July 2009 Budget Package
July 29, 2009
July 2009 Budget Package
L E G I S L A T I V E A N A L Y S T ’ S O F F I C E
July 29, 2009
Overview
General Fund Condition
As of the July 2009 Budget Revisions
(Dollars in Millions)
2009-10
Percent
2008-09
Amount
Change
Prior-year fund balance
$4,071 -$3,379
Revenues and transfers
84,097 89,541 6.5%
Total resources available
$88,168 $86,162
Expenditures
$91,547 $84,583 -7.6%
Ending fund balance
-$3,379 $1,579
Encumbrances
1,079 1,079
Reserve
-$4,458
$500
Budget Stabilization Account
— —
Special Fund for Economic Uncertainties
-$4,458 $500
On July 24, 2009, the Legislature passed amendments to
the 2009-10 Budget Bill, along with implementing legislation.
On July 28, 2009, the Governor signed the budget package,
while vetoing $489 million in General Fund appropriations.
The budget package projects $89.5 billion of revenues and
transfers to the General Fund, and authorizes total General
Fund spending of $84.6 billion. The plan leaves the General
Fund with an estimated reserve of $500 million at the end
of the 2009-10 fi scal year. Year-to-year comparisons of both
revenues and expenditures are diffi cult due to a variety of
one-time budget actions.
L E G I S L A T I V E A N A L Y S T ’ S O F F I C E
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July 29, 2009
Major General Fund Budget Solutions
(In Billions, 2008-09 and 2009-10 Combined)
Expenditure-Related Budget Reductions
K-14 Education
$6.5
Reduces Proposition 98 appropriations for K-12 education by $5.3 billion.
Reduces Proposition 98 appropriations for community colleges by over $800 million.
Adjusts payments toward the Quality Education Investment Act program, resulting in
$450 million in General Fund savings.
Health
$2.3
Assumes that future federal actions will reduce state Medi-Cal funding requirements by $1 bil-
lion and additional state savings of $323 million are achieved.
Assumes $284 million in savings in developmental services.
Rejects proposal to eliminate Healthy Families Program, while reducing support by $179 million.
Reduces Proposition 36 substance abuse programs by $90 million.
Freezes cost-of-living adjustments for long-term care providers for savings of $76 million.
Various other reductions, including over $250 million of gubernatorial vetoes.
Higher Education
$2.0
Reduces by $2 billion General Fund (to the minimum level required for federal stimulus funding)
payments to UC and CSU.
Rejects Governor's proposal to eliminate the CalGrant program.
Local Government
$1.8
Shifts $1.7 billion of local redevelopment funds to offset state General Fund spending for educa-
tion and other programs.
Suspends various noneducation local government mandates for spending reductions of $66 million.
Employee Compensation
$1.8
Delays by one day state payments related to June 30, 2010 payroll for state employees, thereby
reducing 2009-10 costs by $937 million.
Assumes that the Legislature will not approve proposed agreements with largest state employee
union, which will reduce currently budgeted costs by $210 million.
Accounts for $150 million of reduced costs due to CalPERS actions concerning state employee
and retiree health premiums
Furloughs most state employees of executive agencies a third day each month, reducing em-
ployee compensation costs by an additional $425 million.
Criminal Justice
$1.0
Reflects a reduction of about $800 million in General Fund support for CDCR.
Assumes $50 million in savings from limiting the reimbursement rates paid to private contractors
that provide medical care to inmates outside of prison.
Reduces court funding by 10 percent for $169 million of savings. Assumes one-day-per-month
court closures.
Continued
L E G I S L A T I V E A N A L Y S T ’ S O F F I C E
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July 29, 2009
Major General Fund Budget Solutions
(Continued)
Expenditure-Related Budget Reductions
Social Services
$1.0
Reduces CalWORKS costs by $510 million by reducing funding to counties, temporarily
exempting some families from work requirements, and other measures.
