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Major Features of the
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On June 16, 1999, the Legislature passed the 1999-00 Budget Bill. In this report we highlight the major features of the budget package.
This report does not reflect any actions by the Governor on the budget package (such as line-item vetoes or vetoes of trailer bills). We will summarize final actions on the budget in a later report.
The Legislature passed the 1999-00 Budget Bill and sent it to the Governor on June 16, 1999. The budget bill and related implementing legislation comprise a budget package that authorizes total state spending of $80.2 billion in 1999-00. Of this total, $64.1 billion is from the General Fund and $16.1 billion is from special funds. Figure 1 shows the distribution of total state spending by major program area.
Funding Increases in a Variety of Areas. Continued strong economic and revenue growth enabled the Legislature to expand commitments in a variety of areas, including education, health and social services, local government fiscal relief, infrastructure, and resources. The budget also includes a one-time 10 percent reduction in vehicle license fees (VLF), and several other targeted tax relief measures.
Figure 2 summarizes the General Fund budget condition for 1998-99 and 1999-00. It shows that the current year is expected to end with a reserve of
$2.1 billion. In the budget year, revenues are forecast to reach $63.2 billion (an 8.9 percent increase from the current year), while expenditures are projected
to be $64.1 billion (a 9.4 percent increase from the current year). The revenue projections for 1998-99 and
1999-00 are based on the Legislative Analyst's Office's May forecast, which exceeds the May Revision estimate by $137 million in 1998-99 and
$223 million in 1999-00, for a $360 million total. The 1999-00 fiscal year is projected to close with a year-end reserve of $1.2 billion, which is about
1.9 percent of revenues.
| Figure 2 | ||
| The General Fund Budget Adopted by the Legislature | ||
| (In Millions) | ||
| 1998-99 | 1999-00 | |
| Starting balance | $3,064 | $2,539 |
| Revenues and transfers | 58,064 | 63,204 |
| Total resources available | $61,128 | $65,743 |
| Expenditures | $58,589 | $64,089 |
| Fund balance | $2,539 | $1,655 |
| Other obligations | $480 | $480 |
| Set-asides | -- | -- |
| Reserve | $2,059 | $1,175 |
The 9.4 percent growth in budget-year General Fund expenditures translates into 6.8 percent after adjustment for inflation, and 4.3 percent in real per capita terms. The level of budget-year real per capita spending is roughly 14 percent above its level at the start of the decade. Thus, for the decade as a whole, General Fund spending growth has been somewhat more than inflation and population growth--roughly 1.5 percent annually.
In general, the adopted plan includes many of the Governor's priorities contained in the May Revision, including increased funding for education and infrastructure. However, the legislative version differs from the administration's proposal in a number of respects. It generally contains more funding for health, social services, higher education, local government, and tax relief. On the other hand, it spends less in the budget year on prison construction costs by shifting the financing source to lease-payment bonds. It also does not include the Governor's set-aside for employee compensation and litigation (any spending for these purposes would come out of the reserve).
Tax Relief. The budget includes the Governor's proposals for eliminating the first two minimum tax payments for newly incorporated businesses, and the permanent extension of the 50 percent capital gains exclusion for small business stock held for more than five years. In addition, the Legislature passed a one-time 10 percent reduction in the VLF rate for calendar year 2000. The budget also assumes passage of three targeted tax reduction measures. These are (1) an increase in the standard research and development tax credit from 11 percent to 12 percent, (2) an increase in the income tax deduction for health costs incurred by the self employed, and (3) a 25 percent reduction in license fees paid in 1998 by truckers doing business inside and outside of California.
Health and Social Services. The May Revision had maintained current-law spending levels in most health and social services programs, and contained relatively few specific proposals for program expansions or reforms. It did, however, include a $110 million set-aside for the Healthy Families Program, managed care rate increases, nursing home reform, and In-Home Supportive Services (IHSS) provider rate increases.
In contrast, the budget contains a specific expansion of both the Medi-Cal and Healthy Families programs. It also includes funds for a variety of provider rate increases, and it increases spending for IHSS, adult protective services, foster care, and nursing home reform. Finally, the budget repeals the regional 4.9 percent reduction for the Supplemental Security Income/State Supplementary Program that would have taken effect in 2002.
Education. In K-12 education, the budget provides for significant funding increases in 1999-00. The budget's overall spending total is identical to the May Revision's, and it includes many of the Governor's proposals in such areas as deferred maintenance, school safety, and teacher performance bonuses. However, the budget generally provides more funds subject to local spending discretion than the May Revision.
In higher education, the budget includes the Governor's proposed funding increases for new enrollments and fee reductions. It also includes additional funds for faculty salaries, deferred maintenance, and the Community College's Partnership For Excellence program.
Local Government . The budget includes the Governor's proposal for $425 million to further capitalize the infrastructure bank. In addition, it includes: $150 million for one-time general purpose local relief, $50 million to cities to offset booking fee payments made to counties, and a $20 million augmentation for public libraries.
