It's the kind of routine financial transaction that would typically go unnoticed.
But by sheer coincidence, California has $1.5 billion in U.S. Treasury bonds coming due on Thursday - the same day the Treasury says it will reach its debt limit if the federal budget impasse continues.
The significance of the date is uncertain. In placing the United States' credit rating on a negative watch this week, the ratings house Fitch Ratings noted "the Treasury would still have limited capacity to make payments," but it may be unable to prioritize debts.
Tom Dresslar, a spokesman for state Treasurer Bill Lockyer, said the state is "extremely confident" it will get paid.
"The banks we work with have been in contact with folks in the U.S. Treasury Department," Dresslar said, "and they assure us that we're going to get all of our money."
About 59 percent of California's $56.6 billion Pooled Money Investment Account, which is used for state cash flow and other purposes, is invested in U.S. treasuries, he said.
PHOTO CREDIT: In this Thursday, Oct. 10, 2013 photo, a pedestrian walks past the U.S. Treasury Building in Washington on a rainy day. AP Photo/J. David Ake
Gov. Jerry Brown has repeatedly pledged to tear down what he calls California's "wall of debt."
But Brown's definition of that debt wall - about $30 billion in accumulated deficits from recent state budgets - is less than 10 percent of the debt that state and local governments have amassed, according to a new compilation by the California Taxpayers Association, if one includes unfunded liabilities for public employee pensions.
Cal-Tax researchers counted $443 billion in state and local debts, roughly two-thirds of it carried by the state and the other third by local agencies. That's the equivalent of a fifth of the state's annual economic output and amounts to $11,600 for each of California's 38 million residents.
The Rim fire raging near Yosemite is contributing to a run-up in California's firefighting expenses early in the season.
The Department of Finance estimated this morning that the state has spent $44 million fighting fires thus far. Lawmakers budgeted $172 million for the entire season.
"We're eight weeks in (the fiscal year) and we've spent roughly a quarter of what's budgeted," said H.D. Palmer, the spokesman for the department.
Palmer noted that the budget also includes a $1.1 billion reserve that the state can tap if costs exceed what has been budgeted. And the state can expect some reimbursement from the federal government once the fires have subsided and officials sort out how many resources state and federal teams expended on fires on state and federal lands.
The $172 million budgeted for firefighting this fiscal year is more than has been set aside the last four years, but costs exceeded the budget last year. The state budgeted $92.7 million last year, but costs have hit $221 million and 4th quarter expenses are still being reconciled, Palmer said.
On Sunday, President Barack Obama called Gov. Jerry Brown and committed federal resources to help the state, according to a statement form the White House.
Following that telephone call, the Federal Emergency Management Agency announced today it had authorized federal funds to help fund the firefight. The agency said it would reimburse the state for as much as 75 percent of eligible costs, including expenses for field camps, materials and supplies and mobilization and demobilization efforts.
This post was updated at 1:35 p.m. Monday to include information about the Federal Emergency Management Agency's funding announcement.
Dramatic changes in Californians' consumer spending have sharply eroded the sales tax as a source of state revenue, a new report by the Legislature's budget analyst concludes.
Spending on taxable goods such as cars and clothes hit a high point of 53 percent of personal income in 1979 and has been declining ever since to 33 percent currently, Legislative Analyst Mac Taylor's report found.
The relative decline of taxable sales has been only partially offset by increases in the sales tax rate, so it has been supplanted as the state's largest revenue source by the personal income tax, which now generates nearly twice as much revenue.
California will spend $232.9 billion during the 2013-14 fiscal year if the recently enacted state budget is precisely followed.
But the total, outlined in a followup report by the Legislature's budget analyst, Mac Taylor, is only an educated guess, and if past patterns hold true the real levels of income and outgo will be billions of dollars different.
One differential is already known. State revenues are running about $2 billion ahead of the budget's assumptions - as Taylor predicted they would be - and that will affect the money the state must spend on public education, the largest single category in the budget, as well as potentially pay for mid-year increases in health and welfare spending that the Legislature's majority Democrats are seeking.
The state's general fund, from which education and other major state expenditures are financed, is tagged at $96.3 billion in the report, with special funds, such as those devoted to transportation, accounting for another $42 billion, bond spending for $7 billion, and federal funds, mostly for education and health and welfare services, for another $87.6 billion.
Taylor's report - in effect an explanation of the budget in layman's language - not only deals with the money but how it will be spent, including a major overhaul in how school funds are being allocated, with more money going to school districts with large numbers of poor and/or English learner students. It also includes the state's plans to expand Medi-Cal to serve more of the state's medically insured residents, using funds from the federal health care overhaul, and a boost in higher education spending.
PHOTO: Legislative Analyst Mac Taylor, in 2011. The Sacramento Bee/Hector Amezcua
The extra state aid flowing to California's school districts this year after a half decade of cutbacks is a "credit positive," Moody's Investor Service said Friday, while cautioning school officials against overspending the new money.
"The liquidity of all school districts will improve as the budget reduces payment deferrals and thereby improves the timeliness of aid payments," the credit rating house said in its weekly bulletin. "However, the credit positive budget measures are not a panacea because some school districts will continue to be challenged by expense pressures and growing pension costs."
It notes that under the school finance plan championed by Gov. Jerry Brown and adopted by the Legislature, all districts will receive more money, but those with large numbers of poor, English-learner students will receive markedly more.
"The added funding, which is an important credit factor, could enhance these districts' credit profiles," Moody's says. "Nonetheless, effective management and budgeting of the funding enhancements will shape their longer term credit profile."
PHOTO: Gov. Jerry Brown signs the state budget during a ceremony at the Capitol, Thursday, June 27, 2013, in Sacramento. The Sacramento Bee/Lezlie Sterling
The Wall Street credit rating agency Standard & Poor's said today that California is in a better financial position than it has been in years, but it criticized the politicization of state revenue estimates and warned long-term spending commitments could frustrate efforts to pay down debt.
"Overall, we believe the state ... begins its fiscal year in a stronger position than it has in several years," the rating agency said in a report on the first day of the new fiscal year. "Its liquidity and structural budget positions both reflect materially better conditions."
Gov. Jerry Brown signed the main budget bill last week after persuading legislative Democrats to accept his relatively modest revenue estimates. In a concession to lawmakers, however, Brown reduced by about $650 million the amount of money he originally proposed to pay down debt owed schools under Proposition 98, California's school-funding guarantee.
"Standard & Poor's Ratings Services believes the higher-than-expected cash receipts presented the state an opportunity to accelerate its plans for retiring the $26.9 billion in budget liabilities that remain leftover from prior years' deficits," S&P said. "Compared with what the governor recommended in May, however, the final budget agreement moves in the other direction, decelerating somewhat the repayment of a portion (of) these debts."
That Brown and lawmakers could negotiate at all about the amount of tax revenue they expect the state to collect this year troubled S&P. More than half of states rely on independent revenue bodies, the ratings house said, and it criticized the budget process in California for highlighting "what we view as one of the weaker elements of California's fiscal institutions - that of allowing political negotiation to influence the revenue estimates used in the budget."
California's $96.3 billion spending plan includes additional money for the state's welfare-to-work program, college scholarships and dental care for poor adults - with commitments to spend an increasing amount in future years.
S&P expressed concern about revenue volatility. By enacting even a modest expansion of ongoing spending commitments, the agency said, "we detect a softening of resolve when it comes to paying down the internal debts."
The report said, "We believe that by opening the door to new programs while waiting for future (uncertain) revenue to repay some internal debts, the state delays, or jeopardizes altogether, its ability to confront the long-term liabilities."
PHOTO: Assemblyman Bob Blumenfield, D-Woodland Hills, chairman of the Assembly Budget Committee, far left, celebrates after being presented one of the pens that Gov. Jerry Brown, seated, used to sign a copy of the state budget at the Capitol in Sacramento on Thursday, June 27, 2013. Associated Press/ Rich Pedroncelli
The meltdown of California's once-booming housing industry is graphically illustrated in a new Census Bureau report.
In the two years after the 2010 census, California added a net 27,305 units of rental or owner-occupied housing, a gain of just two-tenths of 1 percent, one of the nation's lowest rates, the report says. When the housing industry was booming in the middle of the last decade, it was adding as many as 200,000 units each year.
California's housing growth during the two-year period was the 42nd lowest in the nation and just a third of the national rate. A few states actually saw a reduction of housing, while it boomed in states seeing big economic and population gains from the surge of oil and gas production.
Oil-rich North Dakota had a 3.7 percent gain in housing during the period, the nation's highest rate, while Texas was No. 2 at 1.8 percent, nine times California's rate. Texas added 176,793 housing units, more than six times what California added.
While open-records advocates urge Gov. Jerry Brown to veto legislation that would weaken California's open-records law, crime victim advocates are raising objections to language in the same bill that would relax requirements for how local agencies handle domestic violence cases.
The language, included in a package of budget bills Brown is expected to sign this month, would make optional an existing law requiring local agencies to implement written policies encouraging the arrest of domestic violence offenders if there is probable cause a crime has been committed.
The bill would also make optional -- but encourage as a "best practice" -- a requirement that agencies maintain a record of protection orders related to domestic violence cases to help law enforcement officers responding to domestic violence calls.
The California Legislature has begun to release details of the so-called "trailer bills" that will accompany the budget bill for floor votes Friday -- and possibly Saturday.
The last-minute release of the policy bills needed to implement the spending plan has become something of a tradition at the Capitol, with open government advocates complaining that the public is not given enough time to evaluate the sometimes voluminous provisions.
The Senate this morning voted to send all the bills to the floor without committee hearings, drawing the ire of Republicans.
As we start to comb through the measures looking for heretofore unknown budget provisions, perhaps Alert readers can lend a hand. Below are links to the current versions of the bills, including the main budget bill, that have been released so far.
One day after reaching a compromise with legislative leaders on the state budget, Gov. Jerry Brown said Tuesday he has not agreed to consider increased spending if the economy outperforms his administration's expectations, but he did not dismiss the possibility.
Legislative Democrats had said Monday when they accepted Brown's relatively conservative revenue estimates that they could call for additional spending in January if tax revenue came in higher than anticipated.
"I haven't made any agreement," Brown told reporters at the Capitol. "Look, we have boom and bust, money comes in, money goes out. And I'm trying to be a good, prudent steward of the people's money."
"In general," he added, "I think prudence rather than exuberance should be the order of the day."
The Democratic governor appeared with Senate President Pro Tem Darrell Steinberg, D-Sacramento, and Assembly Speaker John A. Pérez, D-Los Angeles, to tout the deal days before a likely vote in both houses Friday.
"This is not only a balanced budget, but it's a real step forward," Brown said.
The budget deal includes a modified version of Brown's controversial proposal to shift more money to poor and English-learning students. The proposal was made more palatable to lawmakers by Brown's agreement to spread more money to more school districts statewide.
The agreement also includes commitments to spend money in the future on mental health services, college student aid and other programs. Brown agreed to spend far less than lawmakers hoped, however. Legislative Democrats had initially urged about $2 billion more in spending on state services and programs than Brown's figure. The $96.3 billion agreement reached Monday includes about $200 million more in discretionary, general fund spending.
"The budget not only is in balance," Steinberg said, "but it begins to provide some relief to the people who were hurt most over the last several years."
The budget agreement did not resolve Brown's proposal to eliminate the state enterprise zone program and to use the money instead for sales tax exemptions for manufacturing and biotech research companies.
Brown said today that the enterprise zone negotiation remains "out in front of us." The issue would not have to be resolved before a budget vote this week.
PHOTO: Assembly Speaker John A. Pérez, D-Los Angeles, center, speaks to reporters at the Capitol on Tuesday, June 11, 2013, as Gov. Jerry Brown, left, and Senate President Pro Tem Darrell Steinberg, D-Sacramento, right, look on. The Sacramento Bee/David Siders
VIDEO: Assembly Speaker John A. Pérez, D-Los Angeles, Senate President Pro Tem Darrell Steinberg, D-Sacramento and Gov. Jerry Brown speak to reporters at the Capitol on Tuesday, June 11, 2013. The Sacramento Bee/Amy Gebert
Gov. Jerry Brown and California lawmakers have cleared the air by announcing a budget accord, but environmental groups are choking on a piece of the deal that would borrow half a billion dollars intended for programs to curtail greenhouse gases.
California's fledgling cap-and-trade program auctioned off its first permits in November, following through on a landmark 2006 law, and has raised about $236 million to date, according to the Air Resources Board. Those proceeds are supposed to flow into programs to reduce emissions.
But the governor wants to shift $500 million generated by the auctions into the general fund. Brown defended the move Tuesday at a news conference by saying "we don't think we're quite ready yet" to start allocating the money.
"We're the most aggressive in the western hemisphere in terms of our clean energy goals," Brown said.
That has drawn the ire of environmental groups and questions from lawmakers who worry the governor is undercutting the greenhouse gas law's intent, or at least unnecessarily delaying implementation.
With just nine days of budget negotiations left, Senate leader Darrell Steinberg called the Legislature and Gov. Jerry Brown "basically aligned" on public education funding.
In a conversation with Mark Baldassare, president of the Public Policy Institute of California, on Thursday, Steinberg credited Brown for including "significant augmentations" to public education in his version of the budget. Steinberg noted only a few points on which he differed from the governor.
"The governor suggested an equity formula that to me was about 80 percent there, but I still object to about 20 percent of it," Steinberg said.
Like Brown, Steinberg wants to include a 35 percent bump in funding for low-income or disadvantaged students. Steinberg, however, championed Senate Bill 69, which would use a different formula to dole out additional money to disadvantaged students in both low- and high-income districts.
"Kids that come from more disadvantaged backgrounds ought to have more resources -- spent well, that's the key piece -- in order to be able to achieve their dreams in life," Steinberg said.
Steinberg also downplayed the role that personality differences play in negotiations, saying his experiences working on budgets with three different governors have been relatively similar.
"In terms of some of the tension points as far as my frustrations at times, I can repeat the same things I've said this budget cycle that I've said in all previous budget cycles," Steinberg said. "The executive is the executive."
Steinberg seemed confident the Legislature and governor could work out the remaining kinks in the budget before the June 15 deadline.
"If there is no creative tension, we're not pushing each other hard enough," Steinberg said.
PHOTO: Senate President Pro Tem Darrell Steinberg, D-Sacramento during the first day of session at the State Capitol in December 2012. The Sacramento Bee/ Hector Amezcua
California voters last year passed Proposition 39, which changed the way multistate corporations are taxed, creating a big pot of money - about a billion dollars a year - with half required to be spent on energy-saving projects in schools, colleges and other public buildings.
Seven months later, the Capitol's politicians are still wrangling over how to divvy up the more than $400 million going to schools. It's one of the stickiest of several high-dollar issues still in limbo with scarcely a week remaining before the June 15 constitutional deadline to pass a budget.
Just before the Legislature's budget conference committee recessed indefinitely late Wednesday, Sen. Kevin de León, D-Los Angeles, a co-sponsor of Proposition 39, engaged in a pointed exchange with Gov. Jerry Brown's budget point man, Michael Cohen, over Brown's plan to distribute the school money widely, based on attendance, with every school in the state getting at least a token amount.
That runs counter to plans by de León and other Democratic legislators to concentrate the money on fewer schools with, they say, the largest potential to achieve greater energy savings and create jobs in low-income areas.
Thousands of doctors, nurses, unionized health care workers and Medi-Cal patients flocked to the Capitol on Tuesday to protest possible cuts to the Medi-Cal program.
Gov. Jerry Brown's proposed budget calls for a 10 percent reduction in payment to Medi-Cal providers, a move that opponents say would reduce the poorest patients' access to healthcare. He has shown no signs of backing down from the proposed cut.
The "We Care for California" Coalition, which includes health care providers, insurance firms and associations representing doctors and hospitals, organized more than 100 buses to bring protesters from across California to the rally.
Dave Regan, president of Service Employees International Union-United Healthcare Workers West, called upon SEIU-UHW members at the rally to make their voices heard to legislators.
"We deserve better than politics as usual. Better than the politics of disenfranchisement, the politics of erosion of care, the politics of saying 'it's somebody else's problem,'" Regan told the crowd. "And if we can't persuade the governor, we need to find two-thirds of this legislative body who know what the right thing is."
The Legislature's two-house budget conference committee rejected Gov. Jerry Brown's proposal to "clarify" the state's power to collect sales taxes on computer software Tuesday.
The eight-member committee unanimously approved a motion to leave the issue out of the budget, saying it will receive a full airing in separate legislation, rather than be included in a budget-related "trailer bill."
