BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 826| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- CONFERENCE REPORT NO. 1 Bill No: SB 826 Author: Leno (D) Amended: 6/10/16 Vote: 21 CONFERENCE COMMITTEE: 6-4, 6/10/16 AYES: Senator Leno, Senator Lara, Senator Hancock, Assemblymember Ting, Assemblymember Bloom, Assemblymember McCarty NOES: Senator Nielsen, Senator Bates, Assemblymember Obernolte, Assemblymember Olsen SUBJECT: Budget Act of 2016 SOURCE: Author DIGEST: This bill contains the 2016-17 Budget Act, as it was reported out by the 2016 Conference Committee on the Budget. This bill authorizes General Fund expenditures of $122.5 billion and assumes $125.2 billion in total General Fund resources. Under the budget act, there would be combined total reserves in the Budget Stabilization Account and the Special Fund for Economic Uncertainties of $8.5 billion. Conference Committee Amendments delete the prior version of this bill, which expressed legislative intent to enact the Budget Act of 2016, and instead add the current language. ANALYSIS: On June 9, 2016, the Budget Conference Committee completed its work to reconcile the Senate and Assembly versions of the 2016-17 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 SB 826 Page 2 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. The Conference Committee approved various actions on that date that, when combined with the actions taken in both houses throughout the budget process, comprise the Legislature's 2016-17 state budget plan. The budget carefully balances the need for additional public investment in education, health care, human services and other state programs, with the necessity of maintaining the state's fiscal stability through increasing reserves and continued debt reduction. Overall, this budget is structured such that it: 1)Continues to fully fund existing programs and commitments. 2)Directs new spending to the most beneficial investments. 3)Increases important investments over a multi-year period. 4)Builds up reserves, pays down debt and retains the state's fiscal strength. This budget plan will continue the Legislature's ongoing commitment to California's residents by strengthening the state's investments in public programs and services. With this budget, the Legislature continues its emphasis on rebuilding state programs and services, which have still not caught up with the economic recovery. Earlier this year, the Legislature advocated for, and was successful in realizing, additional support for developmental disability programs. With this budget package, the Legislature approves funding that addresses the homelessness problem, makes important changes to the CalWORKs program, continues important investments in childcare and higher education, sets aside funds for affordable housing, while at the same time retaining a commitment to fiscal stability for the state. The Legislature's budget adopts the Administration's revenues estimates for the General Fund and property tax revenues. It also largely retains the Administration's aggressive reserve and infrastructure funding policy, but with additional provisions regarding legislative review. SB 826 Page 3 Overall Resources, Expenditures and Reserves The General Fund budget summary for the Legislature budget plan, compared to the Governor's May Revision, is as follows: Conference Committee Version 2016-17 Budget General Fund Summary (Dollars in Millions) --------------------------------------------- | | | | | |2015-16 |2016-17 | |---------------------------+--------+--------| |Prior Year Balance | $3,445*| $4,875| |---------------------------+--------+--------| | Revenues and Transfers | 117,001| 120,310| |---------------------------+--------+--------| |Total Resources Available |$120,446|$125,185| | | | | |---------------------------+--------+--------| | Non-Proposition 98 | 65,849| 71,418| |Expenditures | | | |---------------------------+--------+--------| | Proposition 98 | 49,722| 51,050| |Expenditures | | | |---------------------------+--------+--------| |Total Expenditures |$115,571|$122,468| | | | | |---------------------------+--------+--------| |Fund Balance | $4,875| $2,717| |---------------------------+--------+--------| | Reserve for | 966| 966| |Liquidation of | | | |Encumbrances | | | |---------------------------+--------+--------| | Special Fund for | 3,909| 1,751| |Economic Uncertainties | | | SB 826 Page 4 |---------------------------+--------+--------| |Budget Stabilization | $3,420|$6,714 | |Account | | | --------------------------------------------- *After prior year adjustments. The conference version of the budget includes total General Fund expenditures of $122.5 billion for 2016-17, an expenditure level which is about $300 million higher than under the May Revision. However, the Conference Version also includes shifts and repurposing of program expenditures, with additional emphasis on expenditures among programs to address legislative priorities, as well as increasing spending commitments over a multi-year period. The budget adopts the Administration's revenue assumptions for 2016-17 of $120 billion, and its property tax estimates. The budget 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 with targeted prudent investments in human services, education, health care, and other areas that will improve the state's human and social capital. The Conference Version of the budget provides for $8.5 billion in general reserves, comprising $1.8 billion in the Special