Youth and Adult Corrections. The May Revision had proposed $355 million for the construction of one prison and the design of another. The adopted budget, instead, appropriates $24 million for acquisition and planning costs, and authorizes $311.5 million in lease payment bonds for construction of a prison in Delano. In other areas, the budget includes $30 million for one-time grants to local law enforcement agencies for equipment purchases ($31 million less than the May Revision), as well as funds for inmate and parole treatment programs, and various medical services.
Resources. The budget provides significant new funds for resources programs. Included are funds for local flood control subvention arrearages and deferred maintenance for state parks. The budget also augments the May Revision proposal for habitat acquisition and river parkways, and reschedules into future years $100 million in expenditures proposed in the May Revision for the purchase of Grizzley Creek and Owl Creek forest lands.
Transportation. The budget provides $37.5 million for intercity rail, the Altamont Express commuter train, and ferries. This is $38 million less than proposed in the May Revision.
Prepared by the Economics, Taxation, and
Fiscal Forecasting Section--(916) 324-4942
The 1999 budget adopted by the Legislature assumes adoption of several tax relief provisions, as summarized in Figure 1 and discussed below. It is estimated that these provisions will have a General Fund impact of approximately $300 million in the budget year.
| Figure 1 | |
| Tax Relief Provisions | |
| 1999-00
(In Millions) | |
| Fiscal Impact | |
| Vehicle License Fee | |
|
$236.0a |
|
12.5 |
| Minimum corporate franchise tax | |
|
$28.0 |
| Health insurance deduction for the self-employed | |
|
$21.0 |
| Research and development tax credit | |
|
$5.0 |
| Partial exclusion on small business stock capital gains | |
|
--e |
| Total | $302.5 |
| a One-time reduction; also has a similar partial-year effect in 2000-01. | |
| b Applies to commercial trucks or other freight-carrying vehicles. | |
| c Current tax is $300 in the first year, $500 in the second year for firms with gross receipts under $1 million, and $800 for all other firms. | |
| d Conforms to federal law, raising deductible share over time from 40 percent to 100 percent. | |
| e First fiscal effect occurs in 2003-04. | |
The budget adopted by the Legislature includes a one-time reduction in the vehicle license fee (VLF) of 10 percent for calendar year 2000. This reduction is independent of the potential future reductions in the VLF approved in 1998.
The VLF is an annual fee on the ownership of a registered vehicle in California, levied in place of taxing vehicles as personal property. The revenues are distributed to cities and counties. As part of last year's budget, the VLF was permanently cut by 25 percent, with the potential of additional reductions in future years if specific revenue levels (or "triggers") are reached. The first such trigger would result in a cumulative 35 percent reduction beginning in 2001. The maximum reduction possible under the agreement would lower the VLF by a cumulative 67.5 percent, beginning in 2003. In order for any of these additional reductions to become permanent, the corresponding revenue triggers need to be reached in two consecutive years.
Under last year's agreement, cities and counties continue to receive the same amount of revenues as under prior law, with the reduced VLF amounts replaced by General Fund spending. The General Fund currently spends about $1 billion annually to backfill revenues to local governments associated with the initial 25 percent VLF reduction.
The new budget agreement assumes an additional 10 percent VLF reduction--for a cumulative reduction of 35 percentin calendar year 2000 only. The estimated cost of this reduction is almost $500 million, spread across the 1999-00 and 2000-01 fiscal years.
This one-time reduction is independent of the previously enacted trigger provisions. Thus, for the 35 percent reduction to continue beyond calendar year 2000, General Fund revenues would still need to reach the levels specified in last year's budget agreement. Specifically, if the first 35 percent trigger is reached in 2000-01, the new 10 percent reduction would continue in calendar year 2001, again as a temporary measure. Not until calendar year 2002 could the new 10 percent (and thus the cumulative 35 percent) reduction become permanent if the corresponding trigger is reached.
In addition, the budget agreement calls for the initial 25 percent VLF reduction (effective January 1, 1999) to apply to VLF paid in 1998 by commercial trucks doing business both inside and outside of California. This reduction will essentially act as a credit against amounts payable in the 1999 calendar year, and have an estimated one-time General Fund fiscal cost for 1999-00 of $12.5 million.
The budget adopted by the Legislature removes the sunset provision for the partial income tax exclusion of capital gains on small business stock. Under current personal income tax law, individual and business taxpayers can exclude 50 percent of the capital gains on certain small business stock, provided the stock is held for five years or longer and was purchased prior to January 1, 1999. To qualify under the program, the stock must be issued by a corporation (1) with less than $50 million in assets, (2) active in certain trade or business activities, and (3) with 80 percent or more of its dollar payroll attributable to California. By eliminating the January 1, 1999 sunset date, the partial capital gains exclusion is made permanent.
This change would first affect revenues in 2003-04 (a $3 million reduction), increasing to $44 million in 2005-06.
Current law requires that corporations in California pay a minimum corporate franchise tax of $800 annually. Corporations with gross receipts of under $1 million, however, pay reduced amounts for the first two years of operation ($300 for the first year and $500 for the second year). The budget agreement eliminates the minimum corporate franchise tax for all new corporations for the first two years of operation, beginning January 1, 2000. This is expected to result in reduced revenues of $28 million in 1999-00 and approximately $60 million annually thereafter.
