BILL ANALYSIS
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THIRD READING
Bill No: AB 1630
Author: Assembly Budget Committee
Amended: 10/6/10 in Senate
Vote: 27 - Urgency
PRIOR VOTES NOT RELEVANT
SUBJECT : Budget Act of 2010
SOURCE : Author
DIGEST : Senate Floor Amendments of 10/6/10 delete the
prior version of the bill expressing the intent of the
Legislature to enact statutory changes relating to the
Budget Act of 2010.
This bill now enacts the 2010-11 State Budget.
ANALYSIS : In the 2010 May Revision, the Governor
identified a budget shortfall of $17.9 billion. He offered
a total of $19.1 billion in budget "solutions" to close the
shortfall and generate a reserve of $1.2 billion.
The negotiated budget package includes approximately $18.3
billion in General Fund "solutions" to close the gap, and
provides a final reserve of approximately $323 million.
General Budget Framework
The budget package includes a combination of significant
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expenditure reductions, federal relief, additional
revenues, and fund shifts. In addition to addressing the
2010-11 budget, the package includes many ongoing solutions
and permanent reforms. The 2010-11 budget package includes
proposals to reduce the deficit with solutions that fall
into the following categories (dollars in billions based on
preliminary scoring):
Starting Problem-$17.9
Expenditure Reductions 7.5
Federal Funds5.3
Additional Revenues2.5
Fund Shifts, Other Revenues2.8
Alternative Funding0.5
Baseline Workload Adjustments-0.2
Total Solutions$18.3
Final Reserve$0.3
2010-11 Budget Major Proposals
1. K-14 Education. Maintains modest increase in education
funding on a per-pupil programmatic basis for 2010-11,
and begins paying "settle-up" payments for the 2009-10
fiscal year with a $300 million payment in 2010-11.
This budget provides ongoing Proposition 98 funding of
$49.7 billion and through a new deferral of $1.9 billion
and one-time funds brings total state funding for
schools and community colleges to $52.5 billion.
A. Increases K-12 Per Pupil Funding. Provides over
$300 per-pupil more than the Governor's May Revision
proposal on a programmatic basis. Programmatic
spending under the budget plan is proposed to be just
under $8,000 per pupil.
B. Preserves Integrity of Proposition 98. Rejects
the Governor's legally-suspect proposal to manipulate
the Proposition 98 guarantee and rather proposes a
direct suspension of the guarantee for one year at a
specific funding level. As the LAO has noted,
suspension of the Proposition 98 guarantee reduces
legal or Constitutional ambiguity over the
maintenance factor created as part of last year's
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budget agreement. Thus, the suspension keeps last
year's budget promises and enables funding for
schools to grow as the economy rebounds.
C. Implements mandate reform. Begins reforms of
some K-14 mandate requirements by suspending some
less-important mandates and clarifying law to
permanently eliminate or reduce other mandate costs.
Funds the anticipated cost of mandates for 2010-11.
D. Child Care. Rejects the elimination of child
care funding, as proposed in the Governor's May
Revision.
E. Community Colleges. Provides $126 million for
enrollment growth for 26,000 new students. Also
provides an additional $35 million to restore
categorical programs and $25 million for an Economic
and Workforce Development program to develop programs
to meet emerging workforce needs. Includes a new
deferral of $189 million paid in 2011-12.
1. Higher Education. Provides $5.5 billion from the
General Fund for support of the University of California
and California State University systems. Funding is
above the 2009-10 level and includes full funding for
enrollment growth and an augmentation of approximately
$199 million for each segment to backfill previous cuts
to the systems.
2. Health and Human Services. The budget makes a number of
reductions in health and human services programs, but
rejects the Governor's proposals to eliminate CalWORKs,
community mental health programs, Adult Day Health care,
and the significant reductions proposed to the In-Home
Supportive Services program.
The negotiated budget also restores or partially
restores several programs that were vetoed by the
Governor in 2009-10. The most significant being the
restoration of funding for child welfare services and
the Office of AIDS.
3. Public Safety. The negotiated budget does include
corrections savings of over $1.1 billion, primarily from
reduced inmate medical care costs. The budget proposal
does not include a "realignment" of state inmates to the
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counties.
4. State Employees. The budget package reduces spending
for state employees by about $1.5 billion consistent
with collective bargaining agreements that have already
been reached or are in negotiation. This is $500
million less than what the Governor has proposed.
5. Federal Funds. The budget package assumes new or
extended federal funds to provide $5.3 billion in budget
solutions. This amount is less than the $6.9 billion
assumed in the Governor's January Budget.
6. Revenues. The negotiated budget includes $2.5 billion
in revenue solutions. More that half of this, $1.4
billion, is from the Legislative Analyst's revenue
forecast, which was $1.4 billion higher than the
Governor's May Revision - three months into the fiscal
year, this additional revenue has already been realized.
The remainder of the revenue change is from the
following:
A. Extend the Net Operating Loss (NOL) suspension:
The budget continues the suspension of the NOL
corporate tax benefit for an additional two years,
which results in increased tax revenue of about $1.2
billion in 2010-11. Over 90 percent of all
corporations are exempted from this suspension.
B. Corporate underpayment penalties and "Cost of
Performance" rule change. The budget proposal revises
recent corporate tax law changes related to penalties
assessed when a corporation underpays their tax
liability by more than $1 million. The budget
proposal also restores the old "cost of performance"
rules for the sourcing of intangibles and services
related to calculation of multi-state apportionment.
These changes will reduce tax revenue by about $132
million in 2010-11.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
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DLW:nl 10/6/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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