Nearly three decades ago, the Legislature and then-Gov. George Deukmejian decreed that custom software - programming for a large customer's specific needs - would be free of sales taxes, but state tax officials assumed that they could continue to tax off-the-shelf software. Software taxes generate about $300 million a year in state revenue, plus millions more for local governments.
Recently, however, that assumption has been challenged by a series of court decisions because another section of state tax law exempts ":technology transfers." Brown proposed, therefore, that a budget trailer bill give the state explicit power to tax non-custom software delivered on discs or other physical media.
Conference committee members were warned, however, that rapidly evolving technology could make writing such legislation difficult, and they decided to leave it out of the budget.
PHOTO: Sen. Mark Leno, D-San Francisco, shown here during session in the Senate chambers in March, is chairman of the two-house budget conference committee. The Sacramento Bee/Hector Amezcua
The two-house conference committee tasked with resolving revenue and expenditure differences and writing a final 2013-14 state budget convened Friday afternoon, and the multifaceted conflicts quickly emerged.
Not only do the Assembly and Senate disagree on a number of specific spending issues, but they jointly disagree with Gov. Jerry Brown on how much money the state has to spend and proposed to commit about $2 billion more than he wants.
"At this point the administration is not comfortable with either of the budgets in conference," Brown's deputy finance director, Michael Cohen, told the committee.
The three-way conflict - Republicans on the committee generally back the governor - was laid out by Legislative Analyst Mac Taylor in a summary report as the committee met and jousted over the macro-issues before beginning an item-by-item review.
The meeting began 15 days before the constitutional deadline for enacting a budget - one that, if not met, could result in legislators having their salaries suspended. That happened in 2011. Last year, the deadline was met.
Following budget hearings in which legislative Democrats urged about $2 billion more in spending on state services and programs than Gov. Jerry Brown proposed, the governor said today that he and legislative leaders remain in a "quasi-collaborative mode" on the annual spending plan.
Brown declined to say if he would veto a budget package that includes additional spending.
"We're in a exploratory, you know, quasi-collaborative mode, and I don't think edicts or pronunciamentoes will help that process," Brown told reporters after an event in Sacramento.
The Democratic governor was preparing to meet this afternoon with Senate President Pro Tem Darrell Steinberg and Assembly Speaker John A. Pérez. Asked how the budget negotiations would play out, Brown said, "A lot in private, and a little bit in public."
Brown's remarks followed an address to members of the California State Association of Counties. As the state moves to expand Medi-Cal under the federal healthcare overhaul, Brown has proposed shifting certain funding for indigent care from counties to the state, a move county officials oppose.
Brown's office has estimated savings of about $300 million next fiscal year, growing to $1.3 billion in the 2015-16 budget year. He joked with the county officials that if they could "share at least $300 million with the state" next year, they all could "call it a day."
PHOTO CREDIT: Gov. Jerry Brown talks with reporters in Sacramento on Wednesday, May 29, 2013. Rich Pedroncelli/Associated Press
A "conference committee" is a parliamentary device to reconcile differing versions of legislation passed by both houses of the Legislature, but in California's Capitol is rarely used except to produce a final legislative version of the state budget.
The 2013 budget conference committee is scheduled to convene on Friday - 15 days before the constitutional deadline for budget passage - but there are few major differences between the Senate's version of the 2013-14 budget and the Assembly's version.
That doesn't mean that there aren't some serious differences over the budget. However, the conflicts are not within the Legislature, but between its Democratic majorities in both houses and Gov. Jerry Brown. And they will be aired when Brown's representatatives appear before the committee.
Brown wants to take a conservative approach on estimating revenues while the Legislature's budgets embrace a projection by its budget analyst, Mac Taylor, that the state could have $3.2 billion more to spend than Brown assumes.
The legislative budgets would give most of the extra money, if it materializes, to schools, as the state education financing law dictates, and spend much of the remainder to bolster health and welfare programs.
Brown has warned the Legislature publicly that he'll resist any expansion of spending beyond his parameters.
Another point of budget conflict has to do with how the school money, whatever its size, will be distributed. Brown wants to shift more money into districts with large numbers of poor and/or English-learner students but the Legislature has balked at Brown's plan and wants to scale back the extra spending on those students in favor or broader grants of aid to all districts.
PHOTO CREDIT: Gov. Jerry Brown stands for applause with Assembly Speaker John A. Perez, D-Los Angeles and Senate President Pro Tem Darrell Steinberg, D-Sacramento before delivering his State of the State speech in January. The Sacramento Bee/Hector Amezcua
The full 9th Circuit Court of Appeals Friday upheld Gov. Jerry Brown's 10 percent cut in payments to hospitals, doctors, pharmacists and other providers of medical care to the poor under the state Medi-Cal program.
The cut, adopted by Brown and the Legislature two years ago to help balance the state budget, was nullified by federal Judge Christina A. Snyder, but a three-judge appellate panel reversed the rejection. That decision was upheld Friday by the full appeals court. The cut had been suspended by court order while the appeal was under way.
The case was in federal court because of a series of suits challenging the federal government's approval of the state action. Friday's ruling upheld the right of the federal government to approve the reduction. Attorneys for the providers and health care advocacy groups said they may seek a rehearing of the case and/or appeal to the U.S. Supreme Court.
The provider rate reduction was aimed at saving the state several hundred million dollars a year and is included in Brown's latest budget, which is now undergoing scrutiny in the Legislature. It's the centerpiece of a larger conflict over reductions of "safety net" health and welfare services that pits Brown against their advocates, with Democratic legislators caught in the middle.
Gov. Jerry Brown this morning downplayed an estimate by the nonpartisan legislative analyst that California will collect about $3.2 billion more in revenue than Brown projected in his budget revision last week, saying the difference is minor and he will hold the line on spending.
"We got the (budget) in balance, if we stay the course," Brown told about 1,000 people at the California Chamber of Commerce's annual Host Breakfast in Sacramento. "And that's my intention."
The dispute over available revenue underlies an emerging conflict at the Capitol between Brown and legislative Democrats over spending on social programs, including mental health, child care and adult dental services.
Despite income tax revenue running about $4.5 billion ahead of expectations through April, Brown last week said economic growth will be slower than previously anticipated. He projected revenue next fiscal year down $1.8 billion from his January estimate.
The state's legislative analyst, Mac Taylor, predicted higher tax revenue next fiscal year based largely on an improving stock market and a more favorable economic forecast.
Like Brown, however, Taylor said revenue projections are volatile and that the state should approach spending with caution.
The Democratic governor said today that relying on uncertain revenue leads the state to "get into trouble."
"That's what happened before," Brown said. "You spend money that you think is going to be there year after year, and it isn't."
PHOTO CREDIT: Gov. Jerry Brown discusses his revised budget plan at a news conference at the Capitol on Tuesday, May 14, 2013. Renée C. Byer / Sacramento Bee
Gov. Jerry Brown's proposal to shift $500 million in cap-and-trade fees levied on business for greenhouse emissions into the state budget ran into bipartisan opposition Tuesday.
The two Democrats and one Republican on a Senate budget subcommittee denounced Brown's plan, which was included in a revision of his state budget last week.
The $500 million loan to the general fund is designed to partially offset the Brown administration's forecast that revenues will dip below earlier projections in the 2013-14 fiscal year by $1.8 billion, but members of the committee said it made little sense since the same budget proposes to repay some of the state's "wall of debt," which is mostly money owed to schools.
Money from the fees is supposed to pay for programs that reduce greenhouse gases, and the Legislative Analyst's Office had warned in the past that using the fees for other purposes could be illegal..
"It's a little bit of an odd exception to reducing the wall of debt,' Sen. Jim Beall, D-San Jose, the subcommittee chairman, said. Republican Jim Nielsen of Gerber and Democrat Hannah-Beth Jackson of Santa Barbara joined in the criticism. The committee was poised at one point to formally reject the loan, but decided to leave the issue open instead.
The hearing was conducted on the same day that the Air Resources Board revealed results of its third auction of carbon emission credits, raising $280 million. Business groups have complained about the program, saying it amounts to a new tax burden that will inhibit economic recovery. Environmentalists, meanwhile, have been critical of the proposed loan, saying it undercuts the purposes of the program.
PHOTO CREDIT: Sen. Jim Beall, D-San Jose shown in the Senate chambers in March, was critical of Gov. Jerry Brown's plan to shift cap-and-trade funds to the state general fund.
California spent far more than any other state on K-12 education in 2011, but its per-pupil spending was $1,421 below the national average, putting it 36th in the nation, according to a new Census Bureau report.
The Capitol's ceaseless debates over school spending usually count only state and local funds, and education advocates say by that measure, after adjustment for California's high cost of living, the state ranks near the bottom vis-à-vis per-pupil spending in the other states. But the Census Bureau calculates revenue from all sources, including the federal government, and spending of all types, including capital outlay.
Gov. Jerry Brown is attempting to overhaul how state and local school funds are distributed, giving more to districts with large numbers of poor and/or English-learner students. His latest budget revision pegs per-pupil spending in 2011-12 from state and local revenues at $7,175 and says it would rise to $9,929 by 2016-17, thanks largely to tax increases approved by voters last year.
Gov. Jerry Brown reiterated his resolve to remake how California finances public schools by giving districts with large numbers of poor and/or English-learner students more money when he presented a revised state budget this week.
"I think it's fair. I think it's just," Brown declared, adding, "I think it has great moral force."
Defending his plan, Brown stressed that overall, schools will see substantial increases in state aid and 80 percent of the money would still be distributed in "base grants" on a per-pupil basis, with the remaining 20 percent going to districts based on their numbers of poor and English-learner students, and just 4 percent going into "concentration grants to districts with especially large proportions.
But Brown's school plans are continuing to take heavy flak in the Legislature as education factions outside the Capitol ramp up pressure.
California Gov. Jerry Brown detailed his revised budget proposal this morning. Read The Bee's coverage of the plan here, then see what legislators, advocates and others are saying about the proposal in this rapid response roundup.
This post is being updated throughout the morning as details emerge.
Despite income tax revenue running about $4.5 billion ahead of expectations through April, Gov. Jerry Brown included relatively low revenue figures in the revised budget he released this morning, likely dampening expectations for greater program spending.
The budget Brown proposed will assume revenue in the current fiscal year only $2.8 billion ahead of expectations, with revenue next fiscal year down $1.8 billion from Brown's January estimate.
In the weeks leading up to Tuesday's budget revision, speculation mounted that Brown could take advantage of $4.5 billion that rolled into state coffers unexpectedly this spring. But the governor took a more cautious approach, projecting that economic growth will be slower than previously thought because of federal spending cuts and a higher payroll tax on workers.
"Four percent growth has now become 2 percent," Brown said.
The governor also assumes that the spring revenue spike was partly due to wealthy taxpayers taking more income in 2012 in anticipation of federal tax changes. That means the state potentially would receive lower tax revenues in 2013-14 than Brown previously expected.
"We have climbed out of a hole with a Prop 30 tax," Brown said, referring to his initiative last year that hiked income taxes on the wealthy and sales taxes. "That's good. But this is not the time to break out the champagne."
The proposed budget includes a $1.1 billion reserve. It increases funding for Brown's effort to overhaul California's educational finance system by $240 million. In his education proposal, Brown also proposes $1 billion to implement English, math and other subject guidelines known as the Common Core Standards.
Brown continued to ask lawmakers to approve his new funding formula, which directs more money to K-12 districts with large numbers of impoverished students and English learners. He was skeptical of critics who consider his plan flawed because wealthier suburban districts stand to receive less money than they would otherwise.
"Ask somebody in Beverly Hills or Palo Alto or Piedmont, 'Would you like to move to Compton? Would you like to move to Watts?' And if they say, 'Yeah, let's do it because I want to get the extra money,' then I'll believe it," Brown said.
The governor has dropped his January proposal to cap the number of state-subsidized classes that public university students can take. He had pitched the idea as a way to make the University of California and California State University systems more efficient.
Brown proposed a statewide approach - not a county-by-county effort - to implement California's expansion of Medi-Cal under the federal health care overhaul.
The budget includes $500 million in additional Medi-Cal spending, and more funding for California's prison realignment, in which the state shifted responsibility for certain low-level offenders to counties.
Brown seemed resistant Tuesday to Democratic proposals to raise additional taxes. He also dismissed calls to increase spending beyond education, mocking the Capitol as "a big spending machine."
PHOTO CREDIT: Gov. Jerry Brown unveils the revision of his budget proposal. The Sacramento Bee/Melody Gutierrez
Gov. Jerry Brown today will propose spending $1 billion to implement English, math and other educational standards in California's public schools, part of a revised budget plan he is scheduled to release this morning, a source said.
The revised budget proposal comes with state income tax revenue running about $4.5 billion ahead of expectations through April. Nearly all of the additional revenue could be required to go to schools and community colleges under Proposition 98, California's school-funding guarantee.
Brown is seeking a major overhaul of education funding, seeking to give local school districts greater flexibility in how they spend state money while directing more money to school districts with high proportions of poor students and English learners.
Senate President Pro Tem Darrell Steinberg and other Democratic lawmakers have argued more money should be allocated to all districts on a per-pupil basis.
The $1 billion Brown will propose will be to implement the so-called Common Core State Standards adopted by California and more than 40 other states since 2010.
PHOTO CREDIT: Gov. Jerry Brown speaks at a news conference at the Capitol on Jan. 10, 2013. Randall Benton / Sacramento Bee
Voter approval of a multi-billion-dollar tax increase last year has reduced financial pressure on California's nearly 1,000 school districts and thus dropped the number of districts in fiscal distress, the Legislature was told Tuesday.
Joel Montero, who heads the Bakersfield-based Fiscal Crisis and Management Assistance Team, told an Assembly budget subcommittee that the number of districts in distress is half what it was a few years ago, when the state was routinely "deferring" billions of dollars in aid to local districts because of its own budget problems.
Last year, voters passed Proposition 30, which hikes sales and income taxes by about $6 billion a year, much of which will go to schools. Gov. Jerry Brown says he wants to spend much of the new revenue to repay the state aid deferrals.
"The impact of Proposition 30 has been positive," Montero said during his annual update on school financial problems.
California's state and local governments are at least $648 billion in debt and the total could surpass $1.1 trillion -- depending on how pension liabilities are calculated -- according to a data compilation by a conservative think tank.
The report was published by the California Public Policy Center, which is based in Southern California and concentrates its work on public employee unions and public pension liabilities. It's also a target of criticism by unions and other liberal groups, which accuse it of being part of a right-wing conspiracy to attack unions and public employees.
Anticipating that criticism, the organization took great pains to base its debt calculations on official data, including pension funds' own estimates of their unfunded liabilities, deviating from that methodology only on speculating about potentially higher pension debts.
The heavily footnoted report says the state's official debt stands at $132.6 billion, with general obligation bonds more than half the total. Other state debts include $27.8 billion in "budgetary borrowings" that Gov. Jerry Brown has described as a "wall of debt," $10.9 billion owed to the federal government for unemployment insurance benefits, and $11.3 billion in lease-revenue bonds.
Despite relatively robust income tax returns and a projection that the state will finish April billions of dollars ahead of estimates, Gov. Jerry Brown today dismissed a reporter's suggestion he must be "pretty happy," suggesting any overage may be tied up by Proposition 98, California's school-funding guarantee.
"The revenues, guys, wait 'til the May revise," the Democratic governor told reporters at the Capitol. "We have a very complicated mechanism called Prop. 98, and depending upon how the money flows, it may ... not be as available as many people are now thinking."
April is typically the most significant month for personal income tax collections, and state budget watchers track revenue daily. The nonpartisan Legislative Analyst's Office estimated today that the state's personal income tax collections will end the month about $4 billion above the administration's estimates.
By the end of the fiscal year, the LAO said, revenue may be "a few billion dollars" above estimates. Like Brown, however, the LAO was restrained in its assessment of the significance of any additional revenue.
The report said "much or all of the revenue gain could be required to be allocated to schools and community colleges under Proposition 98, which means that this fiscal year's strong revenue performance may have little, if any, positive effect for the state's financial bottom line."
PHOTO CREDIT: Gov. Jerry Brown speaks to reporters at the Capitol on Tuesday, April 23, 2013. David Siders / Sacramento Bee
Spring is getting off to a good start in California's state budget, too, with general fund revenue for March exceeding Gov. Jerry Brown's budget forecast by $254 million, state finance officials announced Friday.
Year-to-date revenues are slightly $5 billion above the forecast of $59.645 billion, records show.
Employment and housing are helping to lead the way.
California's unemployment rate fell to 9.6 percent in February, its lowest level in more than four years, finance officials said.