The budget agreement assumes that California will conform to federal law regarding the personal income tax deduction allowed for the cost of health insurance premiums paid by the self-employed. Currently, California allows a deduction of 40 percent of the cost of health insurance premiums for self-employed individuals and their families. A similar federal program currently allows a 60 percent deduction for 1999 through 2001, a 70 percent deduction for 2002, and a 100 percent deduction beginning in 2003 and thereafter. This provision would raise California's deductibility percentages to equal those of the federal program. The estimated revenue reductions are $21 million in 1999-00, rising to $83 million in 2003-04 and annually thereafter.
The budget agreement assumes adoption of an increase in the income tax credit for qualified research and development expenditures. Under current law, a credit equaling 11 percent of increased research and development expenditures above a base amount is available to individuals and businesses. These expenditures must be technological in nature, relate to the development or production of a new or improved product, and be carried out in California. This provision permanently increases the standard tax credit to 12 percent of qualified expenditures, resulting in estimated revenue reductions of $5 million in 1999-00, rising to $9 million in 2002-03 and annually thereafter.
Prepared by the Local Government--(916) 445-6442
and the Economics, Taxation, and
Fiscal Forecasting Sections--
(916) 324-4942
General Fund support for health and social services programs in 1999-00 totals $17.1 billion, an increase of 4.8 percent over the prior year. Figure 1 describes the major General Fund changes in the 1999-00 Budget Bill and related legislation.
| Figure 1 | |
| Health and Social Services Programs
Major 1999-00 Policy Changes--General Fund | |
| (In Millions) | |
| Program/Issue | Change From Prior Law |
| Medi-Cal | |
| Provider rate increases | $39.5 |
| Nursing home reform | 36.0 |
| Disproportionate share hospitals | 30.0 |
| Family planning--fund shift | -146.7 |
| Increase federal match | -210.0 |
| Health Coverage Expansion | |
| Medi-Cal--expanded eligibility for parents | $64.7 |
| Healthy Families--expanded eligibility for children | 10.1 |
| Public Health | |
| County Medical Services Program | -$20.2 |
| Breast Cancer Early Detection Program | 14.9 |
| Expanded Access to Primary Care | 18.0a |
| Mental Health | |
| Children's System of Care | $13.4 |
| Local incentive grants | 10.0 |
| Food Stamps | |
| California Food Assistance Program | $11.9 |
| Other Programs | |
| IHSS Public Authorities | $90.0 |
| Foster Care rate increases | 7.3 |
| a General Fund increase over current year. | |
Provider Rate Increases. The budget includes $39.5 million from the General Fund for various Medi-Cal provider rate increases.
Nursing Home Reform. The budget includes $36 million from the General Fund to augment Medi-Cal payments to nursing homes in order to fund the following staffing improvements: (1) a 5 percent pay increase for direct-care staff and (2) an increase in the staffing ratio to a minimum of 3.2 hours per patient, effective January 1, 2000.
Reduced State "Takeout" from Disproportionate Share Hospital Payments. The budget includes a General Fund augmentation of $30 million in the Medi-Cal Program to backfill for an equivalent reduction in the state takeout from disproportionate share hospital (DSH) transfers made by public hospitals operated by counties, the University of California, and local hospital districts.
Family Planning ProgramFunding Shift and Expansion. The budget anticipates federal approval of a waiver providing 90 percent federal funding for the current state-only family planning program. This shift results in General Fund savings of $146.7 million in 1999-00. The budget legislation also augments funding for the program by a total of $46.9 million ($4.7 million General Fund) to expand family planning services. This assumes approval of a waiver to provide 90 percent federal funding.
Assumed Increase in Federal Matching Rate. The budget assumes $210 million of General Fund savings that depend on action by the federal government to increase the federal matching rate for California's Medi-Cal Program.
The budget package expands eligibility for parents in the Medi-Cal Program and for children in the Healthy Families Program. These expansions will increase enrollment in these programs by an estimated 249,000 parents and 169,000 children.
Expanded Medi-Cal Eligibility for Parents. Effective March 1, 2000, budget legislation expands eligibility to parents with family incomes up to 100 percent of the federal poverty level (after applicable income deductions). Currently, the income limit for parents applying for Medi-Cal is about 86 percent of the poverty level. This expansion also makes working parents in two-parent families eligible for Medi-Cal if they meet the income requirement. At present, only single parents or unemployed parents (working less than 100 hours per month) qualify to apply for Medi-Cal. Budget legislation also eliminates asset limits for parents, effective August 1, 1999.
The budget includes a net General Fund augmentation of $64.7 million for additional Medi-Cal costs for expanded parental eligibility in 1999-00 .
Expanded Healthy Families Program Eligibility for Children. The budget includes $10.1 million from the General Fund to expand eligibility for children's health coverage under the Healthy Families Program. The expansions (1) increase the family income limit from 200 percent to 250 percent of the poverty level, (2) allow use of the same income deductions used in Medi-Cal in computing family income, and (3) establish a one-year, state-only program to cover children who are legal immigrants who do not qualify for federal funding because they entered the U.S. after August 22, 1996. (Pending federal legislation would eliminate this restriction.)
