California Revenues Continue to Fall – Deficit Could Swell Back to Over $14 Billion by End of 2008-09

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Governor Will Release Budget Changes on May 14th
Advocates Fear More Cuts Likely – Pressure Rises to Increase Revenues

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The news of the growing budget deficit has also increased the anxieties of disability, senior and mental health advocates across the State who fear more massive cuts to critical services and programs.

The growing deficit also means bad news to hundreds of bills that are waiting final action both the Senate and Assembly Appropriations Committee with the likelihood that most bills now that will cost state funding or create new mandates will be killed.

“In light of our current budget predicament, it will be extremely difficult to justify any additional spending,” said Sen. Tom Torlakson (Democrat – Antioch, 7th District), chair of the Senate Appropriations Committee.

Included in bills pending in either the Senate or Assembly Approporiations Committees are several critically important measures that address the crisis of the huge growth of children and adults diagnosed with autism spectrum disorders, affordable and accessible housing, special education hearing related issues, and more.

The Assembly and Senate leadership earlier this month on April 2, introduced a package of bills focusing on the crisis of people diagnosed with autism spectrum disorders.

Drop in Revenues Impacts Prop 63 Mental Health Services Fund

The drop in State revenues is impacting a critical mental health program. Proposition 63 requires that 1.76% of total monthly personal income tax collections be transferred to the Mental Health Services Fund (MHSF). The amount transferred to that fund in April was $1 million below the estimate of $31 million.

More Proposed Spending Cuts Likely If Bad News Continues

The Schwarzenegger Administration says that no decisions have been made yet and won’t be until early May on what the Governor will propose to bridge the growing deficit. California Health and Human Services Agency Secretary Kim Belshe said earlier this month to the Olmstead Advisory Committee that no decisions have been made or would be made until later in the month, before the release of the budget changes. She did say that the budget news, even then earlier this month, was getting worse.

Most Capitol observers and advocates believe that If the state’s finances continue to worsen as most analysts now believe it will, the widening shortfall will almost certainly mean more proposed major cuts to health and human services when the Governor releases his revisions to his proposed 2008-2009 State Budget on May 14th.

The growing huge deficit will also increase pressure on the Governor and legislative Republicans to propose or agree to proposals that increase revenues, including raising taxes.

Democratic legislative leaders are more adamant now that the budget deficit – especially one that is swelling back up to double digits, cannot be solved without raising taxes.
Assembly Speaker Fabian Nunez, who will be turning over the Speakership to Karen Bass during the second week of May, said that the crisis is so bad now that “we don’t have a choice but to raise taxes”. He said that with the shortfall growing so enormously, only closing tax loopholes, eliminating some credits or approving only cuts can’t bridge the gap.

Legislative Republicans however believe the ongoing budget problems for the State has been spending more than what the State takes in as revenues. Senate Republican Leader Dave Cogdill (Republican – Fresno, 14th District) said that state spending over the past five years grew over 30% and that legislative Republicans in both houses will strongly oppose any tax increases.

Emergency Budget Cuts Enacted in February

News of the widening budget deficit comes just months after the Governor on January 10, upon releasing his proposed State budget for 2008-2009, declared a “fiscal (budget) emergency” that required the Legislature to respond within 45 days to his proposals to cut spending and make other changes.

The Legislature approved many – but not all – of the Governor’s proposals for emergency budget cuts to the current year State budget, including:

• Approving a permanent 10% rate reduction to most Medi-Cal providers, including Adult Day Health Centers and other community-based providers

• Eliminating for four months the 2008 cost of living increase for the state portion (SSP) of the SSI/SSP grants due June 1, 2008.

• Approving the permanent ongoing cost reductions of over $329 million to regional centers serving 230,000 children and adults with developmental disabilities.

• Total cuts, some borrowing, delays in scheduled payments – including to Medi-Cal providers and other budget changes amounted to over $7 billion, reducing the then budget deficit to about $8 billion.

Other proposals by the Governor were not acted on by the Legislature including cuts to In-Home Supportive Services (IHSS), elimination of the cost of living increase for the state funded portion (SSP) of the SSI/SSP scheduled for June 1, 2009, permanent elimination of several critical Medi-Cal “optional benefits” including adult dental, permanent 10% rate reductions to supported employment, adoption assistance and foster care programs; 10% reductions to Adult Protective Services, closure of at more than a dozen Department of Rehabilitation field offices, over $480 million cut to special education and other proposals.

