BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 69|
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CONFERENCE COMPLETED
Bill No: SB 69
Author: Leno
Amended: Conference Report No. 1 - 3/7/11
Vote: 21
PRIOR VOTES NOT RELEVANT
CONFERENCE COMMITTEE VOTE : 6-4
AYES: Leno, Lowenthal, Negrete McLeod, Blumenfield,
Skinner, Fuentes
NOES: Emmerson, Huff, Nielsen, and Harkey
SUBJECT : 2011-12 State Budget
SOURCE : Author
DIGEST : This bill enacts the 2011-12 State Budget.
Conference Committee Amendments place the specifics of the
2011-12 State Budget into the bill.
ANALYSIS : The following details budget solutions adopted
by the Budget Conference Committee. This information was
provided by the Senate Budget and Fiscal Review Committee:
2011-12 Budget Package
Conference Committee Adopts Balanced Budget
On March 3, 2011, the Budget Conference Committee completed
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its work to reconcile the Assembly version and the Senate
version of the 2011-12 Budget. The Conference Committee
built upon extensive work by both Senate and Assembly
Budget Committees.
The Governor released his budget on January 10, 2011, and
indicated that the State has a General Fund deficit of
$25.4 billion for the two-year period ending June 30, 2012.
On February 8, 2011, the Governor indicated he will cancel
the sale-for-leaseback of 11 state properties, which
reduces 2010-11 revenues by $1.2 billion, but saves the
state $6 billion in higher lease costs over the next 35
years. With the Governor's February 8 action, and a
desired budget reserve of $1.0 billion, a total of about
$27.6 billion in budget solutions are needed.
The Governor's budget framework relies primarily on
expenditure reductions, and a constitutional amendment to
maintain temporary taxes for an additional five-year
period. The maintenance of existing tax rates would be
achieved through a vote of the people and would support a
realignment of public safety services from the state to
local governments and fund K-12 education.
The Budget Conference Committee version of the budget
adopts the Governor's general framework for balancing the
budget.
General Budget Framework . The Conference version of the
budget proposes to solve the shortfall with solutions that
fall into the following categories - dollars based on
preliminary scoring:
Expenditure Reductions: $12.5 billion
Revenues: $12.0 billion
Other Solutions: $ 3.0 billion
Total Solutions: $27.5 billion
This budget package produces a reserve of around $1
billion.
Major Expenditure Reductions
Overall, the Conference Committee budget prioritizes K-12
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education and public safety. 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 . Adopted the Governor's Proposition 98
funding framework, which includes $2 billion in
expenditures attributable to the maintenance of certain
temporary taxes. Overall, the Proposition 98 funding level
would be $49.4 billion, which is similar to the 2010-11
level. The Prop 98 funding level exceeds the Governor's
level by about $100 million mainly due to certain shifts of
existing special fund revenue that bumped up the minimum
guarantee. The K-12 package includes the following major
actions:
Deferrals : Adopts the governors proposal to defer $2.1
billion in K-12 funds from 2011-12 to 2012-13.
Student Mental Health Services : 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.
Mandates : Approved the Governors proposal to provide $90
million for mandates.
Emergency Repair Program : Rejected the Governors
proposal to provide $53 million for the Emergency Repair
Program.
Basic Aid Districts : Included a technical adjustment to
reflect the 8.9-percent "fair share" reduction to basic
aid school districts for 2010-11 and 2011-12. This
reduction is intended to be ongoing and comparable to the
ongoing revenue limit reductions, but was restored in the
Governor's budget in error.
Class Size Reduction : Approved a one-year extension of
the continuous appropriation for the class size reduction
categorical program.
Economic Impact Aid : Restored $56 million to the
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Economic Impact Aid (EIA) program.
Categorical Flexibility : Approved the Governors proposal
to extend various flexibility options to school districts
for an additional two years.
Secretary of Education Elimination : Approved the
Governors proposal to eliminate the Office of the
Secretary of Education.
Childcare . Rejected the Governors 35 percent subsidy
reduction for
providers, but found other solutions to achieve the
Governors savings level
of $716 million. The childcare package includes the
following major
actions.