State Funds Suspended for County Medical Services Program. The budget legislation suspends, for one year, the statutory General Fund appropriation of $20.2 million for the County Medical Services Program, which provides health care for low-income adults in small counties.
General Fund Support for Breast Cancer Early Detection Program (BCEDP). The budget includes a General Fund appropriation of $14.9 million (in lieu of Proposition 99 funds proposed by the Governor) for the BCEDP.
Augmentation for Primary Care Clinics. The budget appropriates $6 million in Proposition 99 funds and $22.1 million from the General Fund for the Expanded Access to Primary Care program. The General Fund appropriation is an increase of $18 million over current-year expenditures from this source.
Children's System of Care Program. The budget includes $13.4 million from the General Fund to (1) fully fund the Children's System of Care Program in Los Angeles County, (2) provide additional funding for counties currently participating in the program, and (3) expand the program to 11 additional counties. This program provides a coordinated system of services through interagency collaboration.
Local Incentive Grants. The budget includes $10 million from the General Fund to provide grants to counties for training and integrated services to severely mentally ill adults at risk of homelessness or incarceration.
CalWORKs Budget Reflects Current Law. The budget includes $102.6 million (federal Temporary Assistance for Needy Families block grant funds) to provide a 2.36 percent cost-of-living adjustment (COLA) pursuant to current law.
Continuation and Expansion of State-Only Program for Legal Noncitizens. The California Food Assistance Program (CFAP) provides state-only food stamps benefits to (1) pre-August 1996 immigrants who are ineligible for federal benefits and (2) a very limited number of federally ineligible post-August 1996 immigrants. Under prior law, the CFAP program was to sunset on June 30, 2000. The budget legislation (1) expands eligibility, for one year only, to immigrants who arrived after August 1996, and (2) extends the sunset indefinitely by tying continuation of the state program to the continuation of certain federal benefits for noncitizens (which currently has no sunset). The one-year program expansion results in General Fund costs of approximately $12 million in 1999-00. The out-year costs for continuing the program are approximately $55 million annually, beginning in 2000-01.
Grant Payments. Pursuant to current law, the budget provides for the statutory COLA (2.36 percent effective January 1, 2000) for SSI/SSP grants, at a General Fund cost of $33 million in 1999-00. In addition, the budget legislation repeals a statutory provision that would have required a 4.9 percent grant reduction in low-cost counties in the future (estimated to occur in 2002-03). Eliminating this 4.9 percent regional grant reduction will result in annual General Fund costs (in the form of lost savings) of over $100 million, beginning in 2002-03.
Continuation and Expansion of State-Only Program for Immigrants. The Cash Assistance Program for Immigrants (CAPI) provides state-only SSI/SSP benefits to (1) federally ineligible, aged noncitizens who immigrated prior to August 1996, and (2) a very limited number of federally ineligible post-August 1996 immigrants. Under prior law, the CAPI program was to sunset on June 30, 2000. The budget legislation (1) expands eligibility, for one year only, to immigrants who arrived after August 1996 and (2) extends the sunset indefinitely by tying continuation of the state program to the continuation of certain federal benefits for noncitizens (which currently has no sunset). The budget assumes that the program expansion has no budget-year cost because of a deeming provision which attributes the sponsor's income to the immigrant. The out-year costs for continuing the program are approximately $40 million annually.
Public Authorities. Under prior law, counties that established Public Authorities to negotiate IHSS provider wage increases had to pay for 100 percent of the cost of wage increases. The budget includes $90 million from the General Fund for a state share of the costs of provider wage increases negotiated by Public Authorities.
Rate Increases. The budget includes $6.4 million from the General Fund for the regular statutory 2.36 percent COLA for Foster Family Homes and Group Homes. The budget also includes $7.3 million from the General Fund to provide: (1) a 2.36 percent COLA for Foster Family Agencies; (2) a full COLA for six counties that were previously scheduled to receive partial COLAs; and (3) an additional 2.36 percent increase for all foster care providers, effective January 1, 2000.
Program Expansion. The budget includes $65.3 million from the General Fund for the APS program, which represents a 227 percent increase over the current year. This appropriation funds the provisions of Chapter 946, Statutes of 1998 (SB 2199, Lockyer).
Prepared by the Health and
Welfare Section--(916) 445-6061
In this section we describe the major features of the budget package, as it relates to the Proposition 98 level of spending and K-12 schools.
The budget includes $38 billion in Proposition 98 spending in 1999-00 for K-14 education. This represents an increase of $2.8 billion, or 8 percent, from last year's budget package. Figure 1 summarizes for the two fiscal years the effect of the budget package on K-12 schools, community colleges, and other affected agencies.
