Legislative Analyst's Office, October 1998

California Spending Plan 1998-99  

Chapter 3

Major Features of

The 1998-99 Budget Plan

Proposition 98 Education

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)
  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.)

K-12 Program Impacts

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:

Figure 3
Major K-12 Education Expenditures
1998-99 Budget Act and
Education Trailer Bills
(In Millions)
Purpose Amount
Instructional materials $250
Staff development day buyout 195
School library materials 159
Deferred maintenance 115
High school class size reduction 44
After school programs 50
Proposition 227--bilingual education 50

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.

Figure 4
Major K-12 Education Expenditures
Prior-Year Funds and "Settle-Up"
(In Millions)
Purpose Amount
School district block grants $180.0
Digital high school 86.0
School science laboratory materials 71.5
Proposition 227--bilingual education 50.0
Math staff development 30.0
Deferred maintenance 20.0
Community policing 10.0

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.

Longer School Year/
Staff Development Buyout

The budget changes the length of the school year and how the state funds staff development. Specifically, trailer legislation eliminated provisions in law that allowed schools to include up to eight staff development days as part of their 180-day school year. This change increases the minimum number of instructional days from 172 days to 180 days. (In recent years, schools included an average of four to five staff development days within their 180-day school year.)

In addition to lengthening the instructional year, the budget includes $195 million to fund up to three staff development days that take place outside the required 180-day school year for teachers ($270 per teacher per day) and one day for classified staff ($140 per classified staff per day). School districts are free to fund more staff development days outside the instructional year, using their own discretionary funds. For 1998-99 only, schools that have set their calendars with less than the required 180 days of instruction will be allowed to apply for a one-time waiver of the new requirement.

Higher Education

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.

Figure 5
Higher Education Budget Summary
Selected Funding Sources
(Dollars in Millions)


Change From 1997-98
Amount Percent
University of California    
General Fund $2,518.8 $339.9 15.6%
Student fees 750.2 1.1 0.2
Totals $3,269.0 $341.0 11.6%
California State University    
General Fund $2,164.0 $266.8 14.1%
Student fees 541.6 -4.8 -0.9
Totals $2,705.6 $262.0 10.7%
California Community Colleges    
General Fund (Proposition 98) $2,173.8 $233.7 12.0%
Property taxes 1,441.2 56.6 4.1
Student fees 155.3 -10.2 -6.2
Totals $3,770.3 $280.1 8.0%
Student Aid Commission      
General Fund $351.8 $57.1 19.4%

University of California

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.

California State University

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.

Community Colleges

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.

Figure 7
Major Community College Increases
1998-99 General Fund
(In Millions)
Purpose Amount
Partnership for excellence $100.0
Enrollment growth 90.4
Cost-of-living adjustment 71.4
Telecommunications/technology 10.0

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.

Student Aid Commission

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.

Health and Social Services

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 8
Medi-Cal and Major Welfare Grant Programs
General Fund
1997-98 and 1998-99
(Dollars in Millions)
Program 1997-98 1998-99 Change
Amount Percent
CalWORKs $2,050.7 $1,798.8 -$251.9 -12.3%
Foster Care 397.8 432.9 35.1 8.8
SSI/SSP 2,017.2 2,181.8 164.6 8.2
Medi-Cal 6,766.8 6,892.0 125.2 1.9

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.

Figure 9
Health and Social Services Programs
Major 1998-99 Policy Changes
General Fund
(In Millions)
Program/Issue Change From Prior Law
Grants --
Services $10.0a
Grants $41.5
State-only program for noncitizens 19.4
Food Stamps  
Expand state-only program for noncitizens $70.7b
Other Social Services Programs  
Foster Care Initiative $96.1
Adult Protective Services 20.0
IHSS personal care services "income eligibles" -19.9
Developmental services provider rate increases 50.8
Developmental center staff 15.7
Regional center staff 20.8
Department of Aging programs 11.6
Drug courts 4.0
Provider rate increases $48.6
Disproportionate share hospitals 40.0
Regional Burn and Trauma Center 25.0
Public Health  
Drinking water systems $15.2
Newborn hearing screening program 3.5
a State match for federal Welfare-to-Work block grant.
b General Fund and federal TANF block grant funds.


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).

Figure 10
Maximum Monthly Grants
1997-98 and 1998-99
  1997-98 1998-99 Change
Amount Percent
Low-cost counties $538 $582b $44 8.2%
High-cost counties 565 611b 46 8.1
Individuals $650 $676c $26 4.0%
Couples 1,156 1,201c 45 3.9
a Family of three.
b Effective November 1, 1998.
c Effective January, 1, 1999.

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.

