Budget leaders release conference committee report, adding $1 B, but less than previous plans.

House and Senate budget leaders have released their compromise supplemental budget. The overview acknowledges the heightened economic uncertainty caused by the coronavirus and lawmakers’ attempts to address the public health crisis.

During the 2020 legislative session, the coronavirus (Covid-19) began to spread. At the time the Proposed Final budget is voted upon, the full impacts to public health and the state economy will be unknown. The uncertainty related to Covid-19 has been such that the February 2020 economic, revenue and caseload forecasts have not picked up any potential effects.

Prior to the Covid-19 outbreak, the 2020 Legislature started the 2020 supplemental budget process with an additional $1.5 billion in Near General Fund – State plus Opportunity Pathways (NGF-O) from revenue forecasts that were higher than expected in the 2019-21 biennium. Over the same time period, the projected costs for continuing current programs and other mandatory cost adjustments increased by $121 million. These mandatory costs do not include new fiscal or policy-related changes, or any actions related to the Covid-19 virus.

Summary of Proposed Final Budget

The Proposed Final 2020 supplemental budget (Conference Report Engrossed Substitute Senate Bill (ESSB) 6168) increases net new NGF-O spending by $961 million, or approximately 1.8 percent over the enacted 2019-21 budget. The $961 million includes the $121 million in current obligations as discussed above, as well as $839 million in net new spending. This proposal would bring NGF-O spending to $53.5 billion ($102.0 billion total funds) in 2019-21.

In addition to the $961 million in new spending, the Legislature, through Engrossed House Bill (EHB) 2965, spends $100 million from the Budget Stabilization Account (Rainy Day Fund) for emergency response efforts related to the Covid-19 outbreak.

There’s much more at the links. The Washington Research Council comments,

There’s a lot to go through (stay tuned for more), but it would appropriate $53.460 billion for 2019–21 from funds subject to the outlook, an increase of $961.0 million over enacted appropriations. The Senate- and House-passed budgets would have each increased appropriations by more than that.

The agreement would leave an unrestricted ending balance of $918 million in 2019–21 and $859 million in 2021–23. After appropriating $100.0 million from the rainy day fund for coronavirus response, total reserves would be $2.997 billion in 2019–21 and $3.558 billion in 2021–23.

In our newsletter Monday we said,

We’ve never seen a conference committee negotiate a compromise budget that spends less than either chamber approved.

Now we have. 

The Associated Press reports,

The budget plan was released Wednesday, and lawmakers hope to pass it Thursday and then quickly adjourn…

Leaders said that the crisis also led them to spend less than they originally planned in several areas in order to build up the state’s reserves for future years.

“If revenue is reduced, which I think we all anticipate it will, we have built in a buffer,” said Democratic Sen. Christine Rolfes, the Senate’s main budget writer.

Lawmakers said while they’re not putting as much as originally planned toward various programs, they still are increasing spending in high priority areas, including homelessness.

California lawmakers are bracing for a major budget hit from the virus, a revenue loss exacerbated by the state’s tax structure. 

Nearly half of California’s personal income tax collections come from the top 1% of earners whose income mostly stems from capital gains, which in California are taxed the same as income.

Having revenues so closely tied to the stock market isn’t always a bad thing. As the Dow Jones Industrial Average broke records over the past two years, it has meant record surpluses for California, including an eye-popping $21 billion surplus in the current budget year. The extra money helped the state to expand its Medicaid program to cover adults living in the country illegally and offer first-in-the-nation subsidies to help middle-income families pay their monthly health insurance premiums.

But the market’s 20 percent dive from recent highs could mean trouble for California — the world’s fifth largest economy — if the losses persist.

Ting said Monday the state is already starting to miss its revenue projections.

A roller coaster, with the expanded entitlements making the inevitable reductions harder to achieve.

More on the budget agreement from the Senate Democrats.