Recession looms as Legislature prepares its return ahead of May budget revision
The sight of only two legislators donning masks and seated at a dais set for 15, with the rest of a committee conferenced in on Zoom, could become a more common image when the California Legislature reconvenes on May 4. That day, if all goes as planned, will mark an unprecedented seven-week recess as the state and the nation fight to slow the spread of coronavirus.
100 dollar bills with red arrow descending
The aforementioned scene happened on April 16 as the Senate Budget Committee held the first hearing of the social distancing era and first official hearing of any kind at the Capitol since the Legislature recessed exactly one month prior — a recess initially set to go through April 13, but extended to May 4 by legislative leadership. It was during this hearing that Legislative Analyst Gabe Petek made the dreaded yet unsurprising announcement that California “has entered a recession, and possibly a quite severe one.”
Gov. Gavin Newsom made a similar declaration just hours later during his daily press conference, proclaiming that “we are now in a pandemic-induced recession here in the state of California,” citing the 3.1 million unemployment applications the state has received — a number expected to climb.

The barreling economic downturn caused by COVID-19 upends most if not all the initial January 2020–21 state budget proposal and creates a bleak outlook for the pending May Revision.

“The January budget is no longer operable,” Gov. Newsom proclaimed in a press conference earlier in April. “We should be prepared for substantial adjustments.”

What to look for in the May Revision
By law, the May Revision must be released on or before May 15. Following the release, the annual Budget Conference Committee meets in late May and early June to cull recommendations on individual budget items from both houses, then sends an agreed-upon budget back to the floor of both houses for a vote. The two houses have a June 15 deadline to pass the budget and send it to the Governor, who then has until July 1 to sign it. A May 4 return from its recess will allow the Legislature to fulfill its role in meeting these deadlines, which are set by the California Constitution and are not waivable.

Based on March guidance from the Department of Finance and an April memo from Assembly Budget Chair Phil Ting (D-San Francisco), expectations for May are strictly for a “workload budget.” This indicates that the revised budget will focus almost exclusively on the preservation of existing programs and is unlikely to add any new programmatic spending, “with the exception of COVID-19 related costs, wildfire prevention and homelessness funding,” according to Ting’s memo.

A workload budget, hastened by expected steep drops in state revenue, signals that January’s K-12 budget proposals related to teacher preparation and recruitment, special education and opportunity grants will likely be nixed, and that the amount of money available for the Local Control Funding Formula and other statutory cost-of-living adjustments could be significantly reduced.

Under a workload budget, the Proposition 98 guarantee, while susceptible to fluctuations in revenue and enrollment, still cannot be arbitrarily reduced, but any new revenue projections that are lower than those included in the Governor’s January budget will potentially lower the Proposition 98 guarantee in the coming year. Funds from the statewide rainy day fund of more than $18 billion, as well as the Public School System Stabilization Account balance of $377 million will be available, but those accounts do not figure to serve as a sufficient counter to the expected revenue dips. An additional deposit of $110 million was proposed for the education stabilization account in the January budget, but it remains unclear how economic changes will affect that proposal.

Assemblymember Ting’s memo also offered the possibility of an August revision to the enacted budget, due primarily to the extension of the tax filing deadline from April 15 to July 15, which will not allow for a clear picture of state revenues during the May and June budget process. The memo states that budget committees would consider a second round of deliberations, and that “it is possible the State will need to consider sizable ongoing reductions to major programs during this time.” It is currently unclear how the process of revising the enacted 2020–21 budget would play out between the Legislature and the Administration.

While recognizing a volatile budget situation, CSBA continues to strongly advocate for the preservation of funding for K-12 education, and for any available one-time funds to be allocated on a discretionary basis to allow LEAs to respond to the pandemic locally and preserve existing programs.

What it means for 2020 legislative proposals
As of this writing, it is not known what specific adjustments the Legislature will make to its 2020 calendar upon its expected return, but deadlines for policy committees, fiscal committees and the floors of each house to hear bills will have to be addressed. Several key policy committee deadlines have already passed during the recess.

With the calendar being squeezed and the declaration of a workload budget, it is likely that policy committee chairs will opt to hear only bills that deal with mitigation of the COVID-19 outbreak or that make non-fiscal adjustments to existing programs, and will likely decline to hear proposals for new programs. Similarly, recognizing the looming recession, fiscal committee chairs are likely to limit their hearings primarily to COVID-19 related measures.

While the Legislature can be called into special sessions in the fall, the current two-year 2019–20 legislative session, by law, cannot be extended beyond midnight on Aug. 31.

CSBA’s Legislative Committee continues its 2020 work to review new legislation and adopt official positions, so that CSBA is ready to respond as needed when the Legislature reconvenes and a clearer picture of what bills will advance emerges. Visit www.csba.org/legislativenews for updates on the budget and Legislature, and www.csba.org/coronavirus for updates on the COVID-19 pandemic.