BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
2008 (Arambula)
Hearing Date: 07/15/2010 Amended: 05/28/2010
Consultant: Maureen Ortiz Policy Vote: PE&R 4-1
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BILL SUMMARY: AB 2008 exempts employees of the Franchise Tax
Board and the State Board of Equalization from being subject to
any furloughs implemented by Executive Order or by any other
action of a state agency, board, or commission.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Furlough exemption loss of savings
FTB ---approximately
$1.5 million annually---- General
BOE ----approximately
$600 annually----- General
FTB: tax revenue ---tens of
millions annually--- General
BOE: tax revenue ---tens of millions
annually -- General
---tens of millions annually -- Special*
*Various Special Funds created under numerous collection
programs within BOE
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STAFF COMMENTS:
The above fiscal estimates represent costs and savings pursuant
to the enactment of a one-day mandatory furlough program. The
actual receipt of revenue may not coincide directly with the
fiscal years shown above due to variances in the flow of revenue
in relation to collection activities.
A report issued February 12, 2010 by the Senate Office of
Oversight and Outcomes compared the effects of furlough savings
to the revenue generation at the Franchise Tax Board and the
Board of Equalization. This report indicates that California
has lost $6.36 for every dollar saved through budget cuts at the
BOE, and has foregone $7.15 of revenue for every dollar saved
through furloughs at the FTB.
The imposition of the recent three day furlough resulted in a
tremendous impact on foregone revenue from tax collection
agencies. In the case of the Board of Equalization (BOE), while
it is a statewide constitutional office and was not required to
implement the furlough program, the BOE essentially realized a
$41 million funding reduction in its budget which was equivalent
to the furlough reduction. In order to accommodate this budget
reduction, the BOE implemented the following: 1) a hard hiring
freeze effective August 1, 2009; 2) a voluntary leave program
whereby over 1,200 BOE employees voluntarily reduced their pay
5-10% while continuing to work full time in order to avoid
layoffs; and 3) a reduction in operational expenditures, travel
and equipment purchases.
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AB 2008 (Arambula)
Consequently, the BOE has estimated a revenue loss of
approximately $264 million due to the large number of vacancies
that were not filled, of which $156 million would have been
revenue to the General Fund. The remaining revenue is comprised
of a variety of collection activities by the BOE including the
Hazardous Substances Tax Program, Alcoholic Beverage Tax
Program, Cigarette and Tobacco Products Tax Program as well as
numerous other fees. (Staff notes that although this
legislation will exempt BOE employees from being furloughed, it
is not clear that the board's full budget will automatically
remain intact.) The BOE indicates that since its budget
reductions due to furloughs are met through unfilled positions,
new staff has to be recruited, hired, and trained before revenue
collections resume - the result is lost revenue for many months
after the furloughs are completed, unlike other departments
where employees will simply return to a 40 hour work week. The
BOE currently has between 250-300 vacant positions that are tied
to revenue generating functions.
According to the FTB, the imposition of a three day furlough
program resulted in lost revenue of over $500 million due to
uncollected taxes during the 17 months of enactment.
On December 29, 2008, the Governor issued Executive Order
S-16-08 which proclaimed a furlough of two unpaid days per month
from February 2009 through June 2010 for represented state
employees and supervisors. The Governor's Executive Order
S-13-09 then subjected all state employees to a third day per
month furlough effective July 1, 2009 through June 30, 2010
which resulted in a total salary reduction of approximately
13.86%. The three day furloughs ended June 30, 2010. The
governor has instead proposed alternative employee compensation
related savings in 2010-11 that include a 5% pay reduction, 5%
increase in employee contributions to retirement, and 5%
departmental reductions.
SBx8 29 (Steinberg) which was vetoed on March 24, 2010 would
have exempted employees funded from non-general fund sources, as
well as employees of FTB and BOE, from future furloughs. In his
veto message, the governor stated it is necessary to apply
furloughs across the board, with limited exemptions as needed to
protect public health and safety, to effectively manage the
workforce and to avoid inequities and morale problems for state
employees.
AB 2008 provides that the bill does not create a legal
authorization for the furlough of state employees through
executive order. The bill is intended to prevent future
furloughs of state employees who work in revenue generating
positions.