BILL ANALYSIS
SENATE COMMITTEE ON BUDGET AND FISCAL REVIEW
Denise Moreno Ducheny, Chair
Bill No: SB 844
Author: Budget and Fiscal Review Committee
As Amended: April 8, 2010
Consultant: Keely Martin Bosler
Fiscal: Yes
Hearing Date: April 12, 2010
Subject : State finance: budget process.
Summary : This bill would amend statute to fully implement
the budget reform provisions of SCA 19 (DeSaulnier). This
bill, SCA 19, and SB 845 constitute a state and local
government reform package that is sponsored by the
organization California Forward. This bill provides a
statutory framework for the implementation of
performance-based budgeting and for a systematic program
performance review by the Legislature. This bill also
makes operational "pay as you go" provisions contained in
SCA 19.
Background :
Historic Budget and Local Government Reform Efforts. There
have been numerous proposals to reform the budget and
State/local government relationship over the past several
decades. Historical reform efforts include, but are not
limited to the following:
Pilot projects on performance budgeting in four
State departments starting in 1993 by then Governor
Pete Wilson.
Recommendations by the California Constitution
Revision Commission that convened from 1994 to 1996 at
the direction of statute and made various
recommendations regarding the State budget process and
alignment of programs between State and local
governments.
Recommendations by the California Citizens Budget
Commission in 1998 that proposed statutory and
constitutional changes to the budget process,
including reducing the vote requirement for the State
budget to a majority vote.
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Recommendations in the Governor's 2004 California
Performance Review regarding the State budget process,
including a recommendation to adopt a biennial budget
and a performance-based budgeting system.
Reforms implemented in recent years include:
Proposition 58 which was passed by voters in 2004
and requires that the State enact a balanced budget
and provides for mid-year actions in the event that
the budget falls out of balance. Proposition 58 also
established a special budget reserve called the Budget
Stabilization Account and prohibited borrowing to
cover budget deficits.
Proposition 1A which was passed by the voters in
2004 and reduced the State's authority over local
finances by restricting the State from reducing or
altering the allocation of local sales tax rates.
Proposition 1A also restricted the State from shifting
property taxes from local government to schools or
community colleges and does not allow the State to
decrease vehicle license fee revenues to local
government without providing replacement funding.
Proposition 1A allows the state to redirect local
property tax revenue to schools for state General Fund
relief only twice in a consecutive ten-year period.
The redirection is considered a loan which must be
repaid within three years with no second redirect
allowed until the first is repaid.
California Forward Organization. California Forward has
sponsored the most recent efforts regarding government
reform. California Forward is an organization that was
created by California Common Cause, the Center for
Governmental Studies, the New California Network, and the
Commonwealth Club of California's Voices for Reform Project
in March 2008. The organization's main goal is to
contribute to improving the quality of life for all
Californians by creating a more responsive, representative,
and cost-effective government. This organization is funded
by the following foundations: the California Endowment,
the Evelyn and Walter Haas Jr. Fund, the William and Flora
Hewlett Foundation, the James Irvine Foundation, and the
David and Lucile Packard Foundation.
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In 2008, California Forward started a process of
consultation and engagement with the public and community
leaders regarding a government reform agenda. They have
made hundreds of presentations, consulted with hundreds of
community leaders, conducted focus groups and public
opinion research in the development of a reform agenda that
includes budget process reform and local government reform.
Proposed Law:
This bill makes statutory changes needed to implement the
constitutional reforms contained in SCA 19 (DeSaulnier).
This bill does the following:
Program Performance Review. This bill requires the
Legislature to establish a process for reviewing the
performance of all state programs at least once every ten
years, including tax expenditures. Six months prior to the
deadline for review of each program a joint committee shall
refer the initial program review to the appropriate policy
committee of each house of the Legislature. A joint
committee shall propose legislation based on the policy
committee recommendations and other recommendations that
will reduce costs, improve outcomes, or terminate the
program. The proposed legislation of the joint committees
shall be submitted to the Rules Committee in each house and
referred to appropriate committees for public hearings and
further actions. This bill requires the proposed
legislation to be posted on the joint committee's website.
LAO Role in "Pay As You Go". This bill requires the fiscal
committee of each house to determine whether a bill or
measure should be reviewed by the Legislative Analyst's
Office (LAO) to make determination of whether the statute
is restricted by the new constitutional "pay as you go"
provisions (contained in SCA 19 [DeSaulnier]) that require
that any statute or measure that has "qualified state
costs" of more than $25 million must have offsetting
program reductions or revenue increases of an equal or
greater amount.
