from the Office of Senator Darrell Steinberg, President Pro Tempore, California State Senate
July 24, 2009
SENATE PASSES 2009-10 BUDGET REVISION
(SACRAMENTO)- The California State Senate passed a package of bills late tonight revising the 2009-10 budget, that was passed in February, with $24.2 billion in deficit reduction solutions and a $921 million reserve; in total solving a $25.3 billion problem.
The bipartisan solution was the product of several months of negotiations and public hearings on how to address the historic downturn in the economy by responsibly cutting all areas of government while keeping the state’s social service safety net intact.
During his floor speech before the vote, Senate President pro Tem Darrell Steinberg (D-Sacramento) noted that with this solution in place the state has resolved over $60 billion worth of deficit since January 1st. “There are a whole host of decisions on the cuts side that pain me greatly – deep cuts to education, to health and human services and to local government. Given the circumstances, I am grateful for all the things we were able to save.”
Steinberg said we will now pivot to a new chapter where we begin to fix what we know ails California and its system of public finance. “Over the next number of months we can now focus on fixing what we know is broken with the system,” Steinberg said. “Everything from seriously considering the recommendations of the tax commission and re-doing our tax structure in California, to bringing government closer to the people and changing the relationship between state and local government, initiative reform, to changing the two-thirds requirement, it obviously isn’t working.”
The budget revision’s main features are as follows:
Cuts: $15.6 billion
Revenue solutions: $3.9 billion
Borrowing: $3.1 billion
Fund shifts: $.5 billion
Deferral/Other: $1.2 billion
$24.2 billion
+ $921 million reserve
$25.3 billion
Cuts
Major spending reductions include: $6.1 billion in K-14 education funds (this number includes $700 million from Community Colleges); $2 billion in higher education (UC & CSU); $1.3 billion associated with state worker furlough days; $1.2 billion in corrections; $1.3 billion in Medi-cal general fund reductions; $1.7 billion from local redevelopment agencies; $334 million in Developmental Services; $528 million to CalWORKs; $226 million to In Home Supportive Services; $124 million to Healthy Families program.
Revenue solutions
Revenue solutions include: $1.7 billion from increasing payroll withholding schedules by 10 percent; $610 million from accelerating Personal Income Tax and Corporation Tax revenues into 2009-10; $1 billion from the sale of a portion of the State Compensation Insurance Fund (SCIF).
Borrowing
$2 billion from the suspension of Proposition 1A (2004). Suspension diverts eight percent of property tax revenues of cities, counties and special districts. The state must repay the $2 billion (with interest) within three years. $1 billion from transferring transportation revenues (the Highway Users Tax Account, or HUTA) from local governments to pay for debt service on transportation bonds. Money must be paid back with interest over a 10 year period.
Fund shifts
Major fund shifts include: $100 million from and oil drilling lease for the Tranquillon Ridge project off the coast of Santa Barbara County.
Deferral/Other
$1.2 billion in one-time savings from deferring the June 30 state worker pay check until July.
The package solves the worst fiscal problem in California since the Great Depression:
It avoids suspension of Proposition 98, the funding source for both K-12 education and community colleges – and guarantees repayment in future years of $11.2 billion in Proposition 98 “Maintenance Factor.”
It protects the human services “safety net.” It protects CalWORKs from elimination and from extreme cut proposals. It maintains the IHSS program largely intact, except for major new fraud prevention measures. It protects Healthy Families from elimination or from a reduction in eligibility threshold, although there are significant cuts to the program.
Restores $62 million of the proposed $70 million parks cut to avoid massive park closures.
No new tax credits.
Reductions to local government, but with some mitigation (Prop 1A and HUTA repayment, ARRA and Prop 1B bond funds for locals, hardship exemptions, trigger off scenarios under securitization of RDA’s, HUTA take not permanent as Governor proposed, didn’t suspend Prop 42- local streets and roads money).
Governor’s “Government Reform/Efficiency Proposals”
Asset management proposals*:
• Sale of high value assets: Authorized the Department of General Services to sell off the Orange County Fairgrounds. While the Governor sought similar authority for other assets (e.g., Ventura County Fairgrounds, San Quentin Prison, Cow Palace, etc.), legislative leaders limited the authority for purposes of evaluating the effectiveness of the law and the department’s ability to execute a fair deal for the state’s taxpayers.
