Governor's May Revision of Proposed 2012-2013 State Budget

May 14, 2012

Today, Governor Jerry Brown offered revisions to his proposed 2012-2013 budget. The revised spending plan estimates that the state has a $15.7 billion budget gap - an amount that is $6.5 billion greater than the amount the Governor identified in his January proposed budget. The state's budget problem has increased primarily because of lower tax revenue than projected, higher costs for schools, and decisions by the courts and federal government to block previously approved budget cuts. To close the gap, the Governor has suggested $8.3 billion in state spending cuts and increased revenue from a tax initiative to be placed before the voters in November. The Governor also offers some detail on trigger cuts that must take place if voters do not pass his revenue measure on the November ballot.

Governor's May Revise

$15.7 billion deficit and $1billion reserve:		$16.7 billion
Proposed cuts		$8.3 billion
November Tax Initiative		$5.9 billion
Other solutions (loan repayment extensions, transfers of special funds, etc.)		$2.5 billion

"It pains us to have to bridge such a sizable gap but we will get the job done with an eye toward doing the least amount of damage to our economy and to those who are struggling the most," said Senate President pro Tempore Darrell Steinberg. "Our goal remains to pass a balanced budget on time, gain passage of the Governor's revenue initiative in November and finally put this stubborn budget deficit behind us."

"This budget reflects the fact that the nation's economic recovery is proceeding more slowly than anticipated," said Governor Brown. "Lower tax revenues, coupled with federal government obstructions that blocked billions in necessary cuts, have created a deeper budget hole. More painful reductions will be necessary as a result, but education and public safety must be protected."
The Governor also addressed Californians directly over the weekend with a statement released on YouTube.

The Senate will convene more than ten budget subcommittee hearings by issue area over the next two weeks which will review all open budget items, as well as new proposed changes in the May Revise.

"We've made significant progress in reducing the state's structural budget deficit in the past year, shrinking it from $20 billion to $8 billion through austerity measures alone," said Senator Mark Leno, Chair of the Senate's Budget and Fiscal Review Committee. "Unfortunately, our fiscal crisis in California is far from over, largely due to the $20 billion structural deficit left by the Schwarzenegger Administration, and we continue to face a significant budget gap."

Summaries and Analyses
The Department of Finance's May Revise summary document is available on the web. The Senate Majority Caucus will forward additional analyses as they are released, including the Senate's Budget and Fiscal Review Committee's summary (expected today) and the Legislative Analyst's Office preliminary analysis (expected later this week).

Timeline
The Senate President pro Tempore, Speaker of the Assembly and the Governor have all expressed their intent to pass a budget in five weeks' time, meeting the Constitutional deadline of June 15.

Caucus Video
Senators Steinberg and Leno held a press conference to respond to the Governor's May Budget Revision on Monday May 14, 2012. Video of the full press conference is on the Caucus YouTube Channel.

Senate Budget Committee Conduct Hearings on Governor's Medi-Cal and CalWORKs Proposals

March 5, 2012

Over the last two weeks, the Senate Budget and Fiscal Review Committee met to conduct a series of overviews on the most expansive policy changes proposed in the Governor's budget. On February 23rd, an overview of the changes to the Medi-Cal program resulted in over four hours of testimony by members of the public who wished to be heard on this important issue. Last week, the Governor's reorganization of CalWORKs resulted in a hearing that saw testimony from representatives of the Department of Finance, policy experts, members of the religious community and even children.

Medi-Cal Managed Care Proposals
The Budget and Fiscal Review Committee, chaired by Senator Mark Leno, met on Thursday, February 23 to hear testimony on the Governor's proposals on Medi-Cal managed care, the expansion of dual eligible pilot projects and the integration of In-Home Supportive Services (IHSS) into managed care.