Home prices in the state rose for the 12th consecutive month. The median price of an existing single-family home sold in February was $333,880, an increase of 24 percent over the past year, according to the California Association of Realtors.
PHOTO CREDIT: Gov. Jerry Brown explains his 2013-2014 budget proposal at a news conference in January. Randall Benton / Sacramento Bee file
Were California's state government a business, it would be a candidate for insolvency with a negative net worth of $127.2 billion, according to an annual financial report issued by State Auditor Elaine Howle and the Bureau of State Audits.
The report, which covers the fiscal year ending June 30, 2012, says that the state's negative status -- all of its assets minus all of its liabilities -- increased that year, largely because it spent more than it received in revenue.
During the 2011-12 fiscal year, the state's general fund spent $1.7 billion more than it received in revenues and wound up with an accumulated deficit of just under $23 billion from several years of red ink. Gov. Jerry Brown has referred to that and other budget gaps, mostly money owed to schools, as a "wall of debt" totaling more than $30 billion.
Californians carried the nation's fourth highest state and local tax burden as a proportion of their personal incomes in 2010 - and that was before voters increased sales and income taxes last year - according to the latest national tax survey by the Tax Foundation.
California's state and local tax burden in 2010 was 11.2 percent of personal income, putting the state behind only No. 1 New York (12.8 percent), New Jersey (12.4 percent) and Connecticut (12.3 percent).
On a per capita basis, California's state-local tax burden in 2010 was sixth highest at $4,934.
Last year, voters passed Proposition 30, which raises the state's sales tax rate by a half-cent and imposes additional income taxes on the highest-income Californians. It is supposed to raise about $6 billion a year to close the state budget deficit, and that would add less than a half-percent to the tax burden, leaving it still below Connecticut's proportion.
Proposition 30 did, however, give California the nation's highest marginal income tax rate at 13.3 percent for those with taxable incomes of $1 million and above, jumping over Hawaii's 11 percent, the Tax Foundation reported.
Recipients of in-home care services for low-income disabled and elderly California residents can breathe a little easier today, after a tentative settlement was announced in a court fight over proposed cuts to the program.
The pact will end three class-action lawsuits challenging proposals to cut hours, services and state reimbursement rates in an effort to help California survive years of budget crisis, from 2009 to 2012.
Service hours for In-Home Supportive Services will be cut by an additional 4.4 percent under the agreement beginning July 1, reflecting a nearly 8 percent cut since 2011. The state is expected to save an estimated $160 million in 2013-14. But the reduction is a far cry from the 20 percent cut that was ordered by the state in late 2011 but suspended by a federal judge.
Both sides expect the outlook to brighten in years ahead: 1 percent of the 8 percent cut will be restored in spring 2014, and the pact includes a strategy for rescinding the remaining cuts, perhaps in 2015.
Unionized in-home support services compensate caregivers, often relatives, for providing services such as cooking, bathing and driving to medical appointments. Without such help, many recipients would be forced into more costly nursing homes, advocates say.
Service Employees International Union and a nonprofit group, Disability Rights California, led the court fight against the state's proposed cuts. The agreement is tentative because its terms require legislative action.
PHOTO CREDIT: Supporters of In-Home Supportive Services watch then-Sen. Wesley Chesbro on a TV during a Senate subcommittee hearing in the Capitol in Sacramento on Thursday, May 20, 2004. John Decker / Sacramento Bee file, 2004
The California State University system hopes to add 6,000 students, provide raises to faculty and staff and address rate increases for employee health care benefits using an additional $125.1 million in funding allocated in Gov. Jerry Brown's proposed state budget.
CSU officials previewed their proposed spending plan for 2013-2014 in a media teleconference Monday in advance of presenting their plan to the Board of Trustees on Tuesday.
Fee hikes that have become routine in recent years to address budget cuts to the 23-campus system are not included in the proposal, said Robert Turnage, assistant vice chancellor for budget.
"I think everyone understands what our students have been through the last few years," Turnage said. "It's very clear that we need a break."
Turnage said the addition of $125.1 million from the Proposition 30 tax increase is divided into three main categories dealing mandatory cost increases, a compensation pool and student success.
State tax revenue kept pace with budget estimates last month, with strong sales and corporate tax receipts offsetting a shortfall in personal income taxes, according to a report today by the State Controller's Office.
Total revenue of $5.3 billion in February was more than 20 percent higher than the same month last year, according to the report.
"Healthy revenues, along with recovering home prices, a steep drop in foreclosures, and increased car sales are harbingers of a California economy that is starting to warm up," Controller John Chiang said in a prepared statement.
Though sales, income and corporate tax revenues were all up over last year, income tax revenue was nowhere near as robust as expected. The controller's office attributed the category's weak showing - nearly 19 percent less than anticipated - to a large number of tax refunds being issued in February.
The director of the California Public Utilities Commission was scolded by lawmakers today after conceding that his agency had committed errors in forecasting and other budget-related issues involving hundreds of millions of dollars.
A state Department of Finance audit found serious management, training and procedural problems in PUC accounting and forecasting procedures for special funds tied to programs ranging from low-income customer subsidies to telephone services for deaf and disabled individuals. The money stems from surcharges on Californians' gas, electric and telephone bills.
"I find it deeply troubling that an agency would have such dismal accounting of large amounts of public funds in apparent disregard of basic principles of good management," said Assemblyman Richard Bloom, a Santa Monica Democrat who chaired today's Assembly budget subcommittee meeting, which examined the audit findings and the PUC's response to them.
In the ongoing tussle over budget rules, a state appellate court has dismissed a challenge from school groups who said California leaders had illegally manipulated the state constitution when they wrote the 2011-12 budget.
The San Francisco-based First District Court of Appeal said Tuesday that even if it ruled in favor of the school groups, "there unquestionably is no effective relief that can be granted" because voters overrode potential legal problems by passing Gov. Jerry Brown's Proposition 30 last fall.
Besides increasing income taxes on top earners and the statewide sales tax, the initiative retroactively changed the state constitution so the state could divert just over 1 percentage point of sales tax to local governments without giving a share to schools.
The state's complicated school funding formulas remain an ongoing battleground in the Capitol, with rules still being defined 25 years after voters approved the underlying initiative, Proposition 98. As part of the 2011 budget deal, Brown and lawmakers sent about $6 billion to local governments so they could assume former state responsibilities, most notably housing inmates and watching parolees.
The nonpartisan Legislative Analyst's Office says in a new report that Gov. Jerry Brown's school funding overhaul has many strengths but questions the retention of some "irrational" relics from the current system that benefit powerful constituents.
California for years has funded schools with a combination of general per-pupil dollars and earmarks dedicated for state-driven purposes. Brown, right, wants to blow up the earmarks and create a new system that gives districts more control and directs more money to schools with impoverished students and English learners.
The governor's proposal would generally help urban and rural districts while proving less beneficial to suburban districts with wealthier families. The Bee explained today how this would play out in the Sacramento region, based on Department of Finance estimates.
The analyst's office finds Brown's system "simple and transparent" compared to the current ways in which the state funds K-12 schools. It relies on a uniform funding formula and gives districts more say in how dollars get spent.
"Currently, the state's categorical programs, as well as the broader education funding system, are based on overly complex and complicated formulas," the report says. "Very few policy makers, taxpayers, school board members, or parents understand or can explain why a particular district receives a particular level of funding."
The nonpartisan Legislative Analyst's Office has so many complaints with Gov. Jerry Brown's plan for spending new clean energy money that it produced a separate 12-page pamphlet today to detail the problems.
Thanks to voter-approved Proposition 39, the state has $450 million to $550 million annually to spend on energy efficiency projects over the next five years. Brown proposed in his budget to devote all of that money to retrofitting K-12 schools and community colleges. The initiative did not specify that funds go toward education.
The money comes from a $1 billion annual tax increase that affects out-of-state corporations doing business in California.
The analyst's office found "many serious concerns" with Brown's plan from both a legal and economic perspective.
One curiosity in California's state parks controversy is why department officials hid millions of dollars when they needed the Legislature's approval to spend the funds.
State Auditor Elaine Howle in hearings this week referred to the hidden surplus as a "useless reserve" because state Department of Parks and Recreation officials in theory couldn't spend the money without telling lawmakers of its existence. But that left some lawmakers unsatisfied.
"I can't get my head around the nature of this," said Assemblyman Bob Blumenfield, D-Woodland Hills, chairman of the Assembly Budget Committee, asking later Wednesday whether "sheer stupidity" was to blame. If officials couldn't spend the money, Blumenfield wondered, what was their motive for willfully hiding the funds?
State finance officials warned the parks department as early as April 1999 about unreported budget surpluses that went unresolved until last year, a new California State Auditor report finds.
Despite that warning, Department of Parks and Recreation officials continued to sweep accounting differences under the rug until last year, when state attorneys and The Bee investigated the issue.
The current parks budget officer told auditors that she discovered the difference in February 2011 when she joined the department. But two former high-level officials told her to keep quiet because state budget writers might impose deeper funding cuts to the department.
The new audit also questioned the way in which state officials threatened to close 70 parks in previous budget discussions. It said that threat was "premature" because the department had never determined the amount needed to operate all 278 state parks at the 2010 level, a comparison basis that would have been necessary to properly assess how many parks to shutter.
PHOTO CREDIT: A deck juts out into the water at Brannan Island State Recreation Area, a California state park that's a maze of waterways through the Sacramento-San Joaquin Delta. Manny Crisostomo / Sacramento Bee file, 2010
In a new report issued today, California's top fiscal analyst questioned Gov. Jerry Brown's desire to pour more money into state university systems without demanding a bigger detour from their "high-cost" model.
The nonpartisan Legislative Analyst's Office believes Brown correctly identified inefficiencies in the state's higher education systems. But it disagrees with the governor's approach and recommends that lawmakers reject several of his higher education proposals, particularly his ongoing funding increases for University of California and California State University.
"Why the state would invest more in a system that is high cost and has poor outcomes without requiring explicit improvement is unclear," the report states.
The trust fund that provides pensions to retired teachers has a $64 billion deficit and would need a $4.5 billion per year infusion of revenue to become fully solvent, according to a new internal study.
The California State Teachers Retirement System produced the report in response to a legislative resolution.
Its release came just days after the Legislature's budget analyst, Mac Taylor, indirectly chided Gov. Jerry Brown for ignoring "huge unfunded liabilities associated with the teachers' retirement system and state retiree health benefits" in his new budget.
STRS receives money from the state, from local school districts and from teachers themselves, but is also highly dependent on investment earnings, which were clobbered during the recent recession. And while its larger cousin, the California Public Employees Retirement System, has the power take money from the state treasury as it sees fit, STRS must receive specific appropriations from the Legislature.
While fully funding teacher pensions would require $4.5 billion more a year --excluding projected investment earnings -- the system says in its report, the burden would be eased by setting lower funding targets and./or stretching out contributions. The most important decision, STRS said, is to begin closing the deficit, rather than allowing it to widen further.
With a declining birthrate and ebbing migration into California from other states and nations, the historically fast-growing state will see only relatively slow population expansion in the foreseeable future, the state's own demographers conclude.
However, these trends also mean that Latinos are likely to become the state's largest single ethnic group sometime this year, a data-packed section of Gov. Jerry Brown's new state budget plan concludes.
That's a couple of years earlier than previous demographic expectations.
Gov. Jerry Brown's budget plan appears to provide sufficient funding to avoid tuition increases at the University of California next year, a UC administrator said this afternoon.
"When you add everything up, I think our initial reaction is that we can manage without a tuition increase for '13-14," Daniel Dooley, senior vice president of external relations at the UC, told The Bee. "We're pretty excited about what he's proposed."
Brown promised while campaigning last year for Proposition 30, his initiative to raise taxes, that its passage would avert tuition increases at public universities this school year. The prospect remained, however, of tuition rising in the fall.
Brown's budget proposal includes an additional $250 million for the University of California system. That amount is less than the UC requested, and the Democratic governor said he would lobby regents to hold tuition steady.
Gov. Jerry Brown's new budget boasts that even with new taxes, general fund spending is below the record $103 billion that it reached in 2007-08, just before a severe recession hit the state.
But that claim is fudging a bit. Brown's budget would spend, he says, $97.7 billion in 2013-14, but the number doesn't include $5.3 billion that the state is now sending to counties to pay for "realignment" of some social and correctional programs to local control.
That's money that used to flow into and out of the general fund. When it's added to the projected spending for 2013-14, the total is $103 billion -- thus equaling the record set six years earlier, not taking inflation into account.
The budget also says that general fund spending "remains at its lowest level since 1972-73" by inflation-adjusted measures such as a proportion of personal income. But that, too, doesn't take into account big changes that have been made since then in how money is allocated, such as "realignment" and dozens of other shifts between local and state levels.
The realignment funds, for instance, are now counted as a "special fund" expenditure. When the general and special funds are merged, spending rises to $138.6 billion. And when $7.2 billion in bond spending and about $80 billion in federal funds are included, the total budget jumps to about $225 billion.
There was a flurry of tweeting and other on-line speculation about which journalist would jump in with the first question Thursday when Gov. Jerry Brown unveiled his new budget at a Capitol press conference -- and even a bit of odds-making.
Television journalist Nannette Miranda, however, defied the odds by asking a question of Brown even before he began his presentation -- an innocuous inquiry about his well-being.
That not only earned her bragging rights but an autographed budget summary from Brown saying it was a "great question" to certify her triumph.
"Coolest 1st Question Prize ever!" tweeted Miranda, who is the Sacramento bureau chief for ABC-owned stations in California, when Brown aide Steve Glazer informed her she could come by the governor's office to pick it up.
PHOTO CREDIT: Twitpic posted by Steve Glazer @steve4jerry
Brown said he is unwilling to restore funding for social service programs that have been cut during the recession. "That kind of yo-yo political economy is not good," he said. "I want to advance the progressive agenda, but consistent with the amount of money the people made available."
The spending plan Brown released this morning calls for small increases to education funding in a $97.7 billion general fund budget for the fiscal year that begins July 1 but generally holds the line elsewhere.
The governor's budget will give each state university system an extra $250 million. The addition is not as much as the University of California and California State University had hoped, so it remains to be seen whether university officials will pursue tuition hikes.
As part of his plan, Brown will demand each system cap the number of classes that students can take at 150 percent of what is necessary to complete most degrees - 270 quarterly units at UC and 180 semester units at CSU. That cap will shrink further after two years. Students could continue taking classes but would have to pay full price rather than the subsidized in-state rates. The governor believes this will force more students to finish on time and free up resources.
Because Congress permanently killed an estate tax transfer to states this week, California stands to lose $45 million in inheritance tax revenue that Gov. Jerry Brown and lawmakers anticipated in their June budget, according to the Department of Finance.
As part of the "fiscal cliff" agreement, Congress permanently eliminated the state estate tax credit, a device once used to return a share of federal inheritance taxes to states. The nonpartisan Legislative Analyst's Office says that likely means California won't receive estate tax revenues again without a vote of the people.
In 1982, voters passed Proposition 6, which eliminated the state estate tax but allowed California to recoup a share of inheritance taxes paid to the federal government. For taxpayers, that ensured California estates would not have to pay more than the federal tax.
In 2001, Congress and President George W. Bush phased out the state estate tax credit entirely by 2005, eliminating the transfers the federal government gave to states like California. Some states imposed new estate taxes thereafter, but Proposition 6 prevented California lawmakers from doing so.
When the Bush-era tax rules were scheduled to expire after 2010, state fiscal officials said California stood to gain as much as $2.7 billion in estate tax transfers from the federal government. But Congress then extended the Bush tax rules for two years up to the fiscal cliff deadline this week -- and now have permanently blocked the state tax credit. Estates are only taxed federally above $5 million.
California officials this time were counting on only $45 million in 2012-13 based on their interpretation of the situation, but that money will not arrive.
Finance spokesman H.D. Palmer said his department typically has to use existing federal law as a basis for its projections. When compiling Brown's new January budget before the fiscal cliff deal, the department actually assumed another $290 million in estate tax money in 2013-14. But Finance used a separate accounting mechanism to erase the estate tax proceeds, knowing that the funds were unlikely to show up, Palmer said.
Updated with additional information from Finance and revised terminology.
California will begin moving 860,000 lower-income children from Healthy Families to Medi-Cal next month after receiving last-minute federal approval today, state health officials said.
The shift comes despite a request from Senate President Pro Tem Darrell Steinberg to postpone the switch because he fears too many children will lose access to their medical providers.
Many health care advocates fought the shift in June and felt that Healthy Families had served its beneficiaries better than Medi-Cal could. But Gov. Jerry Brown asked lawmakers to end Healthy Families as the state prepares for President Barack Obama's health care overhaul in 2014, saying it would be more efficient and ultimately save money.
