by Sheila Kuehl
July 13, 2011

Now that California's 2011-12 budget has gone into effect, at least until the first revenue assumption proves wrong and triggers more cuts, this set of essays reviews the history of budget development over the last six months, culminating in a report on the final budget, as signed.  This essay is the third in the series, and sets forth the breakneck attempt to finish a budget and put a tax "continuation" measure on the ballot before the June 30th expiration of the 2009-11 temporary taxes.  In February, the Assembly and the Senate each held scores of hearings and finished separate versions of a preferable budget, both including the assumption that the Governor would be able to get sufficient Republican votes to put the continuation measure on the ballot in time.  The two budgets were then scheduled to go immediately into a Conference Committee.

Further essays will describe the budget presented by the Conference Committee, the endless and contentious issue of putting the tax extensions up for a vote of the people, the May Revise, the June budget, the veto, the final budget document, the budget after the Governor wielded his blue pencil, an explanation of "re-alignment" and a final essay on winners and losers.   

Hurry Up And Wait: All Rush and No Gold

As detailed in my first essay in this series, the Governor's budget proposed to solve the deficit problem with 12.7 billion in cuts and 12 billion in revenue.  The revenue figures were predicated on passage, by June 30th, of a five-year, limited, extension to the 2009-11 tax bumps in personal income taxes, vehicle license fees and a few others.  Without such an extension, the legislature would be forced to find a full 26 or 27 billion in new cuts, including even deeper cuts to K-12 education. 

In order to get these extensions to the ballot in time to go into effect by July 1, both houses of the legislature had to agree on a budget in February, or March, at the latest.  As a result, on receipt of the Governor's January budget, each house began to hold parallel public budget sub-committee hearings, night and day, to hear testimony on every aspect of the budget, make recommended changes, and vote on a budget to go to Conference Committee for resolution, tout suite.  The Governor, for his part, began personally hunting for two Republican votes in each house to put the tax extensions on the ballot.  By February 18th, the Assembly and the Senate each presented their completed budget for Conference:

The Assembly Version
The Assembly began with an assumed shortfall of about 26.6 billion, which included a few changes the Governor had made after his January presentation.  After completing hearings of the budget sub-committees, plus a very long hearing of the full Budget Committee, the Assembly adopted a budget containing 12.7 billion in permanent cuts, which would be necessary even if a tax extension got through, 12 billion in continuing revenues (the tax extensions) and 2.2 billion in "other" solutions.  The Assembly decided, however, to include a reserve of only a 300 million dollars, smaller than the Governor's proposal or the reserve in the Senate's adopted budget.

Cuts to Health and Human Services  The biggest set of cuts was to Health and Human Services (what else is new?): 6.4 billion dollars from programs for the poor, elderly, disabled and children.  Medi-Cal was cut by 557.2 million by mandating higher co-pays for doctor visits, prescriptions, emergency room visits and hospitalization.  Medi-Cal doctors' rates were cut by an additional 10%, allegedly saving the state 729.6 million.  Coverage of over the counter cough and cold medicines was eliminated and a cap was placed on the amount that could be spent on hearing aids.  Adult day healthcare was cut, again, by 28 million.  Both monthly premiums and co-pays paid by families receiving help from the Healthy Families children's insurance program were increased, and vision care was cut, saving the state 30 million.

One billion dollars in Prop 10 (tobacco tax) money, which was not supposed to be used to replace general fund money was shifted to cover Medi-Cal services for children.  $900 million in Prop 63 (mental health) money was also shifted to Medi-Cal mental health services.  There were also significant cuts to the state's portion of Supplemental Security Income but the Governor's proposed cut to Senior Services Programs was rejected by the Assembly, which was forced to play Sophie's Choice with its many vulnerable populations.

CalWORKS, the state's welfare-to-work program, was slashed, again, by changing the lifetime years a person could benefit from the program from five years to four years and taking an additional 5% from every family's monthly stipend.  This would mean, for instance, that a family of three in a high-cost county like San Francisco or L.A. would receive $659 a month.

Cuts to Education Although hoping to avoid cuts in the classrooms with a ballot measure extending the temporary taxes, the Assembly did adopt some of the Governor's cuts in other areas.  Keeping the per pupil spending at $7,344 per pupil (down from $7,358), there were still cuts to the Emergency Repair Program, data systems for pupil and teacher achievement measures, and the Governor's Secretary of Education (which was eliminated,since there is an elected Superintendent of Public Instruction).  Class size reduction funds were retained and more flexibility was given in the use of funds generally limited to certain categories.