The Medi-Cal managed care program uses a variety of service delivery and payment systems to cover roughly 4.3 million low-income Californians. Each county delivers Medi-Cal managed care through one of three models - a County Organized Health System created by a county board of supervisors, a Two-Plan Model with a local initiative and a commercial plan, and a Geographic Managed Care plan.

Currently, there are about 1.2 million Medi-Cal enrollees who are "dual eligible" -- enrolled in both federal Medicare and the state's Medi-Cal program. The Administration plans to transition these patients, over a three year period, into Medi-Cal managed care starting January 1, 2013, rather than creating a pilot project for this transition as required by SB 208 (Steinberg, 2010). By doing this, the Administration estimates General Fund (GF) savings of $42 million in 2012-13, $412 million in 2013-14, and further savings in following years. Additionally, the Administration proposes to integrate long-term supports and services (LTSS) - including nursing home care and IHSS - into Medi-Cal managed care. The Administration estimates that this would result in GF savings of $580 million in 2012-13 and $546 million in 2013-14.

Key concerns discussed at the hearing include: (1) the Administration's proposal to transition dual eligibles statewide without a pilot phase, (2) the importance of consumer protections, performance metrics, and continuity of care assurances when transitioning to managed care, (3) the lack of details on the Administration's savings estimates and proposals, and (4) the complexity of integrating LTSS programs into a Medi-Cal managed care health plan.

Testimony was heard from California HHS Undersecretary Michael Wilkening, Director Toby Douglas of the Department of Health Care Services, Director of DSS Will Lightbourne, Ross Brown from the LAO, and representatives from county health plans, and health and social advocacy groups.

For more detailed information:

• Committee hearing agenda with background information
• Governor's Health and Human Services Budget
• LAO Report: 2012-13 Budget: Integrating Care for Seniors and Persons with Disabilities

Reorganizing CalWORKs
On March 1, the Budget and Fiscal Review Committee conducted an informational hearing on the Governor's proposal on CalWORKs and child care/early childhood education. The Administration is proposing changes in the benefits and services offered to low-income families would result in an estimated $1.4 billion in GF savings in 2012-13, as well as the restructuring of CalWORKs and the state's subsidized child care program.

CalWORKs currently provides cash assistance and welfare-to-work services to 587,000 families with 1.2 million children. The Governor's budget proposes to reduce CalWORKs services and assistance to 74% of recipient families. The proposal would create two subprograms - CalWORKs Basic and CalWORKs Plus - and a new Child Maintenance Program to be phased in starting October 2012.

CalWORKs Basic would keep much of the current program structure of CalWORKs but reduce the amount of time recipients can receive benefits from 48 to 24 months. CalWORKS Plus would define additional criteria for recipients to be eligible for extended benefits for up to 24 additional months, as well as allow recipients $44 more income per month. The Child Maintenance program allows families currently served in the CalWORKs child-only caseload and 109,000 families in which the adult would lose eligibility under the proposed reforms to receive far more limited assistance.

Many of the panelists noted that the proposed cuts come at a time when many low-income families are struggling to return to work and may draw out the state's economic recovery. The committee's agenda and background paper stated that "low income families…and less educated workers sustain bigger job losses" and "reduced employment for single mothers fare more than it did for married parents" in the recent recession. Jean Ross, of the California Budget Project, testified that female employment has continued to decline unlike their male counterparts.

The Committee also heard testimony from Superintendent of Public Instruction Tom Torlakson, Sarah Bohn of the Public Policy Institute of California (PPIC), Brian Uhler of the Legislative Analyst's Office (LAO), Will Lightbourne and Todd Bland of the Department of Social Services (DSS), and other representatives from the UC Berkeley School of Social Welfare, county welfare departments, and other social advocacy programs.

