Legislative Analyst's Office, October 1998
California Spending Plan 1998-99
 |
Chapter 3
Major Features of
The 1998-99 Budget Plan
|
The budget includes over $35 billion in
Proposition 98 spending in 1998-99 for K-14 education. This
represents an increase of $2.4 billion, or 7.3 percent,
from the revised 1997-98 funding level. Figure 1 (see page
26) summarizes for 1997-98 and 1998-99 the effect of the budget
package on K-12 schools, community colleges, and other specific
agencies.
| Figure 1 |
| Proposition 98 Budget Summary |
1997-98 and 1998-99
(Dollars in Billions) |
| |
1997-98 |
|
| |
Budget Act |
Revised |
1998-99
Budget Act |
| |
|
|
|
| K-12 Proposition 98 |
|
|
|
| General Fund |
$19.9 |
$20.4 |
$22.1 |
| Local property taxes |
9.0 |
8.8 |
9.2 |
| Totals, K-12 |
$28.9 |
$29.2 |
$31.3 |
| Average Daily Attendance
(ADA) |
5,359,444 |
5,357,024 |
5,453,060 |
| Amount per ADA |
$5,386 |
$5,454 |
$5,735 |
| California Community
Colleges |
|
|
| General Fund |
$1.9 |
$1.9 |
$2.2 |
| Local property taxes |
1.4 |
1.4 |
1.4 |
| Totals, Community
Colleges |
$3.3 |
$3.3 |
$3.6 |
| |
|
|
|
| Other agencies |
$0.1 |
$0.1 |
$0.1 |
| Loan repayment |
$0.2 |
$0.2 |
$0.3 |
| Grand Totals, Proposition
98 |
$32.5 |
$32.8 |
$35.2 |
| General Fund |
$21.8 |
$22.3 |
$24.6 |
| Local property taxes |
10.4 |
10.2 |
10.6 |
| |
|
|
|
The Proposition 98 appropriation
reflects the fact that the Legislature appropriated more General
Fund monies than required to meet the constitutional minimum.
Specifically, the Legislature appropriated $177 million more
than the 1997-98 minimum funding level and $587 million more
than what would have been required to satisfy the guarantee in
1998-99. (These amounts include $50 million in each year in
accordance with Proposition 227, the initiative requiring
English-only instruction.)
The K-12 portion of the Proposition 98
budget package includes:
Figure 2 (see page 27) displays K-12
per-pupil funding amounts from 1991-92 through 1998-99. After
adjusting for the effects of inflation and changes in attendance
accounting, per-pupil funding has increased $520, or
10 percent, over the period.
1998-99 Baseline Increases.
Compared to the 1997-98 Budget Act, K-12
Proposition 98 funding increased by $2.4 billion. The
budget allocates $1.6 billion to provide inflation and
growth adjustments. Specifically, the budget includes about
$540 million to accommodate a projected 1.8 percent
increase in the student population, $833 million for a
3.95 percent K-12 revenue limit cost-of-living adjustment
(COLA), and about $200 million for a 2.18 percent K-12
categorical programs COLA.
The budget directs the remaining increased
funding for other purposes, including new programs and existing
K-12 categorical programs (see Figure 3). The major
discretionary increases in the budget are as follows:
1997-98 and Prior Years
"Settle-Up" Funding. Proposition 98
minimum funding levels are determined by one of four specific
formulas, each using a set of specified factors. Because the
factors change during the year, the minimum funding guarantee
under Proposition 98 also changes. Any additional amount
needed to satisfy the guarantee from a past fiscal year is
referred to as Proposition 98 settle-up funding.
The budget contains approximately
$640 million in settle-up funding for K-12 programs.
Figure 4 displays the major allocations of these monies. The
budget appropriates most of these funds for one-time activities.
Specifically, the budget allocates $180 million in block
grants to local school sites for one-time expenditures. Each
school will receive about $30 per student, with no school
receiving less than $10,000. As Figure 4 illustrates, the
budget also includes one-time augmentations for the digital high
school project ($86 million)and various other purposes.
Governor's Vetoes.
The Governor vetoed $88 million of settle-up funds and
$408 million in 1998-99 Proposition 98 funds for K-12
in the budget and trailer bills. The Governor also vetoed
$57 million of 1998-99 Proposition 98 funds for the
community colleges. Of the 1998-99 vetoed funds, the Governor
deleted funding for increases to beginning teacher salaries
($50 million) and reduced funding for school desegregation
($37.1 million).
Also, as part of the 1998-99 vetoed funds,
the Governor vetoed $250 million for programs related to
school reform, but set aside these funds for subsequent
legislation that would increase school accountability and improve
student achievement. These "set-asides" included
$94 million for K-12 categorical program growth and COLA
funding, $75 million for remedial summer school,
$50 million for low-performing schools, and $30 million
for college preparation.
In the final days of the session, the
Legislature passed several bills to restore these funds and to
address the school reform concerns raised in the Governor's
set-aside veto messages. Of these bills, the Governor vetoed SB
1561 (Leslie), which would have provided $50 million for
low-performing schools, because the bill did not meet the
Governor's expectations regarding accountability. He signed
several other bills that, together, restored $218 million
for 1998-99, including $94 million for categorical programs
growth and COLA, $75 million for remedial summer school,
$30 million for remedial instruction for grades 7 to 9, and
$18 million for college preparatory programs. (See the
appendix at the end of this report for a list of significant
spending bills passed at the end of the session.)