The state plans to start the transition by moving nearly 200,000 children in eight large counties. Department of Health Care Services spokesman Norman Williams said today the state will move forward tomorrow after receiving federal approval.
"The department has thoughtfully planned this transition to maximize the continuity of care and maintain adequate health care provider networks for these children," Williams said in a statement. "Our goal is to minimize impacts to children. The transition will be completed over the course of 2013."â€¬
California primary care doctors expect to receive more than twice their current reimbursement rate for treating Medi-Cal patients next year, but those higher payments will now be delayed, according to state officials.
The change in reimbursement rates is part of President Barack Obama's health care overhaul. The federal government has agreed to fund primary care for Medi-Cal patients at the same rate that it pays Medicare providers, hoping to expand the number of doctors willing to treat low-income patients before the Affordable Care Act kicks into overdrive in 2014.
In California, which pays one of the lowest Medicaid rates in the country, primary care physicians can expect to receive 136 percent higher reimbursements, according to the Kaiser Family Foundation.
The state Department of Health Care Services says it intends to eventually give higher payments to doctors for treating Medi-Cal clients, including retroactive payments for treatment after Jan. 1. DHCS blamed the delay on bureaucratic reviews that are not yet final, and it suggested other states also won't be able to pay immediately.
"Since the payment increase will be retroactive to January 1, 2013, any delay in implementation is not expected to impact a provider's willingness to continue serving Medi-Cal members," said DHCS spokesman Norman Williams in a statement.
Gov. Jerry Brown has suggested in recentdays that he may not embrace that expansion if it comes with higher state costs, though his argument appeared to be based on his own speculation that "fiscal cliff" negotiations may lead to a dramatic rollback in the Affordable Care Act.
California's civil war of the judges apparently will continue, even though a rebel organization scored a major victory this year.
A "trailer bill" to the 2012-13 state budget incorporated many provisions of legislation that the breakaway Alliance of California Judges had sought over the opposition of Chief Justice Tani Cantil-Sakauye in a quest for more local control of court funds.
However, with the Brown administration apparently seeking further cuts in state support of the courts, the alliance has elected one of its most combative members, Sacramento Superior Court Judge Steve White, as its president.
It also declared in a letter to its members this week that it will independently lobby the Legislature on budget and other matters, saying that management by Judicial Council and the Administrative Office of the Courts, both of which are controlled by Cantil-Sakauye, "clearly has been a failure."
The U.S. Court of Appeals for the 9th Circuit ruled today that California can cut rates to doctors, pharmacists and other providers for serving Medi-Cal patients, overturning a lower court decision that blocked a state budget cut from last year.
A three-judge appeals court panel determined that U.S. Health and Human Services Secretary Kathleen Sebelius has authority to determine whether California and other states can cut Medicaid rates -- the federal program of which Medi-Cal is part -- and still comply with the program's rules.
"The Medicaid program is a colossal undertaking, jointly funded by the federal government and the States," the 9th Circuit panel wrote. "Congress explicitly granted the Secretary authority to determine whether a State's Medicaid plan complies with federal law."
Sebelius approved California's cuts in October 2011, but U.S. District Court Judge Christina A. Snyder blocked them in December of last year. At the time, the cuts were expected to save $623 million annually.
California appealed the decision, and the 9th Circuit ruled in the state's favor today. It remains to be seen whether California will follow through with a 10 percent reduction to provider rates, and when that might occur.
Lynn S. Carman, who represents pharmacists as chief counsel for the Medicaid Defense Fund, said plaintiffs plan to ask the court for en banc review, meaning the full 9th Circuit bench would reconsider today's decision. If that is denied or the review does not block the rate cuts, Carman said his side would ask the U.S. Supreme Court to consider the case.
California missed its November revenue target by $806.8 million, or 10.8 percent, after a bad projection about tax proceeds from Facebook insiders and an unexpectedly high amount of corporate refunds, the State Controller's Office said Friday.
State budget writers assumed that Facebook insiders would sell a large batch of stock in November at $35 per share, resulting in a tax windfall for the state. But those insiders executed their transactions a month early, state officials say, resulting in more money than expected in October but far less in November. Not only that, but until late November, Facebook shares had been trading below $25 per share.
Those factors contributed to California missing its November personal income tax target by $842.5 million, or 19.0 percent. By comparison, the state exceeded its October target by $378.4 million.
Education may be the largest single segment of California's budget, but the state proportionately spends less of its money on elementary and high schools and colleges than the national average, according to a new Census Bureau report.
The statistic is gleaned from the bureau's annual report on state government finances, the latest of which covers 2011.
The report tallies California's "general expenditures" last year at just under $225 billion -- spending from both the state's own taxes and other resources as well as $64.5 billion in federal funds. Education is almost $75 billion of that, according to the report -- or exactly one-third, somewhat below the national average of 35.8 percent.
California's level of education spending in 2011 was fractionally lower than in 2010. Other states ranged from a high of 46.6 percent in Georgia to a low of 24.9 percent in Alaska.
State environmental leaders this week hailed California's first cap-and-trade auction a success, but it was hardly so for the state budget.
Gov. Jerry Brown and state lawmakers assumed three auctions this fiscal year would generate $1 billion total for the state, half of which they want to plug the state budget deficit. But most of the $289 million raised this month is dedicated for utilities and their ratepayers, leaving only $55.8 million for state purposes.
A low auction price for 2013 credits and low demand for future credits suggest that California will fall well short of its $1 billion projection this year. The nonpartisan Legislative Analyst's Office estimates that if trends hold in the February and May auctions, the state may only raise about $140 million in the first year.
Democratic Sen. Ted Lieu is dropping a push to ask voters to triple the state's vehicle license fee rates.
The Torrance Democrat told the editorial board of the Los Angeles Daily News last week that he planned to introduce legislation to put a measure on the 2014 ballot asking voters to raise the state's vehicle license fee. He said increasing the rate from .65 percent to 2 percent -- the level it was before former GOP Gov. Arnold Schwarzenegger slashed the fee in 2004 -- could generate up to $4 billion a year for roads, public transit and other projects.
Lieu called his proposal at the time "a test to see what the two-thirds (majority) Legislature means," a reference to the supermajority vote required for lawmakers to place measures in front of the people.
But today he scrapped the plan, saying in a statement that "over the last few weeks California's political landscape has changed."
"I have listened carefully to those who have contacted my office or me. Additionally, more stakeholders weighed in on this important issue," Lieu said in a statement. "As a result, I will not be introducing the proposal. Instead, I will work with transportation stakeholders and the public next year on alternative ways to mitigate the transportation infrastructure problem."
PHOTO CREDIT: State Sen. Ted Lieu, D-Torrance, during a hearing at the Capitol in Sacramento, Calif., Tuesday, May 8, 2012. AP Photo/Rich Pedroncelli.
California faces a $1.9 billion deficit through June 2014, significantly smaller than in recent years after voters passed two tax initiatives last week, the nonpartisan Legislative Analyst's Office said Wednesday.
The Analyst's Office said in its annual precursor to the budget process that California faces a small deficit because spending is higher than expected and the state will not receive as much as Gov. Jerry Brown predicted from shutting redevelopment agencies. It also believes other revenues from a managed care tax and cap-and-trade auction will fall short.
But the 19-month deficit figure of $1.9 billion pales in comparison to the $13 billion gap the LAO predicted last November or the $25 billion shortfall it foresaw two years ago. The deficit includes a $943 million deficit in the fiscal year that ends in June.
"The state's economic recovery, prior budget cuts, and the additional, temporary taxes provided by Proposition 30 have combined to bring California to a promising moment: the possible end of a decade of acute state budget challenges," the LAO said in its report. "Our economic and budgetary forecast indicates that California's leaders face a dramatically smaller budget problem in 2013-14 compared to recent years."
The Analyst forecasts the possibility of surpluses starting at $1 billion in 2014-15, growing to more than $7 billion in 2017-18. But that depends on Brown and lawmakers restraining program growth, and numerous advocates are likely to ask for existing cuts to be reversed given the additional money available.
Brown said in a statement: "This report validates the hard work the state has done to cut its deficit and balance its budget over the long term. California is now on the path for a fair and sustainable budget as long as we continue to exercise fiscal discipline and pay down debt."
The governor's Department of Finance told the LAO last week that it had discovered $1.4 billion in extra money from an accounting change. The Analyst's Office said that "adjustment" for the 2010-11 fiscal year was unusually large. Without it, the deficit would have been $3.3 billion.
Post updated with quote and additional details at 12:45 p.m. and 2:15 p.m.
Nearly nine million Californians - almost a quarter of the state's residents - live in poverty under a newly devised federal standard, making the state's rate by far the highest in the nation.
The stunning number will fuel California's perpetual political debate over the state's "safety net" of health and welfare services, which have been reduced sharply due to budget deficits. With voter approval of new taxes, advocates for the poor are demanding that some of the benefit cuts be rescinded.
California's 23.5 percent poverty rate under the "supplemental poverty measure" (SPM) developed by the Census Bureau is approached only by the 23.2 percent rate in the District of Columbia. The highest SPM rate in any other state is Florida's 19.5 percent.
The state-by-state comparison is found in a Census Bureau report on the SPM, which is being tested as a replacement for the current way of measuring poverty, which is a half-century old.
The new, and still experimental, system includes broader data of income and outgo that have emerged since the system was created in the early 1960s, such as payroll taxes that reduce disposable income and government benefits that increase income.The new system also takes into account cost-of-living variations from state to state.
The steep climb in California's poverty rate under SPM, adding nearly 3 million to the poverty rolls, is apparently driven largely by the state's high cost of living.
Under the old - and still official - system, California's poverty rate is 16.3 percent, which translates into slightly over 6 million of the state's 38 million residents. That rate is somewhat higher than the national rate of 15 percent, but by no means the highest in the nation.
The national SPM rate is 15.8 percent, a fractional increase from the official rate, and California's SPM rate of 23.5 percent represents not only the highest in the nation, but the largest of any state's jump from the official rate to the SPM rate. In some states, the SPM rate actually is lower than the official rate.
High unemployment will persist in California for at least a couple more years, the state Department of Employment Development predicts, and the state's $10 billion debt to the federal government will also persist unless California employers cough up more money.
California began borrowing to shore up its flat-broke Unemployment Insurance Fund (UIF) nearly four years ago. The fund pays for the initial 26 weeks of unemployment insurance benefits, plus portions of extended benefits.
The debt grew to nearly $10 billion by the end of 2011. It's expected to hit $10.2 billion by the end of this year and remain at that level through 2013 before slowly declining in 2014 as, EDD expects, unemployment drifts slowly downward.
California has just under 2 million unemployed now. The agency expects that the number will decline slowly in 2013 and 2014. It also expects new claims for unemployment insurance benefits to remain at about 2 million a year through 2014.
The federal government slightly boosted taxes on employers to offset some of the state's UIF debt, but it also started charging interest on that debt -- about $300 million a year -- in 2011. With the UIF in the red and the state budget facing deficits, Gov. Jerry Brown and the Legislature opted to borrow money for the interest payments from the Disability Insurance Fund (DIF), which is financed by payroll taxes on employees.
Brown asked the Legislature this to raise taxes on employers to repay the DIF loan, but there was no action -- nor has anyone proposed a plan to repay the larger, $10 billion UIF debt to the federal government.
To those who chart state government finances, tax revenues during the second quarter of each year loom large because income taxes are the largest source of income and they peak as the annual tax return deadline arrives in April.
Just as fourth quarter holiday gift sales can make or break retailers' year, second quarter tax collections tell state budget writers whether will enjoy surpluses or face budget deficits. And a new Census Bureau report shows how California's second quarter revenues have gone up and down in the last decade.
When state Controller John Chiang reported this month that state sales taxes in July were a third lower than the state budget projection for the month, it created a stir in political and financial circles.
July was the first month of the 2012-13 fiscal year and some analysts wondered whether the controller's report meant that the budget's full year revenue projections were much too high, and deficits were in the offing.
Not to worry, says George Runner, a member of the state Board of Equalization, which collects sales taxes. "Contrary to what you may have heard, the sky is not falling in California--at least not as it pertains to sales tax revenue," Runner said in a statement Friday. "I'm pleased to report that sales and use tax revenues are doing just fine."
Instead of being $295 million below projections in July, Runner said, sales taxes - $1.527 billion - were actually $17 million above Department of Finance expectations.
Why the big difference? Differing accounting method in different financial agencies, which has become a bugaboo of late in determining fund balances throughout state government and contributed to a scandal over hidden funds in the Department of Parks and Recreation.
Runner said the controller counts only "money in the bank" while the Board of Equalization's data also include pending deposits. He said the BOE received more than $900 million in sales taxes during the final days of July which were not deposited in the state treasury by the end of the month.
Paul McIntosh, executive director of the California State Association of Counties (CSAC) for the past five years, announced his resignation Tuesday to "determine my best course in the twilight years to come."
CSAC is the lobbying arm for the state's 58 county governments and plays a major role in each year's state budget negotiations, including the landmark "realignment" from the state to counties of some penal and social services. McIntosh said in his retirement announcement that "I am convinced that a decade from now, we will look back upon the changes made, particularly in the public safety arena, with great pride and success."
CSAC's former legislative director, Steve Keil, will serve as CSAC's interim executive director while the organization conducts what it said would be a "nationwide search" for a permanent successor.
A joint legislative panel showed unanimous support Wednesday for an independent audit of California's state parks department after revelations that officials there hid nearly $54 million and approved unauthorized vacation buyouts.
The Joint Legislative Audit Committee asked State Auditor Elaine Howle to prioritize the investigation into how the Department of Parks and Recreation hid funds and underreported account balances to the Department of Finance and lawmakers. Howle said she could fast-track the audit to the Legislature by January, the start of the next budget season.
The committee also asked Howle to investigate how parks officials secretly paid out more than $271,000 to 56 employees in exchange for stored vacation time, transactions first reported by The Bee last month. The audit panel initially voted 7-0 on a bipartisan basis for an expedited parks audit, though the tally was not yet final because some members were expected to add their votes later.
Gov. Jerry Brown administration officials said last month that the parks department hid nearly $54 million in two funds. On Friday, his Department of Finance said it discovered $268.5 million of accounting errors in other special funds in a quick two-week review, but that the mistakes were honest unlike the parks situation. The department also said that most of the net $196.7 million in extra funds had been corrected prior to the latest budget enactment in June and are not surplus like the parks money.
Assemblywoman Beth Gaines, R-Rocklin, told the legislative panel that the Department of Finance's recent findings were insufficient and that an independent review from Howle's Bureau of State Audits would inspire more public confidence.
"Californians feel betrayed, and this audit is essential to gaining back their trust," said Gaines, who was among more than a dozen signatories from both parties asking for the review.
The Assembly Budget Committee will question Brown officials for the first time Thursday on the parks situation and the Finance audit showing accounting inconsistencies.
Moody's Investors Service called the drop in Facebook's share price a "credit negative development" in the wake of a Legislative Analyst's Office report last week on how the company's stock value could impact the state budget.
Facebook closed Monday at $21.92 per share, up from last week, but still 37 percent below the $35 price that state budget writers are counting on when a big round of insider transactions occur in November. The Analyst's Office said last week that if the stock price remains significantly below that $35 mark, the state could miss "hundreds of millions" in tax revenues that it has forecast in the first budget cycle since the Menlo Park company went public in May.
Both the LAO and Moody's noted that even a drop of that size would be less than 1 percent of the state's $91.3 billion general fund budget. And should the share price rise or other income streams strengthen, the state could overcome a stock malaise from the social media giant.
Moody's spokesman David Jacobson said the current share price has no bearing now on the state's A1 stable credit rating, currently second-worst in the nation behind Illinois according to Moody's. But he said a low stock price in November could have a negative effect on the state's credit rating.
"California's personal income tax revenue tends to be volatile because it relies heavily on top earners and those with high capital gains income," Moody's wrote in an update. "At 10.3 percent, the state's top rate for personal income taxes is one of the highest in the country and the state taxes capital gains at the same rate."
An audit of more than 500 California special funds found most money accurately accounted for and no other instances of problems similar to those in the state parks department, state Finance Director Ana Matosantos said Friday.
State officials ordered the audit after The Bee found that the state parks department had stockpiled $54 million while community groups struggled to find funds to keep parks open.
Finance officials said they'll adopt new procedures to coordinate information between the state finance department and the State Controller's Office.
Beginning with the 2013-14 January budget, they said they will work to reconcile special funds in collaboration with the controller, as they do with the budget's general fund.