| Figure 1 | |||
| Proposition 98 Budget Summary | |||
| 1998-99 and 1999-00
(Dollars in Billions) | |||
| Budget Acta | 1998-99 Revised | 1999-00 Enacted | |
| K-12 Proposition 98 | |||
| General Fund | $22.1 | $22.3 | $23.8 |
| Local property taxes | 9.2 | 9.3 | 9.9 |
| Totals, K-12 | $31.3 | $31.6 | $33.7 |
| Average Daily Attendance (ADA) | 5,453,060 | 5,497,849 | 5,578,766 |
| Amount per ADA | $5,735 | $5,752 | $6,035 |
| California Community Colleges | |||
| General Fund | $2.2 | $2.1 | $2.3 |
| Local property taxes | 1.4 | 1.5 | 1.6 |
| Totals, Community Colleges | $3.6 | $3.6 | $3.9 |
| Other | |||
| Other agencies | $0.1 | $0.1 | $0.1 |
| Loan repayment | 0.3 | 0.3 | 0.3 |
| Proposition 98 Summary | |||
| General Fund | $24.6 | $24.8 | $26.5 |
| Local property taxes | 10.6 | 10.8 | 11.4 |
| Totals, Proposition 98 | $35.2 | $35.6 | $38.0 |
| a Includes related legislation. | |||
The Proposition 98 totals (including the revised total for 1998-99) reflect the fact that the Legislature appropriated more General Fund monies than required to meet the constitutional minimum. Specifically, the Legislature appropriated $295 million more than the 1998-99 minimum funding level and $175 million more than the guarantee in 1999-00.
The K-12 portion of the Proposition 98 budget package includes:
Compared to last year's budget package, K-12 Proposition 98 funding increased by $2.4 billion. The budget allocates $903 million to provide inflation and growth adjustments. Specifically, the budget includes about $687 million to accommodate a projected 1.5 percent increase in the student population, and $216 million for a 1.41 percent cost-of-living adjustment (applicable to most program funding).
The budget directs the remaining $1.5 billion for other purposes, including new programs and existing categorical programs (see Figure 2). The major increases are as follows:
| Figure 2 | |
| Major 1999-00 K-12 Expendituresa | |
| (In Millions) | |
| Purpose | Amount |
| Revenue limit "deficit reduction" | $455 |
| Deferred maintenance | 144 |
| School safety block grant (ongoing) | 71 |
| Teacher performance bonuses | 50 |
| Beginning teacher salary increase | 50 |
| High school block grant | 29 |
| High school class size reduction | 28 |
| Charter school funding model | 20 |
| a Budget bill and education trailer bills. | |
The budget provides $158 million for unanticipated attendance growth in 1998-99 (45,000 ADA). The budget also includes $221 million for various other
K-12 purposes that will be counted towards Proposition 98 minimum funding requirements for 1998-99 or prior years. Figure 3 lists the most significant of
these allocations.
| Figure 3 | |
| Major K-12 Expenditures
Prior-Year Funds | |
| (In Millions) | |
| Purpose | Amount |
| ADAa growth (revenue limits and special education) | $158 |
| Instructional materials increase | 134 |
| Digital high school | 44 |
| Special education COLAb | 41 |
| School safety block grant (one-time) | 29 |
| Prior-year desegregation claims | 26 |
| a Average daily attendance. | |
| b Cost-of-living adjustment. | |
Prepared by the K-12 Education Section--(916) 445-8641
The budget includes a total of $7.7 billion from the General Fund for higher education in 1999-00. This is $574 million, or 8 percent, above current-year expenditures. The budget approved by the Legislature is $200 million, or 2.7 percent, above the amount requested by the Governor. Figure 1 compares the General Fund budget for higher education as approved by the Legislature with estimated expenditures for 1998-99. The budget-year augmentation includes $206 million for enrollment growth of 38,000 full-time-equivalent students (2.7 percent) and $68.9 million to reduce resident-student fees at the University of California (UC) and California State University (CSU) by 5 percent, and at community colleges from $12 to $11 per unit. Figure 2 shows fee reductions for California public colleges and universities over the past two years.
| Figure 1 | |||
| Higher Education Budget Summary
Selected Funding Sources Changes From 1998-99 to 1999-00 | |||
| (Dollars in Millions) | |||
|
1999-00 Budget |
Change From 1998-99 | ||
| Amount | Percent | ||
| University of California | |||
| General Fund | $2,704 | $184 | 7.3% |
| Resident-student fee revenue | 625 | -5 | -0.8 |
| Totals | $3,329 | $179 | 5.7% |
| California State University | |||
| General Fund | $2,283 | $156 | 7.3% |
| Resident-student fee revenue | 481 | -11 | -2.2 |
| Totals | $2,764 | $145 | 5.5% |
| California Community Colleges | |||
| General
| $2,328 | $180 | 8.4% |
| Property taxes | 1,568 | 89 | 6.0 |
| Student fee revenue | 149 | -9 | -5.6 |
| Totals | $4,045 | $260 | 6.9% |
| Student Aid Commission | |||
| General Fund | $395 | $52 | 15.0% |
| Figure 2 | ||||
| Higher Education
Resident Undergraduate Student Fees | ||||
| 1997-98 Through 1999-00 | ||||
| 1997-98 | 1998-99 | 1999-00 | Two-Year Percent Change | |
| University of California | $3,799 | $3,609 | $3,429 | -9.7% |
| California State University | 1,584 | 1,506 | 1,428 | -9.8 |
| California Community Colleges | 390 | 360 | 330 | -15.4 |
The budget provides $184 million, or 7.3 percent, more in General Fund support for UC in 1999-00 than in 1998-99. The major augmentations include:
The budget provides $156 million, or 7.3 percent, more in General Fund support for CSU in 1999-00 than in 1998-99. Major augmentations include:
The budget package contains major funding increases for community colleges. General Fund Proposition 98 spending for community colleges totals approximately $2.3 billion in the budget year. This represents a $180 million, or 8.4 percent, increase above the 1998-99 level. Despite expected enrollment growth, student fee revenues are expected to decline by $9 million, mainly due to the $1 per credit unit reduction approved by the Legislature. Major increases for 1999-00 include:
The budget appropriates $395 million from the General Fund for the Student Aid Commission in 1999-00. This is $52 million, or 15 percent, above expenditures in 1998-99. The growth in the commission's budget provides for an increase in the number of Cal-Grant awards and an increase in the maximum grant amount.
