California Lawmakers Approve Budget Deal

California Lawmakers Approve Budget Deal

By: Dave Ackerman, AGC Legislative Advocate

2011-06-29

Tuesday evening the California Legislature, with only Democrats voting in favor, approved a state budget and sent it to the Governor for approval.

The Governor’s effort to strike a deal with a handful of republicans to extend several state taxes until a statewide vote could be held to decide on a permanent extension came to an abrupt close over last weekend.

On Monday, Governor Brown, Speaker Perez and Pro Tem Steinberg outlined a package that was similar to the June 15 Democrats' budget that the Governor vetoed, with some of the gimmicks replaced with rosier revenue scenarios of $4 billion more than assumed in the budget passed two weeks ago. If the revenues don't materialize, $2.5 billion in cuts will be automatically triggered in a three-tier priority system, with any remaining shortfall kicked into 2012-13.

The “trigger” plan requires the Governor’s Department of Finance to certify on December 15 whether the $4 billion projection is accurate. The department is required to choose between its own forecast and the Legislative Analyst's, whichever is higher. The "trigger" cuts are essentially in three tiers outlined below, based on how much of the extra $4 billion comes in – or doesn’t come in.

Tier 0: If the state gets $3 billion to $4 billion of the money, the state will not impose additional cuts and roll over any balance of the problem into the 2012-13 budget.

Tier 1: If the state gets $2 billion to $3 billion of the money, the state will impose about $600 million of cuts and roll over the remainder into the 2012-13 budget. The $600 million in cuts include:

• $100 million cut to UC
• $100 million cut to CSU
• $100 million cut to In-Home Supportive Services hours
• $100 million cut to Department of Developmental Services
• $80 million cut to public safety programs
• $30 million cut to community colleges triggering a $10/unit fee hike
• $23 million across-the-board cut to childcare funding
• $20 million cut to Department of Corrections and Rehabilitation
• $16 million cut to California State Library in library grants
• $15 million cut related to Medi-Cal Managed Care
• $15 million cut to California Emergency Management Agency
• $10 million cut to Department of Social Services in anti-fraud grants

Tier 2: If the state gets $0 to $2 billion of the money, the state will also impose as much as $1.9 billion in additional cuts, proportionate to revenues:

• $1.5 billion reduction to K-12 schools that allows districts to drop seven classroom days. That would lower the required total to 168 days, down from 180 days three years ago.
• $248 million cut that eliminates school bus transportation
• $72 million cut to community colleges.

All cuts would take effect January 1, 2012, except for the school year reduction, which districts could impose starting February 1, 2012.
This action sets up a January showdown if the revenues don't materialize. No voters--Democratic or Republican--want a shorter school year.

The three biggest questions with the plan:

1. Will the revenues materialize, or will the “January Joust” occur?
2. Will redevelopment agencies, essentially eliminated under the plan, be successful with their planned lawsuit ($1.7 billion in revenues at stake)?
3. Will anybody sue over the Prop. 98 gimmickry that relies on a shift of sales tax revenue to local government as a way to recognize new revenue while ignoring the formula that would ordinarily require about 40% to go to K-14?

The only way anybody wins with this budget is higher or new revenues. This would avoid or soften the triggered cuts Democrats would hate and would allow Republicans to return to the time-honored argument that lower taxes drive higher tax revenues.

AGC Press Release