The Senate and House have passed broadly similar operating budgets. Both would impose a capital gains tax. Both would increase spending from funds subject to the outlook (NGFO) by double digits in 2021–23. Both would appropriate billions of dollars in federal relief funds. Both would drain the rainy day fund.

Across the 2021 supplemental and the 2021–23 biennial budgets, policy spending from the NGFO plus federal relief would increase by $10.067 billion in the Senate budget and by $10.817 billion in the House budget. Substantial spending differences between the two include:

• The Senate would appropriate $800.0 million from the NGFO to reduce the unfunded actuarial accrued liability of the Teachers’ Retirement System (TRS) plan 1 (even though there are proposals to address this by combining retirement plans).
• For small business grants and the small business credit initiative, the Senate would appropriate $142.8 million in federal relief and the House would appropriate $392.8 million in federal relief.
• For rental assistance, the Senate would appropriate $495.2 million in federal relief and the House would appropriate $1.172 billion in federal relief.

In some cases, the two budgets would fund programs at similar levels but use different funding sources. For example, for the unemployment insurance relief account, the Senate would appropriate $500.0 million from the NGFO and the House would appropriate $600.0 million in federal relief dollars.

Given the high level of proposed spending, the use of one-time federal relief to start new, ongoing state programs, and the unnecessary use of the rainy day fund, sustainability is a concern with both budgets. Additionally, the proposed capital gains tax is not needed to balance the budget; instead, this revenue would be used to fund new programs. Both budgets would address the current economic uncertainty by effectively creating shadow reserve accounts. But because these reserves would not be subject to constitutional restrictions, both budgets would water down our constitutional rainy day fund.

Read the report here.