CDCAN Report #133-2011,  Tuesday June 28

Higher Revenue Projections and Additional Cuts to Higher Education Will Close Budget Gap  in Democratic Plan – “Trigger” In Budget Plan Would Be Pulled If Revenues Don’t Come in As Planned By Next January That Could Impact Health and Human Services, Education and other Budget Areas – Vote on Budget Could Happen As Early As Tuesday or Wednesday – Governor’s Position on Adult Day Health Care Not Clear Yet

SACRAMENTO, CALIF (CDCAN)  [Last updated 06/28/2011  3:50 AM] -  Giving up on winning support from Legislative Republicans, Governor Jerry Brown reached an agreement late Monday afternoon with the Legislature’s two Democratic leaders, Senate President Pro Tem Darrell Steinberg (Democrat – Sacramento) and Assembly Speaker John Perez (Democrat – Los Angeles) with a budget plan that will not contain his proposals to extend for five years the 2009 temporary tax increases scheduled to expire June 30, 2011 but instead counts on $4 billion more in revenues that he hopes California will bring in next year.  The agreement will mean that there will be no special election in 2011 and that any proposal to increase taxes for voters to decide will be placed on the November 2012 general election ballot by petition rather than by a 2/3rds vote of the Legislature that would require at least 2 Republican votes in the State Senate and the Assembly (assuming all Democrats voted for it).

The budget agreement reached on Monday does not contain any new additional spending cuts to health and human services beyond what was passed by the Legislature and approved by the Governor in March, and beyond what the Legislature passed on June 15th (those budget trailer bills have not been sent to the Governor yet).  It is not clear from the budget agreement reached yesterday whether or not the Governor will support the :Legislature’s restoration of partial funding for Adult Day Health Care centers and a separate budget trailer bill that deals with getting federal government approval for the creation of a new model of Adult Day Health Care.

The budget agreement however contains two “triggers” that would be pulled if the State determines in January 2012 whether the higher projected level of $4 billion in  new revenues are actually coming into the State as budgeted.  If the funding falls short – one or two “triggers” would be pulled that would automatically implement mid-year cuts of more than $2.5 billion in State general fund spending including $200 million in health and human services (the bulk – $1.9 billion would come from K-12 education). 

The Governor said Monday that “we have severe trigger cuts that will be triggered and go into effect without the projected [additional] revenues. And those are real.”

Budget Agreement Will Need Only Majority Vote – Vote Could Come As Early As Tuesday or Wednesday

The budget agreement, blasted by legislative Republicans as doing “absolutely nothing to change government as usual” will need only a simple majority vote of at least 41 votes in the Assembly and 21 votes in the State Senate to pass.  That vote  could happen as early as Tuesday afternoon (June 28th) or Wednesday (June 29th) – though no floor sessions are officially scheduled today in either the Assembly or State Senate. 

Democrats hold 52 of the 80 seats in the Assembly and 25 of the 40 seats in the State Senate

It is not clear if either house will hold a informational hearing by the two full Assembly and Senate budget committees before bringing the new agreement for a final vote on the floor of both houses. 

Legislative Democrats Passed Majority Vote Budget on June 15th – Governor Vetoed June 16th

Legislative Democrats on June 15th, passed on a majority vote, a revised main budget bill and several budget trailer bills, that did not include extensions of the 2009 temporary tax increases.  That plan did include several fee and a sales tax increase that were included that Democrats said only needed a majority vote to pass in part because of how  the new revenues would be used -  a contention that Legislative Republicans strongly objected to. 

The Governor however vetoed the main budget bills on June 16th saying it was unbalanced and did not solve the on-going budget deficits and contained “questionable” legal provisions such as cutting or shifting $1 billion to the State general fund from Proposition 10′s First Five Commissions. 

Following the Governor’s veto, State Controller John Chiang announced that he would withhold, under Proposition 25,  legislator’s pay and reimbursements for each day after June 15th that a budget is not passed and presented to the Governor, because the budget plan they passed on June 15th was not balanced.  Legislative Democrats strongly criticized not only the Governor for his veto – but Chiang, also a fellow Democrat – nclaiming that he exceed his authority and misread the requirements of Proposition 25 and other state laws governing the State budget.

What The Budget Agreement Contains

* No details are yet available, but generally, the new budget agreement relies on the over $6 billion in reductions to health and human services and billions in fund shifts and other cuts that the Legislature passed and the Governor approved in March, and much of the provisions of the budget that the Legislature passsed on June 15th that the Governor vetoed the next day because he believed it wasn’t balanced and contained “legally questionable maneuvers”. The budget agreement reached on Monday does not contain additional new cuts to health and human services beyond what the Legislature passed in March and on June 15th. 

