On February 20, Governor Arnold Schwarzenegger signed a historic 32-bill package to respond to the $42 billion budget deficit. Included in the package was a $92.2 billion general fund budget for 2009-10.
The governor used line-item vetoes to make additional cuts of $957 million from the general fund, and $347.6 million in special fund cuts.
While the passage of state budgets generally has been tardy in California's recent history, this year's budget was approved far earlier than any in recent memory – more than four months before the beginning of the fiscal year.
Included in bills signed by the governor were AB X3 3 (Evans), the tax increase package, and SB X3 15 (Calderon), the tax incentive economic stimulus package.
Taking the biggest hit in the line-item vetoes was the Department of Corrections, which lost $400 million. Perhaps the biggest loser was Lieutenant Governor John Garamendi, who had denounced the budget agreement and was viewed by some as pandering to the spending lobby. (Cal-Tax: In fact, the only alternatives suggested by Mr. Garamendi are more and higher taxes, a stance similar to the one taken by former State Treasurer Phil Angelides during the governor's first term.) The governor reduced Mr. Garamendi's budget more than 60 percent (from $2.78 million to $1 million).
The governor also cut up to 10 percent of the budgets of the other constitutional offices (attorney general, secretary of state, insurance commissioner, etc.), and directed them to find the budget savings either through furloughs or other economies. The heads of these constitutional offices previously rebuffed the governor's attempt to furlough state employees.
The University of California and California State University systems each were cut by $250 million, with the expectation that the amount will be backfilled by the federal stimulus package.
In summary, the general fund budget gap was closed by the following actions:
|
|
2008-09 |
2009-10 |
|
|
|
Expenditure Solutions |
$6,725 |
$8,129 |
14,854 |
36% |
|
Revenue Increases |
1,534 |
10,980 |
12,514 |
30% |
|
Federal Stimulus Funds |
2,730 |
5,150 |
7,880 |
19% |
|
Borrowing |
268 |
5,135 |
5,404 |
13% |
|
Line-Item Vetoes |
|
957 |
957 |
2% |
|
Increase From Target Reserve of $2 billion |
|
-49 |
-49 |
0% |
|
Total |
$11,257 |
$30,303 |
$41,559 |
100% |
At the budget-signing ceremony, the governor said: "We have achieved a great victory for California today. By staying focused on what was best for the people of our state and not the special interests, we were able to come together and solve our $42 billion deficit and also find meaningful and lasting solutions to our broken budget system. During a down economy and facing an historic budget deficit, we had to make some very difficult decisions, but I am very proud that California is back on the best path forward. We will continue to work with our most important partners – the people of our great state – to ensure we never again face the kind of catastrophic budget scenario we experienced this year."
The 32 bills and four constitutional amendments (which the governor does not sign) that made up the package are:
SB 6 (Maldonado) – Open primaries
SB X2 3 (Florez) – Air pollution: Grants for farm equipment
SB X2 4 (Cogdill) – Public contracts: Design-build and public-private partnerships
SB X2 7 (Corbett) – Residential mortgage loans: Foreclosure
SB X2 9 (Padilla) – Public works: Labor compliance
SB X2 10 (Oropeza) – Allows rental car companies to pass the increased car tax (Vehicle License Fee) on to consumers as a separately stated charge
SB X2 11 (Steinberg) – Judges: Employment benefits
SB X2 12 (Steinberg) – Court facilities financing
SB X2 15 (Ashburn) – Personal income taxes: Credit for principal residence
SB X2 16 (Ashburn) – Horse racing license fees
SB X3 1 (Ducheny) – 2009-10 budget
SB X3 2 (Ducheny) – Revisions to 2008-09 budget
SB X3 4 (Ducheny) – Education finance
SB X3 6 (Ducheny) – Human services
SB X3 7 (Ducheny) – Transportation finance
SB X3 8 (Ducheny) – State and local government
SB X3 10 (Ducheny) – The Mental Health Services Act: Proposition 63
SB X3 14 (Ducheny) – Prison facility construction
SB X3 15 (Calderon) – Taxation, credits, apportionment, sales factor
SB X3 19 (Ducheny) – Elections
SB X3 20 (Maldonado) – Budget Act of 2008
AB X2 5 (Gaines) – Employment: Alternative workweek schedules
AB X2 7 (Lieu) – Residential mortgage loans: Foreclosure
AB X2 8 (Nestande) – State government
AB X3 3 (Evans) – Income taxes, sales and use taxes, motor vehicle and diesel fuel taxes, car tax
AB X3 5 (Evans) – Health
AB X3 11 (Evans) – Special elections
AB X3 12 (Evans) – California State Lottery
AB X3 13 (Evans) – State and local government
AB X3 15 (Krekorian) – Taxation, credits, apportionment, sales factor
AB X3 16 (Evans) – State finance
AB X3 17 (Evans) – Budget Act of 2008. Use of funds from the California Children and Families Act
ACA X3 1 (Niello) – Rainy day fund
ACA X3 2 (Bass) – School bonanza
SCA 4 (Maldonado) – Open primary
SCA 8 (Maldonado) – No raises for legislators if the state has a budget deficit
Where bills amend the same code sections, the last chaptered bill takes effect. With respect to AB X3 15 (Krekorian) and SB X3 15 (Calderon), the latter is Chapter 17 and takes precedence over AB X3 15, which is Chapter 10.
Cal-Taxletter, February 27, 2009
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