Contract Reduction : Reduced contracts, or slots,
including preschool, by 15 percent to achieve savings of
$267 million.
Standard Reimbursement Rate Reduction : Reduced funding
for these Title V contracts by 10 percent for savings of
$109 million.
License-Exempt Providers : Reduced licensed-exempt
provider rates from 80 percent to 60 percent for savings
of $44 million.
11 and 12 Year-Olds : Deprioritize services for 11 and 12
year-olds except those with non-traditional hours for
savings of $39 million.
Higher Education . Adopted the Governor's Higher Education
budget
proposals including a $500 million reduction to the
University of California,
a $500 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.
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Health and Human Services . Achieved total expenditure cuts
of over
$6.0 billion in the Health and Human Services area. The
Conference version
of the budget retains many of the painful cuts proposed by
the Governor, but
in many instances found alternative solutions that mitigate
or reduce impacts
to children, the disabled, and the elderly. The major
reductions include the
following:
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.
Adult Day Health Care (ADHC) : Rejected the Governor's
proposal to eliminate this activity. Instead achieved
half the savings, or $93 million by eliminating the
Medi-Cal program with the intent to create a new more
focused program.
Multipurpose Senior Service Program (MSSP) : Rejected the
full elimination of this program and instead reduced
funding by $2.5 million or 13 percent.
Proposition 10 : Approved the 2011-12 shift of $1.0
billion of Proposition 10 funds from State and local
reserves to Medi-Cal.
Proposition 63 : Approved the shift of about $860 million
in Proposition 63 funds from counties on a one-time basis
to backfill for General Fund support for three mental
health programs the Governor proposes to realign to
counties.
Developmental Services : Achieved over $500 million in
expenditure savings in Developmental Services. Approved
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implementation of statewide purchase of service standards
at a reduction level of $174 million, in lieu of the
Governors $424 million reduction.
SSI/SSP : Approved the Governors 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.
CalWORKS : Achieved about $1.1 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. Instead adopted
additional grant cuts for safety net and child-only cases
that exceed 60 months to generate savings of $100
million. Increased the Governor's cut to the county
single allocation from $377 million to $427 million.
Added savings of $100 million from adjusting the
earned-income disregard.
IHSS : Achieved the Governors saving number of $486
million in In-Home Supportive Services (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 : Achieved expenditure reductions of about $1.0
billion in Corrections that are scored outside the
realignment proposal. Among the cuts are $245 million to
the receiver's medical services budget and $391 million
related to local jurisdiction for lower-level adult
offenders and rehabilitation programs.
Courts : Approved the Governor's proposal to reduce the
courts funding by $200 million.
Transportation : Approved the Governor's proposal to use
truck weight fees to pay about $1.0 billion in
transportation-related general obligation bond debt.
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Approved re-enactment of the 2010 Tax Fuel Swap to conform
to the requirements of Proposition 26.
Redevelopment : Approved the Governor's proposal to
eliminate redevelopment agencies (RDA) for expenditure
savings of $1.7 billion. Funding for RDAs would continue
as necessary to retire outstanding debt. In 2011-12, $1.7
billion in RDA funds would be directed to offset state
costs for Trial Courts and Medi-Cal. In the out-years, the
RDA property tax increment would supplement funding for
schools, cities, and counties.
Local Government : Approved the Governor's proposal to
suspend the Williamson Act / Open Space Subvention for
two-year savings of $20 million. Rejected the Governor's
proposal to suspend the Brown Act / Open Meeting mandate.
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 to
State Parks and $10 million to Off-Highway Vehicle Parks.
Government Efficiency and Employee Compensation : Approved
expenditure cuts of about $700 million in areas such as:
employee compensation ($308 million); employee healthcare
($80 million); and other state operations related
governmental efficiencies ($250 million).