* To replace the lost revenues that would have come from the extensions of the temporary tax increases the budget agreement would instead include a higher estimate or projection  totalling $4 billion of revenues that they hope the State will bring in during the 2011-2012 State budget year that begins July 1st and make additional reductions to the California State University and University of California systems. 

* The budget agreement does contain a “trigger” that would be pulled sometime in January if the Department of Finance director determines that revenues are not coming in as projected – that would mean automatic additional cuts of hundreds of millions of dollars to education, health and human services – including programs and services for people with disabilities, mental health needs, seniors and low income families.  See below for information on the “trigger”

* The budget agreement also includes most of the budget trailer bills – including those that details some of the cuts to developmental services – that the Legislature passed – on a majority vote – on June 15th but have not yet sent to the Govenror because of his veto of the main budget bills on June 16th.  This includes the reduction to redevelopment agencies. 

* It was not clear from Monday’s press conference by the Governor and Legislative Democratic leaders whether or not the Governor will support the partially restored funding for Adult Day Health Care centers and the budget trailer bill – that the Legislature passed on June 15th but has not yet sesnt to the Governor.  Advocates across the State have been urging the Governor not to line item veto the restored funding in the main budget bill – and to also sign the separate budget trailer bill that would require the Department of Health Care Services to submit to the federal government a federal Medicaid waiver proposal to create a new model of Adult Day Health Care.

* The new budget agreement does contain several fee increases (including a $12 increase per vehicle registration fee with the Department of Motor Vehicles) that Democrats passed on a majority vote on June 15th over the objections of Legislative Republicans.  The agreement also contains a 1.06% point sales tax swap that shifts the money to local government to pay for programs and services that the Governor wants shifted to the counties from the State (referred to as “realignment”).

* The budget agreement however deletes out proposals that Democrats included in their June 15th budget plan, including shifting or cutting $1 billion from the First 5 Commission (under Proposition 10) and a plan to raise $1.2 billion from selling state buildings.  Those reductions that were in the June 15th Democratic passed budget plan were taken out of the new agreement reached Monday (June 27th ) by the Governor and Legislative Democratic leaders. 

* Though it will not be part of the actual 2011-2012 State budget  once it is passed and signed into law, the Governor said Monday that he intended to push forward, by petition, gathering sufficient signatures to qualify ballot initiatives to raise taxes for voter approval for the November 2012 Statewide general election.  He did not specify what taxes he would propose to be increased by going the initiative route – but the Democratic Governor underscored that he felt new revenues were needed to solve the on-going budget shortfall – and to pay for certain services and programs that he wants shifted (or “realigned”) to the counties. 

How The Trigger Would Work

* In recent years the Legislature and Governor have used “triggers” in state budget agreements that if pulled (or in one instance if not pulled) would result in automatic reductions that don’t require additional approval from either the Legislature or Governor. 

* This happened in the 2009-2010 State Budget that was passed in February 2009 – four months early and in the revised budget that was passed later in July that year.  A “trigger” was link to the actual and projected amount of certain specific federal funds that California would receive that – depending on the amount – could avoid the elimination of 9 Medi-Cal “optional benefits” for adults, the roll-back of wages for In-Home Supportive Services workers and a reduction in grant levels for SSI/SSP (Supplemental Security Income/State Supplemental Payment) . 

* A “trigger” was also used that year regarding cuts to developmental services and imposing a higher reduction in payments to regional center providers if savings could not be determined in other cuts to regional centers. 

* The 2011-2012 State Budget “trigger” are actually at least two triggers that cover cuts to different budget areas and would be pulled under different circumstances. 

* The first step is that the Governor’s Department of Finance director determine in January 2012 whether the higher revenue projections in the budget agreement of $4 billion is on target, using actual budget revenue figures from July through December and new budget projections for the remaining months of the 2011-2012 State budget year (January through June 30, 2012). 

* The actual amount of money that comes in – and the amount that the Department of Finance believes in January will come in for the remaining months of the 2011-2012 State budget year, will determine what triggers will be pulled – and what new additional spending cuts will be made (without further approval needed by either the Legislature or Governor) as reported last night by the Sacramento Bee in “tiers” or “levels” : 

* “Tier O” ($3 to $4 billion): if the Department of Finance determines in January that the State received or is likely to receive that amount in additional revenues, then no trigger will be pulled and no automatic additional mid-year cuts will be made (and any shortfall between the two amounts would be a problem to resolve in the 2012-2013 State Budget year that begins July 1, 2012. 

