State Budget:
Governor Signs Budget After Legislature Approves Trailer Bills
Culminating the most non-transparent budget process in many years, Governor Jerry Brown signed the 2012-13 state budget June 27, shortly after both houses of the Legislature approved most of their budget trailer bills – many of which had been unavailable to the public until the day before the vote.
The governor eschewed the traditional budget-signing press conference, opting instead to sign the main budget bill and "budget bill re-do No. 2" (AB 1464 and AB 1497) in his office and notify the public via a press release and photo. On June 28, he announced that he also has signed 25 budget trailer bills (see table below).
The budget does not include the erroneous refund penalty recently proposed by the governor – a 20 percent penalty that would hit individual and business taxpayers who originally overpay their taxes and then file a claim for refund that the Franchise Tax Board considers to be without "reasonable basis." CalTax led a coalition to successfully keep the penalty from becoming law.
Before signing the budget, the governor used his line-item
veto to strike $154 million in spending (from state funds, not including
federal funds) that had been approved by the Legislature.
Total 2012-13 spending from all fund sources is expected to be $142.4 billion,
up from $135.2 billion in 2011-12 (the total spending in the final budget is
also higher than the $137.3 billion proposed in the governor's January budget,
and the $141.9 billion proposed in the governor's May revision).
General fund spending for next year is expected to increase 4.3 percent, from $87 billion in 2011-12 to $91.3 billion in 2012-13.
As detailed in last week's CalTaxReports, the budget includes at least $5 billion in actions that could be classified as gimmicks, and also assumes that voters will approve the governor's tax increase initiative in November (revenue of $8.5 billion is assumed from the initiative's sales tax increase and personal income tax increase on high earners).
If voters reject the tax increase, the budget calls for "triggers" that would cut $5.95 billion from the spending plan, effective January 1, 2013. The largest triggered cuts would come from public school spending ($5.35 billion), the University of California ($250 million), the California State University ($250 million) and developmental services ($50 million). The budget triggers are tied to the governor's tax increase only – if the governor's initiative is rejected but other tax increase initiatives are approved in November, the triggers still would be pulled. (CalTax: The Legislature could return to the Capitol after the November election to alter or eliminate the triggered cuts before the January 1 effective date.)
The budget also assumes a 5 percent reduction in state employee compensation costs by reaching furlough agreements with 21 bargaining units, and reducing salaries for excluded employees.
As the Legislature plowed through budget trailer bills Wednesday, Republicans in both houses were critical of budget deliberations this year, noting that legislators were given little time to review amendments, and that numerous changes to budget trailer bills were made outside the budget subcommittee process. A number of Democratic members also rose in opposition to budget trailer bills that make cuts to CalWORKs, In-Home Supportive Services and other programs.
CalTax's review of 36 budget trailer bills revealed that cumulatively, 4,455 pages of substantive language were amended into the bills June 25 – and thus were not available to the public until June 26, just one day before the bills were approved by both houses.
Other action by the Legislature included approval of SB 1018 (Senate Budget Committee), which includes a number of concerning provisions related to the state's cap-and-trade program. Among the provisions: cap-and-trade revenue allocated to utilities will be prohibited from going to certain businesses; the cap-and-trade market will be exempted from open meeting requirements; technical amendments to cap-and-trade will not be subject to legal review; the state controller may use cap-and-trade funds for cash-flow loans to the general fund; and gas tax funds were borrowed to fund state parks.
During the Senate debate, Senator Jean Fuller called SB 1018 "legally questionable," and warned her colleagues, "Energy rates for our constituents are going to skyrocket." She also criticized the bill for exempting cap-and-trade discussions from the state's Open Meetings Act.
Senator Doug LaMalfa criticized another provision of SB 1018 that puts the Legislature's stamp of approval on a public goods charge similar to one that was specifically rejected by the Legislature last year, but subsequently was approved administratively without legislative approval.
The Legislature also approved AB 1499 (Assembly Budget Committee), which will re-order the list of measures that appear on the ballot, so the ballot will start with measures that amend the constitution and authorize bonds. If the Legislature and governor follow through with plans to remove the state water bond from the November ballot, this will result in the governor's tax initiative being placed before all other propositions on the November ballot – a position that increases its odds of being approved by voters, according to some election observers. Without the change, the governor's measure likely would appear eighth out of 11 measures.
Senator Ted Gaines said the change is "inappropriate" and "really outrageous," and said the bill also represented a perversion of the budget process. Although the bill's intent was to change the order of ballot measures, not to make any budgetary changes, the legislation includes a token $1,000 appropriation to the secretary of state in order to qualify it as a budget trailer bill that could take effect immediately upon being signed, but still could be passed with a bare majority vote, rather than the two-thirds vote that would be required for a non-budget bill with an urgency clause.
After Governor Brown signed the election measure, Molly
Munger, the proponent of a rival tax initiative, filed suit against Secretary
of State Debra Bowen to block AB
1499 from taking effect. The suit also claims that Ms. Munger's
initiative deserves a higher placement on the ballot because its campaign
submitted signatures before Governor Brown did.
"This attempt to change the rules in the middle of the game is a
manipulation of the political process, and it does not qualify as a
budget-related bill," an attorney for Ms. Munger told The Sacramento Bee.
2012-13 Budget and Trailer Bills Signed Into Law
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Subject
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Bill Number
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Budget
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Budget Bill Re-Do No. 2
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Transportation
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Health: Omnibus
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State Hospitals
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Developmental Services
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Redevelopment
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Supplemental Appropriations Bill
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Healthy Families
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Elections
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Augmentation
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General Government
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Health: Coordinated Care
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Mental Health Realignment
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Child Welfare Services Realignment
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Dept. of Alcohol & Drug Programs
Realignment
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Tax Enforcement
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Education
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Resources
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Realignment Superstructure
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Public Safety/Judiciary
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Public Safety Capital Outlay
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Public Safety Realignment
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Cash Bill
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Human: Coordinated Care Initiative
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Boards and Commissions
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Human Services
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June
29, 2012
© 2012 California
Taxpayers Association. All Rights Reserved.