The Governor also vetoed $8 million in
non-Proposition 98 funding for Department of Education state
operations (executive management), approximately one-quarter of
the department's operating budget. In his veto message, the
Governor set the $8 million aside, pending enactment of
legislation to transfer specified legal counsel positions from
the Department of Education to the Attorney General. Since the
Legislature did not subsequently pass such legislation,
resolution of this issue may require action by the Legislature
early in the next session.
The budget includes significant funding
increases for the University of California (UC), California State
University (CSU), California Community Colleges (CCC), and the
Student Aid Commission. It provides sufficient funds to
accommodate enrollment growth, as well as funds for growth in
prior years that were not explicitly funded in prior budgets. The
budget also provides $55 million from the General Fund to
compensate the three public systems for the revenue loss
associated with a 5 percent undergraduate fee reduction
mandated by Chapter 853, Statutes of 1997 (AB 1318,
Ducheny). Figure 5 shows the change in funding for each
major segment of higher education for 1998-99 from selected fund
sources.
The budget provides $340 million, or
16 percent, more in General Fund support for the UC in
1998-99 than in 1997-98. The major augmentations include:
Figure 6 (see page 32) shows the
per-student funding history for UC over the past 26 years
adjusted for the effects of inflation.
The budget provides $267 million, or
14 percent, more in General Fund support for CSU in 1998-99 than
in 1997-98. Major augmentations include:
Figure 6 also shows the per-student funding
history for CSU over the past 26 years adjusted for the effects
of inflation.
The budget package contains major funding
increases for community colleges. This resulted, in part, because
the budget exceeds the
Proposition 98 minimum funding guarantee for K-14 education by
$587 million. General Fund spending for community colleges totals
approximately $2.2 billion in the budget year. This
represents a $234 million, or 12 percent, increase
above the 1997-98 level. Despite expected enrollment growth,
student fee revenues are expected to decline by $10 million,
mainly due to the $1 per credit unit reduction mandated for
1998-99 by Chapter 853.
1998-99 Expenditures.
Figure 7 illustrates the major program increases funded in
1998-99. The budget includes $100 million for a new
"partnership for excellence." It also includes $90.4
million to fund enrollment growth of 3 percent, and $71.4 million
for COLAs of 2.3 percent.
The partnership for excellence funds will
be distributed to districts on a per-student basis to improve the
performance of colleges in teaching students. The CCC Board of
Governors will develop outcome measures and goals upon which
future performance will be assessed. Beginning with the 2001-02
fiscal year, the board will consider whether partnership for
excellence funds should be allocated based on district
performance.
Settle-Up Expenditures. The budget includes
$75 million in "settle-up" funding for 1997-98 and
prior years for several one-time activities. Trailer bill
language authorizes up to $20 million of this amount to be
used to backfill property tax deficiencies for the 1997-98 fiscal
year, if needed. Half of whatever remains would be allocated to
districts on a per-student basis for instructional equipment,
library materials, and technology infrastructure. The other half
would be allocated by the Chancellor's Office on a
project-priority basis for facility maintenance, architectural
barrier removal, and abatement of hazardous substances.
Governor Vetoed Legislation to
Add $46 Million. The Governor vetoed
$57 million from the amount approved by the Legislature for
the community colleges in the 1998-99 Budget Act. The
vetoes included $11 million for noncredit instruction and
$8.9 million for equalization of state funding among college
districts. Assembly Bill 2398 (Ducheny) would have provided
$11 million for the noncredit courses and $35 million
to "fully" equalize state funding among college
districts. The Governor vetoed AB 2398.
Figure 6 (page 32) shows the per-student
funding history for the Community Colleges for the past 26 years
adjusted for the effects of inflation.
The budget appropriates $352 million
from the General Fund for the Student Aid Commission in 1998-99.
This is $57 million, or 19 percent, above expenditures
in 1997-98. The growth in the commission's budget provides for
5,056 additional new Cal-Grant awards and an increase in the
maximum annual grant amount from $8,184 to $9,036.
In this section, we describe the major
features of the health and social services funding in the state
spending plan. General Fund support for health and social
services programs in 1998-99 totals $15.3 billion, an
increase of 4.6 percent over the prior year. This growth in
expenditures is the net result of welfare grant increases,
workload-related activities, and new or expanded programs such as
the Foster Care Initiative, which were partially offset by
various savings. The largest amount of savings resulted from
caseload reductions and federal carryover funds in the California
Work Opportunity and Responsibility to Kids (CalWORKs) program.
Figure 8 shows the changes in expenditures in the major
welfare grant programs and the Medi-Cal Program.
Figure 9 (see page 36) describes the
major General Fund changes (from prior law) enacted in the 1998-99
Budget Act and related legislation. The major health trailer
bill was AB 2780 (Gallegos, Ducheny, Villaraigosa) which, among
other things, reduced the state administrative fee for the
Disproportionate Share Hospital program and established a newborn
hearing screening program. The major social services trailer bill
was AB 2779 (Aroner, Ducheny, Villarai-gosa) which, among other
changes, reversed a prior 4.9 percent CalWORKs grant
reduction and reinstated the COLA for Cal-WORKs grants.
In response to federal welfare reform
legislation, the Legislature created the CalWORKs program in
1997. This program, which replaced the Aid to Families with
Dependent Children (AFDC) program, provides cash grants and
welfare-to-work services to families with children whose incomes
are not adequate to meet their basic needs. The budget plan
provides $1.8 billion from the General Fund for the CalWORKs
program in 1998-99. Even though the budget contains increased
funding for welfare-to-work services and county fiscal
incentives, General Fund spending is projected to decline by
12 percent in 1998-99 because of caseload reductions and the
availability of unexpended federal Temporary Assistance for Needy
Families (TANF) funds from prior years.