* “Tier 1″ ($2 to $3 billion): if the Department of Finance determines in January that the State received or is likely to receive this level of money instead of the projected $4 billion in new revenues, then automatic mid-year spending cuts of about $600 million in State general funds would be implemented (with any remainder pushed into the next budget year process).  That $600 million in State general fund spending cuts would include new additional mid-year reductions of $200 million to health and human services (no details of what specific programs available but could include In-Home Supportive Services), $100 million to California State University and $100 million to the University of California.  Note: in the budget trailer bill passed in March dealing with IHSS, there is a separate “trigger” regarding additional cuts to that program if a certain medication pilot program does not achieve projected level of new federal funds to California, by October 2012.

* “Tier 2″ ($0 to $2 billion): if the Department of Finance determines in January 2012 that the State received or is likely to receive this amount of funding instead of the projected $4 billion in new revenues, then automatic additional mid-year cuts will be made (on top of the $600 million reduction in State general fund spending in “Tier 1″) of up to $1.9 billion in State general fund reductions, including $1.5 billion cut to K-12 education (by imposing 7 fewer classroom days and $250 million cut to school bus transportation excluding transportation that the federal government requires).  The level of reductions in this tier (up to $1.9 billion) will depend on how much of the $2 billion of the $4 billion in projected new revenues comes in. 

STATEMENT BY SENATE PRESIDENT STEINBERG ON BUDGET AGREEMENT:

The following statement was released Monday afternoon (June 27, 2011) by Senate President Pro Tem Darrell Steinberg following the announcement of a new 2011-2012 State Budget agreement between Governor Brown and Legislative Democratic leaders:

“This is a balanced budget that protects, to the greatest extent possible, California’s public education system, jobs, the economy, and our way of life.

While this budget implements more than $14.6 billion in harsh and very real cuts, it also puts us on a pathway over the next 18 months to eliminate a structural deficit that’s plagued California for a decade.

This budget is the most austere fiscal blueprint California has seen in more than a generation. Spending levels are at an historic low, and every sector of society will feel the difficult choices we’ve made to bring this budget into balance.

Earlier this year, the Governor asked both Democrats and Republicans to get out of their comfort zones and do what was best for California. For Democrats, that meant agreeing to billions of dollars in cuts to programs that are vital to children, the elderly, the sick and the poor. We delivered in March and we’re delivering again in June – with billions more in cuts, particularly if revenues fall short of projections.

Unfortunately, Democrats were forced to deliver alone. We used all the tools available to us under the Constitution to do just that – deliver.The imperative for revenue is as great as before because there is still a structural deficit looming. We will move forward through the initiative process to put the question before the voters in November of 2012.”

STATEMENT BY SENATE REPUBLICAN LEADER BOB DUTTON :

The following statement was released Monday by Senate Republican Leader Bob Dutton  on the budget agreement reached by Governor Brown and Legislative Democratic leaders:

“Californians deserve better than the ‘Hope without Change” budget the Democrats announced today. This latest budget is based on the hope that $4 billion in new revenues will miraculously materialize, but does absolutely nothing to change government as usual. The Democrats have said no to all of the Republican reforms that Californians are demanding, including pension reform, a spending cap and job creation. Californians have the right to a real bi-partisan budget solution that provides for a vibrant economy and job opportunities.”

STATEMENT BY ASSEMBLY REPUBLICAN LEADER CONNIE CONWAY:

The following statement was released Monday by Assembly Republican Leader Connie Conway (Republican – Tulare) regarding the agreement reached by the Governor and legislative Democratic leaders on the budget [there was no official statement released by Assembly Speaker John Perez, though he did make some comments at the Governor’s press conference Monday afternoon where the agreement was announced.

“Republicans listened to the voters and stayed true to the only special interest we represent – California’s taxpayers. Despite every effort by Gov. Brown, legislative Democrats, public employee unions and other Sacramento special interests to pressure us to raise taxes by $58 billion, we honored the commitment we made to the people of California to stay out of their wallets. While Democrats may still use legally questionable maneuvers to raise taxes, the simple truth is because of Republicans’ resolve, temporary tax increases will expire this Friday and the average California family will save nearly $1,000 per year. Californians deserve a government that understands that money belongs to the people, not the government. While we still haven’t seen the details of the Democrats’ budget plan, our steadfast opposition to higher taxes has helped remind Sacramento tax-and-spend liberals of the need to live within our means.

In the remaining months of the legislative year, Republicans look forward to passing badly-needed measures like pension reform to fix future state budgets. We will also continue to push our pro-jobs agenda to help the nearly 2 million unemployed Californians get back to work.”