BILL ANALYSIS
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THIRD READING
Bill No: AB 1636
Author: Assembly Budget Committee
Amended: 8/27/10
Vote: 27 - Urgency
PRIOR VOTES NOT RELEVANT
SUBJECT : Budget Act of 2010
SOURCE : Author
DIGEST : This bill enacts the appropriation for the 2010
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 Conference Committee Budget includes approximately
$18.5 billion in General Fund "solutions" to close the gap,
and provides a final reserve of $535 million.
The Conference Committee budget provides a credible path to
closing the significant budget gap facing California. The
Committee has taken steps to make significant expenditure
reductions, realign some public safety responsibilities
from the state to the counties, delay corporate tax cuts,
and implement a tax reform proposal that results in
additional ongoing revenues. Together these actions should
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help to stabilize the state's fiscal future.
General Budget Framework . The Conference Committee has
taken actions to address the Budget deficit through a
combination of expenditure reductions, suspending new
corporate tax cuts, implementing an oil severance tax, and
reforming existing taxes in a way that increases federal
deductibility and results in more taxpayer dollars
remaining in California. The Conference version of the
Budget proposes to reduce the deficit with solutions that
fall into the following categories-dollars based on
preliminary scoring:
Expenditure Reductions: $8.3 billion
Federal Funds: $4.1 billion
Revenues (corporate tax delays,
Oil severance tax, and tax reform):$4.5 billion
Revenue Adjustments
(Proposition 98 savings, LAO
revenues, public safety restructuring):
-$2.3 billion
Alternative Funding: $1.0 billion
Fund Shifts and Other: $2.7 billion
Total Solutions: $18.5
billion
As noted above, the Conference Committee's Budget
identifies $18.5 billion in solutions to close the Budget
gap. This will result in a reserve of approximately $535
million.
Major Action :
K-14 Education . The Conference version of the Budget
includes approximately $52 billion for Proposition 98 that
funds K-14 education. This is approximately $3 billion
higher than the Governor's proposal.
1. Restores Major Reductions by Governor . The Conference
version of the Budget restores $1.5 billion for revenue
limits (the most flexible funding for schools). The
Conference version also restores $1.4 billion for child
care (including $286 million in one-time funds). The
Governor had proposed eliminating child care funding.
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The Conference version also proposes to restore $300
million for Class Size Reduction and $230 million that
the Governor cut by applying a negative cost of living
adjustment.
2. Preserves Integrity of Proposition 98 . The Conference
version of the Budget proposes a direct suspension of
the guarantee for one year. Suspension of the
Proposition 98 guarantee eliminates any legal or
Constitutional ambiguity over the $11.2 billion
maintenance factor created as part of last year's Budget
agreement.
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, and the significant
reductions proposed to the In Home Supportive Services
program.
The Conference version of the 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 conference version of the Budget
does include the realignment of approximately $467
million in state expenditures on public safety to
counties. Under this proposal counties are eligible for
a block grant if they chose to house and supervise
offenders convicted of "wobbler" crimes locally.
Counties will have the option of rejecting the block
grant if they wished to continue to send offenders
convicted of "wobbler" crimes to the state. Over time
this restructuring proposal is expected to produce
savings to the state of over $1 billion.
4. Local Government . The Conference Budget rejects several
proposals by the Governor to significantly reduce county
administration of health and human services programs.
5. State Employees . The Conference Budget reduces spending
for state employees by about $1.5 billion consistent
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with collective bargaining agreements that have already
been reached or are in negotiation. This is $500
million less than what the Governor has proposed.
6. Federal Funds . The Conference version of the Budget
assumes federal funds consistent with the Governor's May
Revision proposal. However, the Conference version is
slightly higher because the conference version preserves
the federal match for health and human services programs
that the Governor had proposed eliminating.
Revenues . The Conference version of the Budget includes
approximately $4.5 billion in additional revenues from the
following sources:
1. Tax Reform : The Budget adopts a tax reform proposal
that raises taxes that are deductible from federal
personal income taxes (State Personal Income Tax and
Vehicle License Fee) and reduces the state sales tax
that is not deductible on federal personal income tax
forms. Under this tax proposal, all income groups
would, after deductibility, experience a net tax
reduction. The tax reform will generate $1.8 billion in
additional General Fund revenue in 2010-11, growing to
about $3.3 billion in future years. A portion of the
revenues raised by the Vehicle License Fee is proposed
to be dedicated to public safety activities realigned
from the state to the counties.
2. Delays New Corporate Tax Breaks . The Budget delays for
two years the start of new business tax breaks scheduled
to take effect in 2010-11. Delaying these new tax
breaks will preserve about $2.2 billion in General Fund
revenues for 2010-11 that would otherwise be lost.
3. Closes Oil Severance Tax Loophole . The Budget closes
the Oil Severance loophole that will generate $600
million in the budget year, and $1.2 billion ongoing.
This proposal also includes a reduction in the state
sales tax of 0.25 percent and the "single flip", which
increases the local sales tax by 0.25 percent resulting
in a shift of property taxes from local governments to
the schools.
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FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Bass, Beall, Block, Bradford,
Brownley, Buchanan, Charles Calderon, Carter, Chesbro,
Coto, Davis, De La Torre, De Leon, Eng, Evans, Feuer,
Fong, Fuentes, Furutani, Galgiani, Hall, Hayashi,
Hernandez, Hill, Jones, Lieu, Bonnie Lowenthal, Ma,
Mendoza, Monning, Nava, V. Manuel Perez, Ruskin, Salas,
Saldana, Skinner, Solorio, Swanson, Torlakson, Torres,
Torrico, Yamada, John A. Perez
NOES: Anderson, Fuller, Gaines, Harkey, Jeffries, Knight,
Logue
NO VOTE RECORDED: Adams, Bill Berryhill, Tom Berryhill,
Blakeslee, Blumenfield, Caballero, Conway, Cook, DeVore,
Emmerson, Fletcher, Garrick, Gilmore, Hagman, Huber,
Huffman, Miller, Nestande, Niello, Nielsen, Norby,
Portantino, Silva, Smyth, Audra Strickland, Tran,
Villines, Vacancy
DLW:do 8/6/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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