BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 110|
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THIRD READING
Bill No: AB 110
Author: Blumenfield (D)
Amended: 6/28/11 in Senate
Vote: 21
PRIOR VOTES NOT RELEVANT
SUBJECT : Budget Act of 2011
SOURCE : Author
DIGEST : This bill enacts the 2011-12 State Budget.
Senate Floor Amendments of 6/28/11 delete the prior version
of the bill relative to tax compliance and programs, and
places the 2011-12 State Budget into the bill.
ANALYSIS : In January, the estimated General Fund (GF)
shortfall was $27.6 billion - including a $1.0 billion
reserve and including the cancelation of the
sales-leaseback transaction. In March, the Legislature
passed $14 billion in solutions, primarily spending
reductions.
The Legislature adopted most of the Governor's May Revision
framework that relied on approximately $11 billion in
additional revenues. However, after failing to gain the
Republican votes needed to move forward the revenue
portions of the Governor's framework, the Legislature
identified alternative solutions and adopted a budget on
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June 15 which was subsequently vetoed by the Governor.
The Legislature and Governor have since identified
additional alternative solutions, as well as retained many
of the solutions from the June 15 budget, to ensure a
balanced budget in 2011-12. In addition to the reductions
already adopted, the final version of the budget
incorporates the following major changes to balance the
budget for 2011-12 without revenues that require a
two-thirds majority vote.
This includes $12.7 billion in additional solutions, which
will result in a slightly lower budgetary reserve of
approximately $500 million GF in the budget year. The
major solutions include the following:
The solutions by category - based on the January Budget
problem and including legislation adopted in March - are as
follows:
Expenditure Reductions $14.6 billion
Other, including delayed loan repayments $2.9 billion
Revenues, including current-year revenues $1.9 billion
Special Fund Revenues $0.7 billion
Natural Revenue Growth/Misc. Changes $7.1 billion
TOTAL $27.1 billion
Reserve $0.5 billion
Adopt additional expenditure reductions :
1. Reduces K-14 Proposition 98 funding by approximately $3
billion by continuing deferrals of $3 billion. The
final version also eliminates the additional $744
million in settle up payments assumed in the June 8
legislative version.
2. The budget package includes a solution from
redevelopment agencies (RDAs) that provides a $1.7
billion General Fund benefit in 2011-12.
3. The budget package includes $448 million in unallocated
General Fund reductions to the Medi-Cal and Healthy
Family programs.
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4. Includes a $150 million reduction to the University of
California system, in addition to the $500 million
reduction included in the budget package passed in
March, and budget bill language to prevent reversion of
funds if enrollment targets are not met.
5. Includes a $150 million reduction to the California
State University system in addition to the $500 million
reduction included in the budget package passed in
March, and budget bill language to prevent reversion of
funds if enrollment targets are not met.
6. Includes an additional $150 million reduction to the
trial court system and $310 million in savings from a
one-year pause in court construction projects.
7. Reduce funding for state Division of Juvenile Justice
(DJJ) by collecting $72 million in additional "sliding
scale" fees paid by counties for commitments to DJJ.
8. Includes $36 million from savings in various law
enforcement programs in the Department of Justice.
9. Adopts $41 million in savings from dedicating surplus
county office of education property tax balances that
are currently restricted to other education programs,
thereby reducing State GF costs.
10.Achieves $12.1 million in savings from postponing the
opening of the Redding and Fresno Veterans Homes of
California (these homes were slated to open in late
spring 2012).
11.Assumes $10.6 million in savings from revised estimates
of debt service costs for general obligation bonds.
12.Assumes $12.8 million in additional risk-based
reductions made to the Department of Forestry and Fire
Protection (CAL FIRE) fire protection program.
13.Assumes $4 million GF reduction to the Department of
Food and Agriculture.
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14.Assumes an additional $25 million unallocated reduction
to state operations.
15.Achieves various one-time savings of $86 million in the
2010-11, including from reduced borrowing costs and
reconciliation of employee compensation costs.
Adopt majority vote revenues :
1. Increases vehicle registration fees by approximately
$12 to defray the costs associated with the Department
of Motor Vehicles (DMV). This action frees up $300
million in vehicle license fees to be dedicated to local
governments that can be used as a down payment for the
implementation of public safety realignment.
