BILL ANALYSIS                                                                                                                                                                                                    






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          |SENATE RULES COMMITTEE            |                         AB 93|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
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                              CONFERENCE REPORT NO. 1 


          Bill No:  AB 93
          Author:   Weber (D)
          Proposed: 6/11/15  
          Vote:     21  

           CONFERENCE COMMITTEE:  4-2, 6/9/15
           AYES:  Senator Leno, Senator Lara, Assemblymember Weber,  
            Assemblymember Bloom
           NOES:  Senator Nielsen, Assemblymember Melendez

           SUBJECT:   Budget Act of 2015


          SOURCE:    Author


          DIGEST:  This bill contains the 2015-16 Budget Act, as it was  
          reported out by the 2015 Conference Committee on the Budget.  
          This bill authorizes General Fund expenditures of $117.5 billion  
          and assumes $119.9 billion in total General Fund resources.  
          Under the Budget, there would be combined total reserves in the  
          Budget Stabilization Account (BSA) and the Special Fund for  
          Economic Uncertainties (SFEU) of $5.7 billion.




          Conference Committee Amendments delete the prior version of this  
          bill, which expressed legislative intent to enact the Budget Act  
          of 2015, and instead add the current language.


          ANALYSIS: On June 9, 2015, the Budget Conference Committee  








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          completed its work to reconcile the Senate and Assembly versions  
          of the 2015-16 Budget. The Conference Committee built upon the  
          extensive framework of both the Senate Budget and Fiscal Review  
          Committee and the Assembly Budget Committee in establishing the  
          Legislature's version of the Budget. Working from the general  
          framework of the Governor's Budget and May Revision, the  
          Legislature incorporated significant and important budgetary and  
          policy changes to the state expenditure plan.

          JANUARY BUDGET

          The Governor's Budget included $114.8 billion in General Fund  
          revenues and other resources and $113.3 billion in total General  
          Fund expenditures ($66.3 billion in non-Proposition 98 and $47.0  
          billion in Proposition 98), provided for a $534 million SFEU and  
          set aside an additional $1.2 billion for the BSA. Expenditures  
          in 2015-16 were proposed to be about $1.6 billion higher than  
          revised 2014-15 expenditures. The Budget also included the  
          continuation of established efforts to pay down budgetary debt  
          from past years, and as set forth through the passage of  
          Proposition 2. Significant additional funding was proposed for  
          K-14 education, higher education, and debt repayment, with some  
          increases for health and human services, and corrections and  
          rehabilitation. Additional resources that allowed for measured  
          expansions and workload growth are the result of positive  
          revenue growth based on the general economic upturn.
           
           MAY REVISION

          On May 14, the Governor released his May Revision for 2015-16.  
          The Governor projected General Fund expenditures of $115.3  
          billion, revenues of $115.0 billion, and an SFEU of $1.1  
          billion. Compared to January, the revenues represented an  
          increase of $1.7 billion and the reserve level an increase of  
          $579 million. In addition, the Governor adjusted some  
          assumptions in the current year and budget year regarding  
          expenditures in certain programs. The May Revision reflected a  
          significant increase in the Proposition 98 guarantee, based on  
          robust revenues and a significantly greater General Fund cost.  
          The Governor's overall budgetary framework continued to be  
          balanced over most of the forecast period and the budget plan  
          would continue to reduce the budgetary and other obligations.  
          The proposal continued to include a deposit to the BSA of three  
          percent of revenues, with a diversion of half that amount to  







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          retire certain long-term budget debt.
           
           CONFERENCE VERSION

          The Conference Report on the 2015-16 Budget was adopted on June  
          9, 2015. The Conference Committee approved various conference  
          actions between June 1 and June 9, 2015 that, when combined with  
          previous actions taken in both the Senate and Assembly, comprise  
          the Conference version of the 2015-16 Budget Act. The Conference  
          version balances the need for additional public investment in  
          child care, education, health care and other programs, with the  
          necessity of maintaining the state's fiscal stability through  
          increased reserves and debt reduction. The General Fund budget  
          summary for the Legislature's version of the Budget, compared to  
          the Governor's May Revision, is shown in the following table:

