Chapter Highlights Budget Overview Printable Budget Documents

Budget-Balancing Reductions
Need for A Prudent Cash Reserve

When the 2007-08 Budget was enacted, the cash flow projected for the state estimated the fiscal year would end with a healthy cash balance of $11.6 billion after fully repaying $7 billion of Revenue Anticipation Notes (see text box) issued in November 2007. The $11.6 billion would be more than sufficient to fund July and August 2008 cash needs. However, since enacting the budget, the budget reserve has deteriorated significantly because of lower-than-expected revenues and higher expenditures. The current year reserve is now projected to have deteriorated from $4.1 billion to a negative $3.3 billion, absent corrective actions. The deterioration in the budget reserve has also resulted in a projected cash shortage in March, July, and August 2008 unless swift and significant cash management solutions are put in place.

The Constitution makes payment of Debt Service on General Obligation Bonds one of the state's two highest fiscal priorities (second only to payments to local school districts). The Administration is firmly committed to managing cash flow to ensure that timely payment of the state's debts will never be jeopardized. Without prompt action by the Legislature, the state would face a potential cash flow crisis in March, July, or August. Therefore, the Governor's Budget proposes cash management solutions totaling $8.7 billion. The major cash management solutions proposed are:

• $3.313 billion-Sell Economic Recovery Bonds by the end of February 2008. Proposition 57 authorizes the sale of these bonds. Therefore, no legislative action is needed to achieve this cash flow solution in time to avoid a problem in March.
• $1.300 billion-A two-month delay in disbursement of deferred apportionments for K-12 schools and community colleges.
• $814 million-A two-month delay in disbursements for programs in the Department of Social Services.
• $584 million-Split the STRS Supplemental Benefit Maintenance Account payment and delay the payment from July to November and April.
• $500 million-A one-to-five-month delay in gas tax disbursements for local streets and roads, increasing borrowable resources.
• $454 million-A delay of the four weekly checkwrites for Medi-Cal fee-for-service institutional providers in August until September.
• $400 million-A delay of $400 million in advances to regional centers.
• $400 million-Reduction in 2007-08 Proposition 98 overappropriation.
• $232 million-A one-month delay in the Medi-Cal Managed Care Plan payment and Delta Dental Plan payment.
• $200 million-A two-month delay of the mental health managed care program advance.
• $165 million-A delay in disbursement for Medi-Cal fee-for-service checkwrite from June to July.
• $164 million-A one-to-two-month delay in making first quarterly payment to counties for Medi-Cal administration.
• $92 million-A two-month delay in the quarterly advance to counties for the Early and Periodic Screening, Diagnosis, and Treatment Program.
• $113 million-Other issues.

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CHAPTER HIGHLIGHTS for Budget-Balancing Reductions Back to Top

Need for A Prudent Cash Reserve

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BUDGET OVERVIEW Back to Top
Introduction
This budget proposes the difficult but necessary steps needed to bring the state's chronic structural deficit under control, not only for this fiscal year but permanently. This is accomplished by (1) imposing strict spending restraint in the current and budget years while protecting and preserving essential state services and (2) proposing a Constitutional Amendment to reform the budget process so that state government has the tools needed to avoid spending more than it has in the future.

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PRINTABLE BUDGET DOCUMENTS Back to Top
Budget Summary - Budget-Balancing Reductions (pdf * - 145K) -
Provides this entire Budget-Balancing Reductions Chapter in pdf format.