BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 1497
Author: Assembly Budget Committee
Amended: 6/25/12 in Senate
Vote: 21
SENATE BUDGET & FISCAL REVIEW COMMITTEE : 9-2, 6/25/12
AYES: Leno, Alquist, DeSaulnier, Hancock, Liu, Lowenthal,
Negrete McLeod, Wolk, Wright
NOES: Anderson, La Malfa
NO VOTE RECORDED: Emmerson, Evans, Fuller, Gaines,
Simitian
ASSEMBLY FLOOR : Not relevant
SUBJECT : 2012-13 Budget Trailer Bill
SOURCE : Author
DIGEST : This bill amends the Budget Bill adopted by the
Legislature on June 15, 2012. 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. The overall Budget solution is
distributed among expenditure reductions (48%), revenue
increases (37%), and other solutions (15%). This plan
includes $8.0 billion in expenditure reductions by adopting
the vast majority of the Governor's proposed cuts. The
CONTINUED
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plan leads to an improved fiscal position for the state in
the out-years, with almost 80% of the solutions ongoing or
multi-year.
ANALYSIS : On May 14, the Governor released his May
Revision for budget year 2012-13. The Governor indicated
the General Fund deficit was $16.7 billion for the two-year
period ending June 30, 2013, representing an increase in
the deficit of $6.5 billion since the Governor's initial
Budget proposal in January. This included a $1 billion
reserve. The deficit 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 was predicated 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. Since the passage of
the Budget Bill on June 15 there have been additional
changes within the overall Budget framework. This Budget
includes $7.9 billion in expenditure cuts, $6.0 billion in
additional revenues, and $2.5 billion in other solutions
for a total of $16.5 billion in solutions. The Budget
amendments included in this bill and the accompanying
trailer bills will result in approximately $91.5 billion in
expenditures and an available reserve of around $788
million in the 2012-13 budget year.
Overall, this Budget adopts the Governor's May Revision
framework, with the additional changes since the passage of
the Budget Bill on June 15. The Budget solution continues
to largely hinge on expenditure reductions, the tax
initiative, and 'trigger' cuts. Some one-time solutions
such as additional special fund borrowing have been
eliminated in favor of additional expenditure reductions
and the continuation of revenue shifts to the General Fund.
In addition, the proposal to use property tax
"pass-through" payments to offset Proposition 98
expenditures was rejected, and the Budget adopts additional
solutions through the use of mortgage settlement moneys.
The bullets below delineate the major changes to the Budget
plan since June 15.
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CalWORKs . The proposed Budget maintains the reduction
of approximately $430 million from the June 15 plan,
versus the Governor's $880 million reduction, and makes
significant program alterations. Notably, the Budget
includes no grant cuts. Under the proposal, the current
array of welfare-to-work services would be prospectively
available for eligible adults for up to 24 months, but
"useable" anytime during the 48-month lifetime time
limit. Participants would be able to access the
remaining 24 months of the 48-month limit if meeting
specified, stricter federal work requirements. In
addition, counties could extend services for up to 20%
of those who reach the 24-month time limit, under
specified circumstances that indicate satisfactory
progress toward employment. There are also changes in
the earned income disregard to encourage work
participation. Additionally, the Budget includes a
transfer of federal TANF funding to the California
Student Aid Commission for Cal Grants and a
corresponding increase of General Fund resources for
specified CalWORKs child-only cases.
Child Care . The Governor proposed major reductions to
the state's subsidized child care programs, totaling
$452 million. From the Legislature's June 15 Budget
plan, there would be an additional across the board
reduction equal to about $80 million (versus the $50
million previously included), resulting in a reduction
in the number of available slots. In addition, the
revised plan calls for the suspension of cost of living
adjustments in both 2013-14 and 2014-15.
Cal Grants . The Governor proposed a total of $292
million in cuts to the Cal Grant higher education
student financial assistance program. The Budget plan
adopts a total of $53 million in cuts to Cal Grants by
accepting the Governor's proposal setting stricter
limitations on eligibility for Cal Grants based on
institutions' graduation and loan default rates. In a
departure from the Governor's plan, the Budget reduces
new Cal Grant awards beginning in 2013-14 -- by 17% (in
two steps over two years) for non-profits and for-profit
institutions that are accredited by the Western
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Association of Schools and Colleges, and by 59% for all
other for-profit institutions. In addition, beginning
in 2013-14, there would be no renewal awards for
returning students choosing to remain at institutions
that do not meet graduation or loan default thresholds.
Other Alterations . The revised plan maintains
restoration of amounts for other proposed cuts to the
AIDS Drug Assistance Program and community health
clinics. The revised plan would allow for a slower
phase-in for the transition to Medi-Cal next year of the
Healthy Families program and would require the
Administration and health plans to demonstrate
'readiness' prior to this transition. In addition, the
Budget provides $18 million in mortgage settlement money
for enforcement and counseling, provides $50 million for
charter school growth funding, and includes funding for
routine High-Speed Rail Authority staffing and planning
functions. If the tax measure passes, the plan would
provide $50 million to community colleges.
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. This bill also permanently dedicates revenues to
local governments to pay for public safety programs
realigned in 2011.
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:
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2012-13 Trigger Cuts (in millions)
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| Program Area | May |
| | Revision |
| | Amount |
|-------------------------------------------+----------|
|K-14 Education (Proposition 98) | $5,356.0|
|-------------------------------------------+----------|
|University of California | 250.0|
|-------------------------------------------+----------|
|California State University | 250.0|
|-------------------------------------------+----------|
|Developmental Services | 50.0|
|-------------------------------------------+----------|
|Local Public Safety Grants | 20.0|
|-------------------------------------------+----------|
|Department of Forestry and Fire Protection | 10.6|
|-------------------------------------------+----------|
|Flood Control | 6.6|
|-------------------------------------------+----------|
|Local Water Safety Patrol | 5.6|
|-------------------------------------------+----------|
|Public Safety-Fish & Game, Lifeguards and | 6.0|
|Rangers, Dept. of Justice | |
|-------------------------------------------+----------|
|Total |$5,954.8 |
| | |
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FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Budget and Fiscal Review Committee
staff, the fiscal impact of the contents of this and
associated trailer bills is to achieve $16.5 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 results in approximately
$91.5 billion in expenditures and approximately a $788
million reserve.
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DLW:k 6/26/12 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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