State Senators Prepare to Scrutinize the Governor’s Prop. 47 State Savings Estimate

Roughly $100 million in funding that could go toward services aimed at ending costly cycles of crime hangs in the balance as state analysts spar over how much the state is saving as a result of Proposition 47. Approved by California voters in 2014, Prop. 47 lowered penalties for certain nonviolent crimes and created a process for individuals who were previously convicted of these offenses to apply for resentencing. Prop. 47 requires annual state savings from the measure, as determined by the Governor’s Department of Finance (DOF), to be spent on mental health and drug treatment programs, K-12 public school programs for at-risk youth, and services for crime victims.

There’s broad agreement that Prop. 47 has reduced incarceration, resulting in state budget savings. However, the DOF and the nonpartisan Legislative Analyst’s Office (LAO) disagree about the magnitude of the savings, with the DOF’s estimate coming in about $100 million below the LAO’s. Last month, the DOF offered a justification for its surprisingly low savings estimate. Below we describe and assess the DOF’s explanation. We also highlight key questions that state Senators should ask the Governor’s budget analysts this coming Thursday during a hearing convened by Senate Budget & Fiscal Review Subcommittee #5 in Room 113 of the state Capitol.

The Debate Over State Savings From Prop. 47: A Recap

In January 2014, several months before Prop. 47 appeared on the November statewide ballot, the DOF and the LAO projected that net state savings from the measure “could reach the low hundreds of millions of dollars annually.” At a minimum, this estimate implies savings in the range of $100 million to $200 million per year.

Two years later, in January 2016, the DOF released an updated state savings calculation. This new estimate assumes net state savings of just $29.3 million in the current fiscal year (2015-16) — far below the range that was initially projected in early 2014. In contrast, the LAO is currently estimating savings of roughly $130 million, which is well within the earlier projected range.

The Governor’s Budget Analysts Recently Offered an Explanation for Their Surprisingly Low Prop. 47 State Savings Estimate

Why is the DOF’s current estimate of savings from Prop. 47 so much lower than the initial DOF/LAO estimate released in early 2014? The Governor’s budget analysts recently provided an explanation. The DOF notes that shortly after the initial estimate was published — and several months before voters approved Prop. 47 — federal judges ordered California to implement various measures intended to reduce overcrowding in state prisons. These measures “weren’t anticipated when we initially did the estimate on Prop. 47 savings,” a DOF official stated in a March 9 media interview.

Reading between the lines, the DOF’s explanation suggests that the court order had the effect of curtailing Prop. 47’s projected impact on the state prison population. The reason, it appears, is that the court-ordered changes applied to some of the same adults who otherwise would have benefited from Prop. 47’s reduced penalties and resentencing provisions. Following the DOF’s reasoning, the vast majority of the state savings that were originally projected to result from Prop. 47 must instead be credited to the court-ordered measures, significantly deflating the initial Prop. 47 savings estimate.

The DOF’s Explanation for Its Low Prop. 47 State Savings Estimate Appears Highly Improbable

On the surface, it seems reasonable to suggest that the court-ordered population-reduction measures may have affected the initial Prop. 47 savings estimate to some degree. However, it appears highly improbable that the implementation of these measures would cause the savings estimate to plunge from “the low hundreds of millions,” as initially projected, to less than $30 million, based on the DOF’s current calculation. If the court-ordered measures had actually had such a substantial impact on projected Prop. 47 savings, then that impact should be reflected not only by the DOF’s most recent estimate, but also by that from the LAO. Yet, the LAO’s current estimate remains well within the “low hundreds of millions” range that the DOF and the LAO jointly projected more than two years ago.

A more plausible explanation for the Governor’s current low savings estimate is that the DOF made perplexing methodological choices in developing its calculation, as both we and the LAO have pointed out. Because of these choices, the DOF’s current estimate both understates the savings and overstates the costs attributable to Prop. 47, as the LAO puts it.

Key Questions That State Senators Should Ask the DOF During This Week’s Hearing

This week’s hearing in the state Senate provides an opportunity for lawmakers to cut through some of the confusion surrounding the dueling estimates of Prop. 47 savings. As Senator Loni Hancock, who chairs the subcommittee, and her colleagues prepare to dig into this issue, here are key questions that they should ask the Governor’s budget analysts to address:

  • How did the February 2014 federal court order — which required the state to adopt various prison population-reduction measures — affect the initial DOF/LAO calculation of state savings from Prop. 47? To what degree was this court order responsible for reducing the savings from the “low hundreds of millions of dollars” to $29.3 million, the DOF’s current estimate?
  • Is the DOF’s current methodology for calculating Prop. 47 savings consistent with that used to develop the joint DOF/LAO estimate in early 2014? If not, how was the methodology modified, and why?

The outcome of this debate is critically important, because it will determine how much ongoing state funding is available to invest in services that can help to reduce recidivism and further decrease California’s over-reliance on incarceration. While Prop. 47 provides the Governor with sole authority to determine how state savings are calculated, he could decide to revise his Administration’s current approach and recognize a higher level of savings as part of the normal deliberations of the state budget process, which will continue through June.

— Scott Graves