Since the Assembly had consistently adopted job creation and retention as one of their major touchstones in the budget, they balked at the extensive cuts to childcare proposed by the Governor, reasoning that childcare allows thousands of California workers to keep their jobs.  Consequently, instead of reducing subsidies to child care by 35%, as the Governor proposed, the Assembly voted to reduce each contract, including pre-school, by 10%.  Unfortunately, this made providers crazy since there was no reduction in the teacher-pupil ratio requirements.  Services to 11 and 12 year olds, which the Governor had eliminated, was restored.  The Assembly also opted to change eligibility requirements so that families earning between 60 and 70% of the state's median income would no longer be able to access subsidized childcare.  This proposal was "scored" to save the state about 40 million dollars in Prop 98 funds.

Cuts to Higher Education Further crippling UC and CSU, the Assembly approved a 500 million dollar cut to UC and denied the possibility of any new lease-revenue bond projects.  CSU was treated the same.  The Community Colleges were cut by 400 million with all three systems left to figure out how to absorb the cuts.  All, unsurprisingly, opted to charge higher student fees.

Cuts to Natural Resources Fire protection costs were lowered by cutting staffing on fire engines in state protection areas from 4 firefighters to 3 per truck.  The state's public parks were cut by an additional 11 million, guaranteeing more closures.

Cuts to Public Safety Trial court funding was reduced by an additional 176 million with instruction to "avoid court closures and minimize the impact on court operations".  Good luck with that one.

Sending Responsibility and a Few Bucks to the Counties A later essay will detail the actions commonly referred to as "re-alignment", by which the state authorizes the counties to directly supervise allocations in certain areas, such as health, human services and corrections.  This year's actions actually began in February, however, as the Assembly adopted proposals giving authority to counties to directly "house" and supervise low-level offenders and juvenile justice programs.

And Now For The Other Half: the Revenues The Assembly adopted a budget that continued the temporary taxes and, in addition, adopted the Governor's proposal to tax corporations by a "single sales factor" instead of allowing them to choose the most favorable tax plan for themselves each year.  This action, alone, was projected to bring in an additional 468 million in the current year and 942 million in 2011-12.  They also eliminated tax incentives associated with "enterprise zones" which were found not to have achieved the job creation that was promised at adoption.  Additionally, the Assembly included the savings to the General Fund provided by the Governor's proposed elimination of Redevelopment funding, but put off to Conference Committee some ideas to limit the uses of these funds, or fund redevelopment in different ways.

The Senate Version, Near-Fisticuffs and Taking the "Budge" out of Budget
On February 16th, the Senate budget sub-committee recommendations, which were on the same fast-track as the Assembly, came to the full Senate budget committee.  The Republicans emphasized one theme: the Democrats should not pass a budget that assumes tax extensions, as there would not be a Republican vote to put it on the ballot.  Period.  The Democrats, in turn, castigated the Republicans for their lack of sympathy and understanding for the plight of California's poor as well as their apparent inordinate love for the rich and said they were simply not going to allow the Republicans to force an all-cuts budget. 

Adding insult to injury, the Republicans also refused to vote for any of the cuts, allowing their public relations office to both claim victories for the taxpayers and the "protection" of education.  Predictably, the discussion got very heated, with red-face to red-face confrontations, until one Senator encouraged everybody to just take a deep breath.  The Republicans refused to budge and the Budget Committee passed the budget with the revenue assumptions and Democratic changes to the Senate Floor.

The Animosity Becomes Permanent and the Senate Soldiers On Left to do the budget on their own, the Democrats in the Senate adopted most of the same language as the Assembly, with only a few differences.  They funded Prop 98 at 49.3 billion and agreed with continuing flexibility in spending on categorical items in the schools.  They adopted less generous solutions to childcare but did reject the 35% subsidy reduction proposed by the Governor.  Instead, the Senate proposed a 13% across-the-board reduction which would have the same ill-effects on providers as the Assembly proposal.  They agreed with the cuts to UC, CSU and the Community Colleges.  Cuts to Health and Human Services were a only a little bit different from the Assembly but ended up at about 400 million less.

In the area of Redevelopment, the Senate fleshed out a new plan which was to provide a framework for reworking the funding and expenditure aspects of the program.  They adopted language approving the elimination of RDAs but providing that funding would continue, first as necessary to retire debt in each agency, and then to support trial courts and Medi-Cal.  Further in the future, the funds could, by a vote of the Legislature, be used for schools, and, in a more limited fashion than that in current language, by cities and counties.  Details were to be worked out in Conference and with the Governor.

The Senate also adopted 308 million in cuts to state employee compensation, 80 million in cuts to employee healthcare and additional savings from various efficiencies, including suspending the use of cellphones and cars (275 million in all).

Next: A Piercing March Wind Blows Every Plan To Shreds