Grant Payments. The
Legislature rejected the Governor's proposal to make permanent a
previously enacted 4.9 percent grant reduction and to
eliminate the statutory COLA. These actions result in costs of
$230 million compared to the Governor's budget but no cost
in relation to prior law.
As a result of the grant and COLA
restorations, effective November 1, 1998, the maximum
grant for a family of three in high-cost counties will increase
by $46 to a total of $611 per month, and the corresponding grant
in low-cost counties will increase by $44 to a total of $582 (see
Figure 10, page 37). Budget trailer bill legislation,
however, provides that future COLAs will be suspended in any year
where revenues are insufficient to "trigger" an
additional vehicle license fee reduction, beginning in 2000-01
(see the "Tax Provisions" section of this report).
Employment Services.
The budget appropriates about $1 billion for CalWORKs
employment services (General Fund and federal block grant funds).
The Legislature reduced the Governor's request by (1)
$166 million for basic employment services because the funds
are in excess of the estimated amount needed to fully fund the
program, and (2) $85 million by deferring the state match
for the new federal Welfare-to-Work block grant. The budget
appropriation includes the full amount requested by the Governor
($373 million) for county "fiscal incentives,"
which are payments based on the state's grant savings in the
program.
Mental Health Services for
CalWORKs Recipients. The budget, as passed by the
Legislature, included $22 million from the General Fund for
mental health services for CalWORKs recipients. This expenditure
would have drawn down $23 million in additional federal
Medicaid funds. The Governor, however, vetoed these funds because
the General Fund appropriation was above the minimum amount
needed to meet the federal "maintenance of effort"
requirement.
Caseload Reduction.
Since reaching its peak in 1994-95, the CalWORKs/AFDC caseload
has declined by about 20 percent (see Figure 11, page
38). For 1998-99, the caseload is projected to decline by
9.6 percent, resulting in grant savings of about
$350 million compared to 1997-98.
The Supplemental Security Income/State
Supplementary Program (SSI/SSP) is a state and federally funded
program that provides grants to low-income aged, blind, and
disabled persons. The budget appropriates $2.2 billion from
the General Fund for the program in 1998-99, which is an increase
of 8.2 percent over 1997-98. This spending increase is
largely attributable to higher grants effective
January 1999.
Grant Payments. The
budget provides for the statutory COLA (2.84 percent), as
proposed in the Governor's budget, and an additional grant
increase of 1 percent at a General Fund cost of
$42 million above both prior law and the amount proposed by
the Governor. Effective January 1, 1999, the maximum
grant for aged or disabled individuals will increase by $26 to a
total of $676 per month, and the corresponding grant for couples
will increase by $45 to a total of $1,201 per month (see
Figure 10).
State-Only Program for Certain
Noncitizens. Federal welfare reform and related
legislation made elderly legal noncitizens, who are not disabled,
ineligible for SSI/SSP. In addition, noncitizens who cannot be
naturalized because they are not considered permanent residents
became ineligible for SSI/SSP benefits on
October 1, 1998. (Pending federal legislation may
restore eligibility for these noncitizens.) State budget
legislation provides, for a two-year period, state-only benefits
to these noncitizens (with certain exceptions) at a General Fund
cost of $19 million in 1998-99.
Special Circumstances Program.
The Legislature rejected the Governor's proposal to permanently
eliminate the Special Circumstances Program. This program, which
had been suspended since 1992, provides emergency payments to
SSI/SSP recipients for certain nonrecurring needs, such as
replacing a broken refrigerator or repairing a leaky roof. The
budget includes $8.3 million General Fund for this program,
offset by $6 million in combined savings in SSI/SSP and
Medi-Cal long-term care.
The Food Stamps program provides food stamps
to low-income persons. The cost of the food stamps coupons (over
$2 billion) is borne entirely by the federal government,
with the exception of the state-only program for noncitizens that
is discussed below.
Expanded State-Only Program for
Legal Noncitizens. Budget legislation expands, for
a two-year period, the existing state-only Food Stamps program
for children and elderly noncitizens to include
(1) noncitizens ages 18 through 64 and (2) certain
noncitizens who arrived in the United States after
August 1996. Eligibility for the program will be dependent
on meeting a specified work requirement. The 1998-99 Budget
Act appropriates $71 million for this expansion (which
was partially offset by savings from new federal funds to cover
the pre-existing state-only program for children and the
elderly).
The Foster Care program provides grants to
pay for the care of children placed in foster family homes or
group homes. The Child Welfare Services (CWS) program provides
services to abused and neglected children and children in foster
care and their families. The budget appropriates
$433 million from the General Fund for the Foster Care
program in 1998-99, a 9 percent increase over estimated
General Fund spending in 1997-98. The budget appropriates
$541 million for the CWS program in 1998-99, a
20 percent increase over estimated General Fund spending in
1997-98.
The budget includes an increase of
$103.7 million from the General Fund (including
$7.6 million for a group home COLA required under prior law)
for various increases and reforms in the Foster Care and CWS
programs. Figure 12 (page 40) summarizes the fiscal impact
of the "Foster Care Initiative," and the major features
are described in Figure 13 (page 41).
Federal law requires the states to provide
child support enforcement services to families receiving TANF.
Non-TANF families may request the same services, or seek to
obtain child support through a private attorney. Child support
payments that are collected on behalf of TANF recipients are used
to offset the public costs of TANF grants, except the first $50
of monthly payments which are distributed to the custodial
parent.
