LAO 1996-97 Budget AnalysisBusiness and Labor Overview
Major Issues
- Report Needed on Proposition 103 Rate Rollback Hearings. In 1995, the Department of Insurance received $9.4 million, on a one time basis, to conduct Proposition 103 rate rollback hearings for insurance companies that had not complied with the proposition. To pay for conducting these hearings, the Commissioner planned to raise fees charged all insurance companies. The proposed increase, however, was recently rescinded. The department needs to report to the Legislature on the status and results of the current-year expenditures and the funding mechanism for Proposition 103 rate rollback hearings. (See page G-9.)
- Amend the Lottery Act to Establish Legislative Review. The Lottery Commission's annual budget is exempt from the annual state budget review process. This independence has allowed the commission to spend an average of $300 million annually on administration without oversight by the Legislature or the administration. Given the magnitude of the commission's administrative budget and its impact on education funding, we believe it is important to establish legislative oversight of the Lottery's operations. (See page G-15.)
- Ten-Fold Increase in the Budget for the Cemetery Act Workload. The Department of Consumer Affairs proposes to spend $4.2 million (to be funded from a General Fund loan) in the budget year for Cemetery Act workload--a ten-fold increase over historic spending levels. The department needs to address this problem through less costly alternatives. We recommend that before the Legislature approves any funding for this effort, the department report to the Legislature on options to reduce proposed expenditures. (See page G-21.)
- Terminate State-Chartered Savings and Loan Associations Program. The decline in the number of state-chartered associations coupled with extensive federal regulations and enforcement has eliminated the need to continue a state-charter program. Consequently, we recommend the Legislature enact legislation by July 1, 1996--effective January 1, 1997--terminating the program. (See page G-29.)
- Defense Adjustment Program Not Justified. We recommend that the Legislature not approve a $3 million request for the Defense Adjustment Program because the Trade and Commerce Agency has not demonstrated how these state funds make a difference in the redevelopment process for communities affected by military base closures. (See page G-32.)
- Proposed Changes in Prevailing Wages and Overtime Pay Standards Should be Addressed In Legislation. The budget for the Department of Industrial Relations includes $1.3 million to implement changes in the methodology of computing prevailing wages for public works and $274,000 to revise 14 industry wage orders concerning overtime pay standards. We believe these proposals involve major policy changes that should be considered in legislation rather than the Budget Bill. The Legislature is currently considering legislation concerning each of these proposals. Consequently, we recommend that the Legislature delete the funds from the budget. (See page G-44.)
- Agriculture Industry Should Share Medfly Control Program. The Department of Food and Agriculture is proposing an annual $7.7 million program to control the Mediterranean Fruit Fly (Medfly) by releasing sterile Medflies throughout the year in the recently rescinded Los Angeles Basin. The state has spent at least $100 million from the General Fund over the last 15 years attempting to eradicate the Medfly. Given the benefits of this effort to agriculture, we recommend that the Legislature enact legislation authorizing the assessment of the agricultural industry for 50 percent of this program beginning in 1996-97. (See page G-52.)
Overview
Expenditures for business and labor programs in 1996-97 are proposed to decrease by about 3 percent compared to the current year. This decrease is the net result of changes in many programs. It reflects a decrease in special fund spending partially offset by a slight increase in General Fund spending.
The budget proposes total state expenditures of $1.1 billion for business and labor programs in 1996-97. This level of spending is a decrease of $32.6 million, or 2.8 percent, from estimated current-year expenditures.
Figure 1 (see next page) shows that expenditures for business and labor programs from all state funds reached about $1.2 billion in 1991-92, then declined through 1993-94. Over the eight-year period shown in Figure 1, expenditures increased by $163 million, representing an annual average growth of 2.8 percent. When these totals are adjusted for inflation, spending declined by about 4.9 percent over the total period, or slightly less than 1 percent annually. The General Fund share of program expenditures has declined from 41 percent in 1989-90 to 24 percent in the budget year.
Figure 2 (see page 7) provides the spending trends for selected major business and labor departments from 1994-95 through 1996-97. As the figure shows, none of the agencies show a significant change in proposed General Fund expenditures between the current and budget years. The Trade and Commerce Agency shows a large percentage change in special fund expenditures (a 36 percent decrease). This decrease is the result of eliminating one-time expenditures for various grants and loans for local projects.
Figure 3 (see page 8) summarizes major budget changes proposed for business and labor programs. As shown in the figure, there are a variety of relatively small increases in General Fund program expenditures. These include $3 million for the Trade and Commerce Agency to increase local assistance grants for the defense adjustment matching program, $1.3 million for the Department of Industrial Relations for efforts to change the prevailing wage methodology (as proposed by the administration), and $11.1 million for the Department of Food and Agriculture's pest management program, mainly to begin an ongoing program of preventative release of sterile Mediterranean fruit flies in the Los Angeles basin.
