5 Things to Know About Gov. Brown's Budget Revision

California Gov. Jerry Brown lowered his proposed $170.7 billion budget proposal last week due to unexpectedly low tax revenues.

The tax revenue projection has been reduced by $1.9 billion because of lower-than-expected April income and sales tax receipts.

Here are 5 things you should know about this budget revision.

1. Is California's economy shrinking?

No. By the time the legislature votes on the new fiscal year budget, the state will have entered its seventh year of recovery, two years longer than the average recovery period.

"California is doing pretty well in terms of job growth," said Professor Alan Gin of the AHLERS Center for International Business at the University of San Diego. "It sounds like the revenue projections are off and that can still happen even with growth. It could mean that some areas aren't going as strong as projected."

2. Will the state budget be balanced?

According to the governor's office, the state's budget is expected to be balanced for the next two fiscal years. However, Gov. Brown said the state is expected to go into the red by the 2019-20 fiscal year, if nothing is done.

"The emerging shortfall is in large part -- but not entirely -- due to the expiration of the temporary taxes imposed under Proposition 30," according to the May Revision report.

3. What can be done to prevent a budget shortfall?

Voters have a chance to extend Prop. 30 taxes in the November election. If voters reject the idea, the state is expected to have a $4 billion deficit by the 2019-20 fiscal year. If voters approve the measure, the state's budget will have a surplus of "a few hundred million dollars each year," according to the report.

4. What about the state's Rainy Day Fund?

The passage of Proposition 2 in 2014 gives the state a tool to mitigate the boom-and-bust cycle of the economy. Under the measure, the state will save the surpluses in boom years to a Rainy Day Fund, with a constitutional goal of having 10 perecent of tax revenues in the fund.

The governor’s proposal calls for $2 billion more than what is required under Prop. 2 to be set aside for the fund.

While the state is better prepared now for a recession than the previous two economic downturns in 2001 and 2007, California still lags behind other states. Moody's Investors Services report ranked California 19th in recession preparedness.

5. What does all this mean for the average Joes?

Nothing much. The average day-to-day life for Californians won’t be affected too much by the proposed revision. There are a few things to note, however:

• The May Revision keeps the proposed $1.5 billion set aside for the renovation of state buildings. This means that there will be less money in the general fund to deal with setbacks;
• the revised lowered budget proposal could put the governor at odds with Democrats in the legislature who wanted to restore more services cut during the economic downturn. Brown has been tightfisted with the budget since becoming governor again in 2011; and
• while there are no signs of the economy contracting anytime soon, the budget projection assumes the continued growth of the economy. Since WWII, the average expansion period was around five years. The economy has seen seven years of growth, so a downturn could be around the corner.