          
            --------------------------------------------------------------- 
           |                 Conference Committee Version                  |
           |                     General Fund Summary                      |
           |                     (Dollars in Millions)                     |
            --------------------------------------------------------------- 
            --------------------------------------------------------------- 
           |                           |  May Revision   |   Conference    |
           |                           |                 |     Version     |
            --------------------------------------------------------------- 
           |---------------------------+--------+--------+--------+--------|
           |                           |Revised |Proposed|Revised |Proposed|
           |                           |        |        |        |        |
           |---------------------------+--------+--------+--------+--------|
           |                           |2014-15 |2015-16 |2014-15 |2015-16 |
           |---------------------------+--------+--------+--------+--------|
           |Prior Year Balance         |  $5,589|  $2,359|  $5,709|  $2,620|
           |---------------------------+--------+--------+--------+--------|
           |    Revenues and Transfers | 111,307| 115,033| 111,348| 117,297|
           |---------------------------+--------+--------+--------+--------|
           |Total Resources Available  |$116,896|$117,392|$117,056|$119,917|
           |                           |        |        |        |        |
           |---------------------------+--------+--------+--------+--------|
           |    Non-Proposition 98     |  64,929|  65,892|  64,861| *67,507|
           |Expenditures               |        |        |        |        |
           |---------------------------+--------+--------+--------+--------|
           |    Proposition 98         |  49,608|  49,416|  49,576|  50,000|
           |Expenditures               |        |        |        |        |







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           |---------------------------+--------+--------+--------+--------|
           |Total Expenditures         |$114,537|$115,308|$114,436|$117,507|
           |                           |        |        |        |        |
           |---------------------------+--------+--------+--------+--------|
           |Fund Balance               |        |  $2,084|  $2,620|  $2,411|
           |                           |$2,359  |        |        |        |
           |---------------------------+--------+--------+--------+--------|
           |      Reserve for          |     971|     971|     971|     971|
           |Liquidation of             |        |        |        |        |
           |Encumbrances               |        |        |        |        |
            --------------------------------------------------------------- 
           |      Special Fund for     |   1,389|   1,113|   1,649|   1,440|
           |Economic Uncertainties     |        |        |        |        |
           |---------------------------+--------+--------+--------+--------|
           |Budget Stabilization       |  $1,606|  $3,460|  $1,606|$4,220  |
           |Account                    |        |        |        |        |
            --------------------------------------------------------------- 
              *Includes $760 million of unallocated debt repayment.

          Overall Resources, Expenditures and Reserves

          The Conference Committee's version of the Budget includes total  
          General Fund expenditures of $117.5 billion for 2015-16, an  
          expenditure level which is roughly $2.2 above the May Revision  
          levels. This amount includes an additional $760 million pay-down  
          of Proposition 2 debt, and $1.4 billion in additional program  
          expenditures. The total represents an increased level of  
          spending (not including the additional expenditures on debt  
          retirement) over that of the May Revision of approximately 1.2  
          percent.

          The Conference version of the Budget adopts the LAO's revenue  
          assumptions for 2015-16 of $116.3 billion, which is $3.1 billion  
          higher than the May Revision, and somewhat higher property taxes  
          that offset Proposition 98 spending. The Conference plan  
          provides for increased reserves, similar to the Governor's plan,  
          and continues to pay down long-term and budgetary debt. In  
          addition, the Conference version balances these actions with  
          additional targeted prudent investments in education, health  
          care, and other areas that will improve the state's human and  
          social capital.

          The Conference Committee's version of the Budget provides for  
          $5.7 billion in general reserves, comprising combined amounts  







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          attributable to the SFEU plus deposits to the BSA. This  
          represents an amount about $1.1 billion above the reserve totals  
          presented in the May Revision. In addition, under the Conference  
          Committee plan, the state will have higher reserves and bigger  
          operating surpluses in the out-years than projected in the May  
          Revision.  
          
          Expenditure Highlights

          The Budget package represents a comprehensive approach to  
          continue restoring essential educational, social service and  
          health programs, while maintaining the state's solid fiscal  
          outlook. Specifically, the Conference Committee funding plan  
          provides resources for many of its priorities, especially in the  
          areas of child care, human services, health, and higher  
          education. The architecture for the plan begins with much of the  
          Governor's base level funding, but makes distinctive and  
          important changes in program spending reflecting the  
          Legislature's priorities. 

          Early Education and Childcare. A centerpiece of the Conference  
          Committee plan is a $409 million ($147 million Proposition 98  
          General Fund, $262 million General Fund) reinvestment in the  
          state's childcare and early learning system. The approved plan  
          includes $242 million ($112 million Proposition 98 General Fund,  
          $130 million General Fund) for increases in center-based,  
          voucher, and license-exempt rates; as well as $116 million ($10  
          million Proposition 98 General Fund and $107 million General  
          Fund) for 27,000 slots for preschool and alternative payment  
          programs. This initiative couples well with the Governor's  
          proposed earned income tax credit, which provides a refundable  
          tax credit for low-income wage earners.