Reduces IHSS costs by $264 million by eliminating some services for all but the most severely
disabled, making the least disabled ineligible for all services, eliminating the share-of-cost
buyout program, and implementing several antifraud activities.
Reduces funding to counties for Child Welfare Services by $80 million.
Rejects Governor's proposals to eliminate CalWORKS, Cash Assistance Program for Immi-
grants, and the California Food Assistance program.
Eliminates requirements for statutory COLAs for CalWORKs and SSI/SSP beginning in 2010-11.
Transportation
$0.9
Assumes $562 million of higher "spillover" gasoline sales tax and related revenues will be
available for General Fund uses.
Shifts $225 million of Home-to-School Transportation funds to pay for public transit bond debt
costs.
Other
$0.7
Assumes reduced cash-flow borrowing costs of $210 million by adjusting schedule of cash
payments, including delaying billions of dollars of school payments to later in 2009-10.
Authorizes Chief Information Officer to renegotiate information technology contracts and other
costs. Assumes this generates savings of $100 million.
$18.0
Increases in Revenues and Transfers to the General Fund
Increases schedules for payroll withholding by 10 percent.
$1.7
Assumes that parts of State Compensation Insurance Fund can be sold in 2009-10.
1.0
Accelerates receipts of personal income and corporation tax estimated payments.
0.6
Other revenue-related actions.
0.2
$3.5
Increases in Borrowing
Suspends Proposition 1A, borrowing local government property taxes to offset state General
$1.9
Fund spending for education and other programs.
Loans $135 million from the State Highway Account to the General Fund and other special fund
0.2
loans.
$2.2
Total Budget Solutionsa
$23.7
a In addition to the $23.7 billion of solutions listed, the administration's scoring reflected as solutions (1) a reduction in the targeted reserve by
$418 million compared to the legislative leaders' budget agreement and (2) $118 million of reduced 2008-09 spending unrelated to the budget
package.
L E G I S L A T I V E A N A L Y S T ’ S O F F I C E
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July 29, 2009
Proposition 98
Proposition 98 Funding
(In Millions)
2008-09
2009-10
February
July
February
July
Enacted
Package
Change
Enacted
Package
Change
K-12 education
$44,660 $43,062 -$1,599 $48,315
$44,637
-$3,677
California Community Colleges
5,972 5,934 -38 6,482
5,669 -813
Other agencies
106 106 —
107 112 5
Totals
$50,738 $49,102 -$1,636
$54,904 $50,418 -$4,485
General Fund
$35,036 $34,052
-$983 $39,461 $35,032 -$4,429
Local property tax revenue
15,703 15,050
-653
15,442 15,386
-56
Proposition 98 Spending Reductions. Reduces Proposi-
tion 98 spending by $6.1 billion over the two-year period relative
to the February budget package, including $5.3 billion in K-12
education and $850 million in community college reductions.
Reversion of 2008-09 K-12 Categorical Funds. Reduces
2008-09 Proposition 98 spending by reverting $1.6 billion in K-12
categorical funds that had not been distributed to school districts
at the close of the 2008-09 fi scal year. These funds are subse-
quently provided to school districts in 2009-10.
Revenue Limits Reductions. Reduces K-12 revenue limits by
$4 billion to achieve 2009-10 savings. The reductions include a
$1.6 billion reduction to offset the restoration of categorical funds
reverted in 2008-09.
L E G I S L A T I V E A N A L Y S T ’ S O F F I C E
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July 29, 2009
Proposition 98
(Continued)
Additional Payment Deferrals. The package also defers
$1.7 billion in K-12 revenue limit payments and $115 million in
community college apportionment payments from 2009-10 into
the following fi scal year.
Quality Education Investment Act (QEIA). Suspends a statu-
torily required $450 million General Fund payment for the QEIA
program. Instead, provides ongoing Proposition 98 funding for
QEIA in 2009-10 and the program is extended an additional year,
to 2014-15. School districts that receive QEIA funding will receive
a comparable reduction to their revenue limits payments, but are
eligible to apply for additional federal Title I funds in 2009-10.
