BILL ANALYSIS �
ACA 5
Page 1
Date of Hearing: May 5, 2011
ASSEMBLY COMMITTEE ON BUDGET
Bob Blumenfield, Chair
ACA 5 (Portantino) - As Amended: December 6, 2010
SUBJECT : State Finance Reform
SUMMARY : Establishes a "pay-as-you-go" requirement for ten
years that all voter initiatives, statutes, bond issuances and
bond sales costing more than $250,000 must provide additional
state revenue to be enacted. Specifically, this bill :
1)Prohibits the submission of any initiative measure that would
increase state costs more than $250,000 over the amount spent
for that purpose in 2004-05 unless the measure includes
additional state revenue or offsetting savings that cover the
increased costs;
2)Prohibits the submission of any initiative measure that would
authorize the issuance of general obligation bonds unless the
measure includes additional state revenues or offsetting
savings to cover interest, principle, and issuance costs;
3)Prohibits passage of any non-urgency statute that would
increase state costs more than $250,000 over the amount spent
for that purpose in 2004-05 unless the measure includes
additional state revenue or offsetting savings that cover the
increased costs;
4)Prohibits the Treasurer from selling any currently authorized
bonds unless the measure authorizing the sale of the bonds
also contains additional state revenue or offsetting savings
in the amount necessary to replay the bond, including
principle and interest;
5)Contains a sunset provision for this measure of January 1,
2020; and,
6)Includes extensive findings and declarations.
FISCAL EFFECT : Unknown.
COMMENTS : This measure would create a very strict
"pay-as-you-go" (PAYGO) provision for all major state
ACA 5
Page 2
expenditures in bills and initiatives; it would not apply to
revenue reductions, except for tax expenditure items. The
author has stated that the measure is intended to mirror the
federal PAYGO policy in order to help assist in laying the
foundation for prudent and economically sound spending.
The structure of this measure may conflict with subdivision (d)
of Section 12 of Article IV of the Constitution, which restricts
any bill, other than the budget bill, from containing more than
one appropriation. ACA 5 envisions that single bills and
initiatives will include both the original appropriation for the
stated purpose in the bill and a second appropriation for the
additional revenues or offsetting savings.
This measure may require all future budget packages to be
adopted with a 2/3rd vote. Typically, a budget package includes
a budget bill which contains most of the appropriations for the
budget, and trailer bills that make the policy changes
associated with those appropriations While the entirety of the
package must be balanced and would thus satisfy the PAYGO
provisions in theory, under this measure, each bill must
independently meet the PAYGO requirements if they cost more than
$250,000 over the 2004-05 level for the services. This, it is
likely the only way a budget package could be constructed to
meet this PAYGO requirement would be to include an urgency
clause in every budget related bill, including the budget bill.
This measure could undermine public health and safety in
emergencies. Unlike other fiscal measures that constrain
spending, this measure does not include any exemption in the
case of an emergency, such as a massive disaster, as stipulated
in subdivision (c) of Section 3 of Article XIIIB of the
Constitution, which could limit the State's ability to respond
to a natural disaster, public health emergency, or war if this
measure was in effect.
This measure may cause large disruptions to existing
transportation, environmental, housing, school construction,
local jail, and court projects funding with authorized bond
funding. California has $130 billion in currently authorized
bonds, with close to $37.1 billion that has not been
appropriated. This measure applies to these previously
authorized bonds retroactively, and may be interpreted as a
changing of the terms and conditions of the bonds. If the
terms and conditions of the bond are changes it is likely that
ACA 5
Page 3
the voters would need to reauthorize the remaining bond funds
under the new terms before any funds could be appropriated.
In addition, under the provisions of the measure, the
Legislature may need to identify new revenue of offsetting
savings for an entire bond in order to appropriate partial
funding for an existing measure to be sold. For example, the
2011-12 budget includes the appropriation of $2.3 billion of
remaining authorized Proposition 1B, the Highway Safety, Traffic
Reduction, Air Quality, and Security Bond Act of 2006, funding.
This measure may require the Legislature to identify funding for
the entire costs of the $19.9 billion bond for the Treasurer to
sell the $2.3 billion in bond funds.
REGISTERED SUPPORT / OPPOSITION :
Support
None of file.
Opposition
California Taxpayers Association
Analysis Prepared by : Christian Griffith / BUDGET / (916)
319-2099