Breaking: California Assembly Now Meeting in Rare Session: Compromise Balanced Budget Bill Details Emerging

By Frank D. Russo

The following has just been announced by the Speaker of the California Assembly. More details are expected. The debate has just begun on the budget bill.

You may watch the Assembly on the California Channel by clicking here.

Here is what has just been released:

“The California Assembly met on a Sunday for the first time in five years to consider a compromise balanced budget proposal advanced by Assembly Democrats that protects education and includes budget reform and a proposal to securitize the state lottery.

“This is truly a compromise budget,” said Assembly Speaker Karen Bass (D-Los Angeles). “We are ready for budget reform right now. We are ready to go to the ballot right now. We are ready with a compassionate, balanced budget that meets the Governor’s demands and will keep our economy strong, maintain our commitment to education, and protect our state’s most vulnerable citizens.”

The proposal has five major changes from the budget that was approved by the Assembly-Senate conference committee on July 17, 2008. The changes reflect changes required by the Governor to sign a budget bill.

Budget Reform – The package includes a new constitutional amendment for the November ballot that increases the size of the state’s “Rainy Day” Fund enacted in Prop 57/58 from five to 10 percent of General Fund revenues. It also provides more protection to the Fund by requiring any transfers from the Fund back to the General Fund to be in a stand-alone bill. It also creates a mechanism to transfer funds to the Rainy Day fund in strong revenue years. All of these provisions were recommended by the LAO.

Lottery Securitization – It includes measures that allow the state to securitize the existing revenue stream from the State Lottery, including the revenues for education, for budgetary purposes starting in 2009-10. This measure would be on the November 2008 ballot. It is estimated that that it would generate at least $5 billion for payment of budget debts in 2009-2010, but have no effect on the 2008-09 budget. Education would be fully protected. The proceeds from the securitization would be placed in a new Debt Retirement Fund, and could be used for repaying budgetary borrowing, bonded indebtedness, and payments to the Rainy Day Fund. There are no proposed new games and makes few changes to lottery operations.

Increases the Size of the Reserve – The General Fund reserve in the conference report was $1.518 billion. Under this plan, the reserve is $1.755 billion.

Changes the Revenue Package – The bill keeps the key provisions of the revenue package from the Conference Report: It ensures the wealthiest Californians pay their fair share, reinstating the 10 and 11 percent tax brackets on high income earners to the level they were under Republican Gov. Pete Wilson. It also suspends the Net Operating Loss provisions for three years, restores the corporate tax rate to the pre-1997 rate, and includes tax amnesty. However, it drops the proposed revision of tax schedules to offset “indexing” ($815 million) and the proposed rollback of the dependent credit on higher income taxpayers ($215 million). In addition, it includes an additional $250 million in “spillover” transportation funds to provide General Fund relief. Another change is the assumption of the Governor’s tax accrual proposal to reflect the Administration’s latest numbers.

Cuts Millions More – The bill cuts by $270 million the size and scope of the correctional reform package to be consistent with the Administration package. It also moves public transit funds to pay for home-to-school transportation ($100 million in General Fund savings), and includes dozens of other cuts.

Compare these changes to the Assembly-Senate conference committee report by visiting here and clicking on ‘Budget Committee Reports’, then clicking on ‘2008 reports’, then clicking on ‘Conference Report -AB 1781.’

For more information, visit the budget website of Assembly Democrats”

More to come as we get it and the debate continues.

Comments

Posted by: E. Barron at August 18, 2008 12:33 AM

Posted by: Liz at August 18, 2008 09:19 PM

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