Prepared by the Higher Education Section--
(916) 445-8641
The 1999 budget for judicial and criminal justice programs totals $6.9 billion, including $6.3 billion from the General Fund and $636 million from various special funds. This is an increase of $484 million, or 7.5 percent, over 1998-99 expenditures. The increase is the result of four primary factors: (1) additional costs associated with the state's increased financial responsibility for support of trial courts, (2) increases in spending to accommodate projected caseload growth, (3) increases in spending for new and expanded treatment programs for prison inmates and parolees, and (4) increased funding for programs to assist local law enforcement agencies.
The amount is about $8.9 million, or less than 1 percent, above the Governor's proposed budget. Although the net amount is close to the spending level proposed by the Governor, the Legislature made a number of changes to the Governor's budget, including new policy initiatives and augmentations and modifications to individual spending proposals.
The budget includes $1.8 billion for support of trial courts. This amount includes $926 million from the General Fund, $223 million from fine and penalty revenues, $203 million from court fee revenues, and $458 million transferred from counties to the state. The General Fund amount is $226 million, or 32 percent, greater than the current-year amount. This increase is due in large part to legislation adopted in 1997 and 1998 whereby the state has substantially increased financial responsibility for operation of the trial courts and county responsibility has been capped and reduced. Accordingly, the budget includes a reduction in county contributions and a corresponding increase in General Fund costs of $96.6 million.
The budget also includes a number of other substantial General Fund augmentations, all of which were proposed by the Governor in either the January budget or the May Revision. These include $41.3 million for salary increases for trial court employees that were negotiated previously between the counties and court employees, $19.2 million for various services (such as information technology) that were previously provided to the courts by counties, and $19.1 million to correct computer problems in the trial courts associated with the year 2000 change. The budget package also includes $2.1 million and provisions in a trailer bill (AB 1105, Jackson) to establish new programs to assist courts with complex litigation and to establish alternative dispute resolution pilot projects.
The budget also includes $5.5 million to establish 20 new trial court judgeships ($2.5 million) and 12 new appellate court justices ($3 million), beginning in the last quarter of 1999-00. Full-year costs of the new judgeships and justices will be about $22 million. Legislation to create the new judgeships and justices had not been enacted at the time this report was prepared.
The Legislature augmented the Governor's proposed Trial Court Funding budget by $7 million to increase the rates paid to trial court interpreters.
The budget provides a total of $4.1 billion from the General Fund for support of the California Department of Corrections (CDC). This represents an increase of $129 million, or 3.3 percent, above the 1998-99 level. This is the smallest rate of increase in the CDC budget in recent years, resulting primarily from somewhat slower projected increases in the prison inmate and parole populations than in recent years.
The budget provides full funding for the projected inmate and parole caseloads. The budget assumes that the inmate population will reach about 167,300 inmates at the end of the budget year, an increase of about 3.4 percent from 1998-99. The projected budget-year population is about 3,600 inmates fewer than was initially assumed in the Governor's January budget. The parole population is projected to reach about 118,100 parolees at the end of the budget year, an increase of 3.4 percent.
The Legislature made several modifications to the Governor's proposed expenditures for CDC. One of the largest related to the Governor's proposed augmentation of $77 million to address various "structural" deficiencies in CDC's base budget, including providing more money for merit salary increases and restoring previous unallocated budget reductions. The Legislature reduced the proposal to $40.7 million, for a General Fund savings of $36.3 million.
Accommodating Prison Population Growth. In the May Revision, the Governor requested $355 million from the General Fund to fully fund planning and construction of a new maximum security prison at Delano in Kern County and for planning for a second prison in San Diego. The Legislature initially rejected the Governor's proposal and instead augmented the budget by $38.7 million to fully implement and expand prison inmate and parole treatment programs designed to reduce recidivism and thus reduce growth in the inmate , AB 1112 (Wright), made statutory changes necessary to implement the new programs.
The Legislature subsequently enacted AB 1535 (Florez), which authorized the new Delano prison. The bill appropriated $24 million from the General Fund for acquisition and planning costs, and authorized $311.5 million in lease payment bonds for construction. The bill also appropriated $15.5 million from the General Fund to CDC to hire more parole agents to reduce the ratio of parolees to agents.
