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2011-12 Budget Summary

Governor Brown’s 2011-12 Budget exposes the stark reality of California’s economic and budgetary crisis. After years of budget gimmicks, temporary solutions and one-time fixes, California still faces a structural budget deficit estimated between $17.2 billion and $21.5 billion per year through 2014-15. Governor Brown spares Californians from an all-cuts budget and has proposed $26.4 billion in budget solutions that balances cuts and revenue.

A cornerstone of the 2011-12 budget is a complex and multi-year proposal for “realignment” of the state-local responsibilities. This process would move budget and decision-making authority for some government services from the state to local government with the goal of increasing efficient provision of services, ending duplication and decreasing state costs. The Governor’s realignment proposal depends on funding from the extension of temporary tax increases due to expire in 2011, though some of the realignment proposals may proceed without a tax extension. Voters will decide on the temporary tax extensions and other revenue measures in a June special election.

Revenues

  • Special Election – proposed for June 2010: Extend 2009 temporary increases to the state sales and income tax and vehicle license fee for five years. Revenue from the sales tax and VLF will go to fund Brown’s realignment proposal, which would shift provision of some services from the state to local government. Revenue from the income tax will be used to maintain education funding at the current level.
  • Enterprise Zones: Eliminates the Enterprise Zone tax credits for businesses, saving the state $581 million annually.
  • Corporate Tax Breaks: Modifies the corporate tax break from the February 2009 budget deal and requires out-of-state corporations to use a mandatory single sales formula, rather than allowing them to choose between two different methods of calculating how much they owe in taxes. Making the formula mandatory rather than elective saves the state $942 million in 2011-12.

Realignment

The Governor proposes a phase-in of realignment so that local governments take responsibility for $5.9 billion in services in 2011-12 increasing to $7.3 billion in services in 2014-15. The state would fund the counties’ costs through the extension of the temporary increase in the vehicle license fee and sales tax which would be placed in a Local Revenue Fund. The following programs would be devolved to the counties:

Phase I – 2011-12

  • CAL FIRE: Local government would assume fire protection in rural areas.
  • Child Welfare Services: foster care, adoptions and child abuse prevention.
  • Corrections: Parole violators, low-level offenders, adult parole and eliminate the state Department of Juvenile Justice by 2014.
  • Mental Health: Mental health programs and substance abuse treatment programs.
  • Mandates: Reduces the numbers of mandated services local governments have to provide.

Phase II: Begins 2014-15

  • CalWORKS, food stamps and child support responsibilities devolve to the counties.
  • In-Home Supportive Services and other health care are assumed by the state.   

Redevelopment Agencies

  • Eliminates existing Redevelopment Agencies (RDA) and shifts $1.7 billion from the RDAs to Medi-Cal, trial courts and local governments.
  • Proposes new authority for local governments to fund development projects through local tax increases or bonds with 55-percent voter approval.

State Workers

  • Reductions in wages: Proposes a 10 percent reduction in wages for workers in the six bargaining units that have expired contracts with the state that were not settled.  
  • Savings of $71.6 million from collective bargaining agreements reached with 15 of the 21 state bargaining units in 2010.

Education

  • Prop 98: Funding level of $49.3 billion for K-14 and assumes $2 billion in additional revenues for Prop 98 that will come from voter approval of the extension of temporary taxes. If not approved by voters, the minimum level would drop to $47.3 billion.
  • Secretary of Education: Eliminates the office for a savings of $1.6 million.
  • UC and CSU Cuts $500 million from each.
  • California Community Colleges: Increases fees per credit from $26 to $36 and decreases credit funding apportionments by $400 million.

Health and Human Services

  • In-Home Supportive Services Program (IHSS): Cuts service hours 8.4 percent across the board and raises eligibility criteria, kicking 43,000 recipients out of the program.
  • Medi-Cal: Cuts $1.7 billion and institutes co-pays of $5 and $50 for emergency room.
  • CalWORKS: Eliminates half of the state funding, $1.5 billion in cuts. 
  • Child Care: Eliminates care for 11 and 12 year olds and reduces child care subsidies.
  • Healthy Families: Eliminates vision coverage, increases co-pays and premiums.

Other Actions

  • State Disability Insurance (SDI) Fund Borrowing: Borrows $362.4 million from the SDI Fund to pay interest on federal loans to the Unemployment Insurance Fund. The loan would be paid back over four years.
  • CalFIRE: Eliminates the fourth firefighter on engines for a savings of $30.7 million.
  • Fuel Tax Swap:  Uses revenue from truck weight fees instead of from fuel excise tax to fund Transportation bond debt service. Proposes to reenact the fuel tax swap with a two-thirds vote to protect the revenue source.
  • Prop 10 Funding: Shifts $1 billion of Prop 10 tobacco tax revenue from the First Five Commission to fund Medi-cal for kids under age five.
  • Sale Leaseback of State Buildings: The projected $1.2 billion from the sale of 11 state buildings is maintained.

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