With the stroke of his pen, Governor Jerry Brown took a bow as the budget dance Wednesday night came to an end when he signed into law the spending plan for fiscal year 2012-13.
Using his line-item veto power on Wednesday, he eliminated $128 million in spending from the plan proposed by the Legislature (mainly legislative Democrats, who control both houses and have a lock on the simple majority vote needed to pass the budget to the Governor thanks to Prop. 25).
Now, after weeks of haggling, closed-door negotiations and posturing between the Legislature and the Governor to get this final plan into place, the dust has finally settled. Let’s break down some of the most relevant budget facts below:
THE TOTALS The new budget plans to spend $91.3 billion from the general fund and $51.1 billion from special funds and bond funds, bringing total spending to $142.4 billion
DEPENDANCE ON NEW REVENUE The new budget factors in increased revenue to be generated by Governor Brown’s tax initiative, the Schools and Local Public Safety Protection Act, which qualified just last week. If this initiative passes on November 6, it would increase the personal income tax of individuals whose annual income is greater than $250,000 for a period of seven years. It would also increase sales and use tax by ¼ cent (to 7.5 percent) for a period of four years.
The attorney general estimates that these increased tax revenues would amount to somewhere between $6.9 and $9 billion for the first fiscal year (2012-13). This money would be allocated mostly to K-12 schools, and some to community colleges. Some of the new revenue from this measure would also be directed to public safety to help fund the transfer of non-violent, non-sexual non-serious offender from state to county auspices as part of the April 2011 legislation AB 109.
TRIGGER CUTS If voters do not pass the Governor’s tax initiative in November, the state faces additional cuts triggered by the shortfall (aptly named “trigger cuts”).
These cuts would amount to $6.1 billion and take effect on Jan. 1, 2013, with education bearing the brunt of the cuts as it receives the bulk of general fund spending. If these cuts are triggered, school districts would be allowed to shorten each of the next two school years by three weeks. The proposed trigger cuts are:
- K-14 education: $5.49 billion
- University of California: $250 million
- California State University: $250 million
- Developmental Services: $50 million
- Local Water Safety Patrol: $10.6 million
- Department of Forestry and Fire Prevention: $10 million
- Flood Control: $6.6 million
- Fish and Game: Non-Warden Programs: $2.5 million
- Fish and Game: Wardens: $1 million
- Park Lifeguards: $1.4 million
- Department of Justice: $1 million
- Park Rangers: $100,000
REFORMS The new budget bills enact reforms which aim to reduce spending now and in future years with changes to programs that provide welfare, health insurance for low-income children, childcare coverage and college aid. The new budget:
- Reduces the time limit from four to two years for new welfare recipients to meet federal work requirements under the state’s welfare-to-work program, CalWORKS, for a projected savings of $469 million;
- Eliminates the Healthy Families Program, the state program providing health insurance to children of low-income working families, moving recipients to Medi-Cal assistance instead for a projected savings of $13 million;
- Merges the delivery of services for those eligible for Medi-Cal (state welfare) and Medicare (federal welfare) to streamline services and reduce costs for a projected savings of $612 million;
- Restructures funding for trial courts and makes funding for judicial courts more transparent, for a projected savings of $544 million;
- Prohibits colleges and universities who are unable to meet minimum performance standards from participating in the Cal Grant Program for a projected savings of $134 million;
- Reforms the process for K-14 education mandates from a claiming process to block grants for a projected savings of $729 million.
Another budget-related bill will change the order in which initiatives are listed on the ballot, moving initiative constitutional amendments to the top and initiative statutes below (they’ve traditionally been ordered chronologically by the date on which the measure qualifies).
THE CUTS The new budget makes $8.1 billion in total spending reductions, which includes the cost savings of the reforms mentioned above. The rest of the reductions come in the form of the following cuts:
- A 5 percent reduction in wages with or without state employee union agreement, which would reduce spending by a projected $402 million from last year (although SEIU Local 1000, California’s largest state employee union has tentatively agreed to a more flexible plan in which its members will take 12 unpaid days of leave over 12 months);
- A reduction in Medi-Cal funding (mainly hospital and nursing home funding) for an estimated $432 million reduction in spending from last year;
- A reduction in funding to childcare programs and elimination of 14,000 child care slots for an estimated $294 million reduction in spending from last year;
- Transfers cash assets from shuttered redevelopment agencies to cities, counties and special districts to find public services for an estimated $1.5 billion in spending reductions from last year.
Because of a seemingly perpetual massive budget gap, now estimated at $15.7 billion, and expenditures that have exceeded tax revenues nearly every year for over a decade, the options for responsible budgeting are not pretty. Increase taxes, cut spending, or, as we may see in November, both.
The Governor and the Department of Finance project that the budget will be balanced on an ongoing basis for the first time in over a decade, and they (along with the Legislature) have finalized a plan that aims to do both while also reforming several state programs to improve outcomes and reduce cost.
But as with every new budget, projected revenues are yet to be seen. The new budget goes into effect this Sunday, July 1, the start of the 2012-13 fiscal year—one that will likely see significant cuts if no new revenue is set to come in after the November 6 election.