BILL ANALYSIS Ó
AJR 14
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( Without Reference to File )
ASSEMBLY THIRD READING
AJR 14 (Atkins)
As Introduced February 27, 2013
Majority vote
SUMMARY : Urges the Congress of the United States to avert major
federal spending cuts known as "sequestration" scheduled to go
into effect March 1, 2013. Specifically, this resolution :
1)Anticipates a reduction in federal education funding to
California of approximately $87.6 million, putting nearly 2,000
primary and secondary education teacher and aide classroom
positions at risk if cuts occur.
2)States the estimated loss of approximately 64,000 civilian
Department of Defense jobs, and operational reductions by the
Army, Air Force, and Navy totaling more than $69 million from
these cuts.
3)Recognizes a $600-million reduction to the Federal Aviation
Administration and the need for furloughs of one to two days for
most of its 47,000 employees due to federal sequestration.
4)Provides estimates that up to 2,100 food inspectors will be
lost, and that more than 15,000 children in California will not
receive vaccinations if these cuts go through.
COMMENTS : The federal 2011 Budget Control Act (BCA) established
caps on several categories of federal spending over a 10-year
period and created a "Super Committee" to develop a plan to reduce
the federal deficit by $1.2 trillion. The "Super Committee"
failed to outline a plan to address the $1.2 trillion and as a
result the BCA required sequestration to begin on January 2, 2013.
Subsequent legislation was enacted by Congress on January 1,
2013, providing an extension to March 1, 2013. With the deadline
fast approaching, many are looking towards Congress to act in
order to avoid the $85 billion in cuts that would affect all
states. Under sequestration, the military's 2013 budget will be
cut by just over 7.3%, and domestic discretionary programs will be
cut by over 5%.
Effects on California
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California has not fully recovered from "the Great Recession,"
even with new revenues adopted in Proposition 30 by voters last
November, the state's expected General Fund Revenue of $97.7
billion next year is $5.9 billion or 6% below the level collected
in 2007. In December of 2012, California had 356,900 fewer jobs
than it did in January of 2008, and the state has 382,000 more
workers competing for these jobs.
The state budget outlook has been stabilized, with structural
budget surpluses built into the expected out-year forecast. Over
the last seven months, major state revenue sources have begun to
follow stable patterns. As of January, the state was on track to
beat projected revenue numbers that were included in the
Governor's proposed budget.
AJR 14 recognizes that the potential cuts caused by sequestration
could directly affect an already fragile California economy. Many
studies point to the effect sequestration could have on consumer
and business confidence and the stock market, although it is
difficult to measure at this time.
The statistics included in AJR 14 were compiled by the White
House. The White House completed an analysis of all 50 states and
the District of Columbia. In addition to the statistics by the
White House, the Legislative Analyst's Office (LAO) also compiled
statistics of how California would be affected.
According to the LAO, there will be little direct state General
Fund spending effect due to sequestration. But other programs
could be vulnerable including:
1)Build America Bonds (BAB) Subsidies - Currently, the state
receives about $370 million of BAB subsidies per year. Current
estimates indicate the possibility of about 5% annual reduction
in nondefense programs, which would be a hit of about $20
million per year to the General Fund.
2)Child Care and Development Fund (CCDF) - CCDF dollars are
generally used interchangeably with state General Fund to
support the state's child care programs, if cuts to this program
take effect, the state will have to choose to either fund the
program through the General Fund or make additional cuts.
Other local government, school district, and university spending
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provided by the federal government would be affected, some
examples include:
1)School Districts and other Education Entities - Cuts to schools
is anticipated to be about 5.9% and the cuts would begin in July
2013. Programs that could be affected according to the White
House include Title I and special education funds, and Head
Start funding would be reduced.
2)University of California (UC) - In early February, UC released a
report that indicated uncertainty about how sequestration will
be implemented. UC stated that there will be no direct,
immediate effect on Pell Grants, but that cuts to other
important aid programs would occur.
3)California State University (CSU) - CSU is concerned about
potential cuts to various student aid programs and research
funding for it campuses.
Other Studies
According to the Bipartisan Policy Center, if sequestration
remains in effect, through 2021 then both domestic and defense
discretionary spending will be at modern-era lows as a share of
the economy. Finally, these reductions will likely only have a
minor impact on the debt-to-GDP (gross domestic product) ratio,
with the ration projected to reach 100% two years later than it
would absent sequestration.
Analysis Prepared by : Genevieve Morelos and Zoe Adler / BUDGET
/ 319-2099
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