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The 2010-11 Budget: Prison Receivership Proposals Pose Significant Financial Risks

March 16, 2010 - In February 2006, the federal court in the Plata v. Schwarzenegger case pertaining to inmate medical care appointed a Receiver to take over the direct management and operation of the state’s prison medical health care delivery system from the California Department of Corrections and Rehabilitation (CDCR). In this brief, we (1) provide a status report on the Receiver’s actions, (2) present an overview of state spending on inmate medical care, (3) analyze the various requests contained in the Governor’s budget for the Receiver, and (4) identify issues and recommendations for legislative consideration. Specifically, we recommend that the Legislature: require the administration to present at budget hearings a detailed plan on how its proposed $811 million in savings will be achieved; withhold action on staffing requests pending the submission and our review of the above plan; and, fund only the most critical IT projects in the budget year and delay funding for the less critical projects.

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Expenditure Details of the LAO Alternative Budget

February 20, 2008 - Provides details of the LAO alternative budget for expenditure issues. The savings shown are relative to the Governor’s workload budget. In total, these proposals would reduce state costs by $1.8 billion in 2007‑08 and $9 billion in 2008‑09. For each proposal, we provide either (1) a rationale for our inclusion of the item in the alternative or (2) a reference to where we provide such a rationale (typically our companion publication, the Analysis of the 2008‑09 Budget Bill).

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Alternatives to the Governor's Budgetary Reforms

February 20, 2008 - The administration proposes to (1) limit the amount of revenues that the General Fund could receive in any year and (2) implement a system by which the administration could trigger across-the-board reductions if the state’s budget situation declined. Although the measure would help even out the state’s revenues from year to year, it would also be inflexible to legislative decision making on a year-to-year basis and would fail to prioritize state spending. Consequently, we recommend that the Legislature reject the proposed changes. We provide, instead, some alternatives it could consider which build upon the positive aspects of the Governor’s proposal.

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LAO Revenue-Raising Proposals

February 20, 2008 - The Governor’s budget includes almost no new revenue-raising proposals. Given the magnitude of the budget problem, we examine the state’s existing tax structure in the same way as the spending side--with an eye towards reducing inefficient or ineffective provisions. In this section, we discuss proposals that look at the revenue side of the budget. In so doing, we have applied the same approach as with direct spending programs--that is, we have examined tax-related provisions referred to as tax expenditure programs (TEPs)--and recommended changes to those that are not achieving their stated purposes or are of a lower priority.

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LAO Alternative Budget Overview

February 20, 2008 - In contrast to the administration’s across-the-board reduction budget-balancing approach that fails to prioritize state spending, we offer an alternative approach for the Legislature’s consideration. By making more targeted reductions; eliminating or modifying ineffectiveness or nonessential programs; and adding ongoing revenue solutions, we believe this approach offers the Legislature a better foundation to begin crafting a 2008-09 budget that focuses on essential services. This piece provides an overview of the key components of this alternative approach. Our alternative budget would end the 2008-09 fiscal year with a $1.3 billion reserve, and remain balanced through 2012-13.

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Realignment of Parole Could Improve Public Safety and Help Address Budget Shortfall

February 20, 2008 - We propose a nearly $500 million realignment of responsibility for supervision of low-level criminal offenders from the state parole system to county probation. Funding for parole realignment would come from a reallocation of waste and water district property taxes, city Proposition 172 sales taxes, and vehicle license fees. Our plan is designed to give counties a greater stake in the success of these offenders in the community, thereby reducing their likelihood of reoffending.

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State Fiscal Picture 2008-09

February 20, 2008 - State Fiscal Picture 2008-09

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Perspectives on the Economy and Demographics 2008-09

February 20, 2008 - Perspectives on the Economy and Demographics 2008-09

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Perspectives on State Revenues 2008-09

February 20, 2008 - Perspectives on State Revenues 2008-09

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Perspectives on State Expenditures 2008-09

February 20, 2008 - Perspectives on State Expenditures 2008-09

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The Governor’s Tax Proposal

February 21, 2007 - The budget contains two tax-change proposals. The first is to permanently repeal the existing teacher retention tax credit, which was adopted in 2000 but was temporarily suspended in four of the past six years. The second is to make permanent a temporary change made in 2004 to extend, from 90 days to one year, the time that vessels, vehicles, and aircraft recently purchased out of state must be kept outside of California in order to avoid the state’s use tax. We provide background on these two proposals, discuss their economic and fiscal impacts, and identify issues associated with them. Based on our review, we recommend that the Legislature adopt both proposals.

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Improving the Mandate Process

February 21, 2007 - The California Constitution requires the state to reimburse local governments for certain state mandates. The process for determining the existence of state mandates and providing local government reimbursements, however, has significant shortcomings. The administration’s proposal to reform this mandate process provides a good starting point for discussion. In this analysis, we review the administration’s proposal and offer the Legislature a similar, but more extensive, proposal that includes (1) simplifying the process for local governments to file reimbursement claims by placing greater emphasis on unit cost methodologies, (2) allowing mandate payment methodologies to be developed through negotiations between local government and the Department of Finance, and (3) establishing an alternate process to provide early settlement of mandate disputes and bypass the commission entirely.

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Legislative Oversight of State Employee Compensation

February 21, 2007 - We focus on the process for setting compensation and recommend the Legislature improve the state’s employee compensation policies. Our recommendations are geared toward the Legislature focusing state employee compensation expenditures within the context of a balanced budget. Among our recommendations are for the Legislature to (1) limit the authority of arbitrators to order large payments under their interpretation of future labor agreements and (2) end the use of automatic pay raise formulas tied to actions by other governmental employers.

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Potential Fiscal Risks to the State in the Governor’s Health Care Coverage Plan

February 21, 2007 - The Governor proposes to extend health care coverage to California’s uninsured population and to implement specific reforms. The Governor’s proposal would impose an individual mandate requiring all Californians to maintain a minimum level of health insurance, attempt to contain health care costs so that individuals could afford to purchase coverage, and promote various measures meant to improve the overall health of Californians. We conclude that the Governor has presented a comprehensive framework to expand coverage for the uninsured. In addition, the administration has made a serious effort to estimate the programmatic and fiscal impacts of its proposal. We identify a number of legal obstacles and policy issues and conclude that the plan creates fiscal risks to the state potentially reaching several billions of dollars annually.

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State Fiscal Picture 2007-08

February 21, 2007 - Based on our revenue and expenditure projections, we estimate that the adoption of the Governor’s budget plan would result in a $726 million deficit in 2007-08 (compared to the administration’s January 10th estimate of a $2.1 billion reserve). The difference in these numbers is due principally to our lower estimates of revenue in both the current and budget years, but also due to higher expenditure estimates, primarily related to Proposition 98. Adoption of the plan would also leave the state with large operating shortfalls in future years, unless additional corrective actions are taken. Thus, the Legislature will face major challenges in crafting a budget for the coming year. We believe that the primary focus should be on finding additional budget savings and/or revenues to address the near- and longer-term shortfalls. Should these solutions be insufficient to cover the full magnitude of the budget shortfall, however, the state can also achieve some near-term savings by reducing the amount of supplemental repayments on deficit-financing bonds relative to the $1.6 billion proposed in the budget.