In California, the child support enforcement
program is administered by county district attorneys under the
supervision of the Department of Social Services (DSS).
Child Support Automation.
The budget includes $80 million from the General Fund and
federal funds to launch a new approach to automating the child
support enforcement program. The new approach follows the
cancellation in November 1997 of the state's contract with a
vendor to develop the Statewide Automated Child Support System.
Under the new approach, the Health and
Welfare Agency Data Center intends to deploy a Statewide Case
Registry (SCR) and Statewide Distribution Unit (SDU) which will
enable the transmission of data and child support monies across
county lines in compliance with recently enacted welfare reform
laws. The administration's original plan called for counties to
use one of seven automated case management systems to connect to
the SCR and SDU. Assembly Bill 2779 amended the plan to allow up
to four case management systems. Since the administration's plan
has not yet been approved by the federal government and the
federal government will not reimburse for costs already incurred
before approval is granted, it is unclear how much of the
project--which will likely cost several hundred millions of
dollars--will be funded with federal monies and how much will be
funded from the state General Fund.
The Adult Protective Services (APS) program
provides assistance to the elderly and functionally disabled
adults who are victims of abuse, neglect, or exploitation.
Program Expansion.
The Governor proposed expanding the APS program by
$20 million. The Legislature augmented the Governor's
proposal by $32.7 million, but the Governor vetoed this
augmentation.
The In-Home Supportive Services (IHSS)
program provides various services to eligible aged, blind, and
disabled persons who are unable to remain safely in their own
homes without such assistance. The program is administered by the
DSS. The budget appropriates $444 million from the General
Fund for the IHSS program in 1998-99. This represents an increase
of 15 percent over estimated General Fund spending in
1997-98, primarily due to increases in caseload and the minimum
wage (most IHSS service providers earn the minimum wage).
Expansion of Personal Care
Services Program. Budget legislation requires the
Department of Health Services (DHS) to seek federal approval of a
Medicaid State Plan amendment to extend coverage of personal care
services to Medi-Cal "medically needy" individuals.
This action will increase the federal share of costs in the IHSS
program and will result in estimated General Fund savings of
$19.9 million.
The Department of Developmental Services
contracts with 21 nonprofit regional centers to coordinate
educational, vocational, and residential services for
approximately 140,000 developmentally disabled clients each year.
The department also operates five state developmental centers
(DCs) that house nearly 4,000 residents.
Provider Rate Increases.
The budget includes a $48.3 million General Fund
augmentation (including the state share of reimbursements) to
increase rates for services provided to people with developmental
disabilities. This includes services in community care facilities
(13 percent increase) and day and respite care programs
(7 percent). In-home respite workers will also receive an
average pay increase of about 14 percent. In addition,
Chapter 1043 (SB 1038, Thompson) appropriates $2.5 million
General Fund (including reimbursements) to provide increased
wages and benefits for supported living workers.
Regional Center Staff.
The budget includes $20.8 million from the General Fund for
additional staff at the regional centers: 757 new case managers,
105 supervisors, and 218 other positions such as information
systems specialists, training officers, and related clerical
staff.
Developmental Center Staffing
Increase. The budget includes $30.3 million
($1.8 million General Fund and $28.5 million in
reimbursements, which are 49 percent General Fund) for new
staff at the DCs. This includes 438 direct care workers, 107
support staff, and 32 peace officers.
The California Department of Aging
administers various programs providing services to the elderly
and functionally disabled adults.
Expansion of Programs for the
Elderly. The Governor's budget proposed
$9.1 million to expand Adult Day Health Care, the
Multipurpose Senior Services Program, Alzheimer's Day Care
Resource Centers, Linkages, the Foster Grandparent program, the
Senior Companion program, Respite Purchase of Services, Respite
Registry, and the Brown Bag program into areas of the state that
are currently unserved. The Legislature augmented the Governor's
proposal by $12.8 million, but the Governor vetoed
$10.3 million of the augmentation.
The Department of Alcohol and Drug Programs
(DADP) coordinates the state's efforts to prevent or minimize the
effects of alcohol-related problems, narcotic addiction, and drug
abuse. The department also serves as the coordinating agency for
the California Mentor Initiative.
Drug Court Partnership Grants.
Senate Bill 1587 (Alpert) appropriates $8 million from the
General Fund to create the Drug Court Partnership, a competitive
grant program aimed at expanding the use of drug treatment as an
alternative to incarceration for defendants who plead guilty to
drug-related offenses. The Governor subsequently reduced the
appropriation to $4 million. The DADP and the Judicial Council
will administer the grants, which are intended to continue
through 2001-02 at a total General Fund cost of $28 million,
subject to appropriation in future budget acts. As of May 1998,
75 jurisdictions in 31 counties had a drug court in operation,
primarily funded through federal grants.
The California Medical Assistance (Medi-Cal)
program provides health care services to welfare recipients and
to other qualified low-income persons (primarily families with
children and the aged, blind, or disabled). The DHS administers
the program. The budget appropriates $6.9 billion from the
General Fund to the department for Medi-Cal benefits in 1998-99,
an increase of 1.8 percent over estimated General Fund
spending in 1997-98. The DHS budget also includes
$10 billion of federal Medicaid funds in 1998-99. These
Medicaid funds match state General Fund spending for Medi-Cal
benefits in the DHS budget. They include additional federal
funding to (1) provide supplemental payments to
disproportionate share hospitals (DSHs) and (2) match state funds
budgeted in other departments for several related programs.
Provider Rate Increases.
