The 2001-02 Senate Budget Bill SB 75 (Peace) As Adopted by the Budget and Fiscal Review Committee

May 24, 2001

LEGISLATIVE ANALYST'S OFFICE

The Bottom Line
2001-02 General Fund Condition

In Millions

• Reserve. The Senate Budget Committee version includes a reserve of $2.4 billion (roughly 3 percent of expenditures), about $1.4 billion more than the Governor's proposal.
• Revenues. The Senate version assumes total revenues and transfers of $76 billion, which is $1.2 billion higher than the May Revision. The Senate version assumes the administration's underlying revenue estimates, but includes additional funds from two sources: (1) $475 million from the committee's rejection of the Governor's proposal to redirect tobacco settlement monies from the General Fund to a newly established Tobacco Settlement Fund, and (2) about $750 million from the transfer of balances in a variety of special funds.
• Expenditures. The Senate's General Fund expenditure total is $80.1 billion, which is $385 million higher than the May Revision. The net increase partly reflects offsetting factors. The Senate version includes increased funding for senior citizen's tax programs and the restoration of some health and social services expenditures that had been scaled back in the May Revision. However, the Senate version also includes savings related to cuts in vacant positions.

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Key Features of the 2001-02 Budget Bill
Senate Version--General Fund

• Education

• Total General Fund Proposition 98 spending of $30.4 billion in the current year and $32.5 billion in 2001-02 (essentially the same as the May Revision for both years).
• Proposition 98 K-12 per pupil spending of $7,105--up 6.4 percent from the revised current-year level.
• K-12 provisions include a $220 million block grant for low-performing schools, $87 million for standards-based training of teachers, and a
  $50 million augmentation of revenue limits (general purpose funding).
• Higher education includes modest funding increases relative to the May Revision for University of California, California State University, and California Community Colleges, as well as additional funding for financial aid outreach.

• Transportation

• Adopts May Revision proposal related to Transportation Congestion Relief funding, including $1.3 billion in the budget year and $1.2 billion in 2002-03. General Fund transfers would begin in 200304.

• Tax Relief

• Adopts Governor's proposal for an increase in manufacturer's credit. Makes current-year increase in senior citizens' tax relief permanent
  ($265 million).

• Health and Social Services

• Includes augmentations to the May Revision for a variety of health and social services programs. Eliminates sunset of cash and food benefits for post-August 1996 legal immigrants.

• Other Programs

• Adopts most May Revision reductions of the new one-time expenditures that were proposed in the January budget.
• Includes additional savings of $300 million related to the deletion of funding for vacant positions.

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Major One-Time Actions
To Achieve General Fund Savings^a

In Millions

^a Savings are compared to amounts in January Governor's budget.

^b Includes an additional $99 million from the Infrastructure Bank.

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Major Senate Actions
K-12 Education--Proposition 98

(In Millions)

	Governor	Senate	Difference
Cost-of-living adjustments (various programs)	$1,406	$1,406	--
Enrollment growth (various programs)	565	565	--
Instructional Improvement for High Priority Schools	220	220a	--
Math and Reading Professional Development	160	87	-$73
Immediate Intervention/Underperforming Schools	137	137	--
Special Education Settlement	125	125	--
Child care and preschool annualization	109	109b	--
Governor's Performance Awards	96	92	-4
Longer middle school year	65	65a	--
Revenue limits augmentation (PERS reduction)	--	50c	50c
a Senate places appropriation in SB 1020 (Escutia).
b Senate also adds $66 million from one-time funds for child care (Stage III set-aside).
c Senate also adds $135 million from one-time funds to augment revenue limits.

• The Senate version spends $29.2 billion from the General Fund for Proposition 98 K-12 programs, $22 million below the May Revision.
• The Senate version provides $7,105 in Proposition 98 per pupil. This is $427, or 6.4 percent, above the revised 200001 level.
• The Senate version assumes pending legislation will include $65 million for purposes of a longer middle school year, with priority for low-performing schools. This represents a significant change from the Governor's January and May proposals, with further legislative changes possible.
• The Senate version also assumes pending legislation will include $220 million for a grant program for the state's lowest-performing schools (Instructional Improvement for High Priority Schools).

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Major Senate Actions
Higher Education

General Fund (In Millions)

• The Senate proposes a total of $9.6 billion from the General Fund for higher education in 2001-02
• The Senate proposal is $580 million, or 6.4 percent, above estimated expenditures for 2000-01.
• The Senate total is $34.5 million, or 0.4 percent, above the amount proposed by the Governor for 2001-02.
• The Senate approved the May Revision request for $184 million for the three segments to cover higher energy costs in the current and budget years.

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Major Senate Actions
Social Services Programs

General Fund (In Millions)

• Compared to the May Revision, the Senate provided a net increase of approximately $80 million General Fund to various social services
  programs. These augmentations represent an increase of approximately 1 percent to a base of about $8 billion.

