BILL ANALYSIS �
AB 430
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Date of Hearing: July 14, 2011
ASSEMBLY COMMITTEE ON BUDGET
Bob Blumenfield, Chair
AB 430 (Feuer) - As Amended: February 14, 2011
SUBJECT : State Budget
SUMMARY : Requires the Governor's budget to provide estimates
for anticipated revenues and expenditures for the three fiscal
years succeeding the budget year and the five-year
infrastructure plan when the budget is submitted before January
10th. The bill also requires an estimate of the long-run impact
of expenditure and revenue proposals on the economy of
California. Finally, the bill requires projections for the
three additional years be updated on May 15th, and October 15th.
EXISTING LAW : Article IV, Section 12 of California's
Constitution requires the Governor to submit a balanced budget
to the Legislature by January 10th of each year. Government
Code requires the Governor to submit the May Revision of
estimates and expenditures by May 14th of each year.
In conjunction with the Budget, the Governor is required to
annually submit a five-year infrastructure plan to the
Legislature.
FISCAL EFFECT : Unknown additional costs may be necessary for
staff time and professional services contracts to comply with
requirement to estimate the long-run economic impacts of
expenditure and revenue proposal.
COMMENT : The Department of Finance currently provides an
estimate of expenditures and revenues for the three years
following the budget year as part of the submission to the
Legislature of the January 10 Governor's Budget and May
Revision. For the 2011 enacted budget, this estimate is
available on the Department of Finance's website at
http://www.dof.ca.gov/reports_and_periodicals/documents/MY%20at%2
02011%20BA%20(WebVersion).pdf . In addition, the Legislative
Analyst's Office has included a forecast for these future fiscal
years as part of the annual November "Fiscal Outlook"
publication. This information is available on the Legislative
Analyst's website at
http://www.lao.ca.gov/laoapp/main.aspx?type=2&PubTypeID=5 .
AB 430
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While these fiscal estimates provide helpful perspective
regarding how much of the current budget deficit is expected to
be "structural" (meaning ongoing) versus one-time, history has
demonstrated that these out-year estimates are not particularly
accurate because of the dynamic nature of California's economy
and the observable correlation of state revenue with the
national business cycle and financial market performance. For
example, the LAO 2006 Fiscal Outlook projected General Fund
revenues of $128 billion for 2011-12. Now that we have arrived
in 2011-12, our projections have been updated to be just $87.3
billion, this means the long-term forecast was off by over $40
billion, roughly 46 percent of our actual amount of General
Funds for the year
The bill also requires the Governor to include budget-related
proposals for the three years following the budget year. It is
unclear if this vague language requires the Governor to include
the three-year impacts of budget year proposals, or if the
Governor would be required to make specific proposals for each
of the following three years. If it is the latter, than the
comments raised in the analysis of SB 15 (DeSaulnier) related to
the risks and pitfalls of long-term budget proposals and
forecasting apply to this bill as well.
While Government Code Section 13102 requires the Governor to
make an annual submission of a five-year infrastructure plan to
the Legislature, the previous Administration stopped complying
with this requirement in 2008 and no new plan has been received
since that time. The Department of Finance reports that the
current Administration intends to comply with this requirement
and instructions have been sent to departments to begin
gathering the necessary information to allow submission of this
plan for 2012.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
AB 430
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Analysis Prepared by : Christian Griffith / BUDGET / (916)
319-2099