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Combined Index for the 2009-10 Budget Analysis Series

April 2, 2009 - Combined index of the full 14 report 2009-10 Budget Analysis Series.

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2009-10 Budget Analysis Series: The Fiscal Outlook Under the February Budget Package

March 13, 2009 - The budget package of $42 billion in solutions adopted by the Legislature and the Governor in February was an impressive step in addressing the state’s monumental budget shortfall. The budget uses both sides of the ledger—revenue increases and spending reductions—to attack the state’s dire fiscal situation. Unfortunately, the state’s economic and revenue outlook continues to deteriorate. Even in the few weeks since the budget was signed, there have been a series of negative developments. Our updated revenue forecast projects that revenues will fall short of the assumptions in the budget package by $8 billion. Moreover, a number of the adopted solutions—revenue increases and spending reductions—are of a short–term duration. Thus, without corrective actions, the state’s huge operating shortfalls will reappear in future years—growing from $12.6 billion in 2010–11 to $26 billion in 2013–14.

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2009-10 Budget Analysis Series: Health

February 6, 2009 - The Governor's budget for 2008‑09 proposes to hold General Fund spending on health programs virtually flat compared to the current-year spending level. However, based on our review of the available draft legislation, it appears that the federal stimulus package will provide substantial fiscal relief to California in the form of enhanced contributions to the state’s Medi-Cal Program. At the time this analysis was prepared, Congress also appeared to be close to agreement on federal legislation that would reauthorize the State Children’s Health Insurance Program (SCHIP). We recommend that the state forego at this time an option available under the new federal legislation to expand children’s coverage up to 300 percent of the federal poverty level because of the state’s current fiscal condition. We also propose seeking voter approval for modifications to Proposition 99, a 1988 initiative approved by voters, to “unlock” spending now earmarked for certain Proposition 99 programs, a step that could allow the Legislature to achieve substantial General Fund savings in the budget year.

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2009-10 Budget Analysis Series: Revenues

February 6, 2009 - To assist the Legislature in resolving the 2009‑10 budget gap, we developed a list of proposals that would raise more than $5 billion in each of 2009‑10 and 2010‑11. Our proposed options include eliminating or modifying 12 tax expenditure programs for a savings of $1.7 billion over the next two years. In general, these recommendations are based on our conclusion that these programs lack a strong rationale or are not sufficiently effective or efficient in achieving their stated goals. We also identify two targeted rate increases—increasing the vehicle license fee (VLF) to 1 percent and a three-year temporary PIT surcharge—that, combined, would raise $3.4 billion in 2009‑10 and $3.5 billion in 2010‑11. These options could be considered by the Legislature in lieu of any of the Governor’s revenue-related proposals. We believe these proposals have merit, both for tax policy reasons (for example, the VLF increase would result in all property in California taxed at the same rate) and for reducing the net impact of any rate increases on taxpayers (as both the VLF and PIT are deductible for federal tax purposes).

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2009-10 Budget Analysis Series: Transportation

February 3, 2009 - The Governor’s budget proposes $16.5 billion in expenditures (mostly from special funds) for transportation programs in 2009‑10. This is a net decrease of $3 billion, or about 16 percent, below the estimated current-year expenditure level. In this report we examine ways the Legislature can reduce the impact of the Governor’s transportation funding proposals. We also explain how a number of major funding sources for transportation are unstable, and describe ramifications of this situation for transportation programs. We offer several recommendations to the Legislature to help stabilize funding for these purposes. The specific actions the Legislature can take include more clearly setting funding priorities, providing more funding from ongoing sources by raising the per gallon tax on gasoline and diesel, and exploring new ways of funding transportation programs, such as charging a mileage-based fee to generate revenues for transportation. In addition, we look at how the state is implementing Proposition 1B bond programs for transportation and offer recommendations to improve program accountability. We also examine the Governor's economic stimulus proposals for transportation and recommend that the Legislature consider an alternative to achieve greater stimulus effect.

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2009-10 Budget Analysis Series: Resources and Environmental Protection

February 3, 2009 - The Governor’s budget proposes only one significant budget-balancing solution in the resources and environmental protection areas—$350 million of loans from various special funds to the General Fund. We offer a number of recommendations for achieving General Fund savings beyond the Governor's proposal, including shifting funding for various programs from the General Fund to new or increased fees. Fees are an appropriate funding source in these cases, in our view, because the state is either providing a service directly to beneficiaries or administering a pollution control program that should be funded on a “polluter pays” basis. Our fee proposals relate to: (1) wildland fire protection, (2) fish and game regulation, (3) water quality regulation, and (4) scientific activities of the Office of Environmental Health Hazard Assessment that support regulatory programs. We also recommend program reductions and/or expenditure deferrals in CalFire and the CALFED Bay-Delta Program to create additional General Fund savings. In addition, we assess the administration’s approach in evaluating alternatives to the way water is currently conveyed through the Delta as a key component of solving Delta water problems. We find that the analysis being conducted by the administration is too narrow to fully inform the Legislature of the costs, benefits, risks, and trade-offs of the various conveyance alternatives.