2. Increases compliance in collection of the use tax, by
requiring collection of the existing tax by online
retailers, as specified. $200 million in additional
revenues are assumed.
3. Adopts a State Responsibility Area Fee to cover some
costs of state fire suppression on privately-owned
lands. Reduces GF support for CAL FIRE by $50 million
and replaces with fee revenue (savings grows to $200
million in out-years).
4. Assumes an additional $11.5 million in State Water
Resources Control Board programs is shifted from GF to
special funds supported by fees.
Updated funding for realignment :
1. Assumes that 1.06 percent of the existing state sales
tax be redefined as a local revenue to support $5.1
billion in public safety programs proposed for
realignment from the state to local governments in the
budget year.
2. Assumes redirection of vehicle license fee revenues
from the following sources to support public safety
programs proposed for realignment from state to local
governments in the budget year:
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$300 million from the DMV.
$106 million from cities.
$48 million from Orange County.
Updated assumptions :
1. Increases current-year revenue estimates by $1.2 billion
to reflect higher revenues already received since the
May Revision estimates.
2. Assumes current revenue trends continue and generate
approximately $4 billion above the revenue estimates in
the Governor's May Revision for the 2011-12 year. This
is consistent with the most recent data on revenues
collected by the state since the Governor's May Revision
was released.
Based on preliminary scoring, the 2011-12 Budget includes
GF expenditures of $86 billion, down from revised 2010-11
expenditures of $91.5 billion.
However, in the case that revenues are not achieved in the
budget year, the budget package contains an additional $2.5
billion in additional "trigger" cuts. These cuts would be
triggered only if revenues to the state do not achieve
levels assumed in the budget package. If revenues are $1
billion below assumptions, $600 million in additional
reductions will be made on January 1, 2012 to a variety of
programs but excluding K-12 education. If revenues are $2
billion below assumptions, an additional $1.9 billion in
cuts will be made to K-12 education on February 1, 2012.
I. Major Expenditure Reductions
Overall, the final version of the budget prioritizes
K-12 education. Significant reductions were made in
the Health and Human Services areas, but in many cases,
alternative cuts were found that mitigate the harshest
of these reductions. Most areas of the budget saw
significant expenditure reductions.
K-12 Education . The final version of the budget
includes funding for Proposition 98 that is at about the
same level as the current fiscal year. The lower
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spending on Proposition 98 is a result of not including
the Governor's proposed taxes requiring a two-thirds
vote in the final budget package. Overall Proposition
98 expenditures will be approximately $48.3 billion in
the budget year (excluding child care). Major proposals
included in the final budget include the following:
A. Deferrals . Continues approximately $3 billion in
inter-year K-12 payment deferrals, consistent with
the Governor's January proposal.
B. Realignment Revenues . Approves $2.1 billion
rebench of the Proposition 98 minimum guarantee to
reflect the dedication of 1.06 percent of the state
sales tax to a local revenue fund to support public
safety realignment in 2011.
C. Child Care . Approves $1.5 billion rebench of the
Proposition 98 minimum guarantee to reflect removing
all child care programs except preschool out of
Proposition 98.
D. Student Mental Health Services . Approves the
Governor's budget proposal to rebench the Proposition
98 guarantee by $222 million to fund mental health
related services for students with disabilities
(previously provided by counties per the AB 3632
mandate). Also augmented 2010-11 funding by $80
million to partially backfill for a funding shortfall
created when Governor Schwarzenegger vetoed funding
for the AB 3632 mandate.
E. Class Size Reduction . Approved a one-year
extension of the continuous appropriation for the
class size reduction categorical program.
F. Categorical Flexibility . Approved the Governor's
proposal to extend various flexibility options to
school districts for an additional two years.
G. Secretary of Education Elimination . Approved the
Governor's proposal to eliminate the Office of the
Secretary of Education.
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Childcare . Approved $300 million in ongoing savings to
childcare programs. This is approximately $200 million
less than was previously eliminated in March due to the
following actions:
A. Standard Reimbursement Rate Reduction . Restored
10 percent rate cut to the Title V contracts.
B. Contract Reduction . Reduced contracts, or slots,
including preschool, by 11 percent instead of 15
percent.