Gov. Jerry Brown issued a statement pledging to work with the state Legislature to use additional parks money to keep facilities open and fix some serious maintenance problems.
"The disclosure that the Parks department had millions in additional revenues is mixed--it's better to have more money than less, but it's totally unacceptable for Parks personnel to squirrel away public funds," Brown said. "I extend my deepest appreciation for the donors who have come to the aid of our parks in this time of need. I ask for their patience as we take all necessary steps to make sure this never happens again."
The state's Legislative Analyst's Office said Wednesday that "hundreds of millions" of dollars in assumed tax revenues may never materialize due to the continued slide in Facebook's stock price.
Menlo Park-based Facebook closed Wednesday trading at $20.88 per share, a new low 45 percent below the initial price. The state Department of Finance assumed the social media giant would trade at $35 by November, while the Analyst's Office believed it would trade at $42 at that time. The November marker is significant because another wave of insiders becomes eligible to sell shares at that point.
The Analyst's Office said today that much of the Facebook income tax revenues will still come in. But the LAO added that "if the company's stock price remains depressed, hundreds of millions of income tax dollars assumed in the 2012-13 state budget plan are at risk."
Despite a recent flood of state accounting questions, Standard & Poor's gave its highest rating Wednesday to $10 billion in short-term notes California will issue this month to ensure it has enough cash to pay its bills through next June.
Standard & Poor's ran several stress tests on the state's cash situation and determined that California should have more than enough money in its coffers to pay back $10 billion next spring, issuing an SP-1+ rating to the state's short-term notes. California borrows money in the first half of each fiscal year because the bulk of its revenues come in the spring.
The state plans to begin selling the notes to investors on Aug. 14, with the interest rate determined two days later.
To help pay general fund bills for schools, health care and prisons, the state not only borrows from Wall Street but relies heavily on internal special fund accounts, which come from dedicated user fees or payments from regulated industries. The state is already borrowing $9.6 billion in cash from these special funds and has indicated that it can tap nearly $9 billion more if necessary, according to S&P analyst Gabriel Petek.
California's borrowing from special fund accounts has reached nearly $4.3 billion, more than five times the amount from June 2008, according to a semi-annual report issued today by the Department of Finance.
Since the depths of the recession, state leaders have relied heavily on borrowing from special fund accounts that generate money from user fees and regulated industries, among the many patchwork solutions to avoid deeper program cuts in the general fund budget.
Special fund accounts have drawn greater scrutiny in the past two weeks after the Resources Agency revealed that the Department of Parks and Recreation had hidden nearly $54 million in two such funds for more than a decade. The Department of Finance is auditing 560 special fund accounts to determine whether other money has been inappropriately shielded from view and expects to issue a report later this week.
Sen. Elaine Alquist of Santa Clara is jumping into a fight between the 49ers football team and education leaders in her Bay Area community by writing a bill that would allocate $30 million in disputed redevelopment funds toward building a new NFL stadium.
The bill marks the third time in recent years that California lawmakers have written custom legislation at the end of session to advance football stadium projects. Last year, the Legislature approved a bill that provided a speedy environmental review process for a new stadium in Los Angeles. A 2009 bill protected a proposed stadium in the City of Industry from environmental lawsuits.
Alquist's bill is fallout from Gov. Jerry Brown's decision last year to dissolve redevelopment agencies. Santa Clara's redevelopment agency had planned to give $30 million toward the $1.2 billion effort to build a new stadium for the San Francisco 49ers. A county oversight committee created after the redevelopment agency folded decided last month not to use the money for the stadium and instead give it to schools.
After $54 million in surplus parks funds were discovered last week, the Department of Finance said it will release findings next week on whether similar pockets of special fund money are hiding elsewhere in state coffers.
The parks money was found in part because state controller's data showed tens of millions more dollars than the Department of Finance reported in its own figures. Finance, which is responsible for building Gov. Jerry Brown's budgets, is now examining all 560 special fund accounts to determine if similar differences exist.
But finance officials have cautioned against a straight comparison between data provided by the Controller's Office and those issued by the Finance Department on their websites.
In many cases, the controller's numbers differ from finance's for legitimate reasons, Finance Chief Deputy Director Michael Cohen said last week. Finance uses budget accounting, which counts money received and spent at different times of the year than the controller does. In a basic example, if a department buys supplies in May but does not pay its bill until August, Finance and the controller may account for the same purchase in different fiscal years.
University of California's governing board today approved higher fees for 57 graduate professional schools while freezing tuition for undergraduates.
UC regents, meeting in San Francisco, voted to freeze tuition at $12,192 for the coming school year pending the outcome of the November election. If voters reject Proposition 30 - Gov. Jerry Brown's tax increase - UC will likely raise tuition mid-year. The resolution they approved also gives UC's formal endorsement of the ballot measure.
"This tax initiative affects us. It deeply affects us," said Sherry Lansing, chair of the board of regents. "I enthusiastically endorse support for this."
Regent Russell Gould cast the only vote against endorsing Proposition 30.
VIDEO:In today's report, Dan Walters says bad news for CalPERS may be good news for Gov. Jerry Brown.
Brown's tax initiative - aka Proposition 30 - will be top of mind for California State University trustees as they gather for their board meeting today in Long Beach. On the agenda is a major discussion about what CSU will do if voters reject the tax measure in November, triggering a $250 million cut to the university system.
Two contingency plans are on the table. The first raises student tuition by $150 in January and trims employee pay and benefits by 2.5 percent. The second option keeps tuition level but cuts enrollment by 6,000 students and trims employee compensation by 5.25 percent.
"Nothing but difficult trade-offs" was how Assistant Vice Chancellor Robert Turnage described the situation Monday.
CSU is also looking at saving money by having professors spend less time on research and committee work (and more time in the classroom), increasing tuition by $1,000 for out-of-state and international students, and charging students more for any class they repeat more than once or take beyond 16 credits each semester.
A decision on the contingency cuts is expected in September. Read all the details here.
California has the worst credit rating of any state now and the nation's worst credit rating record over the past 11 years, according to a new nationwide compilation by the Pew Center on the States.
The compilation is based on Standard and Poor's credit ratings and covers every year since 2001. Thirteen states sit atop the Pew chart with AAA credit ratings while California is alone at the bottom at A-minus and is the only state to dip to the worst possible rating, BBB, during the 11-year period.
That happened in 2003, during a state budget crisis so severe that then-Gov. Gray Davis was recalled. The highest rating California achieved during the period, A-plus, came in 2006.
"The states with the lowest grades typically have trouble keeping their spending in line with their tax revenues." Pew's Stephen C. Fehr writes in an explanation of the research. That observation applies to California, which has struggled to balance its budget for the past decade and whose current budget assumes that voters will approve sales and income tax increases in November.
Credit ratings affect the interest that states and other public entities must pay on their bonds. California politicians have tended to downplay their significance, however, citing a provision of the state constitution that gives high priority to bond service, the state's unblemished record of making bond payments, and the apparent willingness of lenders to buy the state's debt offerings, albeit at somewhat higher interest rates than those paid by other states.
Four states - Missouri, North Carolina, Virginia and Utah - have held AAA credit ratings for 46 years or more, Pew noted.
State Controller John Chiang will appeal a judge's ruling that he does not have authority to withhold lawmakers' pay in cases in which the Legislature passes a budget Chiang finds unbalanced.
The appeal, to be filed with the 3rd District Court of Appeal, re-opens a dispute between Chiang and Democratic legislative leaders, who sued Chiang after he blocked their pay for 12 days last year. The Democratic controller filed a notice of appeal in Sacramento Superior Court this afternoon.
At issue is an interpretation of voter-approved Proposition 25, which requires lawmakers to pass a budget by June 15 or go unpaid. Sacramento Superior Court Judge David I. Brown ruled it was within the Legislature's power - not Chiang's - to determine whether the budget it passed is balanced.
Chiang spokeswoman Hallye Jordan said Brown's ruling "flies in the face of the voters' will, which was to hold lawmakers accountable for late, unbalanced budgets by docking their pay when they miss the Constitutional deadline."
University of California President Mark Yudof said today that he will ask UC's governing board to freeze tuition for the coming school year, responding to the state budget just as Gov. Jerry Brown had hoped.
Brown and lawmakers added provisions to the state budget this week that would give an additional $125 million to UC and the California State University in 2013-14 if the systems didn't raise tuition for this year -- and if voters approve the governor's tax initiative in November.
"The budget legislation signed by the governor is a significant step toward bringing stability to public higher education funding in California," Yudof said in a statement. "Based on the incentives in this budget package, I intend to recommend to the Board of Regents that our current tuition levels remain in place for the upcoming year."
Previously, UC officials had said they would consider a 6 percent tuition increase this summer.
The situation is more complicated at CSU, whose trustees have already approved a 9 percent tuition hike that has been collected from current students. If CSU wants the $125 million Brown promised, it would have to issue refund checks to students after the election in November.
Nearly all of the 70 California state parks originally slated for closure Sunday will remain open for now, despite a line-item veto of parks funding by Gov. Jerry Brown, state parks officials said today.
The Department of Parks and Recreation has already struck deals with private donors, foundations and non-profit groups to continue operating 40 that were on the endangered list, including the Governor's Mansion in Sacramento. At the direction of Brown and lawmakers last year, the parks department had targeted the parks for closure based on attendance and how much revenue they generated.
Because the state has found outside partners interested in sparing an additional 25 parks, it will keep them open using a sliver of special funds that Brown retained in the budget he signed Wednesday night, parks officials said. Democratic lawmakers added $41 million back into their budget to keep parks open, but Brown line-item vetoed $31 million of it.
That leaves five parks for which the state has struggled to find donors or other agencies willing to chip in: Benicia State Recreation Area; the California Mining and Mineral Museum in Mariposa; Gray Whale Cove State Beach near Montara; Zmudowski State Beach near Moss Landing; and Providence Mountains State Recreation Area in San Bernardino County.
It remains to be seen what will happen to those parks come Sunday, but at least one - the Mining and Mineral Museum - is planning to shut its doors and pack up more than 13,000 objects in its collection, according to curator Darci Moore.
"At this point, we have no choice," Moore said. "We will be packing up the mineral collection and putting it in storage."
Even if they face closure, the two state beaches on the endangered five-park list would remain open to visitors but without trash pick-up and restrooms, said Natural Resources Agency spokesman Richard Stapler.
Natural Resources Secretary John Laird said today he still sees a path to keep all of the parks open using $10 million that Brown agreed to restore as a stopgap measure. Stapler said the department is examining possibilities over the next 24 hours that could save the last five parks without donors.
"What this does is give us the money to allow us to focus on the next 30 without a tight June 30th deadline," Laird said. "We will work through every agreement that is possible with a proposed stakeholder. And then when we get to the end, I expect that there will likely be a few parks for which nobody has stepped forward, and then we will cross that bridge with what we do at that point."
After wrangling with legislative Democrats earlier this month, Gov. Jerry Brown signed a new California budget late Wednesday that slashes courts and state workers while assuming voters will pass a multibillion-dollar tax hike in November.
The signing came hours before Brown's deadline to sign or veto the main budget bill that legislative Democrats sent him 12 days ago. Lawmakers moved the bill to the governor without a deal as they faced the threat of losing pay if they had waited beyond June 15.
Both houses held floor sessions Wednesday to pass a series of "trailer" bills that contained the guts of the compromise between Democrats and Brown. They also amended the main $91.5 billion general fund budget bill.
The 2012-13 spending plan is intended to bridge a $15.7 billion deficit.
Brown did not release details of his line-item vetoes, which he is expected to make public Thursday.
The owner of a Sacramento vocational school that can no longer accept Cal Grant money because of cuts in the state budget says his company will find another way to provide the scholarships to needy students, using private instead of public funds.
"We're going to come up with something so that our students will know no difference," said John Zimmerman, president of MTI College, which will be eliminated from the state's Cal Grant program this year based on new performance standards established in the budget. "Instead of the check coming from the state of California, it's going to come from us," he said.
Zimmerman said he plans to move $1 million from his company's reserves to a scholarship fund that would support about 200 students who qualify for Cal Grants because of their low incomes.
MTI College is in the same situation as the vast majority of for-profit colleges in California, which do not meet new criteria the state is establishing for schools to receive Cal Grants in 2012-13. The state is allowing only those schools with graduation rates of at least 30 percent and loan default rates lower than 15.5 percent to participate in the Cal Grant program for the coming year, a move that will eliminate Cal Grants to some 11,000 students statewide.
Zimmerman said he expects his school will be eligible to accept Cal Grants next year because its loan default rate is improving.
Editor's note: This post was updated at 4:45 p.m. to clarify the state's performance standards.
After federal officials and California Democratic lawmakers raised objections, Gov. Jerry Brown's proposal to limit wildfire liability and impose a lumber tax has stalled for now.
The natural resources budget bill, Assembly Bill 1478, does not contain Brown's proposals to limit payouts in wildfire liability cases or allow timber companies to face less frequent reviews of tree-cutting plans for environmental impacts.
A separate, but related, idea to impose a 1 percent tax on lumber sold in California has not been introduced. That money would have provided additional funding for the state Department of Fish and Game and other regulatory agencies to review timber harvest plans. It was one aspect that environmentalists liked in the proposal, but many of them were suspicious of the liability change that was crucial to getting the lumber tax passed.
California welfare-to-work recipients could receive six-month extensions beyond a new 24-month time limit for aid if they are making progress in a treatment program, on the verge of finding work or struggle with a learning disability, according to new bill language released today.
The guts of the welfare-to-work compromise between Gov. Jerry Brown and Democratic lawmakers is contained in Assembly Bill 1471. The deal struck last week would generally cut off aid and services to CalWORKs recipients if they cannot find employment after 24 months.
The new rules take effect starting in January. Months on aid before January do not count against the new time limit.
Democratic lawmakers insisted on a series of exemptions that would protect one-fifth of welfare recipients who go past that time limit without finding a job. AB 1471 allows counties to grant extensions in six-month blocks to people who meet any of the following criteria:
Senate President Pro Tem Darrell Steinberg said today that he hopes the budget agreement approved later this week lessens the need for any additional "blue pencil" cuts by Gov. Jerry Brown.
The Sacramento Democrat said he expects legislators to consider 21 remaining budget trailer bills on Wednesday, which is Gov. Jerry Brown's final day to act on the main budget bill lawmakers passed earlier this month.
Steinberg said leaders have been "working very closely with the administration" as the final details of the bill language are hammered out. Democratic leaders and Brown announced last week that they had reached an accord on differences that remained after the first budget bill cleared both houses.
"I don't know what to expect," Steinberg said. "The governor does have constitutional authority in that regard, but given the fact that the budget that we've now come to will have a very healthy reserve, even above the $544 million that we passed a week ago Friday, I hope that the blue pencils are minimal."
The Senate is expected to convene at 9 a.m. on Wednesday for floor action on the trailer bills. Steinberg said all he expects most of the language that will be voted on Wednesday to be in print by tonight.
The state budget will freeze tuition rates for the state's two university systems if voters approve tax hikes in November, University of California student groups said this evening.
Charlie Eaton, a leader with the UC student workers' union, said Capitol officials told him that the budget bills will add $120 million each for the UC and California State University systems to avoid tuition hikes. But that is contingent on voter passage of Gov. Jerry Brown's tax hikes in November, he said.
The tuition freeze announcement could not be immediately confirmed by Capitol officials.
Lawmakers have yet to make budget language publicly available. Legislative floor votes have been delayed one day to Wednesday because drafting of bills is taking longer than Senate leaders predicted, according to sources who were not authorized to speak publicly.
UC regents last month examined the possibility of raising tuition 6 percent in 2012-13 if they did not receive additional funding in the state budget. CSU trustees have already agreed to hike tuition by 9 percent in 2012-13.
"I think this shows that students have changed the conversation this year about who should be paying to re-fund education," Eaton said. "It's a great step we're freezing tuition this year but the next step is to figure out how do we roll back tuition."
The UC Students Association made the announcement on its Facebook page this evening: "UCSA just got the word that Speaker Perez was able to secure a tuition freeze for UC and CSU in the budget deal funded by an additional $120 million for each segment. HUGE. This means NO TUITION INCREASE in 2012-2013. This was a top priority for students and students helped make it happen."
Gov. Jerry Brown and Democratic leaders called their budget deal Thursday a "conceptual agreement" for good reason.
With floor votes planned in three days, Brown officials and lawmakers are still filling out major details of cuts to welfare-to-work and health care for low-income children that will determine exactly how the budget will impact programs.
