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August 5, 2013 - The sales and use tax is the state’s second largest revenue source as well as a major funding source for cities, counties, and some special districts. Historically, consumers have spent about the same share of their income each year on taxable items, meaning that sales taxes generally kept pace with growth in the state's economy. Starting in 1980, however, California consumers began to spend a growing share of their income each year on nontaxable items, especially services, and a declining share of their income on taxable goods. Although total consumer spending kept pace with the state’s economy, this shift in spending caused growth in taxable sales to lag behind growth in the state’s economy. Correspondingly, total sales tax revenues for the state and local governments have grown somewhat slower than the state's economy since 1980, despite periodic increases in the tax rate.
July 29, 2013 - The LCFF, enacted as part of the 2013-14 budget package, establishes a new uniform funding formula and a new system of academic accountability. The formula replaces revenue limits and most categorical programs with uniform base rates for all pupils and provides significantly more funding for English learner and low-income students. The new system of academic accountability requires school districts and charter schools to publicly report how they will use the funds provided under the formula, as well as establishes a new system of support and intervention support for underperforming school districts and charter schools. While the transition to the LCFF begins in 2013-14, it will take several years before all provisions are fully implemented and districts and charter schools are fully funded to formula targets. Moreover, a number of key decisions have yet to be made regarding the implementation of the new fiscal and academic accountability provisions.
May 31, 2013 - Pursuant to Chapter 1124, Statutes of 2002 (AB 3000, Committee on Budget)
May 6, 2013 - Historically, the state has spent tens of millions of dollars annually from the General Fund for the California Department of Corrections and Rehabilitation (CDCR) to provide mental health treatment services to mentally ill parolees. Our analysis indicates that federal Medicaid reimbursements could be attained for some of the costs of these existing services. Moreover, the amount of federal reimbursements could increase significantly under the federal Patient Protection and Affordable Care Act (ACA) if the Legislature chooses to expand Medi-Cal to provide health coverage to most low-income individuals, as authorized by ACA. In order to maximize the federal reimbursements that will be available for parolee mental health treatment, especially if the state expands Medi-Cal eligibility, we recommend that CDCR (1) provide increased Medi-Cal application assistance for mentally ill parolees to ensure that all eligible parolees are enrolled, (2) develop a process—in collaboration with the Department of Health Care Services (DHCS)—to claim federal reimbursement for the costs of assisting inmates with benefits applications, and (3) develop a process—in collaboration with DHCS—to claim federal reimbursement for parolee mental health treatment services provided to parolees. If the state took these steps, we estimate it could achieve net General Fund savings of about $6 million in 2013-14 and $28 million annually upon full implementation in 2014-15 (assuming the state implements the Medi-Cal expansion).
March 14, 2013 - Over the past five budget years, furloughs reduced state employee compensation costs by about $5 billion in exchange for giving state employees additional time off. This report examines whether state employees took this additional time off—or whether, after accounting for changes in use of vacation and other time, they worked about as many days as they did before. We find that (1) state workers used most of their furlough days, but decreased their use of vacation and annual leave days, and (2) state leave liabilities and payments to separating employees are now at historic levels.
February 27, 2013 - The Governor's budget proposes $28.3 billion in expenditures from the General Fund for health and human services programs in 2013-14. This reflects a 3.4 percent increase for health programs and a 7.9 percent increase for human services programs over 2012-13 estimated expenditures. For the most part, the year-over-year budget changes reflect caseload changes, technical budget adjustments, and the implementation of previously enacted policy changes, as opposed to new policy proposals. In the report, we find that the budget does not reflect the fiscal impact of the proposed Medi-Cal expansion, nor does it reflect potential costs and savings related to various other provisions of federal health care reform. We find that the Governor's Medi-Cal budget proposal assumes General Fund savings that are subject to significant uncertainty. We also provide a status update on the transition of the Healthy Families Program enrollees to Medi-Cal, finding that the transition is generally proceeding as planned, with some delays. We discuss problems in the operation of the state's Developmental Centers (DCs) by the Department of Developmental Services, and recommend that oversight of the DCs be strengthened by the creation of an independent Office of the Inspector General. We discuss the recent major program changes to the California Work Opportunity and Responsibility to Kids (CalWORKs) that are reflected in the budget, and recommend that the Legislature augment CalWORKs employment services funding--a Governor's budget proposal--to a level of funding it deems appropriate in light of its priorities for the program. We raise various fiscal and policy concerns about the Governor's budget assumption that a 20 percent across-the-board reduction in In-Home Supportive Services service hours will be implemented beginning on November 1, 2013. In light of these concerns, we recommend that the Legislature repeal the 20 percent reduction and instead continue a 3.6 percent across-the-board reduction that would otherwise sunset at the end of the 2012-13 fiscal year.
