The Gov Proposes a 2010 Bludgeont

by Sheila Kuehl
May 1, 2010

This is the second in a series of essays describing the condition of the 2009-10 state budget at the beginning of 2010, the new 2010-11 budget introduced in January, the Special Legislative Sessions called by the Governor to solve the problem of escalating deficits and the tug of war between the Legislature and the Governor on solutions.  

My first essay in this series gave an overview of the budget situation in the middle of the fiscal 2009-10 year and the problems foreseen by the Legislative Analyst as 2010 began.  In this essay I set out the Governor's January proposal for the 2010-11 budget.  In the essays that follow, I will present the "fixes" to the 09-10 budget proposed, rejected, passed, vetoed, passed and signed in March.  As you read this, the Legislature is holding hearings on the various provisions of the 2010-11 budget, which is due to be passed (if a 2/3 vote can be achieved) by the end of June.
   
January, 2010: The Governor Presents His Budget to the Legislature

Every January, the Governor is required to present a proposed budget to the Legislature.  The budget sub-committees in each house then spend several months pulling apart, questioning and, in some cases, amending the thousands of provisions.  The Governor's first proposal, however, is a road map for the ways in which he wants to bring the budget into balance.  Cuts or revenues?  Smoke and mirrors or reality?
This essay presents the basics of the Governor's proposed budget, which has yet to be fully amended and adopted, as there will be a revision in May from his office to reflect the realities of the April tax collections, as well as endless back-and-forths with the four legislative leaders on the big ticket items.

Take Another Little Piece of My Heart, Babe

In January, the Department of Finance, which serves the Governor, opined that the combined deficit from the 09-10 and 10-11 budgets, if left unchanged, would be about 19.9 billion dollars.  There would be mid-year corrections (read "more cuts") to the 09-10 budget, but, since so much had already been wrung out of the already-half-spent 09-10 budget, the bulk of the solution had to be in 2010-11.  Not surprisingly, the primary instrument the Governor chose to balance the budget was more cuts. 

In a departure from prior proposals, every proposed reduction in the 10-11 budget is meant to be permanent.  For education, these included taking another 2.4 billion dollars from schools, cutting back on class size reduction monies, changing layoff notices so more teachers could be laid off in a shorter time, changing seniority rules to allow for hiring less expensive teachers, ending protections for substitute teachers who are retained but not treated as regular teachers, consolidating services, reducing child care funding by $200 million through rate reductions to providers and shrinking child care for working CalWORKS parents.

In higher education, the Governor did a complete turn-around and proposed a Constitutional amendment to allocate 10% of all state general fund monies to UC and CSU (not to the community colleges, which get Prop 98 money).  As this requirement would move a good deal more future money into these two systems of higher education, the Governor proposed that the extra money come from unspecified savings in the prison budget.  At the same time, given that there has not actually been an initiative to accomplish this goal set for the ballot, the Governor proposes even deeper cuts to UC and CSU to the tune of an additional 1.3 billion dollars.  To shave money in the community colleges system, the budget would remove the requirement that 75% of all classes be taught by full-time faculty, as is now the case. 

In the social services, the cuts, also permanent, would lower payments to in-home support services workers to the minimum wage, reduce grants to CalWORKS recipients, lower the maximum you could make and still qualify for Healthy Families (children's health insurance), cut 200 million from the regional centers that serve developmentally disabled persons, eliminate cash assistance programs for legal immigrants and eliminate the California Food Assistance Program.

State Workers, Prisons and Juvenile Justice

Furloughs, which had been the preferred money-saving device for cutting state workers' salaries without renegotiating contracts, would be dropped in the new budget in favor of an across-the-board permanent five percent salary cut, a five percent increase in employee pension contributions and an additional five percent reduction in the total budget of every department, to be allocated by the department.

An additional 1.2 billion dollars is to come out of the prison and juvenile justice budgets by shifting some felons to county jails and further reducing funding to the already deeply criticized and troubled prison health system.

Federal funds, and, if not......reeeeaaaaallllly deep permanent cuts

As indicated in my first essay on this subject, the Governor was looking for at least seven billion dollars in federal funding.  Since he had not been very successful with the Obama administration in making the case for more federal dollars, and, indeed, had left many federal dollars on the table by cutting programs the feds would match, he included in his budget a worst-case-scenario of what would be done if the federal monies were not forthcoming:
---Total elimination of the entire CalWORKS welfare-to-work program
---Total elimination of the In Home Support Services program
---Total elimination of the Healthy Families children's health insurance program
---Huge reductions in Medi-Cal for the poor by eliminating all but the most destitute
---Five percent more (in addition to the first 5%) off state workers' salaries
---Total elimination of all prison programs not mandated by a court order
---Cuts of over 100 million dollars to California's courts
---Total elimination of transitional housing for foster kids
---Total elimination of any enrollment growth at UC and CSU

Oh, and a very short-term, one year, non-permanent suspension of a few tax breaks, like the very attractive Net Operating Loss provision that was a big give-away to larger corporations.

And, finally, the budget counts at least 3.9 billion in "what have you been smoking" savings provisions:

First, the Governor indicates his intention to put the same proposal to redirect Prop 10 funds away from First Five early childhood education and into decimated foster care programs that was rejected by voters in May 2009.  He scores this as 550 million in "alternative funding".

Second, he intends to put on the ballot, again, a redirection of Prop 63 mental health monies into the Early and Periodic Screening, Diagnosis and Treatment program, another proposal that was defeated by the voters in May 2009. Total: 452 million.

He proposes redirecting CalWORKS money allocated to counties into other programs.

He proposes that the state could score 297 million if red light cameras also ticketed speeders.  That money would go to fund the courts, which his budget slashes.

He proposes moving the monies paid by a surcharge on residential and commercial property insurance, which now funds the Emergency Response Initiative to Cal Fire.  Interestingly, the primary duties of Cal Fire are to protect state lands.

He proposes that drilling for oil on Tranquillion Ridge would generate 197 million which could go into State Parks, which he has also decimated.  Last year, the State Lands Commission turned down the drilling.

An additional 450 million in "miscellaneous" revenue is anticipated from selling state buildings and leasing them back, which the Legislative Analyst quickly said would actually result in higher state spending.  He proposes, again, selling the state student loan program to private banks.  Interestingly, the federal government just went the other way, taking back the student loan program from private banks.

Non-Budget Items In the Budget, As Usual

As in most of his past budgets, the Governor insists that allowing a number of projects to proceed without environmental impact analysis will save money.  The Legislature was recently convinced to waive the California Environmental Quality Act for a new NFL stadium and the Governor wants to do this for many more projects.

The Gas Tax Swap

This measure will be analyzed in future essays but, in the Governor's budget, was expected to realize almost a billion dollars to the general fund.  Succinctly, this would not add tax at the pump, but would change the allocation of the tax so that more would go into the general fund and less go directly to transportation.

Next: First Put Out The Fire--Immediate Changes in 09-10 Budget