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2012-13 State Budget Summary

The 2012-13  budget signed by Governor Brown presents the stark reality that the deficit has increased and additional revenue is critical to stave off devastating cuts to education and public safety programs. The budget closes an estimated $15.7 billion gap and builds a $1 billion reserve.

The deficit closed by the budget is larger than predicted due to reduced revenue collection.  The Corporation Tax revenue forecast decreased by $1.3 billion in the current year. Despite a prediction of increased corporate profits, corporate tax collections are not estimated to increase due to increased use of tax breaks by corporations and the enactment of the elective single sales factor apportionment.

Revenue Solutions

The budget puts forward a tax measure that combines the Millionaire’s Tax with the Governor’s original tax proposal. The measure would raise an estimated $8.5 billion if approved by voters in November 2012. The proposal would raise $8.5 billion to fund education and reduce the deficit. The proposal includes:

  • Temporary quarter cent increase in state sales tax for four years;
  • Increase in taxes on the state’s wealthiest taxpayers for seven years.

Trigger Cuts

The Revise increases the trigger cuts proposed in the January budget  from $5.3 billion to $6.1 billion in additional cuts if the proposed tax increases are not approved by voters in November. Those cuts include:

  • K-12 budgets cut by 10 percent with the option for schools to reduce the school year by 15 days;
  • $250 million each from UC and CSU;

State Government and Workforce

The May Revise further squeezes budget savings out of the state workforce through the following measures:

  • Workforce: Permanently reduce the state worforce by an additional 11,000 positions for a total reduction of 30,000 permanent positions in the 2012-13 budget;
  • Pay: Reduction in state employee pay by 5 percent agreed upon through collective bargaining mainly through one unpaid furlough day each month;
  • Other Savings: Eliminates 22 boards and commissions for a total of 80 state entities eliminated since 2010-11.

Education

  • K-14: Funding flat if tax initiative passes. Growth in Prop 98 used to maintain current funding levels and pay down state debt to schools;
  • UC and CSU: Delays $38 million to UC and allows CSU to negotiate and set employee health benefits;
  • Cal Grants: Protects CalGrants for public universities and requires universities to meet minimum performance standards for CalGrants.

Health and Human Services

  • Medi-Cal: Reduces payments to hospitals and nursing homes that serve Medi-cal patients and merges services for “dual-eligibles” who can receive both Medi-cal and Medicare;
  • Healthy Families: Elminates Healthy Families and moves children to Medi-Cal;
  • CalWORKS: Reduces the length of benefits from four years to two;
  • Child Care: Eliminates $80 million amounting to 10,500 child care slots;
  • IHSS: Continues 3.6 percent cut in hours and shifts collective bargaining for workers from counties to a state board.

Courts

  • Delay Court Construction: Cuts $544 million from county courts by taking reserves and from court construction funds, delaying 38 planned court construction projects;
  • Retirement Contributions: Increases retirement contributions for state court employees from 5 percent to 8 percent.

Miscellaneous

  • Loan from DI: Includes a $312 million loan from the Disability Insurance (DI) Fund to pay for interest on the federal loan to the UI fund;
  • National Mortgage Settlement: Uses $410 million from the National Mortgatge Settlement to backfill existing homeowner assistance programs;
  • Redevelopment: Creates a framework to transfer cash assets from redevelopment agencies eliminated in the last budget to cities, counties and special districts to fund core services for a General Fund savings of $1.4 billion.

Read the complete May Revise.

For questions, contact Sara Flocks.