More information on CalWORKs:

• LAO Report: 2012-13 Budget: The Governor's CalWORKs and Child Care Proposals
• PPIC Report: The Great Recession and Distribution of Income in California
• CBP: Falling Behind: The Impact of the Great Recession and the Budget Crisis on California's Women and Their Families

Next week, the full Budget Subcommittee schedule is as follows:
Wednesday, March 7, 2012

• Subcommittee #4 on State Administration and General Government
  1:30 p.m. - Room 112
• Subcommittee #2 on Resources, Environmental Protection, Energy and Transportation
  2:30 p.m. - Room 2040

Thursday, March 8, 2012

• Subcommittee #1 on Education
  9:30 a.m. - Room 3191
• Subcommittee #3 on Health and Human Services
  9:30 a.m. - Room 4203
• Subcommittee #4 on State Administration and General Government
  9:30 a.m. - Room 112
• Subcommittee #5 on Corrections, Public Safety, and the Judiciary
  9:30 a.m. - Room 113

LAO Releases Economic and Revenue Update

February 28, 2012

The Legislative Analyst's Office has released a new "Economic and Revenue Update" report. The report contains information and perspectives on the California economy, along with the LAO's new economic and revenue projections.

The report indicates that the Fourth Quarter of 2011 showed positive, albeit slow, signs of economic recovery. The U.S. real gross domestic product (GDP) grew at an annualized rate of 2.8 percent in the Fourth Quarter, the most encouraging growth of 2011. This is due, in part, to U.S. and California job growth, increasing retail sales, strong recent growth in auto sales and improving consumer confidence.

In terms of state budgeting, the LAO reports that a clearer revenue picture will become available by the end of April, when the state receives a large number of income tax payments and issues taxpayer refunds. The LAO recommends that the Legislature wait until after this data is analyzed in the May Revision process before making 2012–13 budget decisions.

To this end, it should be noted that the Senate continues its full public review of the Governor's proposed budget, scheduling 42 budget subcommittee hearings on all parts of the budget before the expected release of the May Revised Budget.

A few selected pieces of information from the LAO report:

• There are vast differences in how the recession has treated different areas of the state with regard to employment.
• 35.2% of persons aged 16 through 19 are unemployed and 17.6% of 20 to 24 year-olds are unemployed.
• The gain in home prices from the 2000's is virtually all gone, and housing prices are back to near 1995 levels.
• The rate of delinquent mortgage payments (an indicator of foreclosures) fell during the last 3 months of 2011 to the lowest level since the housing market imploded.
• The LAO's forecast of capital gains for 2010 was $14 billion too high, when compares to actual income.
• A rebound in corporate profits was offset by greater use of corporate tax credits, particularly the R&D credit.

Reviewing the Governor's Proposed Education Budget and Education Funding Reforms

February 24, 2012

Overview
The Governor's proposed budget attempts to offer local school districts greater flexibility in how they spend the money that they receive from the state. Specifically, the Governor hopes to address inequities between K-12 school districts by changing school funding formulas. Since the state allocates $39.2 billion for K-12 education (almost 29% of total expenditures) and serves over 6 million students, education spending receives a lot of attention from numerous constituencies.
As part of the Senate's ongoing review of the Governor's budget, the Senate's Budget Fiscal and Review Committee met on Thursday, February 16 to review and discuss the Governor's proposals for K-12 education (meeting agenda).

Proposed Budget Relies on Tax Measure
The Governor's proposal assumes that voters will approve his November tax measure, and also identifies $4.8 billion in education "trigger cuts" if that measure fails. Because of their own budget processes, many local school districts will need to formally discuss their contingency plans if voters reject the Governor's tax measure much earlier than the November election. Many constituents may, in turn, be very frustrated with the types of cuts that are being discussed by their districts as the reality of the potential cuts to local programs sets in.

Outside of the tax measure and proposed trigger cuts, Senators on the Budget committee largely focused on two proposed policy changes outlined by the budget: 1) the weighted-pupil formula (sometimes referred to as "weighted-student formula"); and 2) curriculum mandates. In this issue update we focus on the complexities of the weighted pupil formula.