          K-14 Education. In K-14 education, the Conference plan for  
          Proposition 98 provides over $750 million more for K-14  
          education than the Governor's May Revision. The plan includes  
          $500 million for educator quality and effectiveness; provides  
          $500 million for adult education and $25 million for adult  
          education data; continues to provide one-time funds for mandate  
          claims/support of state-adopted academic content standards; and  
          augments the Governor's proposed local control funding formula  
          payments. For community colleges, the Conference plan increases  
          funding for Foster Youth Education Opportunity Program;  
          increases financial aid for community college students; and  







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          provides funding to help transform basic skills remediation  
          through researched-based best practices.

          Higher Education. The Conference plan maximizes the state's  
          dollars in opening up opportunities for Californians. The plan:

                 For the University of California, provides an additional  
               $25 million contingent on increasing California resident  
               enrollment by 5,000 students, holding resident tuition flat  
               in 2015-16 and 2016-17 and redirecting non-resident  
               institutional aid to support resident students. Provides  
               additional student support services to increase the  
               graduation rates of low income and underrepresented  
               students; and provides $2.5 million for the implementation  
               of the California Dream Loan Program.

                 For California State University, provides an additional  
               $70 million; increases enrollment for California residents  
               by 10,400 students; provides additional support for student  
               services, course sections and tenure-track faculty;  
               reestablishes a California freshman eligibility study; and  
               provides $2.5 million for the implementation of the  
               California Dream Loan Program. 

                 For Cal Grants, repeals the financial aid cuts for  
               students in private non-profit colleges; increases the  
               number of competitive Cal Grant awards by 16,250; and  
               increases the Cal Grant B access award to $1,796.  
               Additionally, the plan makes modifications to the Middle  
               Class Scholarship by adopting a four or five year  
               participation time-limit and an asset ceiling of $150,000. 
           
          Cap-and-Trade Expenditures. The Conference plan approves staff  
          resources necessary to continue existing workload related to  
          cap-and-trade expenditures, but rejects all of the discretionary  
          expenditure proposals, so that discussions continue to further  
          refine the state's expenditure plan for the 40 percent of the  
          cap-and-trade revenues that are not continuously appropriated  
          according to statute enacted last year. 

          Other Significant Investments and Initiatives. In other  
          important legislative initiatives, the plan funds additional  
          significant activities and programs:








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                 For In-Home Supportive Services, restores the seven  
               percent cut in hours and implements overtime payments.

                 For CalWORKs, eliminates the maximum family grant  
               provision and temporarily suspends the 24-month clock.

                 For immigration services, provides more funding for  
               non-profits to help undocumented immigrants with  
               documentation required under the President's deferred  
               action, and creates a fund to support the newly-created  
               Office of New Americans, which is charged with creating a  
               statewide strategic plan for the integration of  
               California's new Americans.

                 For foster youth and child welfare services, provides  
               $25 million General Fund to support foster parent  
               recruitment, retention, and support; $7 million General  
               Fund for housing supports for child welfare families, and  
               $3 million General Fund to support the federal  
               Strengthening Families Act. 

                 For Medi-Cal, sets aside money to provide coverage to  
               undocumented children; provides funds for provider payment  
               increases; and restores most optional benefits, including  
               full adult dental benefits.

                 For developmental services, approves rate increases for  
               community-based providers and regional center operations  
               and sets requirements for the department when submitting  
               their plan to close one or more developmental centers.

                 For the Office of Emergency Services, adopts a fee  
               structure to create a response network for the transport of  
               hazardous materials by rail through the state.

                 For California veterans, appropriates an additional $3  
               million in General Fund to support County Veteran Service  
               Officers; and establishes 36 permanent positions within the  
               Department of Veterans Affairs to address the continued  
               federal claims backlog.

                 For the Department of Justice, establishes permanent  
               position authority within the Bureau of Firearms. 








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                 For farmworker housing, provides nearly $20 million for  
               farmworker housing related programs.

                 For local government, includes approval of various  
               legislative changes that address several long-running  
               issues associated with state-local fiscal relations, and  
               will facilitate the completion of the wind-down of  
               redevelopment agencies.

          The Conference Committee plan also reduces caseloads in  
          dependency court cases and provides some additional funding for  
          previously-authorized judicial positions and provides relatively  
          small - but vital - augmentations for other programs, such as  
          support for libraries, the arts council, and natural resources  
          programs.
           
           FISCAL EFFECT:   Appropriation:    Yes         Fiscal  
          Com.:YesLocal:   No


          SUPPORT:   (Verified  6/15/15)


          None received


          OPPOSITION:  (Verified 6/15/15)


          None received


          Prepared by:Mark  Ibele / B. & F.R. / (916) 651-4103
          6/15/15 12:25:34


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