The joint Assembly-Senate conference committee on the budget worked through the week by taking up various items of disagreement between the two houses, but a final agreement on a 2010-11 state spending plan is not in sight. Meanwhile, the governor upped the ante by re-emphasizing that he will not sign a budget without pension reform (see below).
The conference committee originally planned to discuss revenue issues on June 10, but fell behind schedule and has not yet taken up revenue proposals.
According to the legislative analyst, there is agreement between the governor and the Assembly Democrats and Senate Democrats on several key budget components:
· Substantial Federal Funding Assumed. The plans assume increased federal funding or program flexibility for California totaling $3.4 billion for health and social services programs. It is not clear whether this amount of federal funding actually will materialize.
· Borrowing and Transfers From Special Funds. The budget plans from the Assembly and Senate Democratic leadership generally mirror the Governor's May Revision proposals for $1.6 billion of loans, transfers, and loan extensions from special funds. (Cal-Tax: This amounts to more gimmicks to punt the fiscal problem down the road.)
· Reductions in Prison Costs. The plans each include an $811 million reduction in the prison medical care receivership budget, and a $244 million reduction associated with placing certain offenders in county jails instead of state prisons.
· Universities. The plans all restore $610 million in current-year cuts, and provide funding for enrollment growth.
· Sale of State Buildings. Each plan assumes that the state will sell and then lease back state office buildings. The plans assume $600 million in revenues, but this amount would be hundreds of millions of dollars higher if all the sales are approved. However, this would increase state costs over the long run.
These areas of agreement are not enough to solve the budget problems. Democrats have rejected most of the governor's proposed budget cuts, such as personnel cost savings, $1.5 billion in health spending reductions, $2 billion in social service reductions, and K-14 education savings. Instead, they are proposing tax increases and more borrowing.
During conference committee deliberations, it was pretty clear that there has been vigorous behind-the-scenes lobbying by spending recipients to maximize spending on their items.
Some of the most interesting developments this week:
· Corn-Based Ethanol Funding. The governor's budget proposes $6 million for the California Ethanol Production Incentive Program. Senator Ducheny asked, "Why on earth do we fund a corn-based ethanol program?" She said there are cheaper alternatives that don't have the negative impacts on the food chain. The committee did not make a decision on this item.
· More Employees and Fee Increases for Healing Arts Boards. The governor wants 107 new positions at the various healing arts boards for the Consumer Protection Enforcement Initiative to speed up actions on complaints. The cost: $12.7 million. The conference committee approved the governor's request. The budget anticipates a number of fee increases at the healing arts boards that can be done administratively. Psychiatric technician fees are proposed to increase by 30 percent, for example. Senator Bob Dutton, the incoming Senate Republican leader, questioned the fee increases, noting that the general fund is borrowing from the budgets of the healing arts boards. He asked for information on the extent of the borrowing.
· Private Post-Secondary Education Bureau. The governor wants to re-start the Private Post-Secondary Education Bureau, with 64 new employees at a cost of $8.7 million. The Department of Finance argued strenuously for this increase in spending. Conference committee members agreed to the governor's approach, but reduced the appropriation slightly.
· County Veteran Services Offices. The governor wants to increase spending by $8.4 million to transfer more money to county veteran services offices, to provide veterans with information. Legislators raised a number of questions on this proposal, and it remains open at this writing.
· Prison IT Project Funding in Dispute. The governor's budget proposed $235 million to support 19 information technology (IT) projects by the prison receiver appointed by the federal courts. The Assembly reduced the proposal by $144 million, on the recommendation of the legislative analyst. The Senate and the administration have rejected this action, and the issue remains open.
· Department of Fish and Game Asks for Costly Stun Guns. Seeking to add some shock to the June 7 conference committee discussion, the committee approved spending $378,000 for 350 tasers, at an approximate cost of $1,000 per weapon. The stun guns would be used by department game wardens for such things as hunting violations, or to address various wildlife concerns. Senator Dutton was the only member to oppose the spending. Senator Ducheny inquired about the high cost, and asked staff if the state could receive a discount if it purchased a large shipment of the tasers; staff did not have sufficient information to address the senator's question. (Cal-Tax: A number of tasers can be purchased at www.beststungun.com, with the cost starting around $350. The most expensive tasers are priced at $1,000.)
· Car Tax for State Parks. During a June 7 discussion of state park funding, several Democrats lobbied for reduced park spending.