• Sale-leaseback of 11 state buildings: Authorized the Department of General Service to sell, lease or repurchase specified state-owned properties around the state. Assets include state buildings in San Francisco, Oakland, Los Angeles and Sacramento. The authority is intended to allow the state to sell assets to raise revenue for the General Fund and lease back the office space for the state agencies occupying the buildings. The legislation requires 30-day notice to the legislature before a transaction is concluded and an annual report to the legislature explaining how this authority was used in the prior year.
• Authority to enter into long-term leases of state property: Authorized the Department of General Services to lease-out real property owned by the state, if the land is of no immediate need to the state, but may meet a future need. The bill exempts land owned by the State Land Commission, State Coastal Commission, Caltrans, CSU, UC, and land left to the state by deceased persons. The proposal is intended to provide a revenue-raising opportunity for the state, with all revenues deposited into the General Fund. The bill requires annual reporting to the Legislature on the department’s activities under this provision of law.
• Surplus property reporting requirements for agencies and annual sale of property: Requires state agencies to report annually to the Department of General Services on the inventory of surplus properties owned by state agencies, including, but not limited to the uses of those properties now and over the next five years. DGS is required to make this information available to the public on its website.
*Legislature added provisions to the Administration’s proposals to address conflicts of interest, sale of property at fair market value, and reporting requirements.
IT Procurement reform*
• On the heels of the Legislature’s approval of the Governor’s Reorganization Plan (GRP #1) of IT services estimated to save $125 million in the budget year, this bill provides additional flexibility to the Department of General Services in the procurement of IT services. Specifically, the bill allows the department to lower its “withholding” amount to vendors until the contracts are services are fully rendered to the state (current law: 10%; proposal: 5% for contracts above $10 million and 3% for contracts below $10 million); provide flexibility to the department in awarding contracts for single-procurements performed in multiple phases; and ensure contracts are awarded to vendors that actually meet Disabled Veteran Business Enterprise (DVBE) utilization goals.
*Legislature added conflict-of-interest provisions to this procurement reform.
Eliminate, consolidate, or reform more than 10 boards and commissions
• Eliminated Integrated Waste Management Board. Functions of the board to be carried out by the Department of Conservation.
• Eliminated Bureau of Naturopathic Medicine, and moved oversight responsibilities to Osteopathic Medical Board.
• Consolidated Board of Geologists and Geophysicists with State Mining and Geology Board.
• Sunset the Inspection and Maintenance Review Committee, effective in 2012.
• Consolidated Bureau of Home Furnishing and thermal Insulation and Bureau of Electronic and Appliance Repair into a single bureau within the Department of Consumer Affairs.
• Consolidated Structural Pest Control Board within the Department of Pesticide Regulation.
Health and Human Services
Centralize eligibility determination for public assistance.
• Approved concept. Requires substantial additional planning and development, and a return to the Legislature for future consideration of funding.
Restructure Medi-Cal to improve care coordination and contain costs.
• Approved.
CalWORKs reforms – adjust work requirements in the short and longer term.
• Approved various reforms, starting in 2011-12.
• Requires counties to conduct Self-Sufficiency Reviews of welfare-to-work participants.
• Revises the CalWORKs sanctions procedures for families receiving cash assistance and other services under the CalWORKs program, including reductions in the family grant amount, at specified intervals.
• Revises the CalWORKs time limits for aided adults – only allows for 48 cumulative months in a 60-month period. An adult can return to the assistance unit 12 months after the 48th month of aid.
Reform IHSS and prevent and reduce fraud
• Approved various reforms:
• Requires provider background checks and orientation.
• Requires fingerprinting of all recipients, with exceptions.
• Requires standardized provider timesheets with spaces for recipient and provider fingerprints.
• Authorizes specified fraud prevention and investigation measures to be taken by the counties, DSS and DHCS.
Eliminate COLAs and automatic budget adjustments and increases.
• Approved.
• Prohibit any CalWORKs cost-of-living adjustment from being made unless otherwise specified by statute.
• Prohibit any SSP COLA for each calendar year, unless otherwise specified by statute, except for the pass along of any cost-of-living increase in the federal SSI benefits.
For a more detailed look at the budget revision package the Senate Budget Committee has posted a report on their website located under “Information.”