BILL ANALYSIS                                                                                                                                                                                                    




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                               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  








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          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.
          








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          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     |        |        |








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           |---------------------------+--------+--------|
           |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  








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            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  








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            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  








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          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


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