."
It noted that the state's revenues, ever dependent on wealthy earners, remain vulnerable to a stock market slump or federal policies that trigger an economic downturn. At the same time, the LAO noted that California faces long-term debts not displayed on the annual state balance sheet, such as paying for teachers' retirement and state retirees' health care.
Among the biggest LAO criticisms has to do with Brown's treatment of Proposition 39 money for clean energy. Under the voter-approved initiative, half the funds are supposed to fund clean energy programs in the first five years. The governor proposed spending that money on green projects in schools - and said that this would count toward meeting the state's minimum funding for education.
"This is a serious departure from our longstanding view of how revenues are to be treated for purposes of Proposition 98," the LAO wrote in its report. "It also is directly contrary to what the voters were told in the official voter guide as to how the revenues would be treated."