S&P Rejects Lawmaker's Proposed Strategy To Access Budget Reserves

TOPIC ALERT:

On Tuesday, Standard & Poor's advised against Senate President Pro Tempore Darrell Steinberg's (D-Sacramento) suggestion to use state budget reserves to bolster public programs, the Sacramento Bee's "Capitol Alert" reports.

Gov. Jerry Brown (D) built a $1.05 billion reserve into his revised fiscal year 2012-2013 budget plan, which he released Monday (Yamamura, "Capitol Alert," Sacramento Bee, 5/15).

Details of Revised Budget Plan

Brown's $91.4 billion revised budget plan calls for cutting:

  • $1.2 billion from Medi-Cal -- California's Medicaid program -- by merging services for beneficiaries eligible for both Medi-Cal and Medicare and reducing payments to hospitals and nursing homes;
  • $946.2 million from CalWORKs -- the state's welfare-to-work program -- by limiting the amount of time most adults could be on the program from four years to two years;
  • $225 million from In-Home Supportive Services -- which provides services for the elderly and people who are blind or have disabilities -- by eliminating domestic assistance for beneficiaries in shared living environments and reducing worker payments by 7%; and
  • $64 million from Healthy Families, California's Children's Health Insurance Program, by moving children out of the program.

In addition, the revised budget plan calls for transitioning most state employees to a four-day, 38-hour workweek.

The revised budget plan relies on revenue from a compromise tax hike initiative that Brown is trying to qualify for the November ballot. The budget plan assumes $8.5 billion in new revenue from the tax hike.

Steinberg's Comments

In response to Brown's revised budget, Steinberg said that Democratic lawmakers would propose smaller cuts to social service programs, such as home health care and welfare.

Steinberg said one strategy for sparing social service programs would be to access the state's proposed reserve fund for next year, known as the state's rainy-day fund (California Healthline, 5/15).

Steinberg said, "You build up a reserve during good times and during the most difficult times," adding, "You don't want the resources sitting necessarily in the bank. You want to use it on mitigating the impact on people in the economy."

S&P's Response

In a report, S&P said, "In our view, this reserve level is low but important" considering the potential difficulty of forecasting certain income tax revenue.

According to S&P, lawmakers should pursue "credible" budget solutions to address the state's budget deficit. It suggested that it could lower California's ratings outlook or downgrade its credit rating if lawmakers are unable to deliver an acceptable budget this summer.

California currently has a "positive" ratings outlook but an A- credit rating, the lowest of any state in the nation, according to the "Capitol Alert" ("Capitol Alert," Sacramento Bee, 5/15).

to share your thoughts on this article.