Weighted Pupil Formula
School districts currently receive their share of state education funding based on a funding formula known as the Revenue Limit Formula. Additional funds are added on top of revenue limit allocations through "categorical program funding." Categorical program funding can cover a whole range of issues - extra money for teaching a certain math or science class, home-to-school transportation (busing), certain school safety and violence prevention programs, class-size reduction, etc.

Governor Brown's budget proposal eliminates much of that categorical money - and all the strings that are attached to it - and proposes an equal base grant for every pupil in the state. He then proposes to add money to the grant based on whether or not that pupil is an English-language learner or qualified as low-income. This "weighted pupil formula" is based on the fact that being poor and not knowing English are two of the biggest barriers to a student's success.

Some districts stand to gain from this change - especially those districts that have a large number of students that are low-income or still learning English. Other districts, those with a lot of categorical funding derived from school bus money, or those who have a student population with very affluent parents, for example, may lose revenue with the elimination of categorical funding that used to benefit them. In an attempt to temper such an impact, a one-year "hold harmless" provision guarantees that no district will receive less in 2012-13 than they did in 2011-12.

The Governor has also proposed a six-year schedule to complete this funding shift.

At the Hearing
While Senators at the budget hearing shared a lot of conceptual support for the idea that the state needs to improve the achievement gap by targeting funds to low-income children and English-language learners, they also raised a number of important questions that will need to be addressed if the Governor's proposal moves forward.

For example, has the Governor set the right "weights" - levels of funding - for low-income children and English-language learners? Are the "concentration factors" proposed for districts with high numbers of low-income children and English-language learners set at the appropriate level? Should other factors, such as special education status, the range of grade-levels served, and variations in regional cost of living also be considered? Should this discussion of wholesale change to education funding happen through the education committee policy process and not the budget one? Does the June 15 budget deadline provide the Legislature enough time to fully vet a proposal of this magnitude?

Several members also raised concerns that the Governor's proposal does not include any details about a new accountability system to accompany the weighted pupil formula. Such an accountability system would ensure that districts are spending their monies in a way that results in measurable student success. Specifically, some of those members discussed an accountability system that goes beyond measuring test scores, and accounts for graduation rates, college and career preparedness, and other important aspects of education.

For more detailed information:

• Governor's K-12 Education Budget
• Redbook analysis of the Governor's Education Budget by Senate Budget and Fiscal Review Committee's
• LAO Analysis (Video) - Jen Kuhn, Deputy Legislative Analyst, discusses the LAO's The 2012-13 Budget: Proposition 98 Education Analysis
• LAO Analysis (Written) - The 2012-13 Budget: Proposition 98 Education Analysis
• Discussion of the weighted-student formula by John Fensterwald of Silicon Valley Education Foundation's Thoughts on Public Education Blog

Senate Budget Publishes Budget Overview

February 6, 2012

Senator Leno and the Senate Budget and Fiscal Review Committee have released their detailed overview of the 2012-13 budget - also referred to as the "Budget Redbook". The document highlights the Governor's major proposals and provides additional information and a policy framework for the Senate's budget review. Coupled with further analyses by the Legislative Analyst's Office, the document will provide the basis for budget hearings throughout the spring.

The Committee discusses that the Governor has identified a General Fund budget shortfall of $9.2 billion through the period ending June 30, 2013. Of that shortfall, $4.1 billion is attributed to 2011-12 and $5.1 billion is attributed to 2012-13. The Committee also outlines the Governor's proposed $10.3 billion in cuts and revenues, and the $1.1 billion reserve. The proposed budget includes revised expenditures in the current year of $86.5 billion General Fund and projects expenditures of $92.6 billion General Fund in 2012-13. To provide some context, the Committee shares that state budget expenditures peaked in 2007-08 with expenditures of about $103 billion General Fund.

The Overview is organized by topic areas covered by each of the five Budget Subcommittees and includes an appendix with Department of Finance lists itemizing all of the Governor's proposed budget solutions, as well as a working timeline for completing the 2012-13 budget and a staff assignments list of budget committee consultants.

