BILL ANALYSIS Ó
SB 15
Page 1
SENATE THIRD READING
SB 15 (DeSaulnier and Wolk)
As Amended August 25, 2011
Majority vote
SENATE VOTE :Vote not relevant
BUDGET 21-1
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|Ayes:|Blumenfield, Nielsen, | | |
| |Alejo, Bill | | |
| |Berryhill, Buchanan, | | |
| |Butler, Cedillo, Chesbro, | | |
| |Feuer, Gordon, Harkey, | | |
| |Huffman, Jeffries, Logue, | | |
| |Mitchell, Monning, | | |
| |Morrell, Nestande, | | |
| |Swanson, Valadao, Wagner | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Jones | | |
| | | | |
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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) to contract with the
University of California to conduct a study on the impact of
the budget on the California Economy. This study is due in
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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 indicates the
goal is to increase information about the budget 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 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 Web site 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 DOF's Web site:
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 LAO;
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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 three of the Budget
Summary, page five of the May Revision, and page five 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
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% 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
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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.
Analysis Prepared by : Christian Griffith / BUDGET / (916)
319-2099
FN: 0002146