Supplemental Security Income/State Supplementary Program

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.

Food Stamps Program

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).

Foster Care Program/Child Welfare Services
Foster Care Initiative

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).

Figure 12
Foster Care Initiative
Fiscal Summary
(In Millions)
Proposed Activity Cost
Additional staff to lower social worker caseloads $40.0
Six percent group home rate increase 16.0a
Additional staff to provide for monthly social worker visits 13.2
Independent Living Program expansion 11.4
Expand day treatment services 8.9
Additional state operations staff 7.9
Six percent FFA rate increase 3.3
Subsidize cost of financial audits for small group homes 1.8
Subsidize cost of fingerprint checks for providers exempt from fees 1.3
Expand county staff training 0.8
Establish foster care ombudsman program 0.1
Eliminate "level of care" assessment -1.0
Total $103.7b
a Includes $7.6 million cost-of-living adjustment required under prior law.
b The 1998-99 Budget Act also appropriated $4 million to expand Children's System of Care program (Department of Mental Health) and $3.8 million (Department of Education) to expand the Foster Youth Services program and conduct two studies regarding the education of group home foster children.
Figure 13
Foster Care Initiative
Major Features
Social Worker Caseload Reduction. The budget provides funding to reduce county social worker caseloads. The amount provided will reduce social worker caseloads by about 8 percent.
Rate Increases. The budget provides a 6 percent rate increase for group homes and foster family agencies. Prior law required a 2.84 percent rate increase for group homes. (Statutory rate increases had been suspended since 1990.)
Monthly County Staff Visits. The initiative requires monthly visits by county staff to all foster children in group homes. The General Fund is required to pay the entire nonfederal cost of these visits. Prior regulations allowed visits to be as infrequent as once every six months for approximately half of group home foster children.
Independent Living Program (ILP) Expansion. The measure increases ILP funding and extends eligibility from ages 16 through 18 to ages 16 through 21. This program is designed to prepare children for emancipation from foster care.
Children's Services Development Program. The initiative authorizes counties to enter into performance agreements with private nonprofit agencies to expand day treatment alternatives to group home care. It permits the Department of Social Services (DSS) to waive foster care regulations when necessary to implement these programs.
Out-of-State Placements. The measure requires DSS to certify that out-of-state foster care group homes accepting placement of children from California meet the same standards as facilities which operate within the state, but allows DSS to waive specific licensing standards. It prohibits placement of foster children in out-of-state facilities that are not certified within 12 months of the effective date of the act. It requires that counties obtain a multidisciplinary team assessment and placement recommendation for all children in out-of-state group homes.
Assessment Guidelines. The initiative replaces the requirement that DSS implement a "level of care" assessment tool with a requirement that DSS issue to county placing agencies "best practice" guidelines for the assessment of a child and the child's family. It requires DSS to conduct a pilot project to test the effectiveness of the guidelines.
Fingerprint Checks. The initiative expands fingerprint requirements for applicants for employment having direct contact with clients in community care facilities. When the Livescan Fingerprint Imaging System is operational, it prohibits employment until fingerprint clearance is received. It requires applicants to submit fingerprints to the Federal Bureau of Investigation. It subsidizes the cost of fingerprint checks for providers exempt from fees.
Provisional Group Home Rates and Licenses. The initiative requires DSS to issue licenses and rates to new group homes on a provisional rather than permanent basis, for up to the first 18 months of operations.
Group Home Administrator Certification. The initiative requires group home administrators to become certified, and establishes training and experience requirements. It allows DSS to charge a $100 fee for certification.
Psychoactive Medications. The initiative requires the Department of Mental Health to develop procedures to review treatment plans for children receiving psychoactive medications.


Figure 13
Foster Care Initiative
Major Features


Education of Children in Licensed Institutions. The initiative requires that local educational agencies share information with county placing agencies on the educational alternatives available to children in licensed institutions. It requires local educational agencies to share information when foster children shift educational placements.
Independent Financial Audits. The initiative requires all group homes to submit an annual independent financial audit to DSS, and subsidizes the cost of the audit for small group homes.
Foster Care Ombudsman. The initiative creates the Office of the Foster Care Ombudsman to provide information to children in foster care, receive complaints, and directly investigate or refer complaints for investigation.
Law Enforcement Task Force. The initiative requires DSS to convene a Law Enforcement Task Force to identify statutory and regulatory changes which would allow more effective prosecution of illegal activities by group home operators.

Child Support Enforcement

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.

Adult Protective Services

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.

In-Home Supportive Services

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.

Department of Developmental Services

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.

Department of Aging

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.

Department of Alcohol and Drug Programs

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.

