Sheila Kuehl: “The 101st Day: A Budget In October”

by Sheila Kuehl, California Progress Report

The One Hundred Day Wonder: Not Worth The Wait
Exactly 100 days from the June 30th deadline for passing a budget, after a marathon session that began at 11 a.m. Thursday, October 7th and ended at 7 a.m. Friday, October 8th, the Legislature put a $125.3 billion dollar budget on the Governor’s desk. It was the latest budget in the history of the state and didn’t look much different from the August budget sent by the Democrats to the Governor.  

The 2010-11 budget, in general
The budget, by law, must be balanced. In order to achieve this balance, the Governor and the legislators insist on different solutions, a combination of significant expenditure reductions, most always to education and the poor, elderly and disabled, hoped-for federal relief, additional revenues, usually regressive, and fund shifts, which means moving monies from one designated pot to another, usually as a "loan".

The projected deficit that had to be filled was pegged at about 18 billion dollars. The solutions included 7.5 billion in cuts, an expected (or hoped-for) 5.4 billion in federal funds, revenues from the temporary sales tax and vehicle license fee increases of about 2.4 billion, almost 3 billion in fund shifts and a reserve of about 400 million. These solutions were in addition to the 1.4 billion in General Fund cuts made in the earlier extraordinary sessions and described in previous essays. Below are just a few of the thousands of issues reached by the new budget. You can find the entire budget document, along with the Governor’s vetoes, online at http://www.sen.ca.gov/budget/FAR/FAR2010.pdf.

The Budget and K-14 Education
One of the largest chunks of the California budget goes to kindergarten through 12th grade public education and the two-year community colleges (hence "K-14"). This budget allocates 52.5 billion dollars to K-14 overall and maintains a very modest increase in per-pupil spending, rejecting the Governor’s proposed cuts. Programmatic spending is pegged at about $8,000 per pupil per year.

The budget also rejected the Governor’s tortured re-definition of Prop 98 which would have resulted in a considerably lower funding than that mandated in the state’s constitution. Instead, the legislature simply suspended Prop 98 for 2010-11, thus legally reducing the funds flowing to schools by requiring payback in the future. These cuts, of course, meant even less money for schools this year, including possibly shortening the school year by one or two weeks and increasing class sizes. Some mandates placed on the schools were also suspended with an eye toward phasing many mandates out in the years to come.

Because the level of funding–49.5 billion in total Prop 98 monies–is approximately 1.8 billion less that the minimum funding guarantee laid out in the state constitution, the lesser amount creates a "settle-up" obligation to be paid back in later years. And, since this is not the first year in which Prop 98 has been suspended, the 2010-11 budget also includes $300 million of "settle-up" funds for the monies lost in the 2009-10 budget.

For community colleges, the budget provided 126 million for enrollment growth which is sufficient to allow for 26,000 new students.

Higher Ed
The University of California and the California State University systems had been hard-hit over the past few budgets. This budget approved 2.9 billion for UC, about 316 million dollars above the 2009-10 level, including a 199 million dollar augmentation to make up for past cuts, 106 million dollars in federal funds and 51.3 million dollars to allow enrollment to grow by 5000 students.

Cal State, similarly, got a 199 million dollar augmentation, 106 million dollars in new federal funds and 60.6 million dollars for enrollment growth, about 8,000 new students.

Prisons continue to be a thorny issue

The Governor, to his credit, had proposed a number of reforms to lower prison costs, including changing some felonies that require prison time to alternative felonies where time could be served in county jails, all of which were rejected in the budget. There were augmentations for parole services to serious and violent parolees, incentives to inmates to complete rehabilitation programs, and shifts of responsibility for juvenile justice parolee supervision to counties. In addition, inmate medical care was reduced by $820 million.

Healthcare:  The Biggest Hits of All
Overall, the budget made a number of reductions in health and human services programs, but rejected the Governor’s elimination of CalWORKS, community mental health programs, adult day health care and a huge reduction in In Home Support Services. The budget restored programs vetoed by the Governor in the 2009-10 budget, but, in his line item vetoes for this budget, he took them out again.

For programs overseen by the Department of Healthcare Services, there were a number of "saves" and a number of "hits". The Governor had proposed changing eligibility requirements so that fewer people would qualify for public health benefits, but the proposal was rejected. Annual eligibility for children under the Medi-Cal program was restored. Seniors and persons with disabilities, however, are now required to enroll in managed care programs. Caps on certain services, proposed by the Governor, were rejected, along with mandatory co-payments for services now co-pay-free.

The budget language also required the Department of Public Health to audit nursing homes for compliance with existing nurse-to-patient ratios, with non-compliant nursing homes being assessed various levels of penalties. Medi-Cal rates paid to hospitals were frozen.

Most of the more egregious cuts proposed by the Governor were rejected in virtually every health and human services program, while various savings were found by cutting back on duplicative application processes, federal funding for In Home Support Services, adjusting caseloads, and a reduction in authorized hours for IHSS recipients of 3.6%.

Revenue and Reform Provisions in the new Budget

As indicated in earlier essays, California corporations had gotten an early holiday gift in the form of Net Operating Losses, allowing them to offset tax liability starting in 2012 and carry them forward for 20 years, instead of the current ten years. This NOL was suspended in 2008 and 2009 for corporations with income more than $300,000 or about 8% of California corporations, and is suspended in this budget, as well.

New state employee retirement benefits were rolled back to the levels in existence before the passage of AB400 in 1999, requiring a longer wait for retirement and reduced pensions.

So, What Does This Mean Overall?
Additional cuts to education and health, but not as egregious as thought.  No oil extraction tax.  And…..a budget almost immediately out of balance.

Sheila Kuehl served for eight years in the State Senate and six years in
the State Assembly. Senator Kuehl served as chair of the Senate Natural
Resources and Water Committee from 2000-2006. Her website is
www.sheilakuehl.org
.