News

Governor Newsom’s May Revision budget proposal for the upcoming fiscal year would fund increased cost-of-living adjustments despite declining state revenues, but would also impose unexpected, deep cuts to two current-year funding programs. This brief article outlines CSDC’s preliminary take on the May Revision based on partial information available at the time it was drafted.

Declining Tax Revenues and Delayed Taxes Fog State Budget Picture — Though the May Revision assumes that California and the nation do not experience an economic recession, state tax revenues are declining. The estimated shortfall in the state’s budget has increased from January’s $9.3 billion gap to an estimated shortfall of $31.5 billion. The May Revise also outlines several other risks, including:

• In response to storms and floods earlier this year, state officials extended April’s income tax filing and payment deadline to October 2023, meaning the state will need to wait several more months to have the necessary information to make sound estimates of its already declining and volatile revenues.
• Instability in the banking sector, increasing interest rates, and a potential federal debt crisis create further uncertainty regarding larger economic conditions and estimated state tax revenues.

This unprecedented set of circumstances makes this year’s May Revision the least clear in years and could make it difficult for the Governor and Legislature to enact a fully baked budget by the June 15 constitutional deadline.

Key Features of the May Revision

Key features of the May Revision for charter schools including the following:

Full Funding for Increased Local Control Funding Formula (LCFF) Cost-of-living adjustment (COLA) — The May Revision calls for fully funding an increased 8.22 percent COLA for LCFF and other state categorical funding programs. The COLA factor increased slightly from the 8.13 percent estimate in January when the final two quarters of data used to compute the COLA came in higher than anticipated. While this slight increase is welcome, it comes at the cost of deep cuts...