BILL ANALYSIS
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Date of Hearing: April 15, 2010
ASSEMBLY COMMITTEE ON BUDGET
Bob Blumenfield, Chair
ACA 4 (Feuer) - As Amended: April 12, 2010
SUBJECT : Process, Legislative Process, and Local Government
Finance
SUMMARY : This proposed Constitutional Amendment is the
California Forward organization's proposed changes to the state
budget and legislative processes. Specifically, this bill :
1)Implements a pay as you go system for the majority of
legislation, the Governor's Budget, and initiatives;
2)Limits how one-time revenues could be expended;
3)Requires the Legislature to review state programs once every
ten years;
4)Lowers the vote threshold for the budget to a majority;
5)Increases the vote threshold for fees when they are being used
to fund a program, service, or activity that was previously
funded by revenue from a tax to two-thirds;
6)Forfeits legislator pay, after June 25th, if the Legislature
has not passed a budget;
7)Provides the Governor with mid-year cut authority if the
Legislature does not act prior to the 45th day of a fiscal
emergency;
8)Eliminates the ability of the state to redirect local property
tax to schools;
9)Prohibits the state from reallocating any locally-imposed
non-ad valorem tax or an assessment levied or imposed by a
county, city, city and county, any special district, or any
other local or regional governmental entity; and,
10)Defines a Countywide Strategic Action Plan as a plan
developed by local agencies within a county to effectively use
existing and new revenue to accelerate progress toward
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community goals. In a county where a plan is approved, this
Constitutional Amendment would allow a county to increase the
sales and use tax by up to 1-cent with a majority vote of the
electorate.
FISCAL EFFECT : This Constitutional Amendment would likely
require new state spending in the tens of millions of dollars
annually to develop and implement new performance standards.
Specifically, new information technology expenditures could
result to address the new requirements.
In years when the budget bill is not passed by June 25,
legislators would forfeit any salary or reimbursement for living
and travel expenses. In any year that the Legislature does not
pass a bill by June 25, the measure could reduce state costs by
around $50,000 per day until the passage of a budget.
COMMENTS : This Constitutional Amendment, proposed by the
California Forward organization, is a bipartisan proposal to
improve California's Budget and fiscal processes based upon best
practices in other states and over two years of engagement with
citizens and organizations across California. One of the goals
of this package of reforms is to provide balanced solutions to
improve the accountability, effectiveness, and timeliness of the
state budget process.
There are only eight states that have supermajority vote
requirements for the passage of the state budget. All other
states require only a majority vote for passage of the State
budget. The other states that have a supermajority vote
requirements for the budget each have different systems as
detailed below:
1)Arkansas: Three-fourths majority is required on all
appropriations except education, highways, and paying down
state debt.
2)Connecticut: Three-fifths majority is required for
appropriations only if the General Fund expenditure ceiling is
reached. Otherwise, appropriations require a simple majority.
3)Hawaii: Two-thirds majority is required for appropriations
only if the General Fund expenditure ceiling is reached.
Otherwise, appropriations require a simple majority.
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4)Illinois: A simple majority vote is required for
appropriations until June 1, after such time a three-fifths
majority is required to pass the budget.
5)Maine: A simple majority vote is required for all legislation
that is non-urgency. Urgency legislation requires a two-thirds
vote. Therefore, the budget must be passed by April 1 if it is
to be implemented with a majority vote.
6)Nebraska: Nebraska's system is similar to Maine's.
7)Rhode Island: Appropriations require a two-thirds majority
vote.
Reducing the vote threshold for the state budget could improve
accountability by placing the responsibility of governance
solely on the majority party and the Governor. However, without
the authority to raise revenues by majority vote, the majority
party and Governor would be limited to reducing state
expenditures or reprioritizing existing expenditures. Therefore,
this measure would not provide all the tools needed to fully
address priorities and govern the state.
Legislative pay provisions of this measure have the potential to
significantly reduce legislator pay. This could have the
consequence of reducing the diversity of candidates seeking
legislative office, as these reductions may eliminate candidates
that are not independently wealthy and those that cannot afford
to risk a significant reduction in income.
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Many of the provisions in this Constitutional Amendment reduce
the overall flexibility of the Governor and the Legislature to
modify funding to address priorities. Specifically, this measure
reduces how the Governor and Legislature may use one-time
revenues. It also eliminates the ability to substitute fees for
taxes without a supermajority vote. Reducing the flexibility of
state resources ultimately reduces the Governor and
Legislature's ability to set priorities for the state.
The new restrictions on state redirection of local revenues
would eliminate state budget tools that generated about $3.6
billion in 2009-10 budget relief. The 2009 Budget Act suspended
Proposition 1A to effectively borrow $1.9 billion in local
property tax revenue and shifted $1.7 billion in Redevelopment
funds. These new restrictions would create more stability and
predictability for local governments, but would further reduce
budget options for the state.
The new tax authority in this proposed Constitutional Amendment
would make it easier for county voters to approve an increase in
the sales tax compared to the existing two-thirds vote
requirement in the Constitution for special taxes. The
Legislative Analyst examined 2004 local sales tax measures and
found that voters approved one-third of them. If the voter
approval threshold for these taxes had been 50%, instead of 67%,
another one-third would have been approved. Based on past
behavior of local governments and local voters, it is unlikely
the tax increase would be implemented in all counties, and where
implemented, it might not be set at the maximum one-cent level.
New local tax revenue might be expected to be more in the range
of $1 billion instead of the maximum of $5 billion.
REGISTERED SUPPORT / OPPOSITION :
Support
AARP
State Building and Construction Trades Council of California
Sierra Business Council
Monterey County Business Council
San Joaquin County Business Council
Fresno Business Council
Contra Costa Council
San Francisco Chamber of Commerce
Greenlining Institute
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California Church IMPACT
Yolo County Board of Supervisors
California La Raza Lawyers Association
San Gabriel Valley Economic Partnership
California Alliance of Child and Family Services
Kern County Taxpayers Association
Progressive Christians Uniting
The Campaign for College Opportunity (SCA 19 and SB 844)
WELL Network
Town of Paradise
Inland Empire Economic Partnership
San Carlos Chamber of Commerce
Valley Industry and Commerce Association
Opposition
Cal-Tax
Analysis Prepared by : Christian Griffith / BUDGET / (916)
319-2099