Since taking office, Brown has sought to eliminate Healthy Families, which provides low-cost care to 880,000 children in working poor households that lack health insurance. Brown has argued that all publicly insured patients should be in Medi-Cal as matter of efficiency and to eliminate the challenges patients face when switching between Medi-Cal and Healthy Families as their family income fluctuates.
But health advocates who say Healthy Families works well and affords better care than Medi-Cal have begun mobilizing against Brown's demand to move those 880,000 children out of Healthy Families. Behind closed doors, Brown officials and Democratic lawmakers are trying to appease health care interests caught off guard by the elimination altogether of Healthy Families after they presumed the state would only shift about 190,000 of those children.
FREMONT - Gov. Jerry Brown said this afternoon that he is not abandoning a proposal to insulate California's high-speed rail project from environmental lawsuits, suggesting he was only delaying the legislation until sometime after the Legislature considers funding for the project.
The Brown administration told environmentalists on Wednesday it was backing off a proposal to limit the circumstances in which a court could block construction of the project under the California Environmental Quality Act. Kathryn Phillips, director of Sierra Club California, said at the time that the administration suggested it could revisit the proposal later.
The Democratic governor is seeking legislative approval, likely next week, to start construction of the $68 billion project.
Asked about his proposal to protect the project from environmental lawsuits, Brown said, "I haven't abandoned that at this point ... I think it's a question of when we push and when we don't."
Brown, in Fremont for an event at car maker Tesla Motors, said his goal is to "do the right thing, but do it in a very efficient manner." He said, "We're going to do whatever it takes."
Brown's remarks were his first since announcing a budget deal with legislative Democrats on Thursday. He said staffers are still laboring on the deal's finer points.
"I spent a few hours on the telephone coming down," Brown said. "The nits and nats and details are being turned over as we speak, so staff is working in Sacramento, executive and legislative branch, so they're still struggling."
He said of the deal's prospects ahead of a vote in the Legislature next week, "I'm very optimistic."
Gov. Jerry Brown and Democratic leaders are crafting an exception for Kaiser Permanente as they prepare to move 880,000 Healthy Families patients to lower-cost Medi-Cal as part of their budget agreement.
The provision would enable Oakland-based Kaiser to keep its 200,000 Healthy Families patients as Medi-Cal clients through a direct contract with the state, according to Department of Health Care Services Director Toby Douglas. It would also give Kaiser the ability to avoid paying fees to county-based health plans for an additional 200,000 people it already serves through Medi-Cal.
As part of the budget deal, Democratic leaders agreed to dissolve Healthy Families, which provides low-cost health care to children whose families are at the federal poverty threshold ($23,050 for a family of four) up to 250 percent of that amount ($57,625). The state will shift all 880,000 Healthy Families children to Medi-Cal in waves next year, starting in January.
Ten days before the start of the next fiscal year, Gov. Jerry Brown and Democratic leaders announced a budget "conceptual agreement" this morning after bridging their biggest difference over cuts to welfare-to-work.
Democrats sent Brown a $92.1 billion spending plan last week under the threat of lost pay, but without a deal with the Democratic governor in place.
Brown, Senate President Pro Tem Darrell Steinberg and Assembly Speaker John A. Pérez made the announcement in a joint statement that contained no specific details of the compromise. The announcement said their agreement "protects education, permanently reforms welfare and includes tough ongoing cuts."
The statement says final votes to seal the agreement will take place in the "coming days." Sen. Mark Leno and Capitol aides said they expect floor votes Tuesday.
"This agreement strongly positions the state to withstand the economic challenges and uncertainties ahead," Brown said in the statement. "We have restructured and downsized our prison system, moved government closer to the people, made billions in difficult cuts and now the Legislature is poised to make even more difficult cuts and permanently reform welfare."
Just as two rival tax measures, both purporting to help struggling schools, qualified for the state's November ballot, the Census Bureau today released its annual report on school finance, revealing that California ranks 35th in per-pupil spending, more than $1,200 per year under the national average.
Furthermore, the Census Bureau report said, California ranks even lower - 42nd - in school spending vis-Ã -vis personal income.
The report provides new ammunition for Gov. Jerry Brown and civil rights attorney Molly Munger as they peddle their rival tax measures to voters. Brown says his sales and income tax boost would shield schools from deep spending cuts and increase it sharply over time. Munger's broader income tax measure would raise per-pupil spending for the state's 6 million public school students by more than $1,500 a year, roughly to the national average.
The Census Bureau report, covering the 2009-10 fiscal year, differs from the measures of per-pupil spending that are used in California's ceaseless political debates over the issue. The report includes all sources of income, including federal funds, whereas in state budget scoring, only state and local funds are counted and about $4 billion in state payments on school construction bonds and teachers' pensions are excluded.
Thus, the Census Bureau tagged California's $58.9 billion in 2009-10 "current spending" at $9,375 per pupil, which was $1,240 less than the national average of $10,675 and placed it 35th . The District of Columbia was highest at $18,667, followed by New York, Wyoming, New Jersey and Connecticut. Utah was lowest at $6,064.
Total California spending, including $7.2 billion in capital outlay and ancillary costs, was pegged at $68.1 billion.
In terms of revenue from all sources, California's $10,581 per pupil was 40th in the nation. Its revenue, some $65 billion, was calculated at 4.25 percent of personal income, while its spending, 3.77 percent of personal income, was 42nd. In relation to personal income, Alaska was tops in both revenue and spending.
The state government supplied $34.2 billion of school revenues in 2009-10, or 52.6 percent, which was higher than the national average of 43.5 percent. The federal government's 15 percent was also higher than the national average of 12.5 percent, while local source revenues at 32.5 percent were below the national average of 44 percent, reflecting Proposition 13's limits on local property taxes.
The report also provided details on how states divvied up school spending among different categories. Relatively speaking, the only two categories in which California rose above national per-pupil averages were in support staff and school administration.
Gov. Jerry Brown and legislative Democrats plan to announce a budget deal around 11 a.m. this morning, with floor votes expected Tuesday, according to Sen. Mark Leno, D-San Francisco.
Democratic leaders and Brown reached a compromise that would reduce the amount of time welfare-to-work recipients can receive full aid without finding a job, according to sources close to negotiations. But the package contains CalWORKs exemptions designed to help welfare recipients on the verge of finding employment or struggling to find work in areas with high unemployment.
Brown rejected the Democrats' plan to bridge the state's $15.7 billion gap with $250 million in property tax dollars that counties say they are owed each year. Lawmakers and Brown found other ways to help plug the remaining hole, such as additional CalWORKs savings and using more money upfront from a multi-state mortgage settlement.
Gov. Jerry Brown and legislative Democrats are nearing a deal on welfare-to-work cuts that would reduce the amount of time families could receive full aid and child care, but with exemptions such as one for people in areas with high unemployment.
The Democratic governor and lawmakers are still working out how broadly the exemptions would apply, said sources close to the negotiations who did not want to be named because the deal remains incomplete. That criteria would determine how much the state could save and the extent to which Brown can declare a shift in the welfare model as he asks voters to raise taxes in November.
Brown wants lawmakers to remake the state's welfare-to-work program, known as CalWORKs, by imposing more severe consequences for not finding work. Democrats are willing to accept some changes, but they say the governor's plan is too severe when work is scarce even for more qualified job applicants in California.
"The typical CalWORKs recipient doesn't have a high school diploma," said Mike Herald, a lobbyist for the Western Center on Law and Poverty. "They're having to compete right now in a job market where even people with high school diplomas can't get hired."
California's recession-battered economy is improving but at a "slower than desired pace," says a new overview by Beacon Economics, a private firm that advises both private and public clients, including the State Controller's Office.
"California's economy is not headed for a double dip and will continue to grow although reaching the state's pre-recession peaks on some indicators is still several years away," the Beacon report says, adding that technology, agriculture, travel and business services seem to be leading the recovery.
Beacon's forecast, to be presented today at an economic conference in Los Angeles, closely parallels the economic assumptions of Gov. Jerry Brown's latest state budget. It sees a 1.5 percent increase in non-farm employment this year, followed by a 1.9 percent gain in 2013.
"California is clearly past the bottom it hit during the recession in terms of consumer spending, the residential real estate market, state GDP, and international trade," says Beacon economic researcher Jordan Levine, said in a statement.
"And although Los Angeles County is lagging the state, it also didn't fall as far as surrounding communities during the recession," Levine continued. "The biggest worry we have for Los Angeles is the fact that manufacturing -- traditionally an important source of growth in the region -- does not seem to be experiencing the same renaissance being seen in much of the rest of the nation."
On a mostly party-line vote, both houses of the Legislature sent Gov. Jerry Brown a $92.1 billion spending plan Friday without a deal on welfare cuts.
Lawmakers faced a Friday deadline to pass the budget in order to avoid losing their pay and expense money. It marked the second budget lawmakers passed using their new majority-vote authority under Proposition 25, rather than the supermajority vote required prior to 2011.
While lawmakers sent Brown the main budget bill, Assembly Bill 1464, they did not send him the bulk of more than two dozen "trailer" bills that actually explain how to cut programs and raise revenues to carry out the expenditures. Senate President Pro Tem Darrell Steinberg, D-Sacramento, said that is because legislative Democrats and Brown still must resolve "small but important differences."
Democrats believe that they satisfied the Proposition 25 requirement by sending AB 1464 alone. Last year, Controller John Chiang cited their failure to pass all of the revenue-related trailer bills by the June 15 deadline as one reason to dock their pay, but his power to interpret their budget was curtailed by a Sacramento Superior Court decision in April.
Sen. Mark Leno, D-San Francisco, said Brown would sign the main budget bill and all related bills before the July 1 start of the next fiscal year.
The Democrats' budget relies on cuts to courts, counties and state workers, along with an $8.5 billion November tax hike on sales and high-income earners. It also includes funds from now-defunct redevelopment agencies, borrowing from special funds and extending cuts to in-home care, child care and welfare job training.
The California State Association of Counties, whose support Gov. Jerry Brown has relied upon since taking office last year, immediately slammed a Democratic plan Wednesday to take $250 million that had gone to local governments under deals with now-defunct redevelopment agencies.
Counties had long-standing "pass-through" agreements with redevelopment agencies to receive a share of property tax dollars each year. CSAC Executive Director Paul McIntosh said Wednesday that past agreements are still legally valid and should still be upheld.
"I'm not sure how they can suspend legally binding agreements on contracts," McIntosh said Wednesday of Democratic lawmakers. CSAC sent a letter (PDF) this afternoon to the Legislature expressing its opposition.
Brown did not include the $250 million in his budget. President Pro Tem Darrell Steinberg, D-Sacramento, said he believes the money should be divided up like any other property tax dollars among schools and local governments. He said counties have benefited generally by the elimination of redevelopment agencies, suggesting they should not complain about this loss of funds.
California's budget benefits by any additional dollars that go to schools because it reduces the state's burden. Lawmakers will not pass a bill stating that this money is theirs, but just assume it as one revenue source that helps erase the $15.7 billion deficit.
"This occurs by operation of law," said Steinberg, an attorney. "We don't take an affirmative act to appropriate the money. That's what occurs."
McIntosh said counties have already included this money in their budgets for the next fiscal year. He said Yolo County, for instance, had an agreement for $5.5 million, equal to nearly one-tenth of its $56 million general fund.
Legislative Democrats will vote by Friday's deadline on a state budget that has a "very substantial reserve" and is free of gimmicks to erase a $15.7 billion deficit, Senate President Pro Tem Darrell Steinberg said this morning.
Assembly Democrats took a harder line than their Senate counterparts during the budget committee process earlier this year by outright rejecting the governor's overhaul of welfare-to-work and Cal Grants.
Lawmakers face a constitutional deadline Friday to pass a budget under threat of losing their pay. But that threat is not as severe as last year, when Democrats sent Brown a budget but still lost their pay because Controller John Chiang deemed their plan out of balance. A Sacramento Superior Court judge ruled this spring that the controller has no such authority to interpret the Legislature's budget.
Even its own attorney concludes that the California Citizens Compensation Commission lacked authority to cut legislators' per diem for living expenses and eliminate their lease-car program in separate actions over the past three years.
Now the commission wants another opinion.
The independent, seven-member panel of gubernatorial appointees voted 5-1 Thursday to ask the Department of Personnel Administration to provide outside counsel to consider the scope of its control.
"So we can kind of settle this once and for all," Commissioner Scott Somers said in voting yes.
Thus far, the commission has struck out in finding a state attorney who will ratify its authority - but the issue has simmered for years because lawmakers have been reluctant to challenge cuts to their compensation.
The Department of Personnel Administration concluded in 2009 that the panel lacks authority over lawmakers' travel and living-expense subsidies, and the Attorney General's Office cited a similar rationale in opining on travel allowances last year.
Commission Chairman Tom Dalzell criticized the seven-member pay panel Thursday for balking at the advice.
"We need to stop asking for an opinion and then ask for another opinion when we don't like what it is," Dalzell said.
Gov. Jerry Brown isn't backing down from his call for $8 billion in spending cuts, despite public push-back from Democratic legislative leaders.
"They've got to make cuts," Brown told a gathering of county supervisors in Sacramento today. "The big battle will be on how much is ongoing and how much is not ongoing, so you have to do something similar next year and the year after that. But we're going to get $8 billion in cuts."
The Democratic governor's revised budget plan calls for reductions to programs that help the poor, including the state's welfare-to-work program and Cal Grants for low-income students, to help close a projected deficit that his finance officials say has grown to nearly $17 billion. Billions in additional cuts to schools, colleges and the courts would come at the end of the year if voters reject his tax measure on the November ballot.
Democratic legislators have vowed to try to "buy out" some of those cuts with other solutions, such as dipping into a planned $1 billion reserve.
Brown told reporters after his talk at the California State Association of Counties' board of directors meeting that he is having difficult but pleasant conversations on the budget with various interests, including Democratic leaders. He said he met with Assembly Speaker John A. Pérez yesterday and had an hourlong meeting with Senate President Pro Tem Darrell Steinberg today.
"We're putting our toes in the water," Brown said.
Legislators face a June 15 deadline to pass a budget.
Pay for California Gov. Jerry Brown, legislators and all statewide officeholders will be cut by 5 percent from current levels, the state's independent salary-setting commission decided today.
The seven-member California Citizens Compensation Commission, the majority of whom were appointed by former Republican Gov. Arnold Schwarzenegger, voted 5-1 for the pay cut at a morning meeting at Sacramento City Hall.
The panel, created by voter passage of Proposition 112 in 1990, is charged with setting compensation for the governor, legislators, and for all statewide officeholders from treasurer to controller to Board of Equalization members.
By law, the commission must take action by June 30 and its decisions take effect in December.
Commissioner Charles Murray had helped push the idea of a 5 percent pay cut for all officeholders, meant to save the state about $650,000 - only a tiny sliver of the state budget but symbolically significant to supporters.
Brown currently receives a salary of $173,987 and legislators are paid $95,291, except for legislative leaders of both parties. The Assembly speaker, Senate president pro tem and the minority party leader of each house receive $109,584.
Other current salaries range from $151,127 for Attorney General Kamala Harris and state schools Superintendent Tom Torlakson to $130,490 for the lieutenant governor, secretary of state and Board of Equalization members. The state treasurer, controller and insurance commissioner are paid $139,189.
A 5 percent reduction translates to $8,699 fewer dollars for the governor, $4,765 for legislators, $5,479 for legislative leaders, and amounts ranging from $7,556 to $6,525 for state constitutional officers.
The commission last cut salaries for legislators and statewide officeholders in 2009, when it approved an 18 percent reduction in pay and benefits. It also sliced lawmakers' per diem that year from $173 to $142.
Last year, the pay panel did not slash pay but eliminated a Capitol program providing cars to legislators, who now drive their personal vehicles and are reimbursed for mileage.
* Updated at 1:05 p.m. Thursday to delete a sentence that said state Controller John Chiang last year suggested the pay panel lacked authority to create a car allowance for lawmakers.
It's official: The proposal is in writing and set for a vote -- a 5 percent pay cut for Gov. Jerry Brown, legislators, and for state constitutional officers from controller to treasurer to Board of Equalization member.
Charles Murray of the California Citizens Compensation Commission said Wednesday that he will bring his written proposal to Thursday's meeting of the pay panel but may step aside if another commissioner has a similar plan.
"I think they should lead by example," Murray said of state officeholders, noting that his 5 percent pay cut proposal mirrors the percentage that Brown is seeking from state workers.
Asked about prospects for a vote Thursday, Murray said simply, "We're going to force one."
Charles Reed, chancellor of the California State University System for the past 14 years, announced Thursday that he's retiring as it and other state-supported higher education institutions cope with severe budget cuts.
