LAO 2002-03 Budget Perspectives and Issues: Issue-By-Issue TOC
Analysis of the 2002-03 Budget Bill
Perspectives and Issues Outline
Overview of the Governor's Budget
Total State Spending
General Fund Condition
How the Budget Addresses the Shortfall
Economic and Revenue Assumptions
Key Features of the Governor's Expenditure Plan
Total Spending by Program Area
Programmatic Features
The LAO's Budget Outlook
Additional Solutions of $5 Billion Likely Needed
Additional Risks Exist Related to Federal Funds Shortfalls
Budget Shortfall Would Persist in Future
Considerations for the Legislature
Out-Year Implications Are Important
The Economic Outlook
2001 in Retrospect
U.S. Economy
California's Economy
Slowdown Concentrated in Manufacturing And Business
Services
Regional Impact of Downturn
Recent Positive Signs
Budget's Outlook in Brief
LAO's Economic Outlook
National Outlook
California Outlook
Current Downturn Mild Compared to Previous Recessions
Employment and Income in the Current Economic Cycle
Mild Cycle for Residential Construction
But Steeper Declines in Nonresidential Building
Comparisons of Recent Economic Forecasts
Risks and Uncertainties
Census Results and the Undercount
Census Results and the Undercount (continued)
California's Demographic Outlook
State Population Exceeds 35 Million
California's Population Characteristics
Overall Budgetary Implications
Revenue Volatility
What's Behind the Increased Volatility?
What About Future Volatility?
The Budget's Forecast for State Revenues
The Budget's General Fund Revenue Outlook
Proposed Tax Relief and Recent Tax Changes
The LAO's General Fund Revenue Outlook
Recent Revenue Developments
Cash Down Over $1 Billion
LAO Revenues Down $3.9 Billion From Budget Forecast
The LAO's Forecast for Major Revenue Sources
Personal Income Tax
Background
PIT Liabilities
PIT Revenue Forecast
Sales and Use Tax
Background
SUT Rates
Taxable Sales Fell in 2001 . . .
. . . But Recovery Is Expected Beginning in Mid-2002
SUT Revenue Forecast
Bank and Corporation Tax
Background
Profits Plunged in 2001
Earnings Turnaround Expected in 2002
BCT Revenue Forecast
Other Revenues and Transfers
The Budget Forecast for Special Funds Revenues
An Overview of State Expenditures
Proposed Total Spending
in 2001-02 and 2002-03
General Fund Spending
Special Funds Spending
Spending From Federal Funds and Bond Proceeds
Federal Funds
Spending of Bond Proceeds
State Appropriations Limit
State Spending—A Historical Overview
Spending by Program Area
Distribution of Total State Spending
Relative Growth Over Time and in the Budget Year
Key General Fund Spending Developments
K-12 Education
Higher Education
State Retirement Contributions
Other Programs
Education
Proposal—K-12
Proposal—Higher Education
Issues for Legislative Consideration
CalWORKs Program
Proposal
Issues for Legislative Consideration
Criminal Justice and Judiciary
Proposal
Issues for Legislative Consideration
Transportation
Proposal
Issues for Legislative Consideration
Resources
Proposal
Issues for Legislative Consideration
Energy-Related Activities
Budget Proposal
Reorganizing the State's Energy-Related Activities
State Retirement Contributions
Proposal
Issues for Legislative Consideration
Capital Outlay
Proposal
Issues for Legislative Consideration
Part V: Major Issues Facing the
Legislature
Summary
Introduction
Traditional Versus Budget-Balancing Borrowing
Types and Amount of Budget-Balancing Borrowing
Governor's Borrowing Proposals
Overall Fiscal Effect—About $4.8 Billion
Other Borrowing-Related Options
Discussion of the Governor's Borrowing Proposals
Partial Tobacco Securitization—$2.4 Billion
Deferral of Retirement Fund Contributions—$1 Billion
Transportation Loan—$672 Million
Using Bonds Instead of Direct
Appropriations—$115 Million
Discussion of Other Borrowing Options
Additional Tobacco Securitization—$1.6 Billion
Refinance Existing Bond Debt ($1.1 Billion)
Considerations for the Legislature
Trade-Offs Must Be Weighed
Summary
Introduction
Characteristics and Organization of California's Current
Energy-Related Entities
California Energy Commission
California Public Utilities Commission (Energy Division)
Electricity Oversight Board
California Power Authority
Department of Water Resources, California Energy Resources
Scheduling Division
Department of Conservation, Division of Oil, Gas, and
Geothermal Resources
Problems With the Current System
Difficulties in Coordinating Efforts
Excessive Duplication and Overlaps
Potential Conflicts of Interest
Difficulty in Speaking With "One Voice"
Unnecessary Costs
Staffing Issues
Interagency Differences in Accountability
Current and Past Reform Proposals
So—What Should the Legislature Do?
Step One—Inventory the State's Needs and Objectives
Step Two—Identify Specific Problem Areas That Need Fixing
Step Three—Uncover the Underlying Reasons for Why These
Performance Problems Exist
Step Four—See What Has and Has Not Worked Elsewhere
Basic Principles to Incorporate
Summary
Background
Federal Participation Requirement
Caseload Reduction Credit
What Counts as Participation?
Federal Penalties for Noncompliance
California's Past Performance
Shift to a Separate State Program
California's FFY 2000 Participation
How Does California Compare to Other States?
CalWORKs Participation Requirements
Exemptions
Penalties for Noncompliance
Are Able-Bodied Recipients Meeting Their Participation
Requirement?
Summary
What Explains California's Participation Rates?
Budget and Policy Implications
Focus on Increasing Participation
Prioritize Welfare-to-Work Resources
Wait and See
Conclusion
Summary
What Is the VLF?
How Is the VLF Calculated?
How Has the VLF Been Cut in Recent Years?
How Does the Backfill Work?
How Is the VLF Allocated?
What Is the Average VLF Paid?
What Determines Growth in VLF Revenues?
Text of the Insufficient Moneys Provision
What About the Insufficient Moneys Provision?
Are Local Government Revenues Protected?
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