Future Proposition 98 Obligation. Establishes a statutory
obligation to make $11.2 billion in future “maintenance factor”
payments as a result of funding reductions in 2008-09. Payments
would be required in future years until the obligation is paid in full.
L E G I S L A T I V E A N A L Y S T ’ S O F F I C E
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July 29, 2009
Higher Education
Unallocated Reductions to Universities. Reduces General
Fund support for the University of California (UC) and the Cali-
fornia State University (CSU) by an additional $1 billion each.
When combined with cuts approved in February, and adjusting
for new federal funds and fee revenues, the universities will ex-
perience cuts of about 8 percent in base funding.
Student Fee Increases. Increases 2009-10 enrollment fees at
the California Community Colleges (CCC) by $6 per unit, gen-
erating $80 million in new revenue for CCC. Student fees also
will increase 9.3 percent at UC (generating $166 million for the
university) and 32 percent at CSU (generating $366 million).
Roughly one-third of the revenue from university fee increases
would be directed to campus-based fi nancial aid.
Rejection of Governor’s Cal Grant Proposals. Fully funds
the Cal Grant programs for 2009-10, with $32 million in General
Fund savings created by using a like amount of funding from the
Student Loan Operating Fund. The Legislature thus rejected the
Governor’s proposal to eliminate Cal Grants, as well as his pro-
posals to decentralize Cal Grant administration and to eliminate
two state higher education commissions. The Governor, how-
ever, vetoed $6 million in support for fi nancial aid administration,
with a promise to restore $4 million if his proposed decentraliza-
tion proposal is eventually adopted.
Community College Funding Reductions and Deferrals.
Reduces CCC’s Proposition 98 funding by $812 million. Of this
amount, $115 million is deferred to 2010-11. When combined
with federal funds and fee revenues, CCC’s base funding will be
reduced by about 8 percent.
L E G I S L A T I V E A N A L Y S T ’ S O F F I C E
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July 29, 2009
Social Services
Short-Term California Work Opportunity and Responsibility
to Kids (CalWORKs) Savings. Achieves savings of approximate-
ly $510 million in 2009-10 primarily from reducing county block
grant allocations for welfare-to-work services and child care. To
help counties achieve these savings, budget legislation exempts
families with a very young child, or two or more children under
age six, from work participation requirements through June 2011.
Out-Year CalWORKs Policy Changes. Effective July 1, 2011,
budget legislation reduces from 60 to 48 the number of consecu-
tive months an adult may receive a cash grant, requires adults
to meet with county workers every six months regarding work
requirements, and gradually increases the amount of the grant
sanction for cases which do not meet those requirements.
In-Home Supportive Services (IHSS) Reductions. Assumes
savings of approximately $264 million primarily from eliminat-
ing domestic and related services for all but the most severely
disabled IHSS recipients, making the least disabled ineligible for
all services, eliminating the share of cost buy-out program, and
implementing several antifraud activities.
Supplemental Security Income/State Supplementary Payment
(SSI/SSP) Grant Reductions. Reduces grants by $5 per month
for individuals and $72 per month for couples, resulting in General
Fund savings of $108 million beginning on October 1, 2009.
Cost-of-Living Adjustments (COLAs). Beginning in 2010-11,
eliminates automatic COLAs for CalWORKs and SSI/SSP.
Child Welfare Services Reduction. A gubernatorial veto
reduces funding to counties by $80 million.
Several Program Eliminations and Reductions Rejected.
Rejects the Governor’s proposals to eliminate the CalWORKs
program, the Cash Assistance Program for Immigrants, and the
California Food Assistance Program.
L E G I S L A T I V E A N A L Y S T ’ S O F F I C E
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July 29, 2009
Health
Federal Fiscal Relief for Medi-Cal. Assumes $1 billion in
General Fund savings from obtaining additional federal funds.