• The CalWORKs County Block Grants and Performance Incentives. The Senate rejected the Governor's proposal to delete $250 million in California Work Opportunity and Responsibility to Kids (CalWORKs) performance incentives in 200001. The Senate also increased county single allocation block grants by $31 million and directed parties to develop CalWORKs county block grant funding and allocation alternatives for consideration by the conference committee. These actions result in a Temporary Assistance for Needy Families deficit.

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Major Senate Actions
Health Programs

In considering the Governor's 2001-02 budget, the Senate: (1) adopted the administration's Medi-Cal caseload estimates reflecting an increase of $2.2 billion (about $500 million General Fund) and a 15 percent increase in caseload (about 800,000 additional eligibles) over the prior fiscal year, and (2) modified the Healthy Families Program caseload to provide for a budget that reflects an increase of $272 million (about $31 million General Fund) and a 23 percent increase in caseload (about 275,000 additional eligibles) over the prior fiscal year. Some of the key Senate changes are summarized below.

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Major Senate Actions
Judicial and Criminal Justice Provisions

General Fund (In Millions)

• Eliminated all funding ($31.8 million) for the Board of Prison Terms (BPT) since BPT could not provide sufficient information regarding its capacity to manage the parole hearing process.
• The Senate redirected legal defense funding for the Department of Corrections (CDC) ($5.2 million) from the class action lawsuit, Plata v. Davis, and toward improving inmate medical services. The Senate also deleted defense funding proposed for the Department of Justice. The lawsuit challenges the constitutional adequacy of the CDC's medical care system.

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Major Senate Actions
Resources

Various Funds (In Millions)

• The Senate augmented expenditures from Proposition 12 by about $82 million for resources projects in various agencies. The Department of Parks and Recreation received the largest augmentation--approximately $69 million in bond funds--for additional capital outlay projects.
• The Senate adopted the Governor's proposal for the CALFED Bay-Delta program by approving a total of $558 million (all state fund sources), including $96 million from the General Fund.
• The Senate redirected $65 million in surplus (tidelands) revenues in the Natural Resources Infrastructure Fund from 2000-01 to various programs. These revenues otherwise would revert to the General Fund at the end of 2000-01.

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Major Senate Actions
Environmental Protection

Various Funds (In Millions)

Issue	Governor	Senate	Difference
Stringfellow/Casmalia settlement	$114.5	$114.5	--
Zero-emission vehicle incentives	50.0	50.0	--
Diesel emission reduction	32.0	--	-$32.0
Energy crisis/environmental justice air emissions program	--	57.0	57.0
Waste tire program augmentation	26.0	26.0	--
Clean Beaches initiative	10.0	45.0	35.0
Environmental insurance--for brownfields	--	--	--

• The Senate rejected the May Revision proposal for $32 million from the General Fund for a diesel emission reduction program to create emission offsets for "peaker" power plants. The Senate instead appropriated $32 million from the General Fund and $25 million in excess tidelands revenues for a new program to reduce air emissions from diesel buses, standby diesel generators, and other diesel sources.
• The Senate adopted the May Revision proposal to reduce funding for the Clean Beaches initiative from $100 million from the General Fund to $10 million. In addition, the Senate augmented the program by $35 million from Proposition 13 water bond funds and allocated the full $45 million to specific projects and activities.
• The Senate approved the May Revision proposal to shift $50 million for zero-emission vehicle incentives from theGeneral Fund to the Motor Vehicle Account.

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Major Senate Actions
Transportation

Various Funds (In Millions)

• The Senate approved the May Revision proposal to postpone the transfer of gasoline sales tax revenues from the General Fund to the Transportation Investment Fund (TIF). To make up for the two-year loss of about $2.5 billion, the proposal extends the TIF transfer beyond 2005-06, until 2007-08. To provide cash flow for transportation projects, loans of $560 million would be made from the Motor Vehicle Account, Public Transportation Account (PTA), and State Highway Account to be repaid beginning in 2006-07. The May Revision also proposes capping the gasoline sales tax "spillover" to the PTA at $81 million in the budget year and $37 million in 2002-03.
• The Senate approved a lower amount and a different combination of staff and contracts for the design and engineering of transportation projects. Specifically, the Senate reduced the use of overtime, and split the increase in workload evenly between additional state staff and contracting out.
• The Senate reduced DMV's support by an unallocated $21 million, to reflect the settlement of the disabled placard lawsuit.
• The Senate reduced to $3 million the amount for racial profiling data collection grants. It also reappropriated any unencumbered grant funds from the current year and expanded the categories of data to be collected.

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General Fund Spending Trends

1989-90 Through 2001-02
(Dollars in Millions)

• Under the Senate version, General Fund spending would be $79.9 billion in the current year, a 20.2 percent increase from 199900. In inflation-adjusted terms, the increase would be 15.9 percent.
• General Fund spending would be $80.1 billion in 200102 under the Senate version, a 0.2 percent increase from the current year. In inflation-adjusted terms, spending would decline by 2.4 percent.
• General Fund spending fell during the early 1990's recessionary period, grew moderately in the mid-1990s, and grew rapidly during the prior and current year. The decline in real spending in the budget year would be the first since the early 1990s.

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