This bill allows the Legislature to override the LAO's
determination of constitutionality by a two-thirds vote in
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each house. This bill authorizes the LAO to consider
impacts to other programs and establish a time period in
making determinations in this section.
The Legislative Counsel digest shall reflect the
determination made by the LAO before a measure is read for
a third time if the LAO determines that the bill has
qualified state costs of $25 million or more.
"Pay As You Go" Exclusions and Definitions. This bill
waives the requirements of the new "pay-go" constitutional
amendment if the State is in a structural surplus, and the
net increase in costs or net decrease in revenues does not
exceed the amount by which state revenues exceed state
expenditure obligations in any given year, over a five year
period starting with the prior fiscal year.
Also, this bill defines "qualified state costs" to exclude:
general obligation bond debt; restoration of funding that
was reduced in a prior fiscal year, to balance the budget
to address a forecasted deficit; one-time increases in the
budget bill or a budget trailer bill; COLAs or other
workload increases, including increases in Memorandums of
Understanding (MOUs) approved by the Legislature; and local
mandates. This bill defines "a net increase in qualified
costs" to mean ongoing expenditures and does not include
one-time expenditures. This bill defines "additional
revenue" to mean a sustained increase as determined by the
state agency responsible for collecting the revenue.
Performance Data in Budget Document. This bill requires
each state agency to submit performance data that reflect
desired outcomes for existing and proposed activities as
part of the annual budget submission. This bill also
requires each state agency to identify and update the
following: the mission and goals of the agency, the
activities and programs focused on achieving those goals,
performance metrics, prior-year performance data, and
proposed changes in statute to improve outcomes or reduce
costs. This data shall be available on the Governor's
website.
Development of a Performance-Based Budget. This bill
requires that performance-based budgeting methods be
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implemented for all budgets submitted to the Legislature by
the 2014-15 fiscal year. This bill requires the LAO to
review the adequacy of the performance metrics.
This bill creates a task force consisting of the Department
of Finance (DOF), the State Controller's Office (SCO), and
the Chairpersons and Vice Chairpersons of the budget
committees that shall review and comment on DOF's
guidelines for developing performance-based budgets, on
DOF's training program to ensure successful implementation
of performance-based budgets, and on DOF's plans for
implementing performance-based budgeting.
Fiscal Effect:
This bill, if implemented with SCA 19 (DeSaulnier), is
likely to require new state spending in the tens of
millions of dollars annually to develop and implement new
performance standards. This includes additional resources
for the DOF and the LAO given their expanded roles under
this bill. In addition, new information technology
expenditures could result to address the new requirements.
Source : California Forward
Support :
Organizational Endorsements for SB 844:
AARP
State Building and Construction Trades Council of
California
Sierra Business Council
Monterey County Business Council
San Joaquin County Business Council
Fresno Business Council
Greenlining Institute
California Church IMPACT
Yolo County Board of Supervisors
San Gabriel Valley Economic Partnership
California Alliance of Child and Family Services
Kern County Taxpayers Association
Progressive Christians Uniting
The Campaign for College Opportunity
WELL Network
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Organizational Endorsements for the California Forward 2010
Reform Principles:
Inland Empire Economic Partnership
Orange County Business Council
San Carlos Chamber of Commerce
California Senior Advocates League
San Francisco Chamber of Commerce
California La Raza Lawyers Association
Individuals:
Jane Affonso, Redondo Beach
Ernest and Hannah Biberstein, Davis
Jerry Brown, Chatsworth
Margaret Fertschneider, Atascadero
Elaine Holder, San Luis Obispo
Jeanette McNeely, San Jose
Merilie Robertson, Canoga Park
Dennis Quirin, Oakland
Opposed :
California Taxpayers' Association
Howard Jarvis Taxpayers Association
Comments :
1. Performance Measures and Management. Performance
measures can be a useful tool for managers to assess
how effective programs are in meeting their goals
and to help focus managers on outcomes and not
processes. However, many state departments would
have to make significant changes to their management
structure, training, and data collection systems
before they could effectively use performance
measures to guide management decisions. Given this,
it is unclear whether the state could meet the
deadline for performance measures set forth in this
constitutional amendment. This is especially true
if there is not sustained leadership in the
executive branch on this effort.
2. Measurements and Priorities. Performance
measurements can be useful tools in helping the
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Legislature evaluate program performance and
efficacy. However, they are not a substitute for
setting Legislative priorities. For example, public
needs still require funding regardless of a
department's administrative performance in achieving
an agreed upon performance level.
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