Reed, who came to California after 13 years as chancellor of Florida's state university system, didn't cite money woes as the reason for retiring, but did allude to them in his announcement.
"Our campuses have continued to flourish even in the face of budgetary challenges and tremendous growth, he said. "Throughout my time here, the CSU has grown by more than 100,000 students, and I have been honored to sign more than a million diplomas. I take great pride in the CSU's mission to serve California's students, and I am proud to have played a role in carrying out that mission during these critical years."
As state aid has dwindled in recent years, CSU, the University of California and the state's community colleges have reduced class offerings and raised fees. CSU has been hammered in recent weeks by controversy over raising the salaries of top administrators while increasing students' costs.
Photo Credit: Charles Reed in 2009. Hector Amezcua/The Sacramento Bee
The state's fiscal analyst has explained one way lawmakers could avoid Gov. Jerry Brown's deepest cuts, but the Legislature's top education finance aide said today that solution is unconstitutional.
Rick Simpson, the Assembly's education finance guru, said he believes Brown accurately calculated how much the state owes K-12 schools and community colleges at $53.7 billion in 2012-13. The nonpartisan Legislative Analyst's Office contends that Brown overestimated that amount by $1.7 billion.
Simpson said he wrote the language in the 2009 budget bill spelling out the formula by which the state must pay schools in years when revenues grow faster than inflation and attendance. "The governor is following what the law says," Simpson said today.
He added that he believes the law merely confirms what voters placed in the constitution with Proposition 98 and Proposition 111.
But the Analyst's Office says that interpretation leads to "irrational outcomes" - such as when Brown announced last week that California owes schools more money despite revenues being lower than expected.
The outcome of the disagreement will likely affect how other programs are treated in the budget and how voters view Brown's push for tax increases in November.
LAO education analyst Edgar Cabral reiterated today, "We think our interpretation is the correct interpretation." Even if the 2009 bill spells out a different formula, Cabral noted that it can be reversed through new legislation and does not reflect what his office believes is in the constitution.
The state's top fiscal analyst said today that it "makes sense" for California to help bridge its $15.7 billion deficit with mortgage settlement money, and that the state should be even more aggressive by using more money upfront than Gov. Jerry Brown proposed.
The state will directly receive about $411 million from a multi-state settlement with five banks over their foreclosure practices. Brown has proposed using $292 million of that to solve the current deficit, saving $118 million for the following year, but the nonpartisan Legislative Analyst's Office recommended today that lawmakers use all $411 million of it now.
Brown has proposed using funds to retire a share of housing bond debt and pay for costs in Department of Justice and Department of Fair Employment and Housing programs.
The Analyst's Office said there may be legal risks involved because some money would pay for investigating organized crime, gangs and drug trafficking - none of which are related to the mortgage crisis. But the Analyst's Office believes "the magnitude of the additional budget year savings justifies any legal risk associated with offsetting General Fund costs less directly related to the settlement."
It was a bizarre component of Gov. Jerry Brown's latest budget - despite fewer revenues than expected in January, the governor said the state actually owes more to schools under its complicated funding formula.
The nonpartisan Legislative Analyst's Office says it may be wrong, not bizarre.
One of the key criticisms in the Analyst's review last week was that Brown had overstated how much money the state owes to schools by nearly $2 billion. In a presentation to school officials this weekend, the Analyst's Office said it has "serious concerns" with how the governor treated school funding and that his interpretation leads to "irrational outcomes" of the sort that results in more money to schools despite less revenue.
The outcome of the disagreement will likely affect how other programs are treated in the budget and how voters view Brown's push for tax increases in November.
California's budget deficit is likely worse than Gov. Jerry Brown's estimate of $15.7 billion, the state's top fiscal analyst indicated Friday.
Brown proposed a $91.4 billion general fund budget Monday that slashes health and welfare programs, courts and state worker pay. His proposal also relies on voters temporarily raising taxes on sales and wealthy earners to help cover this year's budget gap and deficits in future years.
The nonpartisan Legislative Analyst's Office said Friday that Brown's revenue forecast is "reasonable," though the Analyst's own projection is still $550 million below the governor's through June 2013. On top of that, the LAO warned that Brown's estimate of money available from former redevelopment programs could be overstated by $900 million.
Based on those initial judgments, the Analyst's Office seems to suggest the state deficit is north of $17 billion rather than $15.7 billion, which was Brown's estimate. But the Analyst's Office didn't provide an exact deficit figure and simply says that the budget problem is "likely somewhat larger" than Brown has estimated.
The Analyst's Office estimates that the state now has an accumulated deficit of $7.6 billion -- meaning a hole that exists because the state failed to balance budgets in the past -- as well as a structural imbalance of roughly $10 billion between revenues and expenditures annually. It believes that the governor's mix of onetime solutions to solve the accumulated deficit is fine, but that the state also needs permanent cuts or revenues to truly solve the gap.
Post updated to clarify that the Analyst's Office is not providing an exact deficit estimate.
California's judicial civil war -- judge against judge over money and power -- has been rekindled by Gov. Jerry Brown's revised state budget.
Chief Justice Tani Cantil-Sakauye convened a special meeting of the state Judicial Council in Sacramento today to discuss Brown's proposed cuts in state support for the courts. Right off the bat, a member of the rebel Alliance of California Judges berated the body for cutting money for trial courts while maintaining a bloated judicial bureaucracy in San Francisco and wasting money on a now-abandoned statewide computer system.
Sacramento Superior Court Judge Steve White delivered the broadside, pointing out that he and his colleagues had warned of continued cuts in state funding and complained that the judicial leadership -- Cantil-Sakauye and her predecessor, Ron George -- had ignored them.
"We were right," White told members of the council. "The time has come to stop and change that."
Against Gov. Jerry Brown's wishes, the California Public Employees' Retirement System board voted today to phase in a higher cost to the state over two years rather than bill the state immediately in full.
The disagreement was over the pace at which PERS is lowering its assumptions about future investment returns from 7.75 percent to 7.5 percent, called the discount rate. Such changes are intended to compensate for lower market returns. When the rate of return assumption goes down, governments must contribute more.
The PERS board agreed to phase in the change over two years at a onetime $137 million savings ($78 million general fund), but Brown had wanted the board to drop the discount rate immediately. In a letter he sent to the board today, Brown reasoned that despite the onetime savings, the delay would actually cost the state general fund $145.9 million over 20 years in higher interest costs.
Senate President Pro Tem Darrell Steinberg today repeated a pledge to look for budget solutions that would allow lawmakers to preserve some services targeted with steep cuts under Gov. Jerry Brown's revised budget plan.
"I said on Monday, I'm not looking for a public fight here," the Sacramento Democrat said this morning. "We're looking to work collaboratively and yet not be afraid to have our differences or air our differences with the other stakeholders, the other parties, but come to a resolution where we can in fact buy out some of the worst cuts."
The revised budget proposal released by the Democratic governor Monday calls for roughly $8 billion in cuts to close a projected deficit that has grown to $15.7 billion since his January budget was unveiled. Those cuts include reductions to health and welfare programs and Cal Grants for low-income students.
Steinberg said he doesn't like many aspects of the proposal, including using money won in the mortgage settlement with major banks and reducing funding for the courts, but added that cuts with the most severe effect on the state's neediest constituencies will be the first to come off the chopping block.
"To me a cut that, you know, will result in the difference between life and death and a cut that will increase homelessness by definition, it's our obligation it seems that we do everything we can to avoid those cuts," he said.
Steinberg again floated the idea of using the state's planned $1.05 billion reserve to plug some of the cuts. Ratings agency Standard & Poor'swarned lawmakers against that approach Tuesday, writing that the reserve "is low but important considering that the potential Facebook initial public offering-related income tax revenue is especially difficult to forecast."
"I respect the rating agencies, but the rating agencies don't represent a hungry kid who can't do well in school because his family has suffered a big cut in his CalWORKs grant," Steinberg said, referring to the state's welfare-to-work program.
He declined to specify other routes that majority Democrats may take to balance the budget without making all of the cuts proposed by Brown.
Here's a video of Steinberg's previous comments on Monday on how he views the cuts and how he hopes to plug the deficit:
As Standard & Poor's urged lawmakers Tuesday to pursue "credible" budget solutions to bridge the state's $16 billion deficit, the ratings agency did not approve of Senate leader Darrell Steinberg's idea to forego a reserve this year.
In the report, S&P suggested it could lower the state's ratings outlook or even impose a downgrade if lawmakers and Gov. Jerry Brown don't pursue real solutions that bolster the state's cash situation this summer. The state still has a "positive" outlook but an A- credit rating, which rates lowest in the nation.
Brown built a $1.05 billion reserve into his $91.4 billion general fund budget for 2012-13. Steinberg said yesterday that one idea was to use that money instead on public programs.
"Look at the size of the reserve," Steinberg said. "You build up a reserve during good times and during the most difficult times, you don't want the resources sitting necessarily in the bank, you want to use it on mitigating the impact on people in the economy."
"It's raining," observed Sen. Mark Leno, D-San Francisco, a reference to the reserve nickname of "rainy-day fund."
But S&P said today, "In our view, this reserve level is low but important considering that the potential Facebook initial public offering-related income tax revenue is especially difficult to forecast."
Gov. Jerry Brown has weathered criticism for making an aggressive bet on revenues in last year's budget act, but the state's top fiscal analyst approves of his latest forecast, which is more conservative.
The nonpartisan Legislative Analyst's Office said today that its own forecasts "now are fairly similar to the administration's in both 2011-12 and 2012-13, with just a few hundred million dollars of bottom-line differences each year." LAO forecaster Jason Sisney would not specify whether his estimate is higher or lower than the governor's, only that they are "fairly close, and in the revenue forecasting world, fairly close means a great deal."
That is a significant change after the LAO had disagreed since November with Brown's revenue estimates, saying the governor had been too optimistic in thinking the state would remain flush with capital gains revenue after a hot spring 2011. Several economists and fiscal experts said in today's Bee that last year's optimistic assumption was driven much more by politics than economic data.
Interestingly enough, the scaling back of capital gains forecasts comes on the eve of the highly anticipated Facebook initial public offering slated for Friday morning that will generate billions for California tax coffers. The Analyst's Office said transactions related to the IPO would be responsible for one-fifth of California's economic growth over the next 13 months.
The LAO estimates that California will receive $2.1 billion through June 2013 from the Facebook IPO alone as employees and insiders cash in their stock options. That figure also assumes that voters will pass Brown's tax hike on wealthy earners and sales. The LAO increased its projection after Facebook increased its per share estimate this week.
The LAO assumes the Facebook IPO will start at $38 and that shares will trade at $45 in six months, when a new round of insiders are slated to cash in.
Brown's Department of Finance was more conservative on Facebook, estimating the state would receive $1.9 billion, which includes $400 million if his tax plan passes. Finance assumed a $35 per share IPO and a $35 per share price after six months.
Finance spokesman H.D. Palmer said the department had even calculated the state's tax benefit from Facebook CEO Mark Zuckerberg's initial transaction alone. California is slated to receive $195 million this month when Zuckerberg exercises his option on 60 million shares, Palmer said.
PHOTO CREDIT: In this Feb. 5, 2007 file photo, Facebook CEO Mark Zuckerberg smiles in this office in Palo Alto, Calif. AP Photo/Paul Sakuma, File
The reaction to Gov. Jerry brown's budget plan is rolling in. Here's a sampling from prepared releases:
Sen. Mark Leno, D-San Francisco and chair of the Senate Budget Committee:
"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. 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. We have just two ways to fill that hole, cuts and new revenue. While budget cuts are unavoidable at this juncture, they must be done in the most sensitive way to prevent further harm to our economy and essential infrastructures. We cannot continue to expect our state to thrive while we simultaneously give away tax breaks to large corporations and scale back funding for our schools, universities, social programs and health care services that are important to children, lower and middle class families and elderly and disabled Californians. We will not have the resources we need to put California back on its feet without the revenues that the Governor is proposing in his November ballot initiative. I look forward to working together with my colleagues in the Legislature and the people of California to fully analyze this latest budget proposal and present a transparent and balanced plan to the Governor by June 15."
Senate Republican Leader Bob Huff of Diamond Bar:
"Unfortunately, the Governor's increased budget deficit was predictable. Senate Republicans have consistently raised concerns that last year's majority vote budget relied on too many phony spending reductions, other irresponsible revenue assumptions, and gimmicks. As state revenues have been increasing, total spending has also increased by $20 billion since the 2007-08 state budget. Despite an 11% unemployment rate, two million Californians out of work, and California being ranked the worse state in the nation to do business 8-years in a row, the Governor and Democrats have no proposals to help grow the economy or to help our small business community. Republicans believe we must get people back to work, which in turn will responsibly increase our state tax revenues."
Legislative Democrats are bracing for "more work on the cuts side" once Gov. Jerry Brown releases his revised budget next week, Senate President Pro Tem Darrell Steinberg told reporters during a weekly q-and-a in his office.
"We all expect the news to be rough. That's no secret," the Sacramento Democrat said.
That will likely mean more steep cuts to the state's health and human services programs. An estimated $1.5 billion lawmakers had hoped to reserve for affordable housing programs is also "certainly a very ripe candidate" for use for general budget relief, he said.
"We have not shied away from doing what we have to do and we won't shy away now," he said. "But we will certainly fight to save more than we lose.'
When asked what areas he hopes to protect from future reductions, Steinberg cited CalWorks, the state's welfare-to-work program, as a top priority. He said studies showing correlation between cuts to those services and homelessness make the decision "one of those can you sleep at night kind of questions."
"I would do just about anything to avoid that cut," he said.
Brown's budget is expected to rely on up to $9 billion in revenues from his proposed initiative to temporarily raise income taxes for top earners and enact a quarter percent increase in the state sales tax, with a round of "trigger" cuts after the election if the November ballot measure fails. While the revenues at stake on the November ballot has grown since the governor's January budget proposal because of changes to the tax plan, Steinberg said he expects the triggers to still target K-12 schools, higher education and the courts.
"I don't see that the fundamentals will change even if the number changes," Steinberg said. "But you've got to make up for a bigger number."
PHOTO CREDIT: Senate President Pro Tem Darrell Steinberg, D-Sacramento, speaks at the Capitol Bureau on Jan. 20, 2011. Hector Amezcua, Sacramento Bee.
Democratic state Sens. Joe Simitian and Noreen Evans today rolled out a proposal aimed at keeping the gates open at more than 50 California state parks set to close this summer.
The proposal, which will be heard by a Senate budget subcommittee Wednesday afternoon, includes shifting as much as $40 million from existing state accounts for road maintenance, septic system repairs and trails and off-highway vehicle funds to cover parks' costs. That money would be used for purposes consistent with the original intent of those funds, Evans and Simitian said.
Other recommendations include facilitating operating agreements with nonprofits, improving entry fee collection efforts and exploring other funding sources, such as license plates and concessions agreements. Some parks would still likely have to close, but supporters said they hoped those would be able to reopen in the future thanks to the plan.
State parks officials announced last year that 70 of the state's more than 270 parks would be targeted for closure due to budget cuts. The closures are projected to save about $22 million. The parks department has been able to form partnerships with nonprofits and local governments to keep 16 of those parks open. Richard Stapler, spokesman for Natural Resources Secretary John Laird, said officials are involved in substantive talks involving about a dozen additional parks.
The California Board of Equalization overstepped five years ago when it voted to tax flavored malt beverages, known popularly as "alcopops," as hard liquor instead of beer, a state appellate court has ruled.
The Sacramento-based 3rd District Court of Appeal, in a decision released Monday, described the bottled drinks, such as Mike's Hard Lemonade and Smirnoff Ice, as "hybrids" of beer and distilled spirits but based its decision on a state agency's classification of them as beer.
The difference in taxation is immense. California taxes beer at 20 cents a gallon but hard liquor at $3.30 per gallon.
Anti-alcohol activists argued that the makers of the drinks marketed them to young people and pressed for the higher taxes to raise prices and discourage sales. The Board of Equalization's three Democrats agreed while its two Republicans voted against the hard liquor classification.
Diageo Guinness USA, which markets Smirnoff brands, and the Flavored Malt Beverage Coalition challenged the Board of Equalization decision in court, noting that an alcopop's alcohol content was similar to beer's, but lost at the trial level before winning the appellate court decision.
"The Legislature did not delegate authority to the board to adopts its own classification of alcoholic beverages," Justice Harry Hull wrote in the 3-0 decision.
Gov. Jerry Brown wants K-12 districts to plan for the next school year as if voters will pass his $9 billion tax hike in November, but the vast majority of them are refusing to do so, according to a new Legislative Analyst's Office survey.
