State budget alert: Brown cuts deficit by half, but Legislature’s work far from complete
Published: March 25, 2011
Analysis from CSBA’s Governmental Relations Department
Gov. Jerry Brown signed 13 measures Thursday for $11.2 billion in cuts and other budget solutions a week after the state Legislature had passed a series of budget bills. This comes 23 days after the governor’s self-imposed deadline of having a budget in place by March 1.
Despite the passage of Proposition 25 last year, which allows a state budget to be passed with a simple majority vote, the governor had hoped to secure bipartisan support for both the cuts and his proposal to place a five-year extension of temporary sales and income taxes and a vehicle license fee surcharge before the voters. However, negotiations on that front had essentially come to an impasse over the revenue extension and Brown’s proposed elimination of redevelopment agencies.
The reported tradeoff for the two Republican votes needed in each house on the revenue extensions appears to be government pension reforms and a state spending cap. So far, though, the governor has not reached an agreement with the five Senate Republicans who have been meeting with him on and off over the last several weeks.
Despite lacking an agreement on a complete spending plan, the Legislature last week had approved a 15-bill package. Some of the measures making cuts and other reductions passed with two-thirds majorities; others passed on a simple majority vote, including Senate Bill 84—the main budget bill—and SB 70, the education funding bill.
These cuts include:
-
health and human services (not including child care): $6 billion
-
University of California and California State University: $1.1 billion
-
transportation and a Proposition 22 weight fee fix: $1 billion
-
corrections: $1 billion
-
state salaries and operations: $700 million
-
local mandate savings: $200 million
-
energy efficiency programs: $200 million
-
Cal Grant restrictions: $200 million
-
courts: $200 million
-
various others: $300 million
“These were painful cuts … but when you have a deficit you have to do something,” Brown said during the press conference accompanying the bill signings. He noted the bills still leave more than a $12.6 billion hole in the budget, adding lawmakers “need to find more revenues or make more drastic cuts.”
While significant action has now been taken to close the $25.5 billion gap between income and expenditure, equally significant action must still be taken. The Legislature has not agreed to put the revenue extensions before the voters, nor to eliminate redevelopment agencies, which would shift significant property tax resources to schools.
Still no COLA, but more deferrals
In recognition of devastating cuts already made to schools over the past three years, the governor took the welcome action of not proposing any further significant reductions to K-12 education, and the Legislature followed suit. However, the developing budget once again fails to provide a cost-of-living adjustment for schools, and it implements new revenue deferrals. The first is a $2.1 billion deferral of 2011-12 revenues into 2012-13, which reduces the Proposition 98 guarantee in 2011-12 but allows districts to spend those resources in that year with the promise that they will receive their payments early in the 2012-13 fiscal year. This increases the total amount of inter-year deferrals to $9.4 billion.
The Legislature also approved additional deferrals within the 2011-12 fiscal year that push the state’s cash flow challenges onto local governments. For K-12 schools, this means $3.2 billion in payments that should be received in July 2011—which are attributed to the 2010-11 fiscal year—will be paid in August and September instead of July; this would extend the time on these existing inter-year deferrals. An additional $2.8 billion of 2011-12 payments due in July and August won’t be paid until January 2012; $2.4 billion of payments in October 2011 will be delayed until January 2012; and $1.4 billion in payments due in March 2012 will be paid in April.
It is important to note that the entire budget is predicated on the revenue extensions and shift of property tax dollars associated with the elimination of redevelopment agencies. Should those provisions not be approved—and alternative revenues not found—the remaining $12.6 billion deficit will have to be closed with further cuts, and it would be virtually impossible for lawmakers to avoid putting the brunt of those additional cuts onto K-12 schools.
Realignment
Another issue that remains to be resolved relates to the shift of responsibility for certain programs and services from the state to the local level. The governor didn’t sign the two bills related to this realignment issue, instead opting to continue to work with local government advocates who have recently come out in support of the plan.
June or November?
It still remains to be seen what happens next and if there will be an election in June for voters to decide if they want to extend the temporary revenues. Talk began surfacing this week that, with June getting closer without a deal, there may be a push to have the measure put on the ballot by a simple majority vote, or a decision by the voters may have to be put off until November—well after the new fiscal year (and school year) begins.
Responding to reporter’s questions Thursday regarding the drop-dead date to begin preparing for a June election, Brown said he was working on getting this wrapped up as soon as possible but acknowledged that at some point the window to call a June election would slam shut. This would make November the next viable alternative for placing the revenue extensions on the ballot through the initiative process.
A November election would put school districts and county offices of education at risk of having to make at least $1 billion more in cuts from their 2011-12 budgets. This is because the revenues the governor proposes to extend will expire on June 30; if they’re not extended by voters until November, approximately six months worth of revenues would be lost.
For now it is a game of wait and see, as there are many moving parts and they may or may not come together in the next few days. In this Action Alert, CSBA urges its members to contact their legislators in support of Brown’s proposal on redevelopment agencies—and, most important, to urge them to let the people vote in June on the revenue extensions.