The figure also shows several proposed spending reductions. For example, the figure shows a $3.1 million reduction for the Department of Industrial Relations due to the expiration of start-up spending related to workers' compensation insurance reform. The figure also reflects a reduction of $2.4 million for the Department of Corporations due to declines in regulatory workload.
Figure 2
Business and Labor Budget Summary
Selected Program Funding
1994-95 Through 1996-97
(Dollars in Millions) |
|---|
| Actual
1994-95 | Estimated
1995-96 | Proposed
1996-97 | Change From
1995-96
Amount Percent |
|---|
| Consumer Affairs | | | | | |
| General Fund | $0.9 | $0.7 | $0.7 | -- | -- |
| Special funds | 256.0 | 307.1 | 309.7 | $2.6 | 0.9% |
| Totals | $256.9 | $307.8 | $310.4 | $2.6 | 0.9% |
| Food and Agriculture | | | | | |
| General Fund | $66.0 | $66.6 | $64.1 | -$2.5 | -3.8% |
| Special funds | 105.0 | 111.5 | 110.7 | -0.8 | -0.8 |
| Totals | $171.0 | $178.1 | $174.8 | -$3.3 | -1.9% |
| Industrial Relations | | | | | |
| General Fund | $132.1 | $135.3 | $138.0 | $2.7 | 2.0% |
| Special funds | 36.1 | 44.8 | 42.2 | -2.6 | -5.8 |
| Totals | $168.2 | $180.1 | $180.2 | $0.1 | 0.1% |
| Insurance | | | | | |
| Special funds | $112.7 | $133.1 | $117.9 | -$15.2 | -11.4% |
| Public Utilities Commission | | | | | |
| Special funds | $79.3 | $76.5 | $74.4 | -$2.1 | -2.7% |
| Trade and Commerce | | | | | |
| General Fund | $36.7 | $37.8 | $39.6 | $1.8 | 4.7% |
| Special funds | 9.4 | 21.5 | 13.8 | -7.7 | -35.8 |
| Totals | $46.1 | $59.3 | $53.4 | -$5.9 | -9.9% |
| Energy Commission | | | | | |
| Special funds | $34.8 | $44.8 | $37.6 | -$7.2 | -16.0% |
| Corporations | | | | | |
| General Fund | $0.3 | -- | -- | -- | -- |
| Special funds | 28.5 | $33.1 | $34.1 | $1.0 | 3.0% |
| Totals | $28.8 | $33.1 | $34.1 | $1.0 | 3.0% |
| Banking | | | | | |
| Special funds | $16.2 | $16.4 | $15.8 | -$0.6 | -3.7% |
Figure 3
Business and Labor Programs
Proposed Major Changes for 1996-97 |
|---|
| Department of
Industrial Relations | | Requested: | $180.2 million | | |
|---|
| | | Decrease: | $0.1 million | (-0.1%) | |
|
| - $1.3 million General Fund for prevailing wage changes
| | | | |
| | - $1 million ($618,000 General Fund) for increased workload in Information Systems Unit
| | | | |
| | - $274,000 General Fund for reform of overtime pay standards
| | | | |
| | | | | | |
|
 |
- $3.1 million to reflect the reduction ($714,000 General Fund) of start-up spending related to workers' compensation insurance reform
| | | | |
| Department of
Food and Agriculture | | Requested: | $174.8 million | | |
|---|
| | | Decrease: | $3.3 million | (-1.9%) | |
|
 |
- $7.7 million General Fund to begin an ongoing prevention program to combat the Mediterranean fruit fly in the Los Angeles basin
| | | | |
| | - $3.4 million General Fund to increase inspection capability at border agriculture inspection stations and to inspect domestic parcel operations
| | | | |
| Trade and
Commerce Agency | | Requested: | $53.4 million | | |
|---|
| | | Decrease: | $5.9 million | (-9.9%) | |
|
 |
- $3 million General Fund for the Defense Adjustment Matching Grant Program
| | | | |
| Department of Corporations | | Requested: | $34.1 million | | |
|---|
| | | Increase: | $1 million | (+3%) | |
|
 |
- $2 million for a health care service plan enrollee complaint program and to increase medical surveys for health care plans
| | | | |
| | | | | | |
|
 |
- $2.4 million to reflect a decline in regulatory activities
| | | | |
Return to LAO Budget Analysis Table of Contents
Return to LAO Home Page