Medi-Cal Program

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.

Figure 14
Medi-Cal Provider Rate Increases
(Dollars in Millions)
Percentage or Other Basis General Fund Cost
Long-term care facilities 6% $73.7
Adult primary and preventive care 10 10.2
Hospital outpatient services 5 6.3
In-home nursing Based on cost survey 5.4
Ambulance emergency trips 50 4.0
Equalize children's rates with adult rates Various 1.7
Early and periodic screening, detection, and treatment services for children 5 2.0
Primary and preventive care for children 20 19.1
Total   $122.3

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.

Healthy Families Program

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.

Public Health

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.

Judiciary and Criminal Justice

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.

Figure 15
Major Judiciary and Criminal Justice Programs
Budget Summary
(Dollars in Millions)
  1997-98 1998-99a Change
Amount Percent
Department of Corrections $3,680.9 $3,896.5 $215.6 5.9%
General Fund 3,635.7 3,851.7 216.1 5.9
Other funds 45.2 44.7 -0.5 -1.1
Department of the Youth Authority $349.5 $311.9 -$37.6 -10.8%
General Fund 331.9 307.8 -24.1 -7.3
Other funds 17.7 4.1 -13.5 -76.3
Offset for undocumented felons (federal funds) $199.4 $195.1 -$4.3 -2.2%
Board of Corrections $49.7 $175.8 $126.1 253.7%
General Fund 23.3 42.0 18.7 80.3
Federal Funds 9.3 114.0 104.7 1,125.8
Other funds 17.1 19.8 2.7 15.8
Trial Court Funding $1,606.0 $1,653.6 $47.6 3.0%
General Fund 221.2 622.9 401.6 181.6
County contributions 890.0 571.7 -318.3 -35.8
Fines and penalties 291.0 224.0 -67.0 -23.0
Court-related fees and other 203.7 235.0 31.3 15.4
a Based on appropriations contained in 1998-99 Budget Act. Does not include other appropriations contained in post-budget legislation.

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.

Trial Court Funding

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.

Department of Corrections

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.

Incarceration and Supervision of
Undocumented Felons

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.

Department of the Youth Authority

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.

Board of Corrections

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:

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.

Environmental Protection

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.

Local Government

The Legislature took a number of actions with a direct fiscal impact on local governments, particularly counties. These changes are summarized in Figure 18.

Figure 18
Actions Affecting Local Governments
(In Millions)
Action 1998-99 Fiscal Impact
Juvenile Detention Facilities. Provided $181 million to fund the construction and expansion of local juvenile correction facilities ($100 million General Fund, $81 federal funds). $181
Criminal Justice Grants. Provided $100 million to fund various criminal justice and juvenile correction grant programs. 100
Trial Courts. Reduced county required contributions to trial courts. Additional relief will be provided beginning in 1999-00. 44
General Assistance. Allowed certain counties to continue lower general assistance grant amounts, if specified program changes are made. Potentially up to tens of millions of dollars
County Hospitals. Reduced the state "takeout" from the Disproportionate Share Hospital program, primarily benefitting counties that operate hospitals. 40
Flood Control. Appropriated $172 million over four years to pay the state share of costs related to flood control projects. 40
Local Libraries. Provided $20 million more than in 1997-98 for the support of local public libraries. 20

Capital Outlay

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).

Figure 19
1998-99 Capital Outlay Programs
(In Millions)
  Budget Amount Future Cost
Legislative/Executive/Judicial $30.5 $25.1
State and Consumer Services 272.2 21.5
Transportation 15.8 6.5
Resources 401.5 63.9
Health and Welfare 167.5 27.9
Corrections 117.4 176.2
Higher Education 637.5 145.8
General Government 25.1 7.2
Totals $1,667.5 $474.1

Some of the major projects and programs funded in 1998-99 include:

Other Major Provisions

State Teachers' Retirement System

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:

Employee Compensation

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.

Figure 20
1998-99 Ratified MOUs: Fiscal Impact
(Dollars in Millions)
Bargaining Unit
1998-99 Cost   Annualized Cost
General Fund Other Funds Total General Fund Other Funds Total
Unit 6:
California Correctional Peace Officers Association (24,314)
$125 $1 $126   $148 $1 $149
Unit 8:
California Department of Forestry Firefighters (3,223)
15 1 16   18 1 19
Unit 16:
Physicians, Dentists and Podiatrists (1,090)
10 3 13   13 3 16
Unit 19:
Health and Social Services/ Professional (3,255)
4 2 6   5 2 7
Totals (31,882) $154 $7 $161   $184 $7 $191

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.

Year 2000 Computer Projects

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.

Arts Council

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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