C. 11 and 12-Year Olds . Continued funding childcare
services for 11 and 12-year olds.
D. Family Fees . Rejected earlier proposal to
increase sharply the family fees paid by low-income
individuals for childcare services.
In addition, as referenced above, all non-pre-school
child care programs were removed from within the
Proposition 98 guarantee, and funded in the regular GF
budget.
Higher Education . Adopted a $650 million reduction to
the University of California, a $650 million reduction
to the California State University, and a $400 million
reduction to the California Community Colleges. Some of
these cuts in each segment will be offset with student
fees.
Health and Human Services . Achieved total expenditure
cuts of around $5.0 billion in the Health and Human
Services area as follows:
A. Medi-Cal . Achieved over $1.6 billion in GF
expenditure cuts in the Medi-Cal program. Reinstates
the previously enacted 10 percent provider payment
reductions for savings of $547 million. Approved
many of the Governor's "co-pays" and "hard caps" on
services, but rejected the hard-cap on physician and
clinic visits, medical supplies, equipment, and
prescriptions. Found other savings not identified by
the Governor.
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B. Adult Day Health Care (ADHC) . Rejected the
Governor's proposal to eliminate this activity
permanently, but instead eliminated the benefit and
provided $85 million to provide a "bridge" to a new
optional benefit that will serve a higher acuity
patient.
C. Multipurpose Senior Service Program (MSSP) .
Rejected the full elimination of this program and
instead reduced funding by $2.5 million or 13
percent.
D. Proposition 63 . Approved the shift of
approximately $860 million in Proposition 63 funds
from counties on a one-time basis to backfill for GF
support for three mental health programs the Governor
proposes to realign to counties.
E. Developmental Services . Achieved over $500
million in expenditure savings in Developmental
Services. Approved implementation of statewide
purchase of service standards at a reduction level of
$174 million, in lieu of the Governor's $424 million
reduction.
F. SSI/SSP . Approved the Governor's proposal to
reduce Supplemental Security Income/State
Supplementary Payment (SSI/SSP) to the minimum
allowed by a federal maintenance of effort
requirement for savings of $192 million.
G. CalWORKs . Achieved approximately $1 billion in
expenditure cuts in the CalWORKs program. Approved
an eight percent grant cut to save $300 million.
Approved the Governor's proposal to reduce the
time-limit for adults to receive assistance from 60
months to 48 months, but rejected the Governor's
proposal to apply a 48-month time limit to safety net
and child-only cases. Approved the Governor's cut to
the county single allocation of approximately $377
million. Added savings of $100 million from
adjusting the earned-income disregard.
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H. In-Home Supportive Services (IHSS) . Achieved the
Governor's savings number of $486 million in the IHSS
program, but reduced the proposed across-the-board
service cut and the proposed domestic and related
cut. Found other savings not proposed by the
Governor, such as the Community First Choice Option
to obtain $121 million in additional federal funds.
Corrections . Approved expenditure reductions of
approximately $1.0 billion in Corrections mainly due to
the realignment proposal. However, the Legislature has
also approved the Governor's workforce cap proposal for
an additional $195 million and significant reductions to
the Board of Parole Hearings operations. Furthermore,
the Legislature has restored nearly $50 million in
community-based rehabilitation contracts that will be
needed as the State implements realignment.
Courts . Approved the Governor's proposal to reduce the
courts funding by $200 million. Also approved an
additional $150 million reduction to the courts and a
$310 million in one-time savings from delaying court
construction projects.
Transportation . Approved the Governor's proposal to use
truck weight fees to pay approximately $1.0 billion in
transportation-related general obligation bond debt.
Approved re-enactment of the 2010 Tax Fuel Swap to
conform to the requirements of Proposition 26.
Redevelopment . The final version of the budget includes
a solution from redevelopment agencies (RDAs) that
provides a $1.7 billion GF benefit in 2011-12, and
creates a voluntary alternative redevelopment program
that allows RDAs to continue with reform.
Local Government . Approved the Governor's proposal to
suspend the Williamson Act / Open Space Subvention for a
two-year savings of $20 million.
