BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 15|
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THIRD READING
Bill No: SB 15
Author: DeSaulnier (D) and Wolk (D), et al.
Amended: 5/19/11
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 8-0, 3/30/11
AYES: Wolk, Huff, DeSaulnier, Hancock, Hernandez, Kehoe,
La Malfa, Liu
NO VOTE RECORDED: Fuller
SENATE BUDGET & FISCAL REVIEW COMMITTEE : 14-0, 5/12/11
AYES: Leno, Huff, Anderson, DeSaulnier, Emmerson, Evans,
Fuller, Hancock, La Malfa, Liu, Lowenthal, Rubio, Wolk,
Wright
NO VOTE RECORDED: Alquist, Simitian
SUBJECT : State budget
SOURCE : State Controller John Chiang
California Forward
DIGEST : This bill places additional reporting
requirements on the Department of Finance (DOF) related to
the annual budget process.
ANALYSIS : Under the current State Constitution, the
Legislature has the power to appropriate State funds and
make midyear adjustments to those appropriations. The
annual State budget act is the Legislature's primary method
of authorizing expenses for a particular fiscal year.
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Also, under the current State Constitution, the Governor is
required to propose a balanced budget by January 10 for the
next fiscal year (beginning July 1) and the Legislature is
required to pass the annual budget act by June 15. Under
current law, the Governor may also reduce or eliminate
specific appropriation items using his or her "line-item
veto" power and the Legislature may override a veto with a
two-thirds vote in each house. However, once the budget
has been approved by the Legislature and the Governor,
current law provides the Governor with limited authority to
reduce spending during the year without legislative
approval.
Proposed Law
This bill commencing in 2015, or earlier if funding for its
purposes is appropriated in the annual Budget Act, requires
that the Director of Finance provide the Legislature
updated projections of state revenues and state
expenditures on or before October 15 of each year.
This bill requires the Governor to submit a budget for both
the budget year and the succeeding fiscal year. The budget
shall contain itemized statements, provisional language,
performance measurement standards for state agencies and
programs, recommended state expenditures, and a projection
of anticipated state revenues, including revenues
anticipated to be one-time revenue.
This bill also requires that the budget contain a
projection of state expenditures and revenues for the three
fiscal years following the fiscal year succeeding the
budget year and budget plans for those three fiscal years.
If the expenditures exceed estimated revenues in the budget
year or succeeding fiscal year, this bill requires that the
Governor to recommend reductions in expenditures or the
sources of additional revenues, or both. The bill further
requires an analysis of the recommendations on the
long-term impact that expenditure reductions or additional
revenues have on the economy of California.
This bill also requires the Governor to submit to the
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Legislature, annually with the budget, any legislation
needed to implement appropriations contained in the budget
and a five-year capital infrastructure and strategic growth
plan.
This bill requires that if the Governor's budget expands or
creates a new program or expands the scope of an existing
program, which results in an increase in state costs or
reduces a state tax in the budget year or succeeding year,
the proposal must be accompanied by a statement identifying
state program reductions or additional revenue that are
equal or greater than the net increase in the state costs
of the new or expanded program or tax expenditure.
This bill also states that it is the intent of the
Legislature to establish an oversight process one year
after the enactment of this legislation for evaluating and
improving the performance of all programs undertaken by the
state or by local entities on behalf of the state, based on
performance standards.
Comments
This bill seeks to provide more information to the
Legislature so that they will better understand the impacts
of decisions they make on the fiscal health of the state in
subsequent budget years. One-time solutions adopted by the
Legislature can provide for temporary budgetary relief and
have a role, but in recent years ongoing budgetary
reductions have also been needed to bring expenditures in
line with long-term revenue projections. This bill seeks
to introduce more information into the process to inform
decision makers of the impacts and tradeoffs of budgetary
decisions.
The DOF currently prepares a five year projection commonly
referred to as the multi-year projection. These
projections are not included in budget submissions on the
department's Web site, but are officially transmitted to
the Legislature on the day the budget is released. It is
unclear whether incorporating this information more
officially in the DOF's submissions would increase the
likelihood that the Legislature uses this information to
inform a final budget package. Ultimately, there are many
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factors entering into final decisions on the budget package
and this information is just one of those inputs.
This bill requires the DOF to do an analysis of the
long-term impacts that expenditure reductions or additional
revenues have on the economy of California. The DOF has
explored general equilibrium modeling to measure the
economic impacts of budgetary policies in the past.
However, this modeling was found to be highly sensitive to
the assumptions used in the model and was eventually
discontinued by the DOF because it did not provide the type
of information that was directly valuable to forecasting
revenues and budget planning. While this sort of analysis
may be interesting from an academic perspective, it would
significantly increase the workload of the DOF and likely
not provide significant value to the budget making process.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Budget Committee analysis:
The direct fiscal effects of this bill are a few million
and are dependent upon how this bill is implemented by the
Administration. The Department of Finance currently does a
five year projection when preparing the annual budget bill
and makes an estimate of the multi-year impact of policies
it proposes. However, this bill may require a more
detailed analysis be done for the second budget year and
also requires additional analyses that are not currently
required, such as an analysis of the impact of budgetary
expenditures and revenues on the economy.
There may be unknown savings attributable to this bill
based on better more informed multi-year planning by the
Administration and the Legislature. However, these effects
will ultimately depend on future actions by the
Administration and Legislature.
SUPPORT : (Verified 5/19/11)
State Controller John Chiang (co-source)
California Forward (co-source)
AARP
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American Association of University Women
American Federation of State, County and Municipal
Employees
Bay Area Council
Business Council of San Joaquin County
California Alliance of Child and Family Services
California Church IMPACT
California Partnership for the San Joaquin Valley
California Senior Advocates League
California State Student Association
Contra Costa Council
Fresno Business Council
Greenlining Institute
Half Moon Bay Coastside Chamber of Commerce
Huntington Beach Chamber of Commerce
Kern County Taxpayers Association
Los Angeles Area Chamber of Commerce
Marin Builders' Association
San Francisco Chamber of Commerce
San Gabriel Valley Economic Partnership
San Mateo County Economic Development Association
Santa Clara and San Benito Counties Building and
Construction Trades Council
Santa Cruz County Medical Society
Saving California Communities
State Building and Construction Trades Council of
California
Silicon Valley Leadership Group
Valley Industry and Commerce Association
WELL Network
AGB:kc 5/19/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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