2012-2013 State Budget May Revise
Governor Brown’s May Revise of the 2012-13 budget 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. In January 2012, the state faced a budget shortfall of $9.2 billion. The May Revision estimates a shortfall that has increased to $15.7 billion as a result of reduced revenue collections and prevention of some cuts by the courts and the federal government.
One of the reasons for reduced revenue collection is that the Corporation Tax forecast has 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.
The May Revise 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 funding is dedicated only to education and public safety. 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.
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:
- $5.5 billion from K-14 education;
- $250 million each from UC and CSU;
- Remaining cuts would come from the Department of Forestry and Fire Protection, Department of Fish and Game, funding for Park Rangers, State beach lifeguards and Department of Justice law enforcement programs.
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. The Administration proposes a four-day, 38-hour workweek for state employees in lieu of furloughs;
- Other Savings: Eliminates 22 boards and commissions for a total of 80 state entities eliminated since 2010-11.
- 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—currently CSU pays 100 percent of health care premiums for employees;
- Cal Grants: Decreases Cal Grants by $38 million by imposing a new graduation rate standard for institutions.
Health and Human Services
- Medi-Cal: Reduces payments to hospitals and nursing homes that serve Medi-cal patients for $396 million savings;
- CalWORKS: Phases in welfare cuts on a slower track and softens some requirements from the January budget;
- Child Care: Restores $180 million for child care for famililes engaged in education or training along with other policy changes to child care services;
- IHSS: Cuts an additional $99 million by reducing IHSS recipient hours by 7 percent.
- Delay Court Construction: Redirects $240 million for court construction to trial court operations on a one-time basis. This will delay the start of 38 court construction projects. $50 million in court construction funding will be redirected to trial court operations on an on-going basis;
- Court Reserves: Reduces General Fund support for trial courts by $300 million and offsets the cut by taking local court reserves. The judicial council will now receive 3% ongoing for emergency funds they will control and distribute to trial courts.
- Retirement Contributions: Increases retirement contributions for state court employees from 5 percent to 8 percent.
- Loan from DI: Reduction in the proposed loan from the Disability Insurance (DI) Fund to pay for interest on the federal loan to the UI fund because the federal government lowered the interst rate on the loan;
- National Mortgage Settlement: Takes money from the National Settlement with banks to offset general fund debt service costs for housing and other spending for a $292 million General Fund savings;
- Redevelopment Agencies: Creates a framework to transfer RDA cash assets to cities, counties and special districts to fund services for a General Fund offset of $1.4 billion.
For questions, contact Sara Flocks.