Unspecifi ed Medi-Cal Reductions. Assumes $323 million in
General Fund savings. How these savings would be achieved
has not yet been determined.
Regional Center (RC) and Developmental Center Programs.
Makes a $284 million reduction in General Fund spending to
programs administered by the Department of Developmental
Services (DDS). (These are in addition to $100 million in Gen-
eral Fund reductions for RCs in the February budget plan.)
Healthy Families Program (HFP). Rejects the Governor’s pro-
posal to eliminate HFP, which provides health care coverage to
low-income children. Instead reduces General Fund support for
HFP by $179 million from the level in the February budget plan.
This reduction would result in longer waiting lists for enrollment
and other actions that would further reduce the caseload.
Proposition 36. Rejects the Governor’s proposal to eliminate all
funding for Proposition 36 programs. Instead eliminates $90 mil-
lion from the trust fund established by Proposition 36 while
maintaining $18 million in funding for the Offender Treatment
Program, which also serves Proposition 36 offenders.
COLAs for Long-Term Care Providers. Freezes COLAs for
Medi-Cal long-term care providers, including skilled nursing fa-
cilities, to achieve about $76 million in General Fund savings.
Centralization of Eligibility Determinations. Authorizes de-
velopment of a plan to centralize eligibility determinations for the
Medi-Cal, CalWORKs, and Food Stamps programs. Implemen-
tation of the plan would be subject to later legislative approval.
L E G I S L A T I V E A N A L Y S T ’ S O F F I C E
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July 29, 2009
Health
(Continued)
Gubernatorial Vetoes. Reduces health spending approved
by the Legislature by about $300 million, including elimination
of certain HIV/AIDS local assistance funding; elimination of all
General Fund support for certain maternal, child, and adolescent
health programs; and Medi-Cal and clinic funding reductions in
addition to DDS and HFP reductions included above.
L E G I S L A T I V E A N A L Y S T ’ S O F F I C E
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July 29, 2009
Transportation
Additional Spillover Revenues. Uses $562 million in additional
spillover gasoline sales tax revenues projected to be available in
2009-10 to reimburse the General Fund for transportation debt
service. This amount is in addition to $90 million assumed in the
February budget.
Redirection of Home-to-School Funding. Redirects $225 mil-
lion in Public Transportation Account money to the General Fund
for transportation debt service. These funds were allocated in
the February budget to pay for Home-to-School Transportation
in 2009-10.
State Highway Account (SHA) Loan. Loans $135 million from
the SHA (mainly gas tax revenues) to the General Fund. The
loan must be repaid in three years with interest.
Unrestricted Motor Vehicle Account (MVA) Revenues. Trans-
fers $70 million in MVA revenues to the General Fund. These
revenues are not restricted by Article XIX of the State Constitu-
tion in their use, and can thus be used for general purposes.
L E G I S L A T I V E A N A L Y S T ’ S O F F I C E
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July 29, 2009
Judiciary and Criminal Justice
Adult Corrections. Refl ects a reduction of $788 million in Gen-
eral Fund support, which is in addition to the Governor’s February
veto of $400 million (for a total reduction of about $1.2 billion).
Adult Correctional Health Services. Assumes $50 million in
savings from limiting the reimbursement rates paid to private
contractors that provide medical care to inmates outside of
prison.
Judicial Branch. Reduces General Fund support for trial courts
by an additional $169 million, which would be accommodated
primarily through implementation of a one day per month fur-
lough, increased court fees, and the redirection of various spe-
cial funds. Also eliminates the statutory requirement that trial
courts automatically receive an infl ationary adjustment each year
based on the state appropriations limit.
L E G I S L A T I V E A N A L Y S T ’ S O F F I C E
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July 29, 2009
Local Government
Proposition 1A (2006) Suspension. Borrows $1.9 billion of
city, county, and special district property taxes. Uses the funds
to offset state General Fund spending for education and other
programs. Establishes a state-fi nanced loan repayment securiti-
zation program to offset the local fi scal effect of the borrowing.
