BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1215 (De La Torre)
Hearing Date: 08/12/2010 Amended: 07/15/2010
Consultant: Maureen Ortiz Policy Vote: PE&R 4-2
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BILL SUMMARY: AB 1215 exempts employees in positions funded at
least 95% by sources other than the General Fund, as well as
employees of the Board of Equalization and Franchise Tax Board,
from furloughs implemented by any state agencies, boards, and
commissions.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Furlough exemption loss of savings
Special fund employees: --$335 million annually for one
furlough day-- Special/Fed
FTB --$1.1 million
annually for one furlough day-- General
BOE (see staff comments
below) General
FTB: tax revenue ---tens of millions
annually-- General
BOE: tax revenue ----tens of millions
annually-- Gen/Special*
Other fee revenue ----unknown potentially millions in
various fee
revenue collected by
numerous state agencies-- Special
*Various Special Funds created under numerous collection
programs within BOE.
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STAFF COMMENTS: SUSPENSE FILE.
The above fiscal estimates represent costs and savings pursuant
to the enactment of a one-day mandatory furlough program. The
actual receipt of revenue may not coincide directly with the
fiscal years shown above due to variances in the flow of revenue
in relation to collection activities.
According to the most recent data available from the State
Controller's Office, the annual payroll costs for all state
employees is approximately $13.9 billion (excluding overtime,
bonus, other premium pay, and CSU), with non-General Fund
employees' payroll amounting to about $6.7 billion.
The imposition of the recent three day furlough program resulted
in lost revenue to the state from a variety of sources. For
instance, there was a loss of various special fund revenues,
direct tax revenue to the General Fund, and federal dollars
derived from a variety of programs. For example, the salaries
of employees in the Disability Determination Services Division
within the Department of Social Services are federally funded
and imposing furlough days on those employees reduced federal
revenue to the
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AB 1215 (De La Torre)
state. However, quantifying the exact amount of total revenue
that will be generated by exempting non-General Fund employees
and those in revenue generating entities from the furlough is
difficult due to the timing of collection activities and the
actual flow of revenue.
The imposition of the recent three day furlough has also
resulted in a tremendous detrimental impact on revenue from tax
collection agencies. In the case of the Board of Equalization
(BOE), while it is a statewide constitutional office and was not
required to implement the furlough program, the BOE essentially
realized a $41 million funding reduction in its budget which was
equivalent to the furlough reduction. In order to accommodate
this budget reduction, the BOE implemented the following: 1) a
hard hiring freeze effective August 1, 2009; 2) a voluntary
leave program whereby over 1,200 BOE employees voluntarily
reduced their pay 5-10% while continuing to work full time in
order to avoid layoffs; and 3) a reduction in operational
expenditures, travel and equipment purchases. Consequently, the
BOE has estimated a revenue loss of approximately $264 million
due to the large number of vacancies that were not filled, of
which $156 million would have been revenue to the General Fund.
The remaining revenue is comprised of a variety of collection
activities by the BOE including the Hazardous Substances Tax
Program, Alcoholic Beverage Tax Program, Cigarette and Tobacco
Products Tax Program as well as numerous other fees. (Staff
notes that although this legislation will exempt BOE employees
from being furloughed, it is not clear that the board's full
budget will automatically be restored.) The BOE indicates that
since its budget reductions due to furloughs are met through
unfilled positions, new staff has to be recruited, hired, and
trained before revenue collections resume - the result is lost
revenue for many months after the furloughs are released, unlike
other departments where employees will simply return to a 40
hour work week. The BOE currently has between 250-300 vacant
positions that are tied to revenue generating functions.
A report issued February 12, 2010 by the Senate Office of
Oversight and Outcomes compared the effects of furlough savings
to the revenue generation at the Franchise Tax Board and the
Board of Equalization. This report indicates that California
has lost $6.36 for every dollar saved through budget cuts at the
BOE, and has foregone $7.15 of revenue for every dollar saved
through furloughs at the FTB.
According to the FTB, the imposition of a three day furlough
program has resulted in lost revenue of over $500 million due to
uncollected taxes during the 17 months of enactment.
On December 29, 2008, the Governor issued Executive Order
S-16-08 which proclaimed a furlough of two unpaid days per month
from February 2009 through June 2010 for represented state
employees and supervisors. The Governor's Executive Order
S-13-09 then subjected all state employees to a third day per
month furlough effective July 1, 2009 which resulted in a total
salary reduction of approximately 13.86%. The savings realized
from the three day furlough were considered as part of the
finalization of the 2009-10 Budget Act.
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AB 1215 (De La Torre)
AB 1215 will exempt employees who work in a department or agency
with a source of funding of at least 95% non-General Fund from
any future mandatory furlough program. It will also exempt
employees within the Board of Equalization and the Franchise Tax
Board from the mandatory furloughs since both are revenue
generating entities and have each realized severe shortages in
General Fund revenue due to the impact of the previous three day
furlough program.
AB 1215 contains Findings and Declarations that although the
furloughs, which were instituted outside the collective
bargaining process, were imposed during a fiscal emergency based
upon a General Fund deficit, they have been applied to virtually
all state employees without regard to the source of funding for
their salaries. Additionally, many residents of California have
experienced extreme delays in accessing unemployment benefits
and disability claims due to staffing shortages at the
Department of Social Services, the Employment Development
Department, and the California Unemployment Insurance Appeals
Board; while other residents have endured long lines and
processing times for licensing applications and renewals at
various other departments that are supported by fees.
This bill is identical to SBx8 29 (Steinberg) which was vetoed
by the Governor on March 24, 2010. In part, the veto message
indicated that "it is necessary to apply furloughs across the
board, with limited exemptions as needed to protect public
health and safety, to effectively manage the workforce, and to
avoid inequities and morale problems for state employees."