The budget, as passed by the Legislature, included a total of
$57.9 million from the General Fund for various Medi-Cal
provider rate increases plus $74 million for a
6 percent increase in nursing home rates that was required
pursuant to an adjustment mechanism in existing law. The Governor
vetoed $9.3 million by eliminating increases for
optometrists and medical vans, and half the increase for
outpatient hospital services. Figure 14 lists the rate
increases that were included in the enacted budget.
Reduced State "Takeout"
From DSH Payments. The budget includes a General
Fund augmentation of $40 million in the Medi-Cal program to
backfill for an equivalent reduction in the state takeout from
DSH transfers made by public hospitals operated by counties, the
University of California, and local hospital districts. The state
takeout is used to offset a portion of the General Fund cost of
the Medi-Cal program. The remainder of the transfers, along with
matching federal funds, are returned as DSH payments to
qualifying public and private hospitals. The budget action
reduces by $40 million the amount of the transfers to the
state needed to obtain the full allotment of DSH payments.
Regional Burn and Trauma Center.
The budget includes $25 million to partially fund
construction of a new regional burn and trauma center in Fresno
to replace facilities in the former county hospital, which is
scheduled to close by 2003.
Los Angeles County Comprehensive
Health Centers. The budget bill, as passed by the
Legislature, included a General Fund appropriation of
$40 million to partially fund construction of three
comprehensive health clinics in Los Angeles County. Budget
legislation SB 1573 (Solis) makes the funding contingent on
a commitment by the county to build a replacement hospital for
the Los Angeles County-University of Southern California Medical
Center with a capacity of at least 750 beds and also makes the
hospital replacement project eligible for future state funding.
The Governor vetoed both the budget appropriation and
SB 1573.
Continuation of Prenatal Care for
Undocumented Immigrant Women. The budget bill, as
passed by the Legislature, provided $36.8 million to
continue prenatal benefits for undocumented immigrants after
December 31, 1998, as authorized by SB 34
(Vasconcellos). The Governor vetoed SB 34 and eliminated the
funding in the budget. These state-only Medi-Cal benefits
continue to be provided, however, under a court order pending the
outcome of litigation challenging regulations of the DHS that
would terminate the program. The Governor indicated that the
vetoed funds are included in the General Fund reserve, pending
resolution of this litigation.
The Healthy Families Program, administered by
the Managed Risk Medical Insurance Board with the assistance of
the DHS, expands health care coverage for uninsured children in
families with incomes up to 200 percent of the federal
poverty level. The program began enrolling children in July 1998
and implements the federal Children's Health Insurance Program,
enacted in 1997. Funding for California generally is on a 2-to-1
federal/state matching basis. Families pay a relatively low
monthly premium and can choose from a selection of managed care
plans for their children. Coverage is similar to that offered to
state employees and includes some dental and vision benefits. The
program also includes some modest expansions of Medi-Cal
eligibility for children.
The budget provides a total of
$65.2 million from the General Fund for the program
(including related Medi-Cal, administrative, and outreach costs)
in 1998-99. (Initial General Fund start-up costs in 1997-98 were
$5.9 million.) The budget also includes a total
$132 million of federal funds for the program in 1998-99. By
the end of 1998-99, the budget estimates that the number of
children enrolled in the managed care plans under the program
will be 201,000 (plus an additional 58,000 children covered by
the Medi-Cal expansions).
Expand Eligibility.
As passed by the Legislature, the budget included $3 million
from the General Fund to expand eligibility for children's health
coverage under the new Healthy Families Program. The expansions,
authorized by AB 2778 (Villaraigosa), increased the family
income limit from 200 percent to 250 percent of the
federal poverty level (with Medi-Cal income disregards) and made
recently arrived legal immigrant children eligible for coverage.
The Governor eliminated the additional funding and vetoed
AB 2778.
The DHS administers a broad range of public
health programs. Among these are (1) programs that
complement and support the activities of local health agencies
controlling environmental hazards (including the protection of
public drinking water systems), preventing and controlling
disease, and providing health services to populations with
special needs; and (2) state-operated programs, such as
those which license health facilities and certain types of
technical personnel.
Drinking Water Systems.
The budget appropriates $15.2 million from the General Fund
to serve as the state match for $76 million in federal funds
for local drinking water systems. The budget provides that if a
water bond measure is placed on the ballot and approved by the
voters, the General Fund would be reimbursed from the bond
proceeds.
Newborn Hearing Screening
Program. Budget legislation established a newborn
hearing screening program, at a cost of $6.2 million ($3.5
million from the General Fund) in 1998-99. Under this new
program, all hospitals approved by the California Children's
Services program (which deliver about 70 percent of all newborns
in the state) are required to offer hearing screening tests to
newborn infants.
The 1998-99 budget for judicial and
criminal justice programs totals $6.3 billion, including
$5.7 billion from the General Fund and $634 million
from state special funds. This is an increase of
$636 million, or 11 percent, over 1997-98 expenditures.
The increase is the result of two primary factors: additional
costs associated with the state's increased financial
responsibility for support of the trial courts and increases in
spending to accommodate the projected growth in the state's
prison and parole populations. Figure 15 (see page 48) shows
the budget act appropriations for the major judiciary and
criminal justice programs for 1998-99.
The amount is about $104 million, or
about 1.6 percent, below the Governor's proposed budget.
Although the net amount is relatively close to the spending level
proposed by the Governor, the Legislature made a number of
changes to the Governor's budget, including deletions of some
requests, additions of new policy initiatives and augmentations,
and modifications to individual spending proposals.
