CA State Senate passes Republican budget plan…
[All I can say is that I hope the Assembly Democrats have more spine, and don’t blink first like their colleagues in the State Senate… Davis’ political hide and a 14 point pop to his poll numbers isn’t worth the pain that this budget will inflict on poor and working folks. -Thomas]
California Budget Project
Email Update
7/28/03
On Sunday July 27, the State Senate passed a budget bill (AB 1765) with minimal debate by a vote of 27 – 10. Republicans Senators Ashburn, Brulte, Johnson, Knight, and McPherson voted for the bill. Democratic Senators Alarcon and Soto abstained and Senator Vasconcellos was absent. The remaining Democrats voted for the bill, while the remaining Republicans voted no. A detailed summary of the plan is available on the website of the Senate Republican Caucus at http://republican.sen.ca.gov/opeds/99/oped1873.asp. A brief summary is available on the website of the Legislative Analyst at www.lao.ca.gov. The Assembly is expected to take up the budget late Monday July 28 or Tuesday July 29.
The budget agreement:
- Is based on AB 1765 as it was considered (and rejected) by the Senate in late June with amendments.
- Does not include any taxes that must be approved by the Legislature. It does assume the increase in Vehicle License Fees previously enacted through the trigger mechanism contained in the original VLF reduction bill and assumes that the Manufacturers’ Investment Tax Credit will be allowed to sunset (for additional information see the CBP’s Unkept Promises: California’s Manufacturers’ Investment Tax Credit, April 2003 at www.cbp.org).
- Assumes that the state will issue $10.7 billion in deficit retirement bonds to be repaid out of existing resources. The bonds will be repaid through a complex transaction insiders call the “triple flip.” This transaction shifts ½ cent of local governments’ sales tax rate (the “Bradley-Burns” rate) to the state; shifts property taxes from K – 14 education to cities and counties to replace lost sales tax revenues on a dollar for dollar basis; and reimburses schools for lost property tax moneys out of the state’s General Fund. Contrary to some reports, the “triple flip” does not attempt to address the so-called fiscalization of land use – the preference of some local governments for sales tax generating land uses. Cities and counties will be reimbursed with property tax dollars based on the amount of sales tax they would have received under current law. The triple flip will be reversed once the deficit bonds are retired.
- Uses the $2.2 billion the state received in fiscal relief from the federal government to cover costs in 2002-03 and 2003-04. The budget assumes that the state receives $680 million in 2003-04 and thereafter in contributions from tribes that engage in gaming activities. The budget also assumes revenues from previously authorized pension obligation bonds and the sale of additional bonds backed by the state’s payments from the national settlement between the tobacco industry and the states.
- Eliminates the Vehicle License Fee (VLF) backfill payments to counties and cities. This payment will be made up with revenues from the restored VLF rates paid by car owners. However, there is a gap of approximately 60 days between the end of backfill payments and the point when car owners will begin to pay higher fees. The budget ensures that county realignment programs will be fully funded and treats the so-called gap payment to cities and counties as a loan that would be repaid in 2006-07. Other local government provisions include a one-time $250 million transfer from Redevelopment Agencies (RDAs) to schools. RDAs would be prohibited from using low and moderate income housing funds to make the transfer and the parent cities or counties of RDAs are authorized to make the transfer in lieu of all or part of that required by a RDA. The budget agreement eliminates state reimbursements to cities for booking fees paid to counties for booking inmates into county jails, as well as counties’ authority to levy these fees, a cut of $38 million, and defers or suspends state payment for most mandated programs.
- Funds K – 12 education at a level $288 million below that provided in the 2002-03 Budget Act as enacted last September. This reduction translates into a $180 per pupil drop in funding from $7,067 to $6,887. The budget funds enrollment growth in revenue limits, the basic allocation school districts receive from the state, but does not fund enrollment growth in categorical programs or cost-of-living adjustments in either revenue limits or categorical programs. The budget delays $1.2 billion in K – 12 payments for programs operated in 2003-04 until July 2004.
- Achieves $384 million in savings from child care programs by reducing funding for after school programs ($7 million), reducing provider regional market rates ($82 million), assuming lower enrollment in CalWORKs’ Stage 3 ($57 million), using federal TANF dollars for Stage 2 ($119 million), reducing the age limit so that subsidies are only available to children under the age of 13 ($16 million), reducing the Alternative Payment Provider administrative rate by 1 percent ($12 million), and eliminating Quality Improvement Technical Assistance spending ($5 million), among other changes.
- Makes unallocated reductions of $293 million to the University of California (UC) and $204 million to the California State University (CSU). According to the Legislative Analyst’s Office, all but $114 million of this cut will be restored through student fee increases of approximately 30 percent. The budget reduces funding for UC and CSU outreach programs by $37.7 million (51 percent) and $12.6 million (19 percent), respectively.
- Reduces Community College funding by a net of $81.8 million. The budget increases student fees from $11 per unit to $18 per unit (the Governor had proposed an increase to $24 per unit in January), defers $200 million in 2003-04 apportionment and Partnership for Excellence payments into 2004-05, and cuts $86 million from apportionments and categorical programs.
