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LAO 2001-02 Budget Perspectives and Issues: Issue-By-Issue TOC Analysis of the 2001-02 Budget Bill
Perspectives and Issues Outline
I State Fiscal Picture

Overview of the Governor's Budget

How the Budget Allocates Uncommitted Resources

Total Spending by Program Area

Main Features of the Governor's Proposal

K-12 Education

Higher Education

Energy Set-Aside

One-Time Spending

The Budget's Economic and Revenue Outlook

The LAO's Outlook for the Budget

Our "Bottom Line"

Key Assumptions

The Outlook Beyond the Budget Year

Budget Faces Large Challenges and Uncertainties

Legislative Considerations

II Perspectives on the Economy and Demographics

The Economic Outlook

Recent Developments

U.S. Economy Has Slowed Abruptly

What Happened?

California Escaped a Slowdown in 2000

However, 2001 Will Be a Much Tougher Year

The Budget's Economic Outlook in Brief

The LAO's Economic Outlook

National Forecast

California Forecast

Power Crisis Is Key "Wild Card" in Outlook

Several Other Factors Pressuring State's Economy

Construction Activity to Hold Up Reasonably Well

Longer-Term Outlook Remains Positive

Comparisons of Recent Economic Forecasts

California's Demographic Outlook

State Population Greater Than 35 Million

California's Population Characteristics

Overall Budgetary Implications

III Perspectives on State Revenues

Total State Revenues

Revenue Performance Over Time

The Budget's General Fund Revenue Outlook

Recent and Proposed Tax Relief

The LAO's General Fund Revenue Outlook

Key Factors Affecting the LAO's Forecast

The LAO's Forecast For Major Revenue Sources

Personal Income Tax

The PIT Share of Total Revenues Has Increased Substantially

Sales and Use Tax

Sales and Use Tax Rates

Taxable Sales Soared In 1999 and 2000 . . .

. . . But Will Slow Sharply In 2001 Before Rebounding

Bank and Corporation Tax

Recent Profit Growth Has Been Erratic

Earnings To Dip In 2001

Outlook for Other General Fund Revenue Sources

The Budget Forecast for Special Funds Revenues

IV Perspectives on State Expenditures

An Overview of State Expenditures

Proposed Total Spending in 2000-01 and 2001-02

General Fund Spending

Special Funds Spending

Spending From Federal Funds and Bond Proceeds

Federal Funds

Spending of Bond Proceeds

State Appropriations Limit

State Spending—An Historical Overview

Spending by Program Area

Total State Spending

Relative Growth in the Budget Year

Key General Fund Spending Developments

Major Expenditure Proposals In the 2001-02 Budget

Education

Proposal—K-12

Proposal—Higher Education

Issues for Legislative Consideration

Energy-Related Proposals

Recent Legislative Actions

Capital Outlay

Proposal

Issues for Legislative Consideration

Health Services

Proposal

Issues for Legislative Consideration

Criminal Justice and Judiciary

Proposal

Issues for Legislative Consideration

Transportation

Proposal

Issues for Legislative Consideration

Resources

Proposal

Issues for Legislative Consideration

Employee Compensation

Proposal

Issues for Legislative Consideration

V Major Issues Facing the Legislature

Realignment Revisited: An Evaluation of the 1991 Experiment In State-County Relations

Introduction

Background

Realignment Principles

Program Transfers

Cost-Sharing Ratio Changes

Increased County Shares

Reduced County Share

Realignment Revenues

Revenue Sources

Jurisdictions Affected

Allocation of Revenues

Transfer Provisions

"Poison Pill" Provisions

Evaluating Realignment

Mental Health Programs

Pre-Realignment Concerns

Results of Mental Health Realignment

What Mental Health Realignment Has Not Changed

Social Services Programs

Major Programs Affected

Changes in Cost-Sharing Ratios Intended to Control Costs

Early Statutory Changes Negated Realignment’s Cost Control Incentives

AFDC: Welfare Reform Changes Overshadow Realignment

Health Programs

Lack of Data Makes Evaluation Difficult

Flexibility Could Be Enhanced

Crosscutting Realignment Issues

Fiscal Incentives Could Be Improved

Revenue Stream Has Been Stable, But Lacks a Reserve

Funding Allocations Have Favored Social Services

Inequities in Allocations Remain

Transfer Provisions Provide Opportunity for Local Preferences

Concerns Regarding Administration of Allocations

Recommendations for Improving Realignment

Improve Fiscal Incentive Structure Of Growth Allocations

Improve Administration of Fund Allocations

Other Recommendations

Considering Realignment as a Model for Future Program Decisions

Conclusion

Academic Preparation for Higher Education

Introduction

Defining "Prepared" and "Unprepared" Students

Unpreparedness Is Persistent and Pervasive

Unpreparedness Rate Has Increased Significantly at CSU

Unpreparedness Has Remained Relatively Constant at UC

Assessing Student Preparedness

Assess Preparation For College-Level Studies Earlier

Precollegiate Education in California'sColleges and Universities

Community Colleges Offer Noncredit and Credit Precollegiate Courses

The CSU Offers Several Types of Precollegiate Services

The UC Also Offers A Variety of Precollegiate Services

Improving Accountability in Precollegiate Education

Segments Should Assess and Report on The Preparedness of All Entering Students

Segments Should Assess and Report on The Effectiveness of Their Precollegiate Services

Funding Precollegiate Courses

State Should Offer Only One Precollegiate Funding Rate

Conclusion

"E-Government" in California

What Is "E-Government" and How Does it Work?

How Does an E-Government Service Work?

What Are the Potential Benefits of E-Government?

What Is the State Doing With Respect to E-Government?

The Administration's Approach

State's Current E-Government Systems

How Do California's E-Government Efforts Compare?

Concerns With the Administration's Current Approach

What Qualities Should the Legislature Look for In a Good E-Government Proposal?

What Are the Future Issues?

Conclusion