The budget assumes that the state will receive a total of $273 million in federal funds to offset the state's costs of supervising undocumented felons and wards in state prison and the Department of the Youth Authority. This is an increase of $89 million, or 48 percent, above the administration's estimate of federal funds for 1998-99. These federal funds are counted as offsets to state expenditures and are not shown in the budgets of the CDC and the Youth Authority, or in the budget bill.
The budget provides $323 million (almost all from the General Fund) for support of the Youth Authority. The department's budget reflects an increase of less than 1 percent over the 1998-99 level. The budget assumes that the Youth Authority's institution population will be 7,355 wards at the end of the budget year, a drop of 275 wards, or 3.6 percent below the 1998-99 level. The parole population is expected to drop by about 2 percent, reaching 5,125 parolees at the end of the budget year. There were no major policy changes in this budget.
The budget includes a number of augmentations to assist local law enforcement agencies.
Citizens' Option for Public Safety (COPS) Program. In recent years, the Legislature has provided $100 million annually for the COPS program, including $75 million for local police departments and sheriffs for front-line law enforcement, $12.5 million for sheriffs for jail services, and $12.5 million for district attorneys. These funds are distributed on a per capita basis. In January, the Governor proposed to modify the program so that the entire $100 million could only be used by front-line law enforcement agencies to hire more officers. The Legislature rejected the Governor's proposal and continued the existing program.
Law Enforcement Equipment. In the May Revision, the Governor proposed $61 million from the General Fund in the budget of the Office of Criminal Justice Planning to establish a new California Local Law Enforcement Equipment Program in which money would be distributed to local law enforcement agencies on a one-time basis for purchase of equipment. The Legislature reduced the Governor's proposal to $30 million.
Local Detention Facilities. The budget includes $75 million in federal funds in the Board of Corrections' budget for distribution to counties for construction of juvenile detention facilities ($70 million) and adult jails ($5 million).
Mental Illness Grant Program. The budget includes $37.7 million from the General Fund in the Board of Corrections' budget to continue the Mentally Ill Offender Crime Reduction Grant Program, which was established in 1998-99. The money will be distributed to specified counties to develop programs to prevent mentally ill offenders in jails from reoffending and returning to jail after they are released.
Prepared by the Criminal Justice and State Administration Section
--(916) 445-4660
The budget includes several items with a direct fiscal impact on local governments.
In addition to the above actions, the budget provides funding for various criminal justice and health and social services programs which benefit local government, such as the $100 million for the Citizens' Option for Public Safety program.
The Legislature did not make a specific appropriation for additional employee compensation that may result from collective bargaining agreements between the administration and employee bargaining units. Instead, any needed funds for this purpose are to be funded from reserves.
The budget includes $425 million from the General Fund for the Infrastructure Bank. This augments the $50 million appropriated for the bank in the 1998-99 Budget Act, bringing the total available funds to $475 million.
Availability of the budget appropriation is contingent upon enactment of legislation that allocates funds for financial assistance to local governments for infrastructure needs. Trailer bill legislation (AB 1661, Torlakson) addresses this requirement by (1) making the funds available only for local government sponsored projects; (2) requiring that all projects be consistent with the criteria, priorities, and guidelines established by the bank for the selection of projects; and (3) stipulating that no single loan can exceed 10 percent of the total appropriation ($47.5 million), except by the unanimous consent of the bank board and with 30-day written notice from the Director of Finance to the Chair and Vice Chair of the Joint Legislative Budget Committee. The bill also requires the bank to submit quarterly reports to the Governor and the Legislature during 1999-00 and 2000-01.
The 1999 budget, as adopted by the Legislature, provides a total of $2.2 billion for resources programs, of which $1.1 billion is from the General Fund, $98 million from bond funds, and $92 million from federal funds. The remaining $918 million are special funds. This total amount is a decrease of about $61 million (2.6 percent) below estimated current-year expenditures. Significant features include:
The Legislature also disencumbered $100 million that had been appropriated for the anticipated purchase of two properties in connection with the Headwaters agreement. Of that money, $20 million had been encumbered for 1998-99 and $80 million for 1999-00. Instead, the Legislature specified that the purchase of the two properties will be paid in installments between 2000-01 and 2004-05consistent with the Headwaters agreementand reappropriated the money for encumbrance in those years. These actions returned $100 million to the General Fund for 1999-00.
The 1999 budget, as adopted by the Legislature, provides about $960 million for environmental protection programs, including about $744 million for the support of various environmental protection agencies and $216 million for local assistance. This amount is an increase of about $61 million, or 7 percent, over estimated 1998-99 expenditures. Significant features include:
In addition, the Legislature approved a number of trailer bills, including:
The 1999 budget provides about $2.3 billion for support of the Department of Transportation (Caltrans) mostly from special funds. This is an increase of approximately 5 percent above the 1998-99 estimated level.
The major support expenditures are as follows:
The budget also provides $2.5 billion, mainly from special funds and federal funds, for transportation capital outlay projects. In addition, the budget provides $2 billion in state and federal funds for local assistance. These funds are allocated to local transportation agencies for projects off the state highway system, including rehabilitation of local streets and roads and transit capital improvements.
