1. CSBA Forecast Conference January 17, 2008

2. Budget Shortfall $3.3 billion in 2007-08 $14.5 billion in 2008-09 $3.3 billion in 2007-08 $14.5 billion in 2008-09

3. We dont have a revenue problem; we have a spending problem. --The Governor, January 8, 2008 This budget also limits spending growth to less than one percent… --The Governor, August 21, 2007 We dont have a revenue problem; we have a spending problem. --The Governor, January 8, 2008 This budget also limits spending growth to less than one percent… --The Governor, August 21, 2007

4. What Happened? Revenues declined –$4.9 billion Beginning balance declined –$0.5 billion Spending declined –$2.0 billion Revenues declined –$4.9 billion Beginning balance declined –$0.5 billion Spending declined –$2.0 billion

5. Closing the Gap 2007-08 $3.3 billion from sale of economic recovery bonds $400 million from Prop 98 $217 million 10% cuts $200 million other $60 million tax enforcement $3.3 billion from sale of economic recovery bonds $400 million from Prop 98 $217 million 10% cuts $200 million other $60 million tax enforcement

6. Proposition 58 Authorizes Governor to declare a fiscal emergency and call a special session of the Legislature Legislature has 45 days to act (by February 23) Authorizes Governor to declare a fiscal emergency and call a special session of the Legislature Legislature has 45 days to act (by February 23)

7. Building the 2008-09 Budget Step 1: Workload budget Step 2: Apply 10% reduction Step 1: Workload budget Step 2: Apply 10% reduction

8. Closing the Gap 2008-09 $9.1 billion 10% cuts $2.0 billion June 2009 PIT accrual $1.5 billion suspend supplemental payment on deficit bonds $9.1 billion 10% cuts $2.0 billion June 2009 PIT accrual $1.5 billion suspend supplemental payment on deficit bonds

9. Closing the Gap 2008-09 (cont.) $96 million other $329 million tax enforcement $96 million other $329 million tax enforcement

10. Proposition 98 2007-08 Guarantee has declined by $1.4 billion Governor proposes a $400 million reduction Does not require suspension Guarantee has declined by $1.4 billion Governor proposes a $400 million reduction Does not require suspension

11. LAOReduce current year Prop 98 funding to the minimum (by $1.4 billion) Replace CY with PY unspent monies Unappropriate unspent CY monies Designate the difference as settle up funding. LAOReduce current year Prop 98 funding to the minimum (by $1.4 billion) Replace CY with PY unspent monies Unappropriate unspent CY monies Designate the difference as settle up funding.

12. Proposition 98 2008-09 Suspend Prop 98--$4 billion Reduce K-14 workload budget by $4.8 billion –$4.3 billion K-12 ($735/ADA) –$500 million community colleges Suspend Prop 98--$4 billion Reduce K-14 workload budget by $4.8 billion –$4.3 billion K-12 ($735/ADA) –$500 million community colleges

13. Proposed K-12 Cuts (from Workload Budget) $2.6 billion-revenue limits –Creates a 6.99% def. factor $358 million-spec. educ. $199 million-child devel. $60 million-Prop 49 $14 million-nutrition $1.1 billion-other categorical $2.6 billion-revenue limits –Creates a 6.99% def. factor $358 million-spec. educ. $199 million-child devel. $60 million-Prop 49 $14 million-nutrition $1.1 billion-other categorical

14. K-12 Local Assistance Funding (Billions) Source GF Prop 98 Federal Local Lottery TOTAL 2007-08 $37.4 $6.6 $12.9 $0.9 $57.9 2008-09 $35.5 $6.5 $13.8 $0.9 $56.7

15. Total Local Assistance Reductions 1.99% from 2007-08 7% from workload budget 1.99% from 2007-08 7% from workload budget

16. Other K-12 Proposals Defer the deferred apportionment until September –$1.3 billion Change COLA to CPI for Wage Earners and Clerical Workers (CPI-W) –4.94% vs. 3.65% Defer the deferred apportionment until September –$1.3 billion Change COLA to CPI for Wage Earners and Clerical Workers (CPI-W) –4.94% vs. 3.65%

17. CalSTRS Fully vest 80% purchasing power protection Reduce payment to SBMA from 2.5% to 2.2% of payroll –Saves $80 million in 2008-09 Fully vest 80% purchasing power protection Reduce payment to SBMA from 2.5% to 2.2% of payroll –Saves $80 million in 2008-09

18. Budget Stabilization Act Excess revenues get deposited into a Revenue Stabilization Fund Automatic mid-year cuts Excess revenues get deposited into a Revenue Stabilization Fund Automatic mid-year cuts

19. The proposed budget reforms represent a serious diminution of the Legislatures appropriation authority. In addition, the proposal would limit future policy makers options to craft budgets. --Legislative Analyst The proposed budget reforms represent a serious diminution of the Legislatures appropriation authority. In addition, the proposal would limit future policy makers options to craft budgets. --Legislative Analyst

20. Whats Next Special session and regular session will run concurrently –Special session ends Feb 23 Budget hearings February thru May Budget due: –June 15 from Legislature –June 30 from Governor Special session and regular session will run concurrently –Special session ends Feb 23 Budget hearings February thru May Budget due: –June 15 from Legislature –June 30 from Governor

21. What We are Doing Lobbying Grassroots activities Coordinate with the Education Coalition Lobbying Grassroots activities Coordinate with the Education Coalition

22. CSBA Budget Resources www.csba.org/ LegislationAndLegal/ Legislation/LegislativeNews/ 2008.aspx www.csba.org/ LegislationAndLegal/ Legislation/LegislativeNews/ 2008.aspx