The governor has proposed spending $140 million to fully fund state parks, but Senator Alan Lowenthal said that if the Legislature approves the governor's plan, it may derail efforts by environmentalists to pass a car tax that will appear on the November ballot. An initiative, which qualified for the ballot three days after the hearing, would require all California motorists to purchase a state park pass that would allow them to park at some California's state parks. The measure, initiative 09-0072, was filed by the California State Parks Foundation, the Nature Conservancy, and the Save the Redwoods League. Cal-Tax opposes the initiative.
The conference committee left the decision open, after the following discussion:
Senator Alan Lowenthal: "Can you tell me where the park pass is? Will that be on the November ballot?"
Senator Denise Ducheny: "I don't know if it's been certified yet …"
Mr. Lowenthal: "Well the idea is not if it passes, I think the issue is, if we fully fund it without giving them the same reductions as we give everyone else, why would anyone vote for the park pass if we've already fully funded it? I mean, why do you need to vote for a park pass if we're fully funded?"
Ms. Ducheny: "'Cause you want more. I don't know."
Mr. Lowenthal: "I don't think that's a good argument."
Ms. Ducheny: "I mean, the park pass would give [state parks] a lot more money to take care of some of things, like maintenance and stuff…"
Mr. Lowenthal: "I understand that, that's after it's passed. Part of the argument for voting for the park pass is that we didn't fully fund [state parks]. That's really why we're putting it on the ballot."
Ms. Ducheny: "Well, they really do need [the initiative] because the general fund really can't afford [state parks]."
Mr. Lowenthal: "And, now that we're fully funding [state parks], they're going to say, 'Why do you need this park pass?'"
Assemblyman Bob Blumenfield: "Or, it could be that [state parks] fear that this is going to come up again and again, and that they just want to be out of the fear cycle."
Mr. Lowenthal: "I understand, but it's just going to be very hard to sell [the ballot measure] if we fully fund [state parks]."
· CalTrans Must Comply With Diesel Regulations – State Asked to Pay $142,000 Per Vehicle. New diesel regulations developed and approved by the California Air Resources Board requires that vehicles must comply with low-emission standards. During a discussion of the Department of Transportation budget, CalTrans projected a cost of $57 million to comply with the state's low-emission standards, which comes to a cost of $142,000 per vehicle. The committee approved the Assembly's plan, which approved the governor's request for $57.3 million to retrofit the vehicles, but also added a provision that would require the director of finance to reduce funding if CARB extends the implementation period of the retrofit program.
· Anti-IHSS Fraud Measures Being Rescinded. Based on the argument by Senator Ducheny that they are not cost-effective, some IHSS anti-fraud programs, such as fingerprinting of recipients, are being eliminated.
(Cal-Tax: In the budget development process, meetings held to work out disputes on specific budget items – known as "open issues" – usually involve legislative staff, the Department of Finance and advocates for particular programs.)
In other budget-related news:
Controller Says May Revenue Was 9.8 Percent Above Governor's Estimate. State Controller John Chiang reported June 10 that May revenues rose above the governor's May Revision estimate by $592 million, or 9.8 percent.
"May revenues may have been positive, but their small climb represents only 3 percent of the state's budget deficit," Mr. Chiang said. "The financial problems before the Legislature and governor remain just as daunting and time-sensitive as they did a month ago."
Personal income taxes accounted for most of the jump in May, coming in $392 million above projections for the month.
State expenditures were running $1.15 billion behind estimates through May 31.
The state started
the fiscal year with an $11.9 billion cash deficit, which rose to $18.6 billion
on May 31. Those deficits are being covered with a combination of $12 billion
of internal borrowing from special funds and $6 billion in external borrowing.
(Source: News release from Controller's Office, June 10.)
Assembly Speaker Says Constitutional Deadline Will
Not Be Met. Assembly
Speaker John Pérez said June 10 that the Legislature
will not meet its constitutional deadline of June 15 for sending a budget to
the governor. During a press conference called to promote his budget plan that
relies on an oil production tax and major borrowing, the speaker also appeared
to reject the governor's demand that public pension reforms be passed as part
of the budget. Speaker Pérez said any pension changes
should be negotiated with public worker unions, and he said delaying a budget
over pension reform "would be a disaster for the economy."
Three days
earlier, the governor said he is serious about his statements that he will not
sign a budget unless budget reform is approved. "I will hold up the
budget," Governor Schwarzenegger said. "It doesn't matter how long it
drags – into the summer or fall or into November or after my administration –
and I think the people will support that." (Source: The Sacramento Bee's Capitol Alert blog, June 7 and June 10.)
Cal-TaxReports, June 14, 2010
© 2010 California Taxpayers'
Association.
All Rights Reserved.