A Look at the July Budget Package “Assumptions”

While not rivaling Clive Cussler, James Patterson or Ian Fleming for pacing or excitement, the Legislative Analyst Office’s appraisal of the budget package signed July 28 is worth perusing – if only to note the number of times the word “assumes” appears.

The package of bills which include eliminating automatic cost-of-living increases in state programs aimed at helping the poor and infirm, were an attempt to close an estimated $24 billion hole in the budget for the fiscal year that began July 1. In February, Gov. Arnold Schwarzenegger signed a budget for the current fiscal year that attempted to close a $43 billion chasm between revenues and spending commitments.

When combing through the Legislative Analyst’s assessment, it’s worth remembering the bit from The Odd Couple TV show with Jack Klugman as Oscar and Tony Randall as Felix.

In one episode, Felix writes out the word “assume” to graphically explain that when someone assumes it makes an “ass” out of “u” and “me.”

Beginning on the first page, the word “assume” isn’t present but there is supposed to be an “estimated reserve of $500 million at the end of the 2009-2010 fiscal year.” However, the next sentence notes, “year-to-year comparisons of both revenues and expenditures are difficult due to a variety of one-time budget actions.”

For a state that chronically experiences spending commitments well in excess of revenues, actions that continue to save money rather than only work once are far preferable.

On Page 2, the reader learns that of the supposedly $24 billion solution more than 25 percent — $6.1 billion came at the expense of public schools and community colleges. On a later page the report says the state pledges to pay schools back more than  $11 billion for all the money it has taken during the last three fiscal years.

Also on Page 2 are the first four appearances of the verb “assumes.”

The first appearance represents quite a sizable assumption:

“(The budget) assumes that future federal actions will reduce state Medi-Cal funding requirements by $1 billion and additional state savings of $323 million are achieved.”

This means a little over 5 percent of the budget solution is predicated on hoped-for action by the federal government.

Right below that on Page 2 is the assumption that there will be $284 million in savings in the state’s developmental services programs.

Under the heading, “Employee Compensation,” it is noted that the budget assumes the Legislature, whose Democratic majority is maintained by political support from public employee unions, “will not approve proposed agreements with (the) largest state employee union, which will reduce currently budgeted costs by $210 million.”

Finally, on Page 2, $50 million will supposedly be saved by limiting reimbursement rates paid to private contractors that provide medical care to inmates outside of prison.

There’s a fifth “assumes” on the page but, given the magnitude of cuts to local courts, it seems a fairly safe bet that there will be one-day-per-month court closures.

The assumptions continue on Page 3:

First, it is assumed $562 million more in gasoline sales tax revenue will be available for General Fund uses.

It is then assumed that $210 million will be saved in borrowing costs by paying some of the state’s obligations next year rather than this year. The primary entity being stiffed: public schools.

And the budget assumes that $1 billion worth of workers compensation insurance business handled by the State Compensation insurance Fund will be sold sometime before June 30, 2010. 

So, by rough count, nearly $3.6 billion– somewhere between one-sixth and one seventh of the budget solution — is based on assumptions.

(Editor’s Note: A treatise could be written on the efficacy of “unallocated” budget cuts like the $1 billion each leveled against the University of California and the California State University system but that’s another topic.)

The assumptions resume on Page 7 where eliminating in-home care domestic services for all but the most severely disabled will supposedly save $264 million. The least disabled will be ineligible for all services. The Legislative Analyst offers no definition of what constitutes least disabled.”

On Page 8, one of the assumptions from Page 2 is repeated: $323 million in savings from “unspecified” reductions in Medi-Cal, the state’s health care system for the poor. 

“How these savings would be achieved has not yet been determined,” the analyst notes.

Another large assumption, although the word isn’t actually used, is that lawmakers — Democrat or Republican — will provide the necessary votes to approve $1.2 billion in what are so far unspecified cuts to the state prison system. Once the cut are specified, logic would suggest rounding up the votes would be even harder.

The budget also assumes without using the word that the state will receive $2 billion in money over two years that currently belongs to redevelopment agencies. The state will then take the money and use it to pay a portion of its obligations to public schools.

The budget balances under the assumptions that such a move will either 1) Not be tested in court or 2) If tested, redevelopment agencies will lose.

To quote former Senate president Pro Tempore John Burton, a San Francisco Democrat: “The odds of (either) happening are slim to none – and Slim left town.”

Adding up all the assumptions now totals about $6.8 billion, 28.5 percent of the budget package.

That doesn’t include the assumption from the February budget that the various temporary tax increases imposed by it will yield $12.5 billion in revenue.




Filed under: Budget and Economy


  1. Even in normal times, state budgets are based on economic forecasts as well as forecasts of the size of relevant entitlement populations. The longer the forecast period, the greater the room for error (and mischief). Those who are currently pushing for California to adopt two-year budgets, i.e., doubling the forecast/assumption period – should be questioning their own “assumptions” of the consequences.

    Comment by D Mitchell — 8.15.2009 @ 7:01 am

  2. Umm, sorry.

    “In one episode, Felix writes out the word “assume” to graphically explain that when someone assumes it makes an “ass” out of “u” and “me.”

    That would be from the Bad News Bears…

    Otherwise it’s nice to see something other than another fund raiser reprint.

    Comment by NoOneInParticular — 8.17.2009 @ 8:13 am

  3. crazy…. great post… thanks for all the information

    Comment by CA Homes For Sale — 9.02.2009 @ 12:17 pm

  4. I guess that to get the business loans from banks you ought to present a good motivation. However, once I’ve received a student loan, because I wanted to buy a building.

    Comment by KaitlinLe25 — 6.12.2010 @ 12:19 pm

RSS feed for comments on this post.

Leave a comment