BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 15
                                                                  Page  1

          Date of Hearing:   August 24, 2011

                            ASSEMBLY COMMITTEE ON BUDGET
                               Bob Blumenfield, Chair
               SB 15 (DeSaulnier and Wolk) - As Amended:  May 19, 2011
                             (As proposed to be amended)

           SENATE VOTE  :   39-0
           
          SUBJECT  :   State Budget

           SUMMARY  :  Makes various changes to the information that is 
          required to be submitted by the Governor to the Legislature as 
          part of the budget process.  Specifically,  this bill:  

       1)Requires the Governor's budget documents to provide estimates for 
            anticipated revenues and expenditures for the three fiscal 
            years succeeding the budget year when the budget is submitted 
            on or before January 10th, upon submission of the May 
            Revision, and upon enactment of the Budget Bill.  If 
            available, this estimate should be compared to the projection 
            from the four previous fiscal years.

       2)Stipulates that the Governor submit legislative language needed 
            to implement budget provisions and the five-year 
            infrastructure plan when the budget is submitted on or before 
            January 10th. 

       3)Requires the Department of Finance (DOF or Finance) to contract 
            with the University of California to conduct a study on the 
            impact of the budget on California Economy.  This study is due 
            in December 2012.

           EXISTING LAW  :  Article IV, Section 12 of California's 
          Constitution requires the Governor to submit a balanced budget 
          to the Legislature by January 10th of each year. Government Code 
          Section 13308 requires the submission of the budget trailer bill 
          language by February 1st of each year. 

          FISCAL EFFECT  :  Small absorbable one-time cost associated with 
          the University of California economic study. 

           COMMENTS  :   This bill intends to increase awareness of the 
          state's long-term economic conditions.  The author's office 
          indicates the goal is to increase information about the budget 








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          but not place new requirements onto the Legislature. This bill 
          provides the necessary information to make these estimates an 
          important part of the future budget deliberations.

          This bill builds upon currently available long-term budget 
          forecasts to incorporate the discussion of the State's long-term 
          fiscal direction at several milestones in the budget process.  
          The bill would require formalize the use of these projections in 
          a manner consist with the use of this information in the 2011-12 
          budget process. In the current budget process, the following 
          long-term forecasts are available:

          1)Historically, the Legislative Analyst Office (LAO) has 
            provided a five-year budget forecast every November.  This 
            forecast has been helpful in understanding the fiscal 
            direction toward which the state is heading, and has proved 
            critical in budget decisions during the budget discussions in 
            the months that follow.  This information is provided on the 
            Legislative Analyst's website at: 
             http://www.lao.ca.gov/laoapp/main.aspx?type=2&PubTypeID=5 .

          2)Typically, the DOF provides the Legislature detailed 
            multi-year budget forecasts at the time of the January 10 
            proposal, as well as at the May Revision.  This information 
            for the 2011-12 enacted budget can be found on Finance's 
            website: 
             http://www.dof.ca.gov/reports_and_periodicals/documents/MY%20at
            %202011%20BA%20(WebVersion).pdf  . This information is also 
            provided to the following offices:

             a)   The Legislative Analyst;

             b)   The Democratic and Republican Leadership Offices; and,

             c)   The Chair and Vice-Chair of the Budget Committees.

          1)Governor Brown has made multi-year forecasts a centerpiece of 
            his budget proposals, and has explicitly provided multi-year 
            information in all the public supporting documents along with 
            this budget proposals, including on page 3 of the Budget 
            Summary, page 5 of the May Revision, and page 5 of the budget 
            signing/veto document.

            This bill also requires that, if possible, these long-term 
            projections are compared to past long-term projections.   This 








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            provides needed context to ensure that long-term forecasts are 
            used for understanding the general direction of the State.  
            Out-year estimates have historically not proven particularly 
            accurate due to the dynamic nature of California's economy and 
            the observable correlation of state revenue with the national 
            business cycle and financial market performance.  Therefore, 
            while it is important to understand the direction the state is 
            headed, relying too heavily on the specific figures can lead 
            to troubling results.  

             a)   For example, in the 2006 Fiscal Outlook, the LAO 
               projected General Fund revenues of $128 billion for 
               2011-12.  Currently in 2011-12, projections have been 
               updated to be just $87.3 billion, resulting in the 
               long-term forecast having been off by over $40 billion, 
               roughly 46 percent of our actual amount of General Funds 
               for the year; and, 

             b)   For a more recent example, in the six months since the 
               Governor's January 2011 forecast, revenue forecasts have 
               increased by a total of $11.8 billion over the current and 
               budget years.

          This bill includes a provision to require the University of 
          California to conduct a study on the impact of the budget on 
          California's economy.  This report will also contribute to the 
          discussions of the interplay between the economy and the budget. 


          While Government Code Section 13102 requires the Governor to 
          make an annual submission of a five-year infrastructure plan to 
          the Legislature, the previous Administration stopped complying 
          with this requirement in 2008 and no new plan has been received 
          since that time.  The DOF reports that the current 
          Administration intends to comply with this requirement and 
          instructions have been sent to departments to begin gathering 
          the necessary information to allow submission of this plan for 
          2012.
          
          REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          California Forward (co-source)
          AARP








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          American Association of University Women
          American Federation of State, County and Municipal Employees
          Bay Area Council
          Brocade Communications Systems, Inc.
          Business Council of San Joaquin County
          California Alliance of Child and Family Services
          California Church IMPACT
          California Partnership for the San Joaquin Valley
          California Senior Advocates League
          California State Student Association
          Contra Costa Council
          Fresno Business Council
          Greenlining Institute
          Half Moon Bay Coastside Chamber of Commerce
          Huntington Beach Chamber of Commerce
          Kern County Taxpayers Association
          Los Angeles Area Chamber of Commerce
          Marin Builders' Association
          MoSys Inc.
          Proofpoint Systems Inc.
          San Francisco Chamber of Commerce
          San Gabriel Valley Economic Partnership
          San Mateo County Economic Development Association
          Santa Clara and San Benito Counties Building and Construction 
            Trades Council
          Santa Cruz County Medical Society
          Saving California Communities
          State Building and Construction Trades Council of California
          Silicon Valley Leadership Group
          Valley Industry and Commerce Association 
          WELL Network
           
            Opposition 
           
          None on File.

           Analysis Prepared by  :    Christian Griffith / BUDGET / (916) 
          319-2099