Fund for Economic Uncertainties plus $6.7 billion in the Budget Stabilization Account (BSA). This includes a $2.0 billion discretionary deposit to the BSA. Principal Budget Components The Conference Version of the budget includes funding for the following initiatives and programs: 1)The Senate's "No Place Like Home" initiative, is a multifaceted initiative to address homelessness and related issues. The plan includes a grant program funded through Proposition 63 revenue bonds for supportive housing. As part of this initiative, the budget includes more outreach to individuals with disabilities who may qualify for SSI, as well as additional resources for programs to reduce homelessness for CalWORKs families and for families that are part of the SB 826 Page 5 child welfare system. The plan also continues to fulfill the promise to rebuild the state's social safety net by reinvesting in CalWORKs through the elimination of the maximum family grant and by increasing the grant levels for maximum aid payment. 2)In K-12 education, the Conference version continues to provide ongoing resources for the Local Control Funding Formula and one-time discretionary resources. To address the teacher shortage facing the state, there is additional funding for teacher recruitment, preparation, and retention. The plan funds a college readiness block grant, to ensure all students have the access and support needed to graduate and attend college. 3)In child care and pre-school, the Conference version includes a major investment in childcare rate increases and pre-school slots, together totaling over $500 million when fully phased-in over four years. These substantial increases are implemented as minimum wage increases in future years. 4)In higher education, the plan provides additional funds to enroll more undergraduate and graduate students at the University of California and the California State University systems, and incorporates the Senate's "College Readiness" program to assist low-income students attend and complete college. In addition, $200 million more in Prop 98 funding is provided to community colleges to expand access to career technical education. 5)In housing, the Conference version adopted a tax credit program that will increase the effectiveness of affordable housing programs, adds enforcement staff to investigate housing discrimination complaints and facilitate compliance, adds a local government grant program that will facilitate the development of transitional housing for ex-offenders, and sets aside $400 million for affordable housing if subsequent legislation is adopted. 6)In health and developmental services, the Conference version augments programs for healthcare workforce development, limits estate recovery in the Medi-Cal program, restores acupuncture SB 826 Page 6 services as a benefit in the Medi-Cal program, provides funding for health programs such as drug overdose and hepatitis prevention, and creates a grant program for children's crisis services. The plan also improves the closure plans for the state developmental centers and improves oversight of the transition of developmental center residents into the community. 7)In human services, the Conference version eliminates the CalWORKs maximum family grant, increases the SSI/SSP grant, provides augmentations for the Immigration Services Program and the Commercially Sexually Exploited Children Program, provides additional resources for the monitoring of psychotropic medications for foster youth, as well as makes investments in senior nutrition programs and the State Emergency Food Assistance Program, and makes clarifications regarding the legal protections for immigrant youth. 8)In resources and the environment, the Conference Version continues oversight of the ongoing drought and statewide efforts to reduce water consumption. In addition, the Senate provided oversight of the energy and utility ratepayer funds, took action to expedite Aliso Canyon mitigation efforts, and provided funding for pest prevention studies in the Department of Pesticide Regulation. 9)In public safety and justice, the plan adheres to the Legislature's emphasis on positive programs to help individuals avoid the criminal justice system, rehabilitate incarcerated individuals, and facilitate the transition of ex-offenders to society through longer term and more effective programs. Among the priorities is to increase the availability of transitional housing, mental health and substance abuse treatment, and services for victims of domestic violence. The conference version represents a balanced approach, both in terms of revenues and expenditures, and with respect to savings and wise reinvestment. It focuses on reducing financial, social, and environmental costs in the future, while ensuring access to social services, health care, higher education, and justice systems. Spending is reasonable, with all new expenditures fully paid for from other budgetary savings and additional SB 826 Page 7 analytically-based revenue estimates. Based on revenue estimates of the Administration, the Conference Version includes critical and responsible reinvestments and significant reserves. Overall, the Conference Version is a fiscally responsible approach to continue rebuilding our public programs. FISCAL EFFECT: Appropriation: Yes Fiscal Com.:YesLocal: No SUPPORT: (Verified6/15/16) None received OPPOSITION: (Verified6/15/16) None received Prepared by: Mark Ibele / BFR / (916) 651-4103 6/15/16 14:39:14 **** END ****