California FY 14 budget produces golden results

Published: March 04, 2013

BudgetContract AwardsGovernor

On January 10, 2013, Governor Edmund Brown Jr. released the state of California’s FY 2013-2014 budget. This revolutionary budget propels California out of a deficit and sets the stage for successful years to come. California has had an unbalanced budget for the past few years, but this year’s balanced budget provides much-needed stability for the state.

While the governor was able to reduce spending in many departments, he also introduced Proposition 30, which increases taxes on the $250,000 annual income bracket and raises sales and use taxes ¼ cent for four years to fund educational programs. This proposition will provide the state with approximately $6 billion annually to spend on education in an effort to even the playing field for lower-income schools and provide students with equal opportunity. This budget also highlights Proposition 98, which funds educational analysis. The $56 billion accumulation will provide educational programs to K-12 students at a $2.7 billion increase from last year.
One of the main goals Governor Brown hopes achieve with this budget is improving public safety programs. By decreasing the amount of spending on California’s overcrowded prison system, the state was able to redirect money toward public safety programs in schools, police departments, fire departments, and other justice and public safety programs.

Click on image above for full-sized version

Further state initiatives include a focus on higher education and health care. By increasing funding for state colleges and universities, the need to raise tuition costs is eliminated. This provides universities with stable funds as well as eases the financial burden on students. As shown in table 1 (above), the higher education budget increased by about $1.8 billion; the PK-12 education budget increased by $2.1 billion. Health care funding increased by an astounding $2.8 billion. As the health care budget expanded, so did the coverage model. California’s Medicaid health program, Medi-Cal, currently covers one out of five citizens and will be expanded to cover even more individuals. This enterprise also includes extending the gross premiums tax on Medi-Cal managed care plans.
The community development and public finance budgets both saw cuts from FY 2013 to FY 2014. The community development drop may be due to a slight reorganization, where the State and Consumer Services Agency was allocated among other departments. Many of the typical public finance initiatives were also redistributed. Previous California budgets had ineffectively put money in programs or funds that were frozen or unable to be reached. These stipulations caused the money to stay tied up and not be used as efficiently as possible. The redistribution will free up some of those funds to be effective again. 

Click on image above for full-sized version

Considering the $9.2 billion deficit from FY 2013 that was weighing on Governor Brown, this balanced budget is quite an accomplishment. It sets the stage for future years and budgets, and shows that by reevaluating what is necessary and what is not, a balanced budget is quite plausible. In FY 2013, the governor stated that over the next few years he would reduce the state deficit, and he is well on his way with FY 2014’s budget. It offers a multiyear plan that pays down the debt from previous years while also creating a $1 billion reserve safety net. This budget alone will tackle $4.2 billion of the debt by repaying budgetary borrowing.
The governor’s aim to bring public safety closer to citizens is evident by the $64 million increase in justice and public safety line items, which include IT projects such as a justice information system and a comprehensive court case management system. Higher education and health care also benefited from IT budget increases of $69 million and $156 million, respectively. These will be important departments to watch in the upcoming fiscal year.

Click on image for full-sized version

While the budget has been tightened in an effort to balance funds, there is still plenty of opportunity for vendors to win contracts. Vendors should note that the state will not be spending money on unnecessary or idealistic projects, so they should focus on initiatives that are truly beneficial to California’s roadmap. Still, the budget did firmly increase from fiscal years 12 and 13, which is promising for vendors looking to win contracts.