California Budget Update March 5, 2009

Agenda California’s financial situation The situation in other jurisdictions This year’s budget process The 08-10 California State Budget Upcoming initiatives

California’s financial situation 2008-2009 Deficit -$14.8 Plus 2009-2010 Revenues and Transfers $86.3 Total Available Resources = $71.5 Less Target 2009-2010 Reserve -$2.0 Less 2009-2010 Expenditures -$111.1 2009-2010 Budget Deficit = -$41.6 Kenny might be able to pretty this slide up… source: slide 2 of: http://www.dof.ca.gov/budget/historical/2009-10/documents/Financial_Disaster-Presentation-w.pdf Amounts in Billions

Other jurisdictions Layoffs…Furloughs…Pay deferrals… Elimination of holidays…Wage freezes …Elimination of bonuses…Contract reopeners…Elimination of positions… Other states, and local jurisdictions, are facing similarly dire situations. 10 states, including of course California, currently have budget gaps that exceed 15% of their General Fund. Local 1000’s Research Department reviewed 18 states, as well as 8 major cities and 8 counties in California, and found that government employers are either considering or have already carried out a host of measures, including those listed on this slide. (source is “081210 Survey of Fiscal Impact on Public Employees”)

This year’s budget process Different than normal Budget already signed For 08-09 and 09-10 Hearings will still take place June Revise Normally, the Governor proposes a budget in January, the legislature holds budget hearings starting in Feb/March, the Governor issues a May Revise, and the legislature – and ultimately, “big five” – hammer out a final budget for the Governor to sign sometime in the summer (supposed to be by June 15, but…). This year is different. The governor has already signed a budget. Moreover, it’s not just for the 2009-2010 fiscal year, but also for our current fiscal year: 2008-09. Budget hearings will still take place on a number of items, meaning that not everything is cemented just yet. Instead of a May Revise, there will be a June Revise, which will take into account any changes to the budget resulting from a variety of things including : 1) Federal Stimulus funds slated for the state; 2) the results of the May 19th ballot initiatives and 3) Tax Revenues. We will discuss some of these factors shortly.

08-10 California state budget: Revenues $12.5 Billion in new revenues, all temporary, including: One-cent sales tax increase VLF increase from .65% to 1.15% Personal Income Tax Increase of between .125% and .25% Reduction of Personal Income Tax dependent credit (From $399 to $99) (unless noted, 08-09 and 09-10 solutions are lumped together) -note: durations vary Specifics at page 8 of: http://www.dof.ca.gov/budget/historical/2009-10/documents/Budget_Agreement_Full-Package-w.pdf

08-10 California state budget: Cuts $14.9 Billion in spending cuts, including: Major cuts to K-14 education Denying pass-through of SSI/SSP Federal COLA Suspends CalWORKs, Medi-Cal COLA 10% cut to receiver’s inmate medical support budget “Changes” to state employee compensation = $333 M in 08-09 and $834 M in 09-10 Employee compensation includes saving from SEIU Local 1000 contract agreement

08-10 California state budget: Borrowing “$5.4 Billion in borrowing: Lottery Securitization One-time loans and transfers from various special funds There has been some discussion about CA using RAW (revenue anticipation warrants) but with significant federal stimulus funds ($8b) it is likely CA will not have to borrow that money.

08-10 California state budget: Tax Credits Tax credits or “stimulus” including: Single Sales Factor Film Credit Job Credit Housing Credit Single Sale factor is a change in the way corporate taxes are calculated depending on the number of employees and the amount capital facilities in CA. Film credit $100 million Job Credit $3,000 for each new employee Housing credit - $10,000 or 5% of purchase price for never been occupied residence.

California state budget: “Trigger” Additional cuts and a tax increase if state doesn’t receive $10 Billion in Fed Funds by June 30, 2009. $1.8 B in Personal Income Taxes (.125% vs. .25%) $948 M in additional cuts, including deeper cuts to SSI/SSP, Medi-Cal, CalWORKs There are now a lot of speculation that CA will not get enough federal stimulus money to meet the trigger by June 30, 2009. This decision is supposed to be made by the Treasurer and the Director of Finance by April 1, 2009.

California state budget: Federal stimulus State of CA will receive close to $23 B (2009- 2019): $11.2 billion for Medicaid $5.9 billion for Fiscal Stabilization Fund (Education) $3.9 billion for Highways and Bridges $2.6 billion for other Education and Social Programs $1.5 billion for Food Stamp Program -this is an estimate at this point -Explain how $10 Million trigger threshold is calculated (i.e., not on lump sum here)

California state budget: Non-Budget Related Items Public Private Partnerships Design Build CEQA exemptions Air Quality program changes Employee schedule flexibility Courthouse building accelerated

Ballot initiatives: May 19, 2009 “Spending cap” (Prop 1A) Funding for education (Prop 1B) Lottery securitization (Prop 1C) Redirecting Prop 10 funds (Prop 1D) Redirecting Prop 63 funds (Prop 1E) Budget deficit = no raises for elected officials (Prop 1F) -Discuss how duration of taxes is dependent on passage of Prop 1A – yes to spending cap = taxed longer -mention June 2010 ballot initiative – Open Primaries

The Future Future deficits 2010-11 - $11.7 billion The coming years do not look any better. According to Depart of Finance, they estimate deficits in…..

Discussion As a state worker, what cuts have you seen to your department or program? How have those cuts impacted the services you provide? As a DLC leader, what cuts do you know about in other departments or programs? How have those cuts impacted the services state workers provide? As a member of the community, how have budget cuts hurt you and your family? How have they hurt your community?