In addition, the budget provides $37.5 million from the General Fund for transit rolling stock. Specifically, this amount includes:
Budget legislation was also passed to reenact transfers, totaling $161 million, from the Motor Vehicle Account and State Highway Account to the General Fund. These transfers, originally made between 1993 and 1995 in annual budget acts, were found to violate the single-subject rule of the State Constitution and thus required separate legislation.
The 1998-99 Budget Act included $20 million in a special budget item to fund efforts by state departments to modify computers to accommodate the year 2000 (Y2K) remediation efforts. As of mid-June, all of those funds had been expended and the special item had received augmentations from the reserve of about $41.7 million.
In the May Revision for the budget year, the Governor requested $64.3 million (including $44.3 million from the General Fund, $10 million from special funds, and $10 million from nongovernmental cost funds) in the special budget item for distribution to state departments for additional Y2K efforts. Of the General Fund amount, $14.3 million was designated for support of the Department of Information Technology (DOIT) Y2K project management office.
The final budget bill reduced the General Fund by $30.8 million, leaving a total of $13.5 million, all of which would be used to support the DOIT project management office. The budget bill includes a provision that allows the administration to take monies from the reserve to supplement the Y2K item as needed.
The budget also includes $17.5 million in the DOIT budget to establish a new center to test the state's mainframe computer systems for their Y2K readiness.
The budget includes $63.2 million for the California Arts Council ($62.4 million from the General Fund). This is more than double the amount requested by the Governor and is the result of legislative augmentations totaling $35.3 million for grants to 40 specified museums and cultural institutions.
The budget provides $155.8 million from special funds for the continued operation of the Smog Check Program within the Department of Consumer Affairs. To address various concerns with the program, the Legislature passed a trailer bill (AB 1105, Jackson) that: (1) raises the eligibility threshold for repair assistance to all vehicle owners with incomes at or below 185 percent of the federal poverty level (up from the current limit of 175 percent), and (2) authorizes (but does not require) the department to make the following changes:
The budget increases General Fund support for pest exclusion activities at both the state and local level. Specifically, it provides
The budget includes $1.6 billion for capital outlay (excluding highways and transit) as shown in Figure 1. As the figure indicates, the budget relies heavily on debt financing for capital outlay. Over 75 percent of the total is from bonds, with 56 percent from general obligation bonds (mostly in higher education) and 44 percent from lease-payment bonds. The majority of General Fund spending is in two areasresources and corrections.
Some of the major projects and programs funded in 1999-00 include:
Prepared by the following sections:
Business, Labor, and Capital Outlay--(916) 322-8402
Transportation and Resources-- (916) 445-5921
State and Local Finance--(916) 445-6442
Criminal Justice and State Administration-- (916) 445-4660
| Appendix 1 | ||
| 1999-00 Budget-Related Legislation | ||
| Bills | Author | Subject |
| AB 10 | Correa | Tax Relief: Minimum franchise tax for new corporations. |
| AB 907 | Alquist | Education: County Offices of Education equalization. |
| AB 1102 | Jackson | Resources: Various Environmental Protection Agency enforcement activities, Permit Assistance Centers. |
| AB 1103 | Lempert | Resources: Various (parks, boating, toxics, Air Resources Board). |
| AB 1104 | Migden | Resources: State Water Resources Control Board. |
| AB 1105 | Jackson | General Government: (Smog check, performance budgeting, various other). |
| AB 1107 | Cedillo | Health: Various (Medi-Cal, Healthy Families, disproportionate share hospitals, public health, Proposition 99, mental health, developmental disabilities). |
| AB 1111 | Aroner | Social Services: Various (CalWORKs, SSI/SSP, CAPI, Food Stamps, Foster Care, child welfare, child support, employment development, drug courts). |
| AB 1112 | Wright | Corrections: Parole programs. |
| AB 1113 | Florez | Education: School safety. |
| AB 1114 | Steinberg | Education: Pay for performance. |
| AB 1115 | Strom-Martin | Education: Omnibus bill. |
| AB 1116 | Ducheny | Education: English language acquisition. |
| AB 1117 | Calderon | Education: Beginning teacher salaries. |
| AB 1118 | Reyes | Higher Education: Fee reductions. |
| AB 1120 | Havice | Tax Relief: Capital gains on small business stock. |
| AB 1121 | Nakano | Tax Relief: VLF one-year 10 percent reduction. |
| AB 1289a | Baugh | Tax Relief: Health insurance premiums for the self-employed. |
| AB 1535 | Florez | Corrections: New prison. |
| AB 1660 | Shelley | General Government: SHA transfer to General Fund, Census, Holocaust Claims Program. |
| AB 1661 | Torlakson | Local Government: Infrastructure bank and local relief. |
| AB 1662 | Leonard | Local Government: Booking fees. |
| AB 1682 | Honda | Social Services: IHSS. |
| SB 688a | Burton | Tax Relief: VLF reduction for commercial truckers. |
| SB 705a | Sher | Tax Relief: Research and development tax credit. |
| a Pending as of June 21, 1999. | ||
| LAO Publications
The Legislative Analyst's Office (LAO) is a nonpartisan office which provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-2375. This report and others, as well as an E-mail subscription service, are available on the LAO's internet site at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. |