Revenues
The Conference version of the budget includes the
Governor's revenue package, which generates $12 billion
after accounting for the increased Proposition 98
expenditures. Most of the revenue solutions are from
maintaining 2010 tax rates, which were raised in 2009 for a
two-year period. The Governor has proposed a
constitutional amendment that must be approved by the
voters to maintain the 2010 tax rates. The following
summarizes the major revenue components included in the
conference budget package:
Maintenance of 2010 tax rates for five years that will go
to the voters for approval :
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$1.4 billion from maintaining the vehicle license fee
(VLF) at current levels for local public safety programs.
$4.5 billion from maintaining the sales tax rate at
current levels for local public safety programs.
$5.3 billion from maintaining the personal income tax
(PIT) surcharge. ($3.3 billion) and dependent exemption
credit ($2.0 billion) at 2010 levels for K-12 education.
Tax policy changes :
$1.4 billion from making the current single-sales factor
corporate tax multi-state apportionment mandatory instead
of elective.
$924 million from the elimination of the Enterprise Zone
tax credits.
$360 million from tax enforcement and tax amnesty
proposals.
Other Solutions
These final categories of budget solution total $3.0
billion of the overall solution. The following are the most
significant proposals:
$2.6 billion from loans and transfers from special funds
to the General Fund, including deferrals of loan
repayments. Part of this amount ($850 million) is
related to the truck weight fee proposal that adjusts
planned transportation loans to conform to the
requirements of Proposition 22.
$362 million in solutions from using the Disability
Insurance (DI) funds to make interest payments to the
federal government for Unemployment Insurance (UI)
benefits. The General Fund will have to repay the DI
fund for this payment in the out-years.
Public Safety Realignment
The Conference Committee approved the Governor's revised
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realignment framework. In January, the Governor proposed a
major realignment of state programs to local governments.
On February 25, 2011, the Governor modified this proposal
to address extensive discussions with stakeholders,
including, among others, local governments and local law
enforcement groups. The modifications significantly reduce
the number of low-level offenders that would be transferred
to the counties, restore $80 million recently vetoed from
the Child Welfare Services program, and add a few other
small law enforcement programs to the list of programs to
be realigned.
The Governor's proposal takes a significant step towards
bringing services closer to the people, allows for more
integrated service delivery, and allows the services to be
tailored to local situations and conditions. In total, the
revised realignment proposal continues to dedicate $5.9
billion in revenues in 2011-12 to fund a menu of programs
shifted from the State to the locals. However, because
they have reduced the number of low-level offenders that
would be transferred to the counties, they have included
funding the existing county mental health services
(realigned in 1991) out of this revised realignment
proposal. This frees up the 1991 realignment funds to cover
an increased share of CalWORKs grants. This "swap" should
have no programmatic impacts.
The table on the next page shows the Governor's February 25
revised realignment proposal compared to the original
proposal included in the January budget. The Conference
Committee approved the revised framework, including the
constitutional amendment to be placed before voters
authorizing the realignment and funding and placeholder
trailer bill to implement certain aspects of the
realignment. The Conference Committee also indicated that
there would need to be significant follow-up legislation
related to implementing the realignment that would be
developed subsequent to placing the constitutional
amendment before voters.
