This is my eighth budget essay for 2008 and continues my reports on the 2008-09 budget processes and continuing changes.
My first essay set out some background information on actions taken by the legislature in February to re-balance the 2007-2008 budget, given shrinking revenues. The second reviewed the Governor’s budget as he presented it in January of this year. The third presented the changes made by the Governor in his May revision of the 2008-09 budget, usually referred to as the “May Revise.” The fourth left the budget area per se for a moment and reported on the LAO’s report on the single payer bill, SB 840. My fifth essay presented the budget as it stood in July at the end of the Legislative Budget Conference Committee’s work. This budget was called, during the course of the summer negotiations, the “Democratic budget.”
The sixth analyzed the revised budget presented by the Governor early in August, which contained a number of new proposals. My seventh, set out the changes the Democratic majority made to the Governor’s August Revision and then put up for a vote.
This is my eighth budget essay for 2008 and will bring you up to date on all the budget changes until Monday, September 15, when everything changes again. My next essay will detail the budget, as adopted, and succeeding essays will highlight the various “trailer bills” that accompany an adopted budget.
Now I will delineate the budget (finally) presented by the Republicans as their solution. They requested a week following Labor Day to prepare their budget in print. It was put to a vote in both houses the second week in September and failed. No Democrat voted for their budget and three of their own members, two in the Senate and one in the Assembly, abstained.
(Note: there are 80 members of the Assembly and 54 of them must vote to adopt a budget. There are 48 Democrats in the Assembly and, therefore, six Republicans must vote for the budget in order to adopt it, along with all Dems. However, this year, since Assemblymember Nell Soto may be too ill to come to the Capitol, it may require seven Republican votes. In the Senate, which has 40 members, 27 votes are required to adopt a budget. There are 25 Democratic Senators and, therefore, two Republican Senators must vote to adopt a budget, along with all Dems).
General Departures from Governor and Senate Budgets
The Republicans’ proposed budget for 2008-09 contained no increases in taxes, and assumed less Prop 98 monies for the schools, but assumed a bump for the schools in 08-09 through a securitization of the lottery. The proposal made 3 billion dollars in additional cuts (over and above those taken by the Conference Committee, the Governor and the Senate, in three budgets, which took deeper cuts each time), primarily in health and human services, put $400 million more into corrections, proposed a hard spending cap for all future budgets, allowed the Governor to make mid-year spending cuts unilaterally, amended current labor laws to reduce or change overtime, meal and rest periods and work shifts (non-budget-related), proposed statutory changes to allow more public-private partnerships in public works, gave a runaway production tax credit to film and TV producers, proposed vague “regulatory relief,” not proposed in specific language, required employers to provide the option of Healthcare Savings Accounts to all employees, and left the next years’ budgets with a larger hole than any of the previous budgets. Details below.
Republican September Plan: Revenue
The Republicans assumed revenues of 97.9 billion to the General Fund and propose 100 billion in spending. Their budget assumed July revenues of $130 million, however, revenues continue to drop. They adopt an accrual device that would show 1.9 billion of 09-10 revenues actually in the 08-09 budget, assume 300 million dollars extra in the 08-09 budget by requiring limited liability companies to pay their fees earlier, and propose a tax amnesty program that is “scored” (the word for how much an idea is worth in any given budget) at $360 million for combined 07-08 and 08-09.
They do not adopt any tax increases, either in the sales tax or in the personal income tax, but borrow over 600 million from special funds with no actual proposed payback. However, in a stunning reversal, they do allow the yacht tax loophole to be closed and “score” it at $16 million.
The Republican budget also assumes no Emergency Response Initiative, under which homeowners in high fire risk State Responsibility Areas would have had to contribute to their own fire protection. Instead the Republican budget requires and additional $51 million in General Fund monies for CalFIRE.
Republican September Plan: Education
The Republicans did not accept either the Senate’s or the Governor’s figure for Prop 98 funds going to education, but, rather, proposed only 56 billion, about 5 billion dollars below current levels. They propose nearly double the amount contained in earlier budget versions of “pass-through” monies from redevelopment funds to go to the schools. This actually means a proposal to borrow $349 million from Low and Moderate Income Housing Funds and put the money into the schools on a one-time basis. They also phase out the Cal Grant competitive program (also proposed by the Governor) thereby “scoring” a savings of $57 million.
