Some “Unrealistic Expectations” Present in Brown’s Budget

Gov. Jerry Brown said he wouldn’t use the “gimmicks, tricks and unrealistic expectations,” that have marked recently enacted spending plans.

His budget plan would contain “no more smoke and mirrors,” he said in his January 3 inaugural address.

But while the Legislative Analyst’s initial review of Brown’s budget praises the Democratic governor’s spending cuts for generating multi-year rather than one-time savings and laying out some “bold” realignment proposals, the assessment also finds some of the things Brown vowed wouldn’t be there.

One hoary budget trick has appeared in nearly every budget of the last decade – an “unallocated reduction” in state operations generated through greater efficiency.

Brown pegs the savings at $200 million.

“Historically, such lack of detail often has been associated with budget actions that fail to produce the desired level of savings,” the analyst notes.

Similarly, the analyst says Brown’s estiamtes of expected savings for state prisons, state employee health plans and the state’s in-home care program are “optimistic.”

Another time-honored budget gimmick is the switch from cash to accrual accounting for the state’s books.

When the switch to accrual occurred, it created a one-time bump in revenue.

Brown is using a “new” form of accrual accounting, the analyst says.

Under accrual accounting, revenues and expenditures are counted in the fiscal year in which they occur.

In Brown’s budget, he proposes to take a portion of the final payments of personal income taxes and bank and corporations taxes and accrue them to the previous fiscal year.

Doing so, increases state revenues by $860 million during the current fiscal year and the one that begins July 1.

The change, the analyst notes, could impact the amount of money the state owes public schools each year.

Although the analyst doesn’t say so, such a move – lowering revenue flowing to the state in a given fiscal year – would most likely also lower the state’s obligation to schools.

“There may be legitimate accounting reasons to adopt the new approach but additional justification from the administration is needed,” the analyst says.

Brown banks on $750 million in savings from the $4.5 billion Department of Developmental Services.

But the analyst finds that $533 million of that savings would come from a proposal “described as increasing the accountability and transparency for the use of state funds for the administrative expenditures of (regional centers) and service providers and through the implementation of statewide service standards.”

More information is needed to assess the plan, says the analyst.

The 5 percent reduction in the personnel budget for state prisons imposed as part of this year’s 100-day late spending plan was supposed to save $292 million this year.

Brown says the Department of Corrections and Rehabilitation will only save $20 million.

But he says in the budget he proposes for the fiscal year beginning July 1 that the department will achieve the full $292 million in savings.

The supposed savings in the prison budget was part of an overall plan to lower state employee compensation costs that lawmakers and Gov. Arnold Schwarzenegger aid would close $1.5 billion of the current year’s buget gap.

Brown’s budget says only one-third of that amount will materialize.

However, in his budget for the following fiscal year, he says virtually all of the savings will be found.

-30-