Post-Budget Legislative
Actions. Subsequent to the enactment of the 1998-99
Budget Act, the Legislature passed and the Governor signed a
number of bills that appropriate an additional $320 million
from the General Fund in the current year for various judiciary
and criminal justice programs.
Under Chapter 850, Statutes of 1997
(AB 233, Escutia), the state is now primarily responsible for
support of the trial courts. The budget includes
$1.7 billion for support of the trial courts in 1998-99. The
amount includes $623 million from the General Fund,
$224 million from fine and penalty revenues,
$235 million in court fees, and $572 million
transferred from counties to the state. Chapter 850 made
substantial reductions in the amount of money counties are
required to transfer to the state beginning in 1998-99, thus
requiring the state to backfill the reductions with large
increases from the General Fund. Figure 16 compares the cost
to the General Fund and to counties for support of the trial
courts since 1994-95.
Legislative Budget Actions.
In enacting the 1998-99 budget, the Legislature made several
modifications to the Governor's Trial Court Funding budget
proposal, including:
Trailer Bill to Provide
Additional County Relief in Subsequent Years. The
Legislature adopted a trailer bill related to Trial Court Funding
that was designed to provide additional fiscal relief to counties
and results in substantial increases in costs to the state
General Fund in subsequent years. Specifically, AB 1590
(Thomson), which the Governor signed, further reduced the county
MOE levels for support of the trial courts beginning in 1999-00.
The bill does this in two ways by: (1) increasing from 20 to 37
the number of counties for which the state will pay
100 percent of costs (thus, all counties with populations
below 300,000 would make no contributions) and (2) reducing the
MOE for the remaining 21 counties by 10 percent. The effect
of these provisions will be to increase the state's costs by
$92 million beginning in 1999-00.
In addition, AB 1590 provided further MOE
relief to counties for contributions they made in 1997-98. This
relief will be provided over five years starting in 1999-00. The
provision will cost the state about $50 million, or about
$10 million annually, from 1999-00 through 2004-05.
Post-Budget Legislation.
In late August, the Legislature also adopted two other bills that
made further modifications to the county MOE levels and
appropriated additional General Fund money to backfill the loss.
Assembly Bill 2788 (Thomson) provided the
same MOE relief for the 1997-98 contributions (discussed above)
but over a three-year period beginning in the current
year. The measure appropriated $16.6 million from the
General Fund to cover these additional current-year costs. The
measure also added one county to the list of counties for which
the state will pay all costs. The Governor signed this measure.
Assembly Bill 2791 (Thomson) contained the
same provisions as AB 2788, but also moved up the 10 percent
MOE reductions and 100 percent county buy-outs from 1999-00
to the current year. This measure appropriated $114 million
from the General Fund to cover the additional costs. However, the
Governor vetoed this measure.
The budget provides a total of
$3.9 billion ($3.9 billion from the General Fund and
$45 million from other funds) for support of the California
Department of Corrections (CDC). This represents an increase of
about $216 million, or 5.9 percent, above the 1997-98
level and is primarily due to projected increases in inmate and
parole populations. The budget assumes that the prison population
will grow to about 166,000 inmates and the parole population will
grow to about 115,000 parolees by the end of 1998-99.
Figure 17 shows the prison and parole populations over the
past five years and the level projected by the budget for the
current year.
Legislative Changes to the
Budget. In the 1998-99 Budget Act, the
Legislature made net General Fund reductions of about
$38.8 million below the Governor's requested budget for CDC.
The most significant changes were reductions of
$52.5 million to reflect recent caseload trends and
$12.5 million budgeted for merit salary adjustments. In
addition, the budget included an increase of $18.6 million
for various programs designed to rehabilitate and reduce future
criminality of inmates and parolees. The Governor vetoed
$16.1 million of this amount, leaving only the Legislature's
augmentation of $2.5 million to expand inmate work and
education slots in state prison to reduce inmate idleness.
Post-Budget Legislation.
In late August, however, the Legislature enacted and the Governor
later signed measures that provided funds for various inmate and
parolee rehabilitation programs, including funds for some of the
programs that the Governor had vetoed in the budget act.
Specifically, SB 2108 (Vasconcellos and Brulte) provided a total
of $23.5 million for expanded drug treatment and other
services for inmates and parolees. In addition, AB 2321 (Knox)
provided $3 million to expand and evaluate the Preventing
Parolee Crime Program.
New Prison Capacity.
The Governor had requested authority in the budget for CDC to
contract for 5,000 beds at publicly or privately built and
operated prisons (the beds would not have come on-line until
1999-00). However, the final version of the budget deleted the
authority to contract for these beds. Subsequent legislation (SB
491, [Brulte and Vasconcellos]) was enacted, however, to
authorize CDC to contract for 2,000 additional beds under
specified conditions. In addition, SB 491 authorized expansion at
ten existing prisons that would provide facilities to house a
total of $1,900 male inmates. Funding for construction of these
facilities ($74 million) was appropriated in SB 2108.
The budget as enacted for 1998-99 assumes
a total of $195 million in federal funds to offset the
state's costs of incarcerating and supervising undocumented
inmates and wards in state prison and the Department of the Youth
Authority. In the January budget, the Governor assumed that the
state would received $286 million in the budget year. In
late May, however, the state learned that its share of recent
federal appropriations would be significantly less than the
Governor had assumed. As a consequence, the estimates were
reduced for 1998-99, as well as for the two prior fiscal years
for which the state is still expecting funding. As a result,
General Fund costs increased by $238 million in order to
backfill for the anticipated loss in federal funds.