Redevelopment Shift. Requires redevelopment agencies to
shift $1.7 billion (2009-10) and $350 million (2010-11) into a new
fund. Uses the resources to offset state General Fund spending
for education and other programs. Allows agencies to extend the
life of their redevelopment projects by one year.
Mandates. Suspends for one year the requirements of most
mandates, with the exception of mandates relating to public safe-
ty, elections, or tax collection. Results in savings of $66 million.
Williamson Act Program Suspension. The Governor vetoed
essentially all funding for this program, which backfi lls property
tax revenues that local governments forego when property own-
ers agree to preserve land for agriculture or open space.
L E G I S L A T I V E A N A L Y S T ’ S O F F I C E
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July 29, 2009
Resources and Environmental Protection
State Parks Funding. Does not include Governor’s proposal to
close most state parks or legislative proposal for a vehicle fee to
support state parks system. Reduces instead General Fund sup-
port for state park operations by $14 million (including $6 million
in gubernatorial vetoes)—from $142 million to $128 million. Re-
duction in General Fund support is unallocated and may result in
the closure of some state parks. In a related action, $62 million
in loans from resources-related special funds were made to the
General Fund.
Emergency Response Initiative. Rejects Governor’s May pro-
posal for a surcharge on property insurance policies statewide to
partially fund emergency response activities (including wildland
fi refi ghting) and supplant $76 million of General Fund support for
CalFire in the budget year.
California Integrated Waste Management Board (CIWMB).
Eliminates the CIWMB and consolidates the board’s functions
with other recycling programs under the Natural Resources
Agency.
L E G I S L A T I V E A N A L Y S T ’ S O F F I C E
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July 29, 2009
General Government
Payday Deferral. Defers over $900 million of state employee
paychecks to the next fi scal year by moving the June 30, 2010
pay-day to July 1, 2010.
State Employee Pay and Benefi t Costs. Counts $425 million
in additional cost reductions related to the Governor’s imposi-
tion of a third monthly furlough day for executive branch employ-
ees. A gubernatorial veto also reduces departmental funding for
scheduled increases in pay and benefi t costs by $55 million ($25
million General Fund), thereby requiring departments to “absorb”
these costs. Rejects Governor’s proposal to reduce state employ-
ee base salary by 5 percent.
State Employee Health Benefi ts. Scores $150 million in sav-
ings to conform with announced changes in California Public
Employees’ Retirement System rates and fees.
Information Technology (IT) Budgets. Authorizes the admin-
istration to reduce IT budgets by $100 million across state agen-
cies by reviewing and renegotiating IT contracts.
Board Eliminations and Consolidations. Assumes $50 million
in savings from various board eliminations and consolidations.
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July 29, 2009
Revenues
Lowers Anticipated Revenue. Reduces projected General
Fund revenues by $3.5 billion due to the state’s economic con-
dition. This change reduces prior-year revenues by a net of
$0.5 billion and 2009-10 revenues by $3 billion.
Increases Withholding Rates. Increases by 10 percent the
amount withheld from individual paychecks under the Personal
Income Tax (PIT) program. This change is effective
November 1, 2009, and increases General Fund revenues by
an estimated $1.7 billion in 2009-10.
Revises Estimated Payment Schedules. Alters the amount of
estimated taxes that individuals and corporations must submit to
the state each quarter. This change accelerates the collection of
these payments in the fi rst half of 2010, thereby increasing Gen-
eral Fund revenues by $610 million in 2009-10.
Sale of State Compensation Insurance Fund (SCIF). As-
sumes that a portion of SCIF will be sold, resulting in General
Fund revenue of $1 billion in 2009-10.
Rejects Tax Increases. Does not include legislative proposals
to (1) raise cigarette taxes, (2) impose a severance tax on oil
produced in the state, and (3) establish PIT withholding on pay-
ments to independent contractors.
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