The Republican budget counts almost twice as much money from securitization of the lottery (1.9 billion, as opposed to 1 billion in other budget proposals) which they assume will be wildly successful (as only “additional” funds from “modernization” of the lottery would augment what is going to the schools now). In addition, the lottery funds would be considered “one-time” funds and would not increase the Prop 98 base so there would actually be an ongoing reduction over the years in Prop 98. The Department of Finance has also indicated their opinion that any lottery modification must go to a vote of the people. If no vote is sought, there may be legal challenges and, during the resolution of these challenges, the schools would most likely be required to do some short-term borrowing, an expensive proposition.
Republican September Plan: Health Cuts
As is the case with all other proposed budgets, the Republican budget proposed further cuts to payments made to MediCal providers, though less in cuts than previous proposals. This cut will, most likely, not be allowed by the courts, as there has already been an opinion that the mid-year cuts made to payments to MediCal providers was illegal.
In addition, the Republican budget proposes hundreds of millions in savings by reducing current minimal services for undocumented immigrants, but also reduces or eliminates health services for those who are in the country legally but who have been here for less than five years. The proposal rolls back eligibility expansions made in previous years, mostly for those still in poverty who are just above federal poverty level computations, and their children. This also means the elimination of “children-only” grants, which currently provide a safety net for children of parents whose work does not meet minimum federal standards. This can be very harmful to the poorest children as the federal calculations are slow, and don?t take into account temporary or variable employment, such as retail.
Republican September Plan: Social Services
The Republican budget “scores” over half a billion dollars in savings by changing current programs that provide home visits to families, increasing reporting requirements for families as well as sanctions for not reporting, and other proposals.
Such a proposal then assumes that thousands of families lose their health coverage and access to other services and shows a huge savings in the budget. For example, they assume 55,000-86,000 children will lose their health coverage because their families will fail to reapply every three months. They permanently reduce childcare reimbursements.
Their budget would also reduce payments made to In Home Support Services workers to the minimum wage (a sudden drop for these workers), eliminate some programs for legal non-citizens, and reduce child welfare services funds to counties, for a total of another almost half a billion dollars. The reduction in child welfare services will directly result in a loss of about 840 social workers which could mean that there would be no investigation of 159,264 additional cases of reported abuse.
The budget also eliminated additional funding for foster care children with special needs, which is short-sighted, as these children would then end up in higher cost group home environments. The proposal also caps and limits eligibility for grants to families to adopt foster children, which, given federal mandates, could jeopardize federal funding based on increasing the adoption rate.
Funding for Adult Protective Services is reduced, as are grants for the elderly, blind and disabled.
They do not propose keeping the federal cost of living increase paid to the state, but would allow it to pass through to the families, unlike the Governor and Senate versions.
The combined health and social services cuts reduce the budget by 1.45 billion dollars over cuts already made. These are, by far, the largest additional cuts proposed in the Republican budget.
Republican September Plan: Corrections
The Republican budget rejects virtually all of the proposed changes to judicial discretion over parole violators, direct discharge for non-violent offenders and other reforms made by the Governor and the Senate version related to inmate and parole issues. As a result, $400 million is added in the budget for prisons.
Republican September Plan: Sock It Away For A Rainy Day?
The Republicans do not set out language in their budget bill related to transfer of funds to the Budget Stabilization Account, but, rather, propose a hard spending cap for the General Fund and all special funds, no matter what the revenue. As to how transfers would be made into and out of the Account, the Republican language is vague. However, as in the Governor’s August budget, and that adopted (but not passed) by the Senate Democrats, the Governor is given authority, in the middle of a budget year, to unilaterally reduce state operations by up to 7% and to defer all cost of living adjustments and rate increases adopted by the Legislature in the budget.
Republican September Plan: Changes to Labor Law Protections
In his August budget revision, the Governor proposed non-budget changes to California labor laws, including changes to overtime, meal and rest periods and work shifts, changes to state infrastructure project development, shifting work to the private sector, and additional bonds and expenditures for capital outlay projects which have already been turned down by the Legislature.
The Democrats refused all of the above, with the exception of agreeing to additional bonds and expenditures for capital outlay projects.
The Republican budget adopts all of the above, except for the bonds.
On Labor Day, the Senate met to vote on the Democratic budget, a modification of the Governor’s August budget. It failed. The President pro Tempore then challenged the Republicans in the Senate to propose their own budget, which, a week later, they did, as set forth above. Both houses of the Legislature took up this budget and debated it during the week of September 8th, but neither house passed it.
And now: for something entirely different
These essays have set out all versions of the budget proposed by the Governor and both parties over the course of the last eight months, without agreement. Now that both parties are poised to/have adopt(ed) a budget, my next essay will detail the budget that was adopted.