In addition, the Legislature chose to
shift an additional $15.8 million in federal prison
construction grant funds to offset incarceration costs of
undocumented felons, as permitted under federal law. Last year,
the Legislature shifted $54 million for this purpose.
The budget provides $312 million
($308 million from the General Fund and $4.1 million
from other funds) for support of the Youth Authority. General
Fund support for the Youth Authority declines by
$24 million, or 7.3 percent, from 1997-98 to 1998-99,
primarily as a result of the declining ward population. There
were no major policy changes in the budget.
Subsequent to the enactment of the budget,
the Legislature appropriated $25 million to the Youth
Authority in AB 2796 (Wright) for distribution to nonprofit
organizations for acquiring, renovating, or constructing
community youth centers. The Governor signed AB 2796.
The budget provides $176 million for
the Board of Corrections. This amount includes $42 million
from the General Fund, $16.9 million from special funds,
$114 million from federal funds, and $2.9 million from
bond funds. This amount was substantially higher than the amount
requested by the Governor ($86.6 million) for two principal
reasons. First, the Legislature provided net General Fund
augmentations of $31 million for new and expanded criminal
justice and juvenile delinquency grant programs for local
governments. The Governor reduced the net augmentations by
$23.2 million. Second, the Legislature augmented
$81.4 million in federal funds for distribution to local
governments to construct or expand local juvenile correctional
facilities. The federal government provided these funds to the
state for construction of state prisons, but federal law and
regulation permit the state to use the funds for local juvenile
detention facilities instead.
Post-Budget Legislation.
Two bills mentioned above also provided substantial
appropriations from the General Fund for programs in the Board of
Corrections. Specifically, SB 2108 provided an additional
$50 million to the board for grants to counties under the
Juvenile Crime Enforcement and Accountability Challenge Grant
Program. In addition, the bill included $27 million for a
new grant program for counties (established in SB 1485,
[Rosenthal]) for the purpose of expanding or establishing a
continuum of responses to reduce crime and criminal justice costs
related to mentally ill offenders. Assembly Bill 2796 included an
additional $100 million for the board to provide funding to
counties for renovation, construction, replacement, and deferred
maintenance of county juvenile correctional facilities.
The 1998 budget provides about
$2 billion for support of the Department of Transportation
(Caltrans)roughly 9 percent more than the 1997-98 amount.
Included in this increase is funding to augment Caltrans' capital
outlay support staff by almost 2,000 personnel-year equivalents
in order to meet the expanded workload resulting from the 1998
State Transportation Improvement Program.
The budget also provides
$1.9 billion for transportation capital outlay
projects--essentially the same as the 1997-98 level. In addition,
the budget appropriates $1.4 billion for a variety of local
assistance programs. Approximately half of the funds are a
pass-through of federal funds for highway and transit purposes.
Of the remaining funds, $310 million is for transit capital
projects, $100 million is for transit operating assistance,
and $200 million is for the State and Local Partnership
program.
In adopting the 1998 budget, the
Legislature made a partial repayment of $46 million from the
General Fund to the Public Transportation Account for a loan made
in 1993-94. The Governor indicated in his veto message that he
will direct that the full amount of the loan principal and
interest owed, estimated to total $113 million, be repaid
from the General Fund in 1998-99.
Storm Damage Repair of
Local Streets and Roads. In post-budget action, the
Legislature enacted SB 1477 (Kopp) which appropriates $300
million from the State Highway Account to counties and cities for
local street and highway reconstruction and for repair of storm
damage to local streets and highways. The amount will be
allocated over two years, with $200 million to be available in
1998-99 and $100 million in 1999-00. Fifty percent of the funds
will be allocated to counties and 50 percent will be allocated to
cities in accordance with specified formulas. The Governor
subsequently vetoed SB 1477.
The 1998 budget, as adopted by the
Legislature, provides a total of $2.2 billion for resources
programs, of which $1.2 billion is from the General Fund,
$106 million from bond funds, and $106 million from
federal funds. The remaining $965 million are special funds.
Total resources expenditures are
16 percent higher than in 1997-98. Significant features include:
The Governor vetoed $132.4 million
from various resources programs including:
Post-Budget Actions.
The Legislature restored $24.7 million in various projects
which had been vetoed by the Governor. Of that amount,
$15.7 million was for local dredging projects. The Governor
subsequently vetoed $22.6 million of these projects, including
the $15.7 million for local dredging projects.
Additionally, the Legislature augmented
resources expenditures by a total of about $530 million,
including the following:
- $230 million for the acquisition
of the Headwaters Forest Preserve, the Elk Head Forest,
the Elk River Property, Owl Creek, and the Grizzly Creek
Marbled Murrelet Conservation Areaall within Humboldt
County; $15 million for economic assistance for
Humboldt County; and $500,000 for the Wildlife
Conservation Board's administrative expenses and costs
related to these acquisitions. The Governor subsequently
reduced the appropriation for economic assistance to
Humboldt County to $12 million.
-
- $235 million for management of
Colorado River water, including (1) $200 million to
line the All American Canal as part of the efforts to
conserve water so that it can be transferred from the
Imperial Irrigation District to the San Diego County
Water Authority and (2) $35 million to construct
storage and other facilities related to groundwater
supplies.
-
- $15 million for the state's
share of costs for a flood control project in San Joaquin
County and $15 million for private property
connections to sewer systems in coastal San Luis Obispo
County. The Governor subsequently reduced the
appropriation for the flood control project to $12.6
million and vetoed the $15 million for the sewer system
infrastructure.
-
- $9.2 million to compensate certain
claimants, including the City of Portola and Plumas
County, with respect to the Department of Fish and Game's
northern pike eradication project at Lake Davis.