February 27, 2013 - In 2012, the Legislature authorized the Coordinated Care Initiative (CCI) as an eight-county pilot to demonstrate the integration of Medi-Cal and Medicare benefits for "dual eligibles"--beneficiaries eligible for both benefits. The CCI will also integrate long-term services and supports (LTSS) under Medi-Cal managed care in the eight counties for dual eligibles and seniors and persons with disabilities covered only by Medi-Cal. The Governor's budget delays the start date of CCI implementation to September 1, 2013, resulting in lower 2013-14 savings than initially anticipated. Joint federal-state decisions regarding key financing and operational aspects of CCI are pending, creating uncertainty regarding the timely and successful implementation of CCI. We recommend that the Legislature clarify the legal status of CCI to go forward and consider authorizing CCI to test greater integration of In-Home Supportive Services--a particular LTSS--under managed care.
February 22, 2013 - The Governor proposes to restructure the way the state allocates funding to school districts, charter schools, and county offices of education. We believe the Governor’s proposed new formulas would address many problems inherent in the state’s existing K-12 funding approach, and we recommend the Legislature adopt most components of the proposal. Unlike the current system, the proposed formulas would be simple and transparent, fund similar students similarly, and link funding to the cost of educating students. We believe the proposed approach could be improved, however, with some notable modifications. We suggest a number of specific changes to better align funding levels with anticipated costs, eliminate irrational funding differences across districts, simplify the formulas, and ensure important state priorities are addressed.
February 21, 2013 - The Governor's 2013-14 budget provides $56.2 billion in total Proposition 98 funding--a $2.7 billion (5 percent) increase from the revised current-year level. The Governor dedicates new monies to paying down school and community college deferrals, transitioning to a new K-12 funding formula, restructuring adult education, funding Proposition 39 energy projects for schools and community colleges, and adding two mandates to the schools mandates block grant. The Governor also proposes various changes and consolidations relating to special education funding. Though we think the Governor's basic approach of dedicating roughly half of new funding to paying down existing obligations and the other half to building up base support is reasonable, we have concerns with many of his specific Proposition 98 proposals. In the areas of adult education, Proposition 39 energy projects, mandates, and special education, we provide alternatives for the Legislature 's consideration. Our assessment of an alternative to the Governor's Proposition 39 proposal can be found both in the Proposition 98 report and in a standalone budget brief--2013-14 Budget: Analysis of Governor's Proposition 39 Proposal.
February 21, 2013 - The Governor’s 2013‑14 budget includes a plan to implement the provisions of Proposition 39, which increases state corporate tax (CT) revenues and requires that half of these revenues for a five-year period be used for energy efficiency and alternative energy projects. The Governor proposes to count all associated revenues toward the Proposition 98 minimum guarantee for schools and community colleges. The Governor also proposes to designate all energy-related Proposition 39 funds to schools ($400.5 million) and community colleges ($49.5 million) in 2013‑14 and for the following four years. The Governor’s proposal to count all Proposition 39 revenues toward the Proposition 98 calculation is a significant departure from our longstanding view that revenues are to be excluded from the Proposition 98 calculation if the Legislature cannot use them for general purposes. In addition, the proposal excludes other eligible projects besides schools and community colleges (such as public hospitals) that potentially could achieve greater energy benefits. Further, the proposal does not coordinate Proposition 39 funding with the state’s existing energy efficiency programs. In view of the above concerns, we recommend the Legislature exclude from the Proposition 98 calculation all Proposition 39 revenues required to be used on energy-related projects and not count spending from these revenues as Proposition 98 expenditures. In addition, we recommend the Legislature direct the California Energy Commission (CEC) to administer a competitive grant process in which all public agencies, including schools and community colleges, could apply and receive funding based on identified facility needs.
February 21, 2013 - The Governor’s budget provides a total of $21.1 billion from various fund sources—the General Fund, special funds, bond funds, federal funds, and reimbursements for various transportation departments and programs under the new Transportation Agency in 2013-14. This is an increase of $558 million, or 2.7 percent, above estimated expenditures for the current year. In this report, we review the Governor’s 2013-14 budget proposals for various transportation departments and programs, including the California Department of Transportation (Caltrans), the California High-Speed Rail Authority (HSRA), and the California Highway Patrol. We identify concerns with several of the proposals and make recommendations for legislative consideration. In some cases, we identify proposals that we think should be rejected or modified. We also identify issues that we think would benefit from additional legislative oversight. These include (1) the ability of Caltrans to manage its budget and workload for completing project initiation documents and (2) the HSRA's oversight of the design and construction of the state's high-speed rail project.
