LEGISLATIVE CORNER

The 2012-13 Budget Summary:

Posted: June 28, 2012

On June 27th, the Legislature passed a bill amending the 2012-2013 Budget Act they approved two weeks ago - along with over 20 budget trailer bills. The Governor signed them all late last night including the main budget bill which was subject to a statutory deadline.

The Legislature had already passed a $92.1 billion budget plan for State fiscal year 2012-13 on Friday, June 15th (by a majority vote). This marks the second year in which the Legislature has been authorized to pass a majority vote budget; prior to the enactment of Proposition 25 in 2010, passage of the Budget Act required a 2/3 vote in each house. Had the Legislature missed the June 15 deadline, Proposition 25 dictates that members’ pay and expense money would be forfeited until they passed a balanced budget.

The Governor did blue pencil $128 million in General Fund spending, including significant cuts to child care and CalGrants arguing that his additional line item vetoes "help bring ongoing expenditures in line with existing resources."

The budget plan assumes voter approval of the Schools and Local Pubic Safety Protection Act - an initiative placed on the November ballot by Governor Brown. The initiative will enact temporary tax increases on high-income earners, raising income taxes by up to three percent on the wealthiest Californians for seven years and would also increase the state sales tax by 1/4 of a cent for four years. If Brown's tax proposals are rejected, the state budget provisions would trigger $6 billion in additional cuts - California's public schools would bear the brunt of the pain; however, state parks and developmental services would also suffer trigger cuts.

There remain a couple additional budget trailer bills that still must be passed in this session to reflect the projections included in the state budget plan including fees for both managed care plans and long term care facilities to help fund Medi-Cal. These bills require a 2/3 vote to pass.

The Budget and accompanying bills reduce expenditures by $8.1 billion, adopts other solutions of $2.5 billion and relies on $6 billion in revenues from the Governor's November initiative. A total of $16.6 billion in changes were adopted to address the $15.7 billion budget gap.

Highlights of the Budget plan include:

Taxes: Relies on increased revenues from Governor Brown's tax initiative of $8.5 billion

K-12 Education: Increases school funding contingent on the tax initiative passing, if it doesn't schools would be cut by about 10% and districts would be given the option cutting the school year by 15 days each of the next two years.

Higher Education: If the Governor's initiative fails CSU and US are subject to a $250 million trigger cut.

State Workers: Assumes a 5% reduction in compensation costs by reaching furlough agreements with 21 bargaining units for state employees.

Health Care: Transfers Health Families beneficiaries to Medi-Cal starting January 1, 2013; continues the administration's commitment to move most Medi-Cal fee-for-service patients into managed care through a "continuing care initiative" that involves Medi-Cal/Medicare Dual Eligibles, long term care services and supports and other patients in rural areas.

Social Services: Reduces aid limit for welfare from 4 years to 2 with certain exemptions and county flexibility; Continues reductions in IHSS of 3.6% while shifting negotiations for worker pay from the counties to the state; implements the Governor's realignment plan for child welfare and mental health;

Child care: Enacts cuts to child care and preschool programs of over $100 million; does not include the Governor's proposal to realign these programs to counties.

Public Safety: Cuts $544 million from county courts; authorizes the ultimate elimination of the program to house prisoners out-of-state.

Redevelopment: Relies on $1.4 billion for former redevelopment assets as well as $1.7 billion in property taxes that would have otherwise gone to redevelopment agencies.

Borrowing, fund transfers: Borrows $312 million for the state disability fund, $697 from the highway and vehicle fuel fund and $432 million for the motor vehicle fund. Delays $307 million in loan payments.

Mortgage settlement: Takes $410 million for the state's settlement with major banks

The Legislature is set to leave town for their summer recess on July 5th, returning in early August for one month to finish their remaining work for the 2011-2012 Legislative session. They intend to address a myriad of key issues beyond the budget including pension reform, high speed rail, foreclosure relief, water bond, and a major reorganization of administrative agencies. Attached is a copy of the Governor's Budget Summary including his line-item vetoes.

Jennifer Regacho
Capitol Advocacy

The 2012-13 Budget Summary