Natural Resources and Energy . Approved a cut of $155
million in energy efficiency programs funded by the Gas
Consumption Surcharge Tax. Approved cuts of $11 million
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to State Parks and $10 million to Off-Highway Vehicle
Parks. Also approved $50 million reduction to CAL FIRE,
to be backfilled with new revenues from a State
Responsibility Area (SRA) Fee to be paid by homeowners
within the SRA. Also assumes $11 million in savings
from new water quality fees, and $12.8 million in
savings to CAL FIRE's Fire Protection Program resulting
from the department's risk-reduction strategy reviews.
Government Efficiency and Employee Compensation .
Approved expenditure cuts of approximately $700 million
in areas such as employee compensation ($308 million),
employee healthcare ($80 million), and other state
operations-related governmental efficiencies ($269
million), which is discussed further in this document
(page 11).
II. Majority Vote Revenues
The final version of the budget does not include the
Governor's proposal to maintain 2010 tax rates for five
years. This, and the Governor's proposal to reform
enterprise zones and implement a single sales factor for
apportioning corporate income to California, would have
generated $11 billion in the current and budget years.
This would have resulted in $1.7 billion in additional
expenditures for Proposition 98.
The final version does include the following majority
vote revenues:
A. Increases vehicle registration fees by
approximately $12 to defray the costs associated with
the DMV. This action frees up $300 million in
vehicle license fees to be dedicated to local
governments that can be used as a down payment for
the implementation of public safety realignment.
B. Increases compliance in collection of the use tax,
by requiring collection of the existing tax by online
retailers, as specified. $200 million in additional
revenues are assumed.
C. Adopts a State Responsibility Area Fee to cover
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some costs of state fire suppression on
privately-owned lands. Reduces GF support for CAL
FIRE by $50 million and replaces with fee revenue.
D. Assumes an additional $11.5 million in State Water
Resources Control Board programs is shifted from GF
to special funds supported by fees.
III. Public Safety Realignment
The final version includes $5.5 billion to fully-fund
the revised public safety realignment program.
Approximately $5 billion of this comes from
reestablishing of a portion of the state sales tax
revenues as a local sales tax, dedicated for the
realigned programs. In addition, about $453 million in
vehicle license fee revenues is being redirected from
the support of the DMV, and local governments to provide
the balance.
The Legislature passed AB 109 in March that realigned
low-level offenders from state prison to local
jurisdiction. This policy change will go into effect
October 1, 2011, when funding is provided for a
Community Corrections Grant Program.
The realignment plan will enable the state to meet the
order set out by a recent United States Supreme Court
decision that affirmed the lower court's decision to
require the reduction of overcrowding in the state
prison system. The state has two years to reduce the
prison population by over 30,000 inmates. Realignment
will allow the state to accomplish this reduction in a
way that has significant potential benefits for public
safety. Funded realignment will allow for funding to
flow with the offender back to the community where it
can be invested in support services, programs, and law
enforcement that enhance the safety of communities.
Other public safety programs not directly related to the
implementation of AB 109 will continue with minimal
changes until additional 2011 realignment legislation
can be enacted later this legislative session. This
includes funding for child welfare services, mental
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health services, substance abuse treatment, and adult
protective services.
The public safety realignment fully funds the local
public safety programs that had previously been funded
by a dedicated 0.15 percent of the vehicle license fee
(that additional 0.15 percent will expire on June 30).
IV. Reducing State Government
The budget package achieves savings related to 23
eliminations and 14 program reductions that were
proposed in the Governor's May Revision. The
Legislature also adopted policy to put in motion a major
reorganization and consolidation of various health care
programs that when fully implemented may result in the
further elimination of additional agencies. These
actions will help the Governor achieve the $269 million
GF savings related to efficiencies in state government
operations. The mechanism to achieve these savings is a
budget control section that provides the Administration
with the authority to make the required budgetary
reductions to achieve the total savings.
The Administration has identified, and in some cases
already achieved, savings through a variety of executive
actions, including eliminating the offices of the
Secretary of Education and the American Recovery and
Reinvestment Act Inspector General, banning
non-essential travel, implementing a statewide building
rental rate reduction, reducing the number of
state-issued cellular phones, and reducing the statewide
vehicle fleet, including the elimination of any
non-essential vehicles and reducing the number of
home-storage permits.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
DLW:mw 6/28/11 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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