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Key takeaways from recent LAO publications

Our office will publish shorter, more focused budget analyses over the next few months. In most cases, rather than sending out an announcement for each publication, we will provide periodic updates with the key takeaways from recent pieces. All of our 2023-24 budget analyses to date can be found here.

The 2023-24 Budget: California State University

Link CSU Funding Increase to Spending Priorities. The Governor’s main proposal for the California State University (CSU) is a $227 million (5 percent) ongoing base increase. Rather than providing an unrestricted increase, we recommend the Legislature designate funding for the specific operating costs it wishes to support. Given that the proposed increase falls short of covering CSU’s operating costs, the Legislature could also consider supporting tuition increases to expand CSU’s budget capacity.
Legislature Could Revisit CSU Enrollment Expectations. The 2022-23 Budget Act provided CSU with $81 million contingent on it increasing resident undergraduate enrollment by 9,434 students. Though CSU is not expecting to meet this target, the Governor does not reduce CSU’s funding accordingly. As an added budget option, the Legislature could consider removing the $81 million. The Legislature also could consider updating CSU’s enrollment targets for 2023-24 and 2024-25.
Recommend Revisiting Certain CSU Capital Projects. As part of his package of budget solutions, the Governor proposes to rescind $405 million in one-time funds provided for six CSU capital projects last year and instead provide $27 million ongoing to debt finance those projects. Given that this approach would significantly increase total project costs, we recommend the Legislature revisit whether to proceed with each of these projects.

The 2023-24 Budget: Proposition 98 Overview and K-12 Spending Plan

Proposition 98 Guarantee Likely Lower Than Estimates in the Governor’s Budget. Under our latest estimates of state revenue, the minimum funding requirement for schools and community colleges would be roughly $2 billion below the level in the Governor’s budget in 2022-23 and 2023-24. Our lower estimates are consistent with recent weakness in a few key economic indicators. Some of this decrease likely will be offset by higher local property tax revenue.
Governor’s Budget Has Relatively Few New Proposals for K-12 Schools. The Governor’s budget would dedicate most of the available Proposition 98 funding to covering an 8.13 percent statutory cost-of-living adjustment (COLA) for existing programs. The Governor also proposes a new ongoing funding stream for high-poverty schools and two one-time grants. To help cover the cost of these proposals, the budget would reduce funding for one of the discretionary grants the state approved in the June 2022 budget.
Recommend Approving Less Ongoing Spending to Avoid Future Shortfalls. The Governor’s budget would rely upon $1.4 billion in one-time Proposition 98 funds to pay for ongoing costs of the Local Control Funding Formula. This approach would create a shortfall in the budget for schools moving forward and make future drops in Proposition 98 funding more difficult to address. We recommend the Legislature instead consider a few options to reduce ongoing spending, such as (1) funding a lower COLA rate, (2) not approving new ongoing commitments, and/or (3) making certain reductions to existing programs.

This article was released by the Legislative Analyst’s Office.