-
- $5 million for preliminary
plans, working drawings, and construction to preserve and
restore the Leland Stanford Mansion State Historic Park.
-
- $5.6 million in various other
projects. The Governor subsequently vetoed about $5.5
million of these projects.
Additionally, state firefighters received
employee compensation increases totaling $16.1 million, of
which $15.2 million comes from the General Fund. This item
is discussed further in this report under the heading Employee
Compensation.
The 1998 budget, as adopted by the
Legislature, provides about $880 million for environmental
protection programs, including about $665 million for
various environmental protection agencies and $215 million
for local assistance. This amount is about $9 million (1
percent) more than 1997-98 expenditures. Significant features
include:
The Governor vetoed legislative
augmentations totaling $7.8 million, including
$5.8 million for nonpoint source pollution and water
recycling research. Additionally, the Governor deleted budget
bill language adopted by the Legislature which tied the
$25 million for the ARB grant program to AB 1368
(Villaraigosa) and SB 1857 (Brulte). These bills--subsequently
vetoed by the Governor--provided that the grant program would
become inoperative if the air quality tax credit initiative
(Proposition 7) is approved by the voters this November.
Post-Budget Action.
The Legislature enacted legislation to restore $1.7 million
of the $5.8 million that had been vetoed by the Governor for
nonpoint source pollution prevention and water recycling
research. The Governor subsequently vetoed this restoration.
The Legislature took a number of actions
with a direct fiscal impact on local governments, particularly
counties. These changes are summarized in Figure 18.
The capital outlay program for 1998-99
totals almost $1.7 billion as shown in Figure 19. About 60
percent ($1 billion) of this amount is from bonds, including $577
million from a $2.5 billion higher education general obligation
bond measure that has been placed on the November 1998 ballot and
$327 million in lease-payment bonds. Future appropriations of
$474 million will be needed to complete the capital outlay
projects funded in the budget. Other funding includes $533
million from the General Fund, $70 million from various special
funds, and $34 million from federal funds. The Governor vetoed
about $160 million in capital outlay appropriations contained in
the 1998-99 Budget Act mainly in the areas of higher
education ($100 million) and resources ($45 million).
Some of the major projects and programs
funded in 1998-99 include:
The Legislature enhanced retirement
benefits for members of the State Teachers' Retirement System
(STRS) who retire on or after January 1, 1999 and provided
General Fund support to pay for these new benefits through
enactment of the following legislation:
The Legislature appropriated sufficient
funds ($706 million, all funds) to provide state employees a
6 percent salary increase effective July 1, 1998 and another
3 percent effective January 1, 1999. The availability of
these funds was conditioned on the administration and employee
bargaining units reaching agreement for salary increases through
the collective bargaining process. The Governor reduced this
funding to $279 million ($141 million General Fund and
$138 million in other funds)the amount he proposed in
January. This would provide sufficient funds for a 3 percent
salary increase but is subject to collective bargaining.
Before the final recess of the
legislative session, the administration reached agreement on, and
the Legislature ratified, memoranda of understanding (MOUs) for
four bargaining units. These units cover about 32,000 of the more
than 150,000 represented state employees. The MOUsall of which
expire June 30, 1999address a wide range of issues such as
salaries, state contribution for health benefits, retirement
benefits, and civil service reform. A summary of the Department
of Personnel Administration's (DPA's) estimated fiscal effect of
these MOUs is shown in Figure 20.
As shown in the
figure, the 1998-99 General Fund cost for these MOUs
($154 million) is $12 million more than the amount the
Governor left in the budget for employee compensation. In
addition, the DPA recently approved a 3 percent salary
increase for excluded employees (managers and supervisors not
represented by bargaining units) effective July 1, 1998. This
action will result in additional General Fund cost in the
neighborhood of $30 million annually.
In January, the
Governor proposed augmentations totaling $19.6 million (all
funds) for state departments to fund efforts to modify computers
to accommodate the year 2000 (Y2K). The Legislature augmented the
amount by $20 million ($10 million from the General
Fund, $8 million from special funds, and $2 million
from nongovernmental cost funds) and placed the augmentation in a
special appropriation item to be distributed to departments to
cover unbudgeted Y2K costs. A principal reason for this
augmentation was an April 1998 report to the Legislature from the
Department of Information Technology that identified a large gap
between Y2K costs identified by state departments and amounts
budgeted for that purpose.
The Legislature
approved a major increase in state support for the California
Arts Council. Specifically, the Legislature provided a total of
$61.5 million, which included $60.1 million from the
General Fund, an amount that was almost four times greater than
both the 1997-98 expenditures and the Governor's proposed 1998-99
budget. The amount included a $20 million General Fund
augmentation for the Arts Council's existing competitive grant
programs. In addition, it included a General Fund augmentation of
$27.6 million for grants to 29 specified museums and
arts-related organizations. The Governor reduced the total
augmentation to $30.2 million, which includes a
$6 million augmentation for existing competitive grant
programs and $24.2 million for grants to 21 specified
museums and organizations. Legislation (AB 2217, Villaraigosa)
enacted subsequent to the enactment of the 1998-99 Budget Act
and signed by the Governor increased funding for one of the
organizations by $2.5 million.
The budget sent to
the Governor included a total of $45 million in
augmentations for housing programs not included in the Governor's
May Revision. Of this total, the Governor vetoed $39 million
in spending. The remaining $6 million will be used to fund
the housing needs assessment mandate, migrant farm worker housing
reconstruction, and an Indian housing assistance grant program.
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