February 19, 2013 - Under the Patient Protection and Affordable Care Act, also known as federal health care reform, the state has the option to expand its Medicaid program (known as Medi-Cal) to cover over one million low-income adults who are currently ineligible. Currently counties have the fiscal and programmatic responsibility for the care of the low-income adult population that would be covered by the expansion. The Governor has proposed to adopt the optional expansion, but has outlined two distinct approaches to implementing the expansion—a state-based approach and a county-based approach—and has not indicated a preference for either approach. Under both approaches, the Governor indicates that the expansion will require a reassessment of the state-local fiscal relationship. We find that the expansion would have significant policy benefits, including improved health outcomes for the newly eligible Medi-Cal population. We estimate that fiscal savings to the state as a whole are likely to outweigh the cost of the expansion for at least a decade, although these estimates are subject to significant uncertainty. Despite the significant uncertainty about long-term costs and savings, on balance, we believe the policy merits of the expansion and fiscal benefits to the state as a whole likely will outweigh the costs and potential fiscal risks. We therefore recommend the state adopt the expansion. We also find that the state is in a better position to effectively deliver health services to the newly eligible population. Therefore, we recommend the Legislature adopt a state-based expansion, shifting the fiscal and programmatic responsibility of providing physical health care to the expansion population from counties to the state. Given this shift of responsibility, we further recommend the Legislature redirect a portion of funding currently allocated to counties under 1991 realignment for indigent health care.
February 19, 2013 - In this report, we review the Governor’s 2013-14 budget proposals for various resources and environmental protection departments and programs, including the Department of Water Resources, Department of Forestry and Fire Protection, Department of Parks and Recreation, California Energy Commission, and the Air Resources Board. We identify concerns with several of the proposals and make recommendations for legislative consideration. In some cases, we identify proposals that we think should be rejected or modified. In particular, we point out several budget proposals that would impact state expenditures in future years. We also note that the proposed budget includes several proposals to use certain revenues for different activities that may not be legally allowable given the revenue source. In addition, we identify several issues in the report that we believe merit greater legislative oversight, including a new surcharge on investor-owned utility electricity bills that the California Public Utilities Commission has been collecting since January 2012 without legislative authorization.
February 15, 2013 - The Governor’s 2013-14 budget for criminal justice programs is relatively flat. It contains few major proposals for the judiciary or corrections compared with recent years when the state budget included significant budget cuts to programs, as well as major policy changes. In total, the Governor's budget provides $13.2 billion for criminal justice programs in 2013-14. This is an increase of about 2 percent over estimated current-year expenditures. In this report, we review the Governor’s 2013-14 budget proposals for criminal justice programs, including the judicial branch, California Department of Corrections and Rehabilitation, Board of State and Community Corrections, and the Department of Justice. We identify concerns with several of the proposals and make recommendations for legislative consideration. In some cases, we identify proposals that we think should be rejected or modified, resulting in several million dollars of General Fund savings. We also identify several issues that we think would benefit from additional legislative oversight. These include (1) how trial courts will implement budget reductions in coming years, particularly in the absence of reserves beginning in 2014-15, (2) the new staffing methodology being implemented by the federal court-appointed Receiver currently managing the state’s inmate medical system, and (3) efforts by the Board of State and Community Corrections to meet its statutory mission to assist local agencies improve criminal justice outcomes through technical assistance and data collection.
February 12, 2013 - In the 2013-14 Governor's Budget Summary, the Governor expresses major concerns about higher education in California. Most notably, the Governor is concerned about escalating higher education costs, funding models that promote neither efficiency nor effectiveness, and generally poor student outcomes. To address these issues, the Governor lays out a multiyear budget plan. The main component of the plan is large annual unallocated base increases for all three higher education segments. The Governor loosely links these base increases with an expectation the segments improve their performance. Although we believe the Governor’s budget plan has drawn attention to some notable problems, we have serious concerns with several of his specific budget proposals. By providing the segments with large unallocated increases only vaguely connected to undefined performance expectations, the Governor cedes substantial state responsibilities to the segments and takes key higher education decisions out of the Legislature’s control. We recommend the Legislature take a different approach and allocate any new funding first for the state’s highest existing education priorities, including debt service, pension costs, and paying down community college deferrals. If more funding is provided, then we recommend the Legislature link the additional funding with explicit enrollment and performance expectations.