BILL ANALYSIS Ó
SENATE COMMITTEE ON BUDGET AND FISCAL REVIEW
Mark Leno, Chair
Bill No: AB 1464
Author: Blumenfield
As Amended: June 13, 2012
Consultant: Keely Martin Bosler
Fiscal: Yes
Hearing Date: June 14, 2012
Subject: Budget Act of 2012.
Summary: This bill contains the contents of the 2012-13
Budget Act.
Background: On May 14, the Governor released his May
Revision for budget year 2012-13. The Governor indicated
the remaining and adjusted General Fund (GF) deficit was
$16.7 billion for the two-year period ending June 30, 2013.
This included a $1 billion reserve.
In January, the estimated GF shortfall was $10.3 billion -
including a $1.1 billion reserve. The budget deficit
increased by $6.5 billion since the Governor's initial
budget proposal in January. The deficit has increased due
to a reduced revenue outlook, higher costs to fund schools,
and decisions made by the federal government and courts to
block previously-approved budget cuts.
This budget relies heavily on the Governor's May Revision
framework that relied primarily on expenditure reductions,
as well as passage of a tax initiative on the November 2012
ballot, and additional "trigger" reductions if the
initiative is not successful. This budget includes $8
billion in expenditure cuts, $5.9 billion in revenues, and
$2.3 billion in other solutions for a total of $16.2
billion in solutions. The budget amendments included in
this bill and the accompanying trailer bills will result in
approximately $92 billion in expenditures and a reserve of
around $500 million in the 2012-13 budget year.
Proposed Law: Overall, this budget adopts the Governor's
May Revision framework, with the exception of $1.2 billion
in expenditure reductions, primarily to the CalWORKs
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program, child care, In-Home Supportive Services, Healthy
Families, and Medi-Cal. The $1.2 billion in cut
restorations are offset by about $900 million in new
solutions in this budget plan. The largest alternative
solutions include capturing additional property tax
increment funds to offset Proposition 98 expenditures
pursuant to last year's dissolution of redevelopment
agencies (about $250 million), capturing unspent
Proposition 98 "reversion" funds to support education
programs in the budget year (about $200 million), and
adopting a more consistent "rebenching" method for the
Proposition 98 budget (about $100 million). The bullets
below delineate the major changes to the Governor's May
Revision embedded in this budget plan:
CalWORKs: The Governor proposed a major
restructuring of CalWORKs and major cuts to grants,
totaling $880 million. The joint plan does not adopt
the restructuring, but cuts a total of $428 million
from the CalWORKs program. The cuts include
continuing reductions to the single county allocation
that have been in place since 2010-11 (these
reductions exempt recipients with young children from
some requirements of the program, thus saving expenses
for child care) and by instituting annual reporting in
child-only cases.
Child Care: The Governor proposed major reductions
to the state's subsidized child care programs,
totaling $452 million. The joint plan reduces General
Fund expenditures by $271 million. The bulk of this
savings is achieved by consolidating funding for the
part-day part-year preschool program funded within the
Proposition 98 guarantee and making a commensurate
General Fund reduction to the General Child Care
Program. In addition, the plan includes $50 million
of across-the-board reductions to child care slots
that would reduce 6,600 slots.
In-Home Supportive Services (IHSS): The Governor
proposed $225 million in reductions to the IHSS
program through a 7 percent across-the-board reduction
in hours of service provided to recipients, and
reductions to services for recipients in shared-living
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arrangements. The joint legislative plan cuts a total
of $90 million from IHSS through continuation of
existing 3.6 percent reduction in hours, which was set
to expire on June 30 and other proposals to reduce
caseload and maximize federal funding. In addition,
the budget assumes larger savings in the out-years
from the state being successful in appeals of
previously-authorized cuts that are currently before
the federal courts.
Cal Grants: The Governor proposed a total of $292
million in cuts to the Cal Grant higher education
student financial assistance program. The joint plan
adopts a total of $55 million in cuts to Cal Grants by
accepting the Governor's proposal which would set
limitations on eligibility for Cal Grants based on an
institution's graduation and loan default rates. In
addition, the joint plan accepts the Governor's
proposal to reduce the Cal Grant award levels for
private institutions (non-profit and for-profit), but
the joint plan phases the implementation of the cut
beginning in 2013-14 so that it would apply only to
future Cal Grant recipients.
Other Restorations: The joint plan restored much
smaller amounts for some other proposed cuts,
including cuts to the Healthy Families program, the
AIDS Drug Assistance Program, and community health
clinics. In addition, the joint Legislative budget
also restores $10 million to open two new veterans'
homes.
This plan relies on the Department of Finance revenue
estimates, and is predicated on the passage of the
Governor's tax proposal. The Governor's tax proposal is a
Constitutional amendment that would raise the personal
income tax and the sales and use tax on a temporary basis.
Together, the proposed increase in the two taxes is
expected to raise an additional $8.4 billion through the
budget year, representing $2.9 billion to schools and
community colleges and $5.5 billion for General Fund
benefit. The measure would also permanently dedicate
revenues to local governments to pay for public safety
programs realigned in 2011.
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The plan assumes the state will receive $8.4 billion in
additional personal income tax and sales tax revenue from
the Governor's tax initiative on the November ballot, of
which $5.5 billion will be used to balance the budget.
(The remaining $2.9 billion will grow the Proposition 98
guarantee for schools.)
In the event that the voters do not approve the Governor's
tax proposal in November, the Legislature's joint plan,
like the Governor's, includes a series of trigger cuts.
These cuts are detailed below:
2012-13 Trigger Cuts (in millions)
----------------------------------------------------
|Program Area | May |
| |Revision |
| | Amount |
|------------------------------------------+---------|
|K-14 Education (Proposition 98) | $5,493.6|
|------------------------------------------+---------|
|University of California | 250.0|
|------------------------------------------+---------|
|California State University | 250.0|
|------------------------------------------+---------|
|Courts | 0.0|
|------------------------------------------+---------|
|Developmental Services | 50.0|
|------------------------------------------+---------|
|Department of Forestry and Fire | 10.6|
|Protection | |
|------------------------------------------+---------|
|Local Water Safety Patrol | 10.6|
|------------------------------------------+---------|
|Flood Control | 6.6|
|------------------------------------------+---------|
|Public Safety-Fish & Game, Park | 6.0|
|Lifeguards and Rangers, Department of | |
|Justice | |
|------------------------------------------+---------|
|Total |$6,076.8 |
----------------------------------------------------
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Fiscal Effect: The fiscal impact of the contents of this
and associated trailer bills is to achieve $16.2 billion in
budget solutions. As of the May Revision, the Governor
estimated that the state had a deficit of $16.7 billion,
which includes a $1 billion reserve. This budget would
result in approximately $92 billion in expenditures and
approximately a $500 million reserve.
Support: Unknown
Opposed: Unknown
Comments: Overall, this version of the budget prioritizes
K-12 education, higher education, and public safety.
Significant reductions were made in the health and human
services areas, but in many cases, alternative cuts were
found that mitigate the harshest of these reductions. Most
areas of the budget saw significant expenditure reductions.
Expenditure reductions are 50 percent of the overall
solution to balancing the budget. This plan includes $8.0
billion in expenditure reductions by adopting the vast
majority of the Governor's proposed cuts.
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