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2009-10 Budget Analysis Series: Proposition 98 Education Programs

February 3, 2009 - The Governor’s budget reflects major reductions to school spending in 2008-09 and 2009-10. In this report, we outline ways for the Legislature to achieve budget-ary savings while minimizing the adverse effects on core educational programs. In contrast to the Governor’s approach of cutting K-12 revenue limits (districts’ most flexible source of funding), we recommend that the Legislature make targeted spending reductions. We develop a three-tiered approach to making these reduc-tions, first identifying cuts that would have the least programmatic effect. To help districts respond to these reductions, the administration proposes to permanently suspend most categorical program requirements and all but three K-14 mandates. In contrast, we recommend that the Legislature adopt a more strategic approach that provides districts with additional categorical program flexibility but also simpli-fies, streamlines, and improves the existing system. We also recommend undertak-ing substantive mandate reform.

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2009-10 Budget Analysis Series: Judicial and Criminal Justice

January 30, 2009 - In this report, we identify issues and present recommendations related to the Judicial and Criminal Justice systems. These include presenting an alternative package of correctional population proposals that attempts to provide a better balance between the need to achieve budgetary savings and the goal of protecting public safety. Our alternative essentially builds upon the Governor’s proposals by modifying the direct discharge proposal and replacing it with earned discharge from parole. We also identify several issues regarding the federal court–appointed Receiver’s health care construction program that merit legislative consideration. For example, we note that the need for the 10,000 new health care beds proposed by the Receiver remains uncertain. In addition, the costs identified by the Receiver to operate the proposed new health care facilities would be significant—exceeding $1 billion annually upon full implementation.

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2009-10 Budget Analysis Series: General Government

January 30, 2009 - In this report, we identify issues and present recommendations related to the General Government portion of the budget. These include our belief that employee compensation reductions proposed by the Governor are necessary due to the magnitude of the budget problem. Nevertheless, we observe that the administration’s plans—especially savings from the furlough-will be difficult to achieve. We also note that due to the sagging economy and falling energy prices in recent months, our forecast for inflation is much lower than that used in the Governor's budget plan. Therefore we recommend the Legislature reject the price increase and direct departments to absorb any increases in operating expenses.

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2009-10 Budget Analysis Series: Higher Education

January 29, 2009 - The Governor’s budget proposal includes $11.5 billion in General Fund support as well as $5.7 billion in other core funding for higher education in 2009-10. The proposed budget would increase university fees by almost $300 million while it would reduce state financial aid programs by $88 million. It also could reduce higher education enrollment by tens of thousands of students. We offer alternatives that would increase funding for state financial aid programs, increase enrollment targets well above the Governor's levels, and better account for student fee revenue.

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2009-10 Budget Analysis Series: Criminal Justice Realignment

January 27, 2009 - The Governor’s 2009-10 budget plan contains a proposal to shift some funding for some criminal justice programs from the state to the local level. We recommend that the Legislature expand upon this concept, and implement a policy-driven realignment of nearly $1.4 billion of state responsibilities to counties along with resources to pay for them. In particular, we propose that the state shift to counties programs for juvenile offenders and adults convicted of drug possession crimes. Under our realignment concept, counties would have broad authority to manage juvenile and drug–addicted adult offenders programs to achieve success. We recommend that the Legislature finance this criminal justice realignment by increasing the vehicle license fee (VLF) rate to 1 percent (which results in a revenue gain of $1.1 billion) and redirecting $359 million of existing VLF revenues. Under this financing approach, realignment would serve as a nearly $1.4 billion ongoing General Fund budget solution.

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2009-10 Budget Analysis Series: Social Services

January 22, 2009 - At a cost of approximately $10.2 billion in 2008-09, California’s major social services provide a wide array of benefits to its citizens. The Governor proposes $3 billion in budget reductions for social services programs in 2009-10, mostly in grant payments to the aged, blind and disabled or low-income families. We present alternative approaches to reducing costs which tend to have less savings and less adverse impacts on recipients and clients. We also present approaches to drawing down more federal funds pursuant to recently enacted federal legislation.

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Analysis of the 2008-09 Budget Bill, General Government Chapter

February 20, 2008 - Analysis of the 2008-09 Budget Bill, General Government Chapter

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Analysis of the 2008-09 Budget Bill, Health and Social Services Chapter

February 20, 2008 - Analysis of the 2008-09 Budget Bill, Health and Social Services Chapter

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Analysis of the 2008-09 Budget Bill, Resources Chapter

February 20, 2008 - Analysis of the 2008-09 Budget Bill, Resources Chapter