Bipartisanship Breaks Out on California Budget: Bills to Pass Tomorrow on This Year’s Deficit

Assembly Budget Committee Chair John Laird (D-Santa Cruz) also released earlier today the Assembly Budget Subcommittee reports on the Fiscal Emergency Special Session in conjunction with today’s hearing. Here is a summary of the report. The entire report is on Laird’s site.

On January 10, 2008, the Governor declared a fiscal emergency and called the Legislature into Special Session in accordance with the terms of Proposition 58.

The Governor projected a $3.3 billion General Fund shortfall for the current year and a $14.5 billion General Fund shortfall in the budget year. In addition, the Governor identified a severe cash crisis for the state that if left unaddressed would see the state nearly being out of cash in March and unable to pay its bills in July and August.

As required by Proposition 58, the Governor proposed his plan for addressing the fiscal emergency. His proposals filled over 900 pages of solutions that turned the projected current year deficit into an $864 million reserve and provided over $8.7 billion in cash solutions to ensure the state can pay its bills throughout the rest of the current year and the budget year.

The Assembly began immediately working to address the fiscal crisis in as swift a manner as possible, and certainly within the required 45 days. Since the Governor's declaration, the Assembly Budget Committee and Subcommittees have held 22 hearings, heard each and every one of the Governor's over 900 pages of solutions, and has worked nearly every day to develop the Assembly's plan to address the fiscal emergency.

In total, the current year plan now before the Assembly Budget Committee turns the current year shortfall of $3.3 billion into a reserve of over $1 billion, about $178 million higher then what the Governor projected with his solution proposal. In addition, the plan takes the budget year problem of $14.5 billion down to about $7.4 billion. The plan also provides over $8.6 billion in cash solutions to ensure the state continues to pay its bills.

While the Governor took an "across the board" approach, the plan now before the Assembly Budget Committee takes a more fine-tuned approach. Still, the solutions hit every area of the budget, but in many cases avoid the most negative impacts proposed by the Governor. Some key elements of the proposal are as follows:

In Health, the plan reduces Medi-Cal rates by 10 percent, but puts off the cut until July 1 to enable this cut to be further evaluated, and perhaps restored, in the regular budget process. And the plan does not include any of the Governor's proposed cuts to optional Medi-Cal benefits.

In Social Services, the plan delays the SSI COLA by four months, but does not take it away for the year. The plan also delays the CalWORKs COLA, but it does not include the Governor's draconian proposals for poor children.
In Education, the plan saves over $500 million in the current year by reverting and capturing unspent prior and current year funds, but it does not approve the Governor's proposal to cut $400 million from school district apportionments.

In Resources, the plan recognizes an additional $113.7 million in Tidelands Oil Revenues and makes various reductions. But the plan does not approve any cuts that would lead to the closure on state parks.

In Transportation, the plan provides a solution to the PTA lawsuit to ensure the state's budget problem does not get $409 million worse.

For the cash crisis, the plan provides over $8.6 billion in cash solutions, but makes changes to the Governor's proposals that minimize the negative impactsof the solutions on local governments and school districts.