Transcript: Press briefing Q&A w/ LAO Mac Taylor on California’s fiscal outlook for 2014-15 – Part II

Part II – Partial transcript of the press briefing Q&A with Legislative Analyst Mac Taylor on California’s fiscal outlook for 2014-15. The press conference was held on Nov. 30, 2013:

Question:
…Do you see the government growing, adding jobs?

Mac Taylor:
Actually most of the spending is – if you’re talking about state government or government in general?

Question:
State.

Mac Taylor:
If you look at our underlying estimates, you have school spending growing, so you could certainly see growth at the local level. But most of the state government is sort of focused in higher education and corrections and then there’s a lot of other – CalTran is big but some other agencies tend to be funded by special funds and federal funds.

In higher education, for example, you’ll see our forecast is flat over the whole period. That’s in part because we don’t automatically put in inflation adjustments in because state law says I’m not supposed to assume automatic. But the underlying demographics on higher ed are that 18 to 24 college-age population is actually declining during the period. So we don’t see – I mean, we can always grow because we want to take more students, but we don’t see great pressures in the higher ed system.

Corrections we have growing relatively slowly. That’s another large employer at the state level.

So, I would say our forecast sort of implicitly assumes not incredibly large expansions in the number of state employees.

Question:
In terms of potential spending, it does look like you guys do take into account the prison spending – $300 million or so.

Mac Taylor:
Yes.

Question:
But when legislative Democrats compromised with the governor last June, I think many of them said, “Look, we’re taking these conservative estimates now but we’re not at all precluding the possibility of mid-year spending increases if the money comes in.” What would you say to legislative Democrats today if they say, “Hey, we’ve got this money. We’ve said we want to look at restoring programs, maybe even mid-year, maybe next year.” What would you say?

Mac Taylor:
Well, I would say that we have tried to set aside funds for those very purposes, realizing that they’re going to want to do that. And that’s why we’ve put those categories in our figure 4 sort of approach to thinking about the operating surpluses. It’s also to remember that implicit in our numbers – say, if you look at 14-15 where we show a $3.2 operating surplus – we’ve already built in to our Prop. 98 numbers a very large increase in Prop. 98 spending. It grows – the general fund share grows by about $6.4 billion, and the amount of money available for ongoing programs is even greater. So there is a large amount of money there for increased program spending. It’s just that’s sort of built in to the top line. And then we’ve tried to build in, acknowledging that they may want to give inflation increases to universities, to the courts, and that they may want to make some new commitments that we’ve tried to acknowledge that.

Question:
What about mid-year?

Mac Taylor:
Well, mid-year, they could do that sooner. It would just mean that you would end the year with not a $2.4 billion surplus starting off, you would have a smaller surplus. And since we implicitly give high priority to trying to build up those surpluses, we would hope they would be careful in making too many of those type of additional commitments too soon.

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