Senate Budget and Fiscal Review Committee's Quick Summary

January 6, 2012

The Senate Budget and Fiscal Review Committee has released its summary of the Governor's proposed budget for 2012-13. As the Legislature begins its review of the proposed spending plan, the Committee will develop more detailed reviews of the Governor's proposal as it carries out its public hearing process.

Yesterday, following the Governor's budget press conference, Committee Chair Senator Mark Leno issued the following statement, "The budget released today by Governor Brown illustrates the significant dent we have made in reducing the state's structural budget deficit this past year. Sadly, in doing so we have made severe cuts in California's funding for K-12 education, universities, health care and services for the elderly, disabled and working families. Taking another $1.4 billion from services that protect needy families, including reductions in child care, will be painful to those with the least. If low-wage families can't get to work for lack of child care, our economic recovery will be impeded.

"While the fiscal state of California is slowly improving, it is clear that additional revenues are needed to rebuild our fine state. I am committed to working with the Governor and my colleagues in the Legislature to analyze this proposal and ensure that we have a realistic plan that does the least harm to Californians."

Senate President Pro tem Darrell Steinberg's Statement on Governor's Budget Proposal

January 05, 2012

Senate President pro Tem Darrell Steinberg (D-Sacramento) issued the following statement in response to the Governor's proposed 2012-13 State Budget:

"Together, we have made a giant dent in a once overwhelming budget deficit. The price has been high for students, working families and those struggling to improve their lives. Those cuts have real consequences on the lives of real people, and I am wary of immediately continuing down that path.

Between revenue estimates by the Legislative Analyst's Office in November, and the Department of Finances numbers in December, projected revenues increased $1.5 billion. If that trend continues even slightly, we may avoid the need to make the kinds of cuts the Governor now suggests. While in the end we may have to cut more, doing it now should be a last resort.

We will begin budget hearings this month on the 2012-13 budget."

***Video of the pro Tem's press availability reacting to the budget can be found here.

Governor Releases Proposed 2012-2013 Budget

January 5, 2012

This afternoon, Governor Jerry Brown released his proposed 2012-2013 budget six days earlier than anticipated. The spending plan builds upon the significant Democratic deficit reduction efforts of previous years.
The Governor proposes to balance the budget with billions of dollars in additional cuts, including a difficult $1.4 billion in human services and child care aid for the poor, and increased revenue raised through a ballot initiative in November.

The proposed budget is based on the Department of Finance's projected deficit of $9.2 billion. It relies upon voter approval of a tax initiative that will temporarily raise the income tax of wealthy Californians and temporarily increase the state sales tax by half a cent. If approved by the voters, the tax proposal will generate nearly $7 billion in new revenue annually for five years, and help protect K-12 education, higher education and public safety programs from additional cuts.

A summary and details of the proposed budget can be reviewed at the Governor's budget website.

"When the Governor proposes more cuts, I'm very wary of that," said Senate President pro Tem Darrell Steinberg. "Cutting, now, should be a last resort. While we may, in the end, have to cut more we ought not to do it now. Between the Legislative Analyst telling us what the revenue numbers were in November, and the Department of Finance numbers in December, it was a $1.5-billion increase. If that trend continues a little bit, we may wipe out the need to make the kind of cuts the Governor is suggesting."

The Legislature will now begin an in-depth review of the Governor's proposal through the Budget Committee process. Updated revenue information will be known by the time of the Governor's Revised Budget Proposal in May. The Legislature has until June 15 to pass the 2012-2013 budget.
Because of the proposed budget's early release, the Senate Budget and Fiscal Review Committee will need additional time to prepare their usual summary document. Committee staff is working hard to deliver it by tomorrow afternoon. At that time, the SMC will update members and staff with that information.

Archives

To check out our archives, click here.