The Legislature is holding open nearly all of those proposals until the Governor releases his budget changes and revisions – referred to as the “May Revise” or the “May Revision” in mid-May.

Budget Stand-off Seems Likely to Last Through Summer

Adding to the crisis is the state’s cash flow situation which could mean earlier widespread impact on thousands of state funded program providers, including those receiving Medi-Cal payments if a budget is delayed into the summer. Last year Senate Republicans balked at the spending plan approved by the Assembly in July, and refused to give their votes needed to pass a budget, until August 21.

Barring a dramatic change in the State’s finances, and with the deficit increasing and no easy solutions, Capitol observers and advocates fear the delay of the 2008-2009 State Budget could easily go past that date and even into September.

Advocates fear not only the actual cuts already made to Medi-Cal and regional centers and other ongoing reductions, and the proposed cuts not yet acted on, but the impact of a budget delay, which many believe can, in and of itself be devastating.

AB 2608 Pushed By Advocates Fearing Budget Delay

Advocates pushing for passage of AB 2608 by Assemblymember Mike Davis (Democrat – Los Angeles, 48th District) that would continue funding from the Federal Trust Fund, if a budget is not passed, to programs and services overseen by the Department of Rehabilitation including independent living centers, providers and consumers of rehabilitation services “during any period of a fiscal year for which the Budget Act has not been enacted by July 1 of that fiscal year”.

Certain other programs – including regional center funded services and Medi-Cal providers have protection in current state to continue payments if a budget is not passed – though those payments would only continue from July 1 through September 1. AB 2608 would continue payments if a budget is not passed to programs under the Department of Rehabilitation with no time limit.

The bill faces a steep hurdle because it will require 2/3rds vote to pass in both houses. Similar measures last year and in previous sessions have failed, but advocates say passage is critical to ensure that hundreds of thousands of people with disabilities, mental health needs, seniors and others are not harmed during a budget delay.

The bill is scheduled for hearing on April 29 (Tuesday), at 1:30 PM before the Assembly Human Services Committee at the State Capitol, Room 437. A copy of the one page bill is on the CDCAN website at www.cdcan.us

Recall Election in the 12th State Senate District Will Impact Budget

A recall election on June 3 for the 12th State Senate seat occupied by Sen. Jeff Denham (Republican – Merced, 12th District).is complicating an already complicated and difficult budget year.

The recall election, scheduled with the other state primary elections, is increasing the bitterness especially in the State Senate between the Republicans and Democrats – with Denham accusing outgoing Senate President Pro Tem Don Perata (Democrat – Oakland, 9th District) of financing the recall effort because he refused to vote for the budget last August.

If Denham survives the recall he will not likely be willing to compromise too much with Senate Democrats, especially on the issue of taxes. If he loses, the Democrats would still need one more Republican vote to pass a budget – and Senate Republicans would likely not be in the mood to give their votes after losing a recall.

The 12th State Senate district includes part of Madera, Monterey and Stanislaus counties, and all of Merced and San Benito counties. It includes the cities of Atwater, Ceres, Dos Palos, Gustine, Hollister, Los Banos, Livingston, Madera, Merced, Modesto, Newman, Patterson, Salinas, San Juan Bautista and Turlock.

Budget Subcommittee Hearings

Both houses have completed many budget subcommittee hearings on the Governor’s proposals, with most proposals being held “open” – meaning they are delaying taking any action until after the Governor releases his budget changes or revisions on May 14th.

Even when one house budget subcommittee has rejected the Governor’s proposed cut – the other house has kept it open, meaning the action is not final (though no action is final in the budget process until a budget is actually passed and signed by the Governor).

Final opportunity for the public to testify on the budget will likely be the week of May 19th – a few days after the Governor’s release of his budget changes and revisions. The budget subcommittees will hold one or two hearings on any new proposals, and likely take final action on most “open” budget issues.

The California Disability Community Action Network, is a non-partisan link to thousands of Californians with developmental and other disabilities, people with traumatic brain injuries, the Blind, the Deaf, their families, community organizations and providers, direct care, homecare and other workers, and other advocates to provide information on state (and eventually federal), local public policy issues.

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