Nearly 90 percent of respondents said they will wait until after November to spend the money. In doing so, districts will likely lay off more teachers and increase class sizes beyond the level that Brown wants heading into the election.
District officials typically budget conservatively, assuming a worst-case scenario. This year, they have a huge uncertainty in not knowing how the November tax initiative will fare, yet they are required to decide how many teachers and staff to lay off before the school year starts.
According to the survey, 36 percent of districts said they would budget this year without the governor's tax hike but plan to spend the money in 2013-14. One-third of districts said they would wait until after November to figure out how to spend the money in the second half of the school year, while one-fifth said they would predetermine an automatic trigger spending plan that kicks in next spring if the taxes pass.
Only 8 percent of districts said they will pursue Brown's preferred path of installing trigger cuts for the second half of the year should the tax hike fail.
Gov. Jerry Brown wants to eliminate the seven-member board that hears appeals on unemployment insurance benefits -- whose members are often termed-out California legislators -- and turn their work over to civil service administrative law judges.
But the Legislature's budget analyst, Mac Taylor, says that eliminating the Unemployment Insurance Appeals Board, whose members are appointed by the governor and legislative leaders, would erode legislative oversight of the appeals process.
Taylor, in a new report to the Legislature, agrees that unemployment insurance appeals should be heard by state administrative judges, but says the board should remain intact, albeit with two fewer members, to oversee the appeals process and set overall policy for benefits. He also recommends that salaries of the remaining five board members be lowered from $128,112 a year to $114,000, the same as the administrative judges, and that members meet the same qualification standards as the judges.
Finally, he suggests that the governor, who now appoints five members of the board, get three appointments while each legislative house continues to have one appointee each. Although the board has seven positions, it has had only five members - three of them former legislators - since last fall.
Brown's proposal and Taylor's alternative will be part of deliberations on a 2012-13 budget.
Ratings agency Standard & Poor's raised concerns today after California income tax revenues fell short in April and a judge ruled the state controller cannot withhold legislative pay based on budget quality.
In its review, the agency said the two developments "could weaken the state's prospects for further improvement in its fiscal structure," though it noted that this outcome is not inevitable.
S&P did not downgrade California's worst-in-the-nation A- credit rating, though it used today's report to suggest the latest developments could threaten the progress the agency has praised in recent months.
California fell nearly $2 billion shy in personal income tax revenues in April, the state's biggest collection month, according to state Controller John Chiang. The Legislative Analyst's Office estimated last week that California is running about $3.5 billion behind Gov. Jerry Brown's forecast for the fiscal year to date in personal and corporate income taxes. The LAO also said the state could also be short by a few billion dollars by June 2013.
A Sacramento Superior Court judge last week ruled in favor of state lawmakers who alleged that Chiang violated the state constitution last summer when he withheld their pay for 12 days for submitting a budget he considered out of balance. Judge David I. Brown ruled that Chiang had overstepped his bounds, and that the Legislature has broad authority to determine for itself when a budget is balanced.
Brown's ruling posed more of a worry for S&P, which stated, "This decision, in our view, may open the door for the Legislature to potentially rely on budget maneuvers that may be politically expedient but fiscally unreliable when devising deficit solutions."
The agency stated further, "We believe that the Steinberg decision, coupled with what we see as reluctance among legislators to make additional difficult spending cuts, increases the risk of a less structurally balanced budget for fiscal 2013."
Update (5 p.m.): The Legislative Analyst's Office revised its April estimates to say that general fund revenues are lagging by about $3 billion for the fiscal year to date, which accounts for a shortfall in income taxes but a slight boost in sales and insurance taxes. The Analyst's Office still says Brown's revenue forecast is likely a "few billion dollars" short through June 2013.
Senate President Pro Tem Darrell Steinberg, D-Sacramento, issued the following statement in response to S&P's comments:
"We know we have a task ahead of us and we are prepared to make the tough decisions required to balance a credible budget on time. The S&P report acknowledges the tremendous progress we have made in tackling the deficit and there is no reason to assume this year will be any different. We are hopeful that this budget coupled with the Governor's tax initiative will help us put an end to the deficit cycle. The court decision upholds the language of the state constitution, reaffirms that a third party has no authority to arbitrarily invalidate a budget and has not fundamentally changed any aspect of the budget process. To imply otherwise is presumptuous."
California voters are inclined to support Gov. Jerry Brown's sales and income tax increase, but by a less than overwhelming margin, a new poll by the Public Policy Institute of California has found.
The PPIC poll of likely voters found 54 percent in favor of Brown's tax measure, for which signatures are now being gathered, and 39 percent opposed. The poll also indicated that a rival measure sponsored by civil rights attorney Molly Munger and the state PTA to raise income taxes on most taxpayers for schools faces an uphill struggle.
Brown has attempted to persuade Munger to drop her initiative, but she's poured millions of dollars into signature-gathering and is likely to turn in signatures soon.
Brown has portrayed his measure as one that would save schools from massive cuts, building on an assumption -- confirmed by the PPIC poll -- that K-12 education is the most popular area of the state budget. But Munger contends that Brown's measure would actually give schools little or no new money.
Overall, the poll found, voters are more than willing to tax high-income Californians, as Brown's measure would do. The poll didn't ask about Munger's plan specifically, but showed nearly three-fifths of voters opposed to raising income taxes on most taxpayers for schools, which her measure would do. They also oppose the sales tax component of Brown's proposal, a quarter-cent increase. That opposition drags down overall support for the governor's approach.
The PPIC poll also found that Brown's approval rating among all adults is 43 percent and among likely voters 47 percent, but support for his handling of public education - -the broad subject of PPIC's polling -- drew approval at just half of those levels. In fact just 23 percent of likely voters like his education policies.
However, Brown is doing much better than the Legislature, which gained the approval of just 15 percent of likely voters in the PPIC poll.
With state revenues slowing to a trickle as the end of April draws near, the state's top fiscal analyst said late Wednesday that California could be "a few billion dollars" shy of Gov. Jerry Brown's budget projections through June 2013.
The nonpartisan Legislative Analyst's Office said total personal income tax collections would likely be more than $2 billion below Brown's expectation of $9.4 billion for the month. Because the state was already running behind, it would mean PIT revenues would be $3 billion shy for the fiscal year compared to Brown's updated January projections.
Corporate taxes are also likely to trail Brown's forecast by about $450 million for the fiscal year so far, according to LAO.
Unless sales taxes are robust, that means the state would be about $3.5 billion behind for this fiscal year, and likely a "few billion dollars" through the budget cycle that ends in June 2013, the Analyst's Office estimates.
Brown pegged the state's deficit at $9.2 billion through that month, and he suggested last week that the problem might be $1 billion or $2 billion worse than previously stated.
In a win for lawmakers, Sacramento Superior Court Judge David I. Brown affirmed his decision today that Controller John Chiang cannot unilaterally block their pay if they submit a budget they consider balanced.
Attorneys for the Legislature and Chiang battled in an hour-long hearing that at one point had the controller's attorney suggesting lawmakers could just write a flimsy state budget on a ham sandwich wrapper and send it to the governor to get their pay.
Most of the hearing featured verbal sparring between Brown and deputy attorney general Ross Moody, who represented the controller. Chiang did not say Wednesday whether he would appeal.
Democratic legislative leaders who sued Chiang contend the controller illegally took control of the budget process when he found their budget out of balance and blocked their pay for 12 days last June.
During the hearing, one of the Legislature's attorneys, Fredric D. Woocher, said of Chiang, "When did he essentially get to appoint himself king?"
Judge Brown was sympathetic. He told Chiang's side, "If your position is correct, nobody is going to want to run for governor anymore. The big race in California is going to be for controller because the controller is going to be the person. He or she will be the top power in the state."
As state leaders hope for a surprise uptick in revenues this spring, state Controller John Chiang reported Tuesday that California lagged last month by $233.5 million, or 4.2 percent.
The state missed its target most in corporate income taxes, which were $125.8 million (8.2 percent) off the mark. Income taxes and sales taxes were each less than 2 percent behind Gov. Jerry Brown's revenue forecast.
For the fiscal year that ends in June, the state is now trailing Brown's expectations by nearly $1.1 billion, or 1.9 percent.
"While revenues continue to fall short, the months ahead will be far more important to the State's finances," Chiang said in a release. "More than 35 percent of all revenues are expected in the next three months, making this the most important period for tax collection in the fiscal year."
Because April is such a telling month for state budgeting, Chiang has a daily revenue tracker on his website. Through Friday, the state had cleared $923 million. Brown's budget is counting on $9.132 billion for the month.
Lawmakers are delaying significant actions on the budget until Brown issues his May budget revision, which takes into account April revenues. Brown is circulating a new tax initiative with larger increases on sales and wealthy earners than his initial proposal in part to give lawmakers a bigger buffer against the possibility of disappointing spring tax revenues.
California state officials sued Orange County today to recoup $73.5 million in property taxes, the latest development in a feud stemming from last year's state budget.
Since its 1994 bankruptcy, Orange County received an enhanced share of state car taxes to help regain its financial footing, the Department of Finance contends. But last year, Gov. Jerry Brown and lawmakers agreed to redirect that share -- $48 million -- to pay counties for new responsibilities they assumed from the state, such as housing low-level prisoners and overseeing parolees.
Orange County lawmakers attempted with little success last summer to have the state restore the car tax money before the end of session. In its place, Orange County has withheld property taxes this year that normally pay for K-12 schools and community colleges - money that the county believes is rightfully its own.
Orange County spokesman Howard Sutter disputes the state's characterization of the car tax history. While some money was dedicated to repaying bankruptcy debt, Sutter contends that did not result in the county receiving more than it was due under state tax formulas.
The state Department of Finance along with California Community Colleges Chancellor Jack Scott filed suit Thursday in Orange County Superior Court, alleging that the county has taken "the extraordinary step of flouting the law and illegally redirecting property tax revenue payments from schools and community colleges to the county's own general fund." The state wants the court to order the county to pay property taxes to schools.
Sutter issued the following in a statement: "While the county has been proactive in discussing this issue with legislators and school officials, the Department of Finance and Attorney General's office have made no contact with the county regarding this matter. The county is disappointed the state has now resorted to filing a lawsuit. We are evaluating the merits of their suit and cannot comment on its specifics at this time until we have had time to completely review their claims."
"A number of these proposals have been overstated in value or blocked by the courts," said Finance spokesman H.D. Palmer.
Among the highlights:
Finance believes the plan to take $1.3 billion in mental health funds and $131 million in First 5 money would be illegal. It also believes cuts to In-Home Supportive Services and prisons face legal hurdles. Republicans respond that Democrats pursued similar measures in the past. Some legally questionable moves survived because Democrats convinced groups not to sue; Republicans say they believe the same moves can occur again.
Finance says the $400 million in state worker savings could not be reached by reducing operating expenses. The Republican plan suggested the reduction could also occur through a once-monthly furlough or 4.6 percent pay cut.
Finance says the state could benefit by $520 million to $880 million by eliminating the funds for affordable housing, lower than the $1 billion that Republicans are counting on.
Finance says that savings from inmate pharmaceutical costs and revenues from selling ad space on highway electronic signs are overstated. Republicans say they have leeway because they are not counting revenues from Facebook's public stock sale.
Geena Davis has a new leading role to add to her resume.
The Academy Award-winning actress has been elected to chair the California Commission on the Status of Women. The leadership decision was announced at an event at Mount St. Mary's College held to unveil a new report by the agency, which promotes equality and justice and advises lawmakers on issues that affect the state's female population.
"I am honored to lead the critical work of the Commission to improve the lives of all women and girls in California," Davis said in a statement announcing her new post. "It's not just an issue of gender equality; it's also an economic issue. Addressing inequalities is good not only for women, but also for California as a whole."
Davis, who founded the Geena Davis Institute on Gender in Media, was appointed to the commission by fellow film star and then-Gov. Arnold Schwarzenegger in 2010. Her new lead could be short lived, however. Gov. Jerry Brown called for eliminating the nonpartisan agency in his 2012-2013 budget proposal. His office says the move would save the state an estimated $270,000.
PHOTO CREDIT: Geena Davis in 2005 Associated Press/ Kathy Willens)
Senate President Pro Tem Darrell Steinberg said Thursday he considers the Republican budget plan a "rehash" that is legally questionable and would not solve California's fundamental budget problems.
Gov. Jerry Brown and legislative Democrats have gone all-in on their multibillion-dollar November tax initiative, which they say will spare the state from deep education cuts this year and from deficit problems in the future.
Republicans issued their own budget plan Thursday to refute that argument, saying that Democrats do not need higher taxes to fully fund schools and that a growing economy and spending restraint will rescue the state in the coming years.
Legislative Republicans rolled out a budget plan Thursday that relies on cutting state worker pay, eliminating affordable housing funds and using pots of money dedicated for mental health and childhood development.
Republicans believe their plan eliminates the state's $9.2 billion deficit without new taxes and preserves the same amount of funding for education that existed last year. They say it undercuts Gov. Jerry Brown's argument that voters must pass higher taxes in November to spare schools from deep reductions.
"The state budget is a reflection of priorities and there is no reason to hold our schools hostage to the uncertainties of the proposed tax increase initiative that may not benefit our students," GOP legislative and budget leaders wrote in a joint letter. "With political will, we can work together in a bipartisan manner to ensure that our schools are protected from trigger cuts, whether the Governor's tax initiative is ultimately accepted or rejected by the voters."
Democrats have all but written off Republicans in this year's budget process because they have majority-vote budget authority and are going directly to voters for a tax hike on sales and upper-income earners. Brown has said that if voters reject the tax hike, the state will need to cut about $2.4 billion in K-14 classroom funds, equal to three weeks of school, as well as cut $200 million each from the state's university systems.
Capping years of sometimes bitter controversy inside and outside the judicial system, the state Judicial Council voted Tuesday to halt deployment of what was to be a computerized case management system linking every California court in paperless operation.
The California Case Management System (CCMS) was the brainchild of former Chief Justice Ron George and more than a half-billion dollars has been spent so far, mostly on private consultants and vendors. But it's come under increasingly sharp criticism by some judges, through the Alliance of California Judges, in the Legislature and by the state auditor.
The auditor had questioned how the money had been spent and an Assembly budget subcommittee voted recently to cut off funds for CMSS deployment.
The Alliance of California Judges, which said that the money had been squandered on an unworkable system while courts were being forced to close the doors due to sharp cuts in state court funds, was the big winner in Tuesday's action.
In a court battle that could shape how schools are funded, a judge tentatively ruled Tuesday that California lawmakers can reduce education funding by diverting state revenues into new pots of money.
School boards and administrators sued the state last fall alleging that Gov. Jerry Brown and lawmakers had shortchanged schools by shifting about $5 billion in sales tax revenues to counties in a new realignment fund.
Under voter-approved Proposition 98, the state is required to devote a specified share of overall general fund revenues to K-12 schools and community colleges. School officials said that by diverting $5 billion in sales taxes, the state avoided sending $2 billion it owed to education last year under the constitution.
In recent years, recalculating Proposition 98 has become a popular solution to balancing the budget in the final days -- as long as the powerful school lobby signs off. Last year, the California Teachers Association agreed to the shift after winning concessions that protected jobs. But school administrators were upset because they said the budget had tied their hands in terms of midyear layoffs or furloughs while cutting $2 billion in the process.
San Francisco Superior Court Judge Harold Kahn issued a preliminary ruling today indicating that he believes the state has the power to create new special funds, and that none of those dollars have to be devoted to schools under Proposition 98.
As the nation's economy recovered, albeit slowly, from recession last year, most states saw a surge of revenues - but not California, a new Census Bureau data dump indicates.
Nationally, state government revenues rose 3.5 percent to $183.8 billion during the fourth quarter of 2011 over the same period of 2010, the Census Bureau report said, but in California, they dropped 8.2 percent to $25.6 billion.
But there may be less import than those numbers would indicate. Temporary income and sales tax increases enacted by the Legislature in 2009 were still in effect in 2010, but had expired by late last year, which largely explains the sharp declines in revenues from those two sources.
Fourth-quarter California income tax revenues last year were $11.3 billion, the Census Bureau report said, down from $12.2 billion in 2010, while sales taxes dropped from $8.1 billion to $7.5 billion.
Gov. Jerry Brown tried to get the temporary taxes extended, but Republican legislators refused to support his plan. He's now pushing a November ballot measure that would raise sales taxes by a quarter-cent and sharply boost income taxes on high-income Californians. He says it would raise about $9 billion a year but the Legislature's budget analyst says that number is likely too high.