As noted below, the realignment funding is expected to grow
to $7.3 billion by 2014-15:
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| |2011-12|2014-15|2011-12|2014-15|
| Program | | | | |
| |Jan 10 |Jan 10 |Feb 25 |Feb 25 |
|---------------------------+-------+-------+-------+-------|
| | | | | |
|Fire and Emergency |$250.0 |$250.0 |$52.0 |$52.0 |
|Response | | | | |
|---------------------------+-------+-------+-------+-------|
|Court Security |530.0 |530.0 |485.0 |485.0 |
|---------------------------+-------+-------+-------+-------|
|Vehicle License Fee Public |506.4 |506.4 |506.4 |506.4 |
|Safety | | | | |
|---------------------------+-------+-------+-------+-------|
|Lower-level |1,802.0|908.1 |1,096.0|705.1 |
|Offenders/Parole Violators | | | | |
|---------------------------+-------+-------+-------+-------|
|Realign Adult Parole |741.1 |409.9 |421.2 |183.0 |
|---------------------------+-------+-------+-------+-------|
|Realign Remaining Juvenile |257.6 |242.0 |156.0 |234.0 |
|Justice | | | | |
|---------------------------+-------+-------+-------+-------|
|Mental Health Services: | | | | |
|---------------------------+-------+-------+-------+-------|
| EPSDT |0.0 |579.0 |0.0 |636.9 |
|---------------------------+-------+-------+-------+-------|
| Mental Health Managed |0.0 |6 0.0 |190.7 | |
| Care |183 | | | |
|---------------------------+-------+-------+-------+-------|
| AB 3632 Services |0.0 |104.0 |0.0 |150.9 |
|---------------------------+-------+-------+-------+-------|
| Existing Community Mental |0.0 |1,077.0|1,077.0|1,077.0|
| Health | | | | |
|---------------------------+-------+-------+-------+-------|
|Substance Abuse Treatment |184.0 |184.0 |184.0 |184.0 |
|---------------------------+-------+-------+-------+-------|
|Foster Care and Child |1,604.9|1,604.9|1,623.9|1,703.9|
|Welfare Services | | | | |
|---------------------------+-------+-------+-------+-------|
|Adult Protective Services |55.0 |55.0 |55.0 |55.0 |
|---------------------------+-------+-------+-------+-------|
|State Penalty Funds to |0.0 |0.0 |40.5 |40.5 |
|Locals | | | | |
|---------------------------+-------+-------+-------+-------|
|Existing Juvenile Justice |0.0 |0.0 |97.1 |103.3 |
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|Realignment | | | | |
|---------------------------+-------+-------+-------+-------|
|Funded Public Safety |0.0 |0.0 |50.9 |50.9 |
|Mandates | | | | |
|---------------------------+-------+-------+-------+-------|
|Growth* | |621.1 |0.0 |888.4 |
|---------------------------+-------+-------+-------+-------|
|Total |$5,931.|$7,255.|$5,931.|$7,255.|
| |0 |0 |0 |0 |
| | | | | |
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The fiscal effect of enacting this bill, along with the
other trailer bills, including the constitutional amendment
to maintain tax rates at 2010 levels for schools and public
safety services, would enact $27.5 billion in solutions to
balance the 2011 Budget Act.
Summary Table
(dollars in thousands*)
--------------------------------------------------------
| | Conference |
|----------------------------------+---------------------|
|Cuts: | |
|----------------------------------+---------------------|
| Higher Education |$1,230.5 |
|----------------------------------+---------------------|
| Health and Human Services |5,952.7 |
|----------------------------------+---------------------|
| Corrections |729.9 |
|----------------------------------+---------------------|
| Resources and Environmental |58.1 |
| Protection | |
|----------------------------------+---------------------|
| Redevelopment |1700.0 |
|----------------------------------+---------------------|
| Transportation |1039.9 |
|----------------------------------+---------------------|
| General Government |1,751.1 |
|----------------------------------+---------------------|
| Total, Cuts |$12,462.2 |
|----------------------------------+---------------------|
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| | |
|----------------------------------+---------------------|
|Revenues: | |
|----------------------------------+---------------------|
| Tax extension: | |
|----------------------------------+---------------------|
| For Realignment |$5,931.0 |
|----------------------------------+---------------------|
| For Education |5,237.0 |
|----------------------------------+---------------------|
| Tax policy changes |2,404.0 |
|----------------------------------+---------------------|
| Tax enforcement |264.7 |
|----------------------------------+---------------------|
| Special fund revenues |257.2 |
|----------------------------------+---------------------|
| Education, Proposition 98 |-2,092.1 |
| Interaction | |
|----------------------------------+---------------------|
| Total, Revenues |$12,001.8 |
|----------------------------------+---------------------|
| | |
|----------------------------------+---------------------|
| Other |$3,030.8 |
|----------------------------------+---------------------|
| | |
|----------------------------------+---------------------|
| Total Solutions |$27,494.8 |
| | |
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Total Solutions $27,494.8
*Based on preliminary scoring.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
Total budget is projected at $86.614 billion.
DLW/RJG:mw 3/15/11 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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