- Makes a number of changes to health care programs, including a 5 percent reduction in Medi-Cal provider reimbursement rates that excludes long-term care and hospital inpatient and outpatient services; rejects the elimination of so-called Medi-Cal optional benefits, but includes cost containment efforts in the area of dental, hearing aids, and durable medical equipment; shifts the accounting treatment of Medi-Cal expenditures from accrual to cash to reflect a reduction in 2003-04 expenditures of $930 million; and includes $46 million to fund the Supplemental Wage Rate Adjustment program that provides supplemental payments to nursing homes in 2002-03 and 2003-04, this program had been previously eliminated in bills enacting mid-year reductions. The budget assumes that the cost-of-living adjustment for long-term care facilities will be suspended in 2004-05. The budget agreement imposes a new “quality improvement assessment fee” that will be imposed on Medi-Cal managed care plans and Intermediate Care Facilities for the Developmentally Disabled. Proceeds of the fee will be used to draw down federal funds and will be returned to health care providers in the form of higher reimbursement rates.
- Retains June 2003 cost-of-living adjustments (COLAs) for the SSI/SSP and CalWORKs programs, but suspends 2003-04 COLAs. The budget does not reduce current grant levels. Other social service changes include shifting $11 million of federal TANF dollars from CalWORKs to Child Welfare Services; authorizing state participation in the federal transitional food stamp program (this change is expected to provide Californians with $70 million in food stamps at an estimated state cost of $2.5 million). The budget shifts a total of $56 million from the Employment Training Panel to support CalWORKs’ employment services costs.
- Imposes new and increased court filing fees to result in $150 million in General Fund savings for trial court funding. The budget also eliminates the Office of Criminal Justice Planning (OCJP), high technology grants to local law enforcement ($18.5 million), and Rural County Law Enforcement Grants ($18.5 million) and makes a number of reductions in corrections spending totaling approximately $110 million. Funding for COPS and Juvenile Justice Crime Prevention grants is reduced.
- Makes a number of complex fund shifts and loans from transportation programs to the General Fund, including transferring $856 million in Proposition 42 funds to the General Fund and deferring the repayment of a loan from the Transportation Congestion Relief Fund to the General Fund. The agreement also increases truck weight fees by about $160 million to make up for a shortfall created by a prior measure that inadvertently resulted in a reduction in total fee revenues.
- Assumes a total $1.1 billion ($585 million from the General Fund) in reductions in employee compensation costs, a reduction of approximately 10 percent. These savings would come through either layoffs or reductions in compensation.
- Eliminates General Fund support for the Technology, Trade, and Commerce Agency. Programs funded with special or federal funds will be transferred to the Business, Transportation, and Housing Agency or other state departments. Transferred programs include the Small Business Expansion program, the Film Commission (although the Film California program is eliminated for $8 million in savings), Manufacturing Technology program, fee supported tourism programs, Underground Storage Tank program, and the Infrastructure Bank.
- Assumes that the Legislature will enact a variety of fees to support resources, environmental, and energy programs. However, these bills were not included as part of the budget package and will, according to the Senate Republican Fiscal Consultants’ Analysis, be considered in August. The fees would backfill reductions in general support and include air pollution permitting fees, waste water discharge permitting fees, pesticide permitting and licensing fees, dam safety fees, earthquake insurance policy fees, fishing and hunting license fee increases, park use fee increases, power plant siting and annual fee increases, and water rights fees. Other changes include eliminating General Fund support for the Secretaries of Resources ($1.3 million) and CalEPA ($879,000).
- Eliminates $11 million in General Fund support for the Arts Council, leaving the Council with $1 million.
- Achieves $40 million in General Fund savings by reducing funding for various housing programs and shifting these programs to the proceeds of Proposition 46 bond funds. The Senate package restores $1.3 million for Emergency Housing Grants proposed for reduction in the Governor’s January budget.
The budget agreement includes the following measures passed by the Senate on July 27:
AB 1765 – Budget bill
AB 7X – Authorizes deficit bonds and sales tax changes
AB 1747 – Natural Resources
AB 1748 – Proposition 50
AB 1749 – Repeals booking fee authority
AB 1750 –Proposition 42
AB 1751 – Transportation
AB 1752 – Human Services
AB 1753 - Departments of Rehabilitation and Developmental Services
AB 1754 – Education
AB 1755 – Redevelopment Property Tax Transfer
AB 1756 – General Government
AB 1757 – Eliminates the Technology, Trade, and Commerce Agency
AB 1758 – Corrections
AB 1759 – Trial Court Funding
AB 1761 – 2002-03 Deficiency Bill
AB 1762 – Health
AB 1763 – Proposition 99
AB 1766 - Triple Flip
AB 1768 – VLF Backfill Loan
SB 9 – Bureaucracy Realignment and Closure Commission
SB 1082 – Performance Budgeting
Copies of the bills listed above are available on the web at www.sen.ca.gov.
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From the California Budget Project
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Sacramento CA 95814-2820
Jean Ross, Executive Director
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Email: cbp@cbp.org
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