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California’s budget finished 2013-14 in the black

California finished its fiscal year in the black for the first time since 2007, state Controller John Chiang confirmed Thursday.

California in the blackThat means the state had funds available to meet all of its payment obligations without needing to borrow from Wall Street or from the $23.8 billion available in its more than 700 internal special funds and accounts.

“While this is welcome news after seven years of record-high borrowing just to pay our everyday bills, we still have much work to do,” Chiang said in a news release. “We should remain laser-focused on paying down the Wall of Debt, reversing the many accounting gimmicks to which we’ve become addicted and keeping the State as liquid as possible to avoid experiencing the payment delays and IOUs that plagued our State during the Great Recession.”

The economy inevitably will decline again sooner or later, he noted. “We should be vigilant about preparing for that day while we celebrate the great progress we’ve made to date.”

Chiang’s report found the General Fund had $1.9 billion in cash on June 30, marking the first time it has ended the fiscal year in the black since 2007, when it ended the year with $2.5 billion in the bank.

For the 2013-14 fiscal year, revenues came in at $101.6 billion, or $2.1 billion (2.1 percent) more than projected in the Governor’s budget released in January. Personal income taxes totaled $66.2 billion, coming in $1.7 billion above the January estimates (2.6 percent). Corporate taxes totaled $8.5 billion, which was $725 million more than expected (9.3 percent). Retail sales and use taxes came in at $22.2 billion, or $415 million under (1.8 percent) the estimates.

Revenues for June alone totaled $14.8 billion, beating estimates in the 2014-15 Governor’s Budget by $304 million (2.1 percent). Income tax collections for the month of June came in $635 million (7.4 percent) above estimates. Corporate taxes topped estimates by $289 million (13.2 percent). Sales taxes came in short of estimates by $265.8 million (11.6 percent).

Posted on Thursday, July 10th, 2014
Under: John Chiang, state budget | 2 Comments »

Lawmakers sing ‘Kum-Ba-Yah’ on rainy-day fund

It’s a rare “Kum-Ba-Yah” day under the State Capitol dome, as the Legislature in unanimously approved a new ballot measure to modify the state budget’s rainy-day fund.

The proposal voters will consider in November would double the reserve’s size from 5 percent to 10 percent of the General Fund; the state would set aside 1.5 percent of the general fund each year, and supplement that with extra capital-gains revenue. For the next 15 years, half of what’s set aside would help pay down the state’s debt and unfunded liabilities, including public employee pensions and retiree health care.

The votes were 75-0 in the Assembly and 36-0 in the state Senate.

From Senate President Pro Tem Darrell Steinberg, D-Sacramento:

“This compromise agreement between legislative leaders of both parties and the Governor balances the needs of fiscal stability and planning for the future. It will help attenuate cuts in vital services during economic downturns, aggressively pay down state liabilities and indebtedness, and still maintain the room that we need for investing in California and its people. This is a formula we should embrace not only in the future, but also for the 2014-15 State Budget we’re negotiating now.”

“We always must have a balance. I have long believed we should approach budgeting in a way people can readily understand; one-third of our excess revenue to pay down debt, one-third to put away for a ‘rainy day,’ and one-third left to invest and reinvest in California and its people. By using this agreement as our approach in debating the upcoming budget, we can make sure there is room left for some investment to meet the needs of our children and families who are still struggling to recover from the cuts we were forced to make during the recession.”

From Senate Republican Leader Bob Huff, R-Brea:

“I think it demonstrates to the people of California that when you have a robust bipartisan discussion, you can make things better because we all bring something to the table… To that end, we wanted to make sure that it’s truly a rainy day fund, and not an everyday fund.”

From Senate Majority Leader Ellen Corbett, D-San Leandro:

“Following today’s bipartisan vote in the California State Senate, I am pleased that legislative colleagues on both sides of the aisle voted to affirm this important Rainy Day Fund proposal that seeks to ensure greater long term economic security for California. Our state can and should save for the future so that we can minimize the potential for future drastic cuts to education, health, human services and other critical programs, while also paying down debt. This new reserve fund, if approved by voters, will be an important step to help secure California’s economic future.”

“California’s economy is one of the largest in the world and is certainly an important driving force within the United States. It makes sense for state elected officials to support efforts that will continue to encourage California’s growth and future economic strength. Just as families must prepare for unexpected job losses or expenses, so too must the state prudently prepare for if and when another recession occurs.”

From Sen. Andy Vidak, R-Hanford:

“This is exactly why I came to Sacramento – to work on bipartisan measures that benefit the people of California. I hope this is the first of many historic agreements. Let this be an example of how we can work across the aisle on a water bond.”

From Assembly Speaker Emeritus John Perez, D-Los Angeles:

“This is a strong proposal for the voters to consider, and I am very proud of the work we have done on a bipartisan basis to take another monumental step forward in making California a model for fiscal responsibility across the country. By putting a genuine Rainy Day Fund before the voters, we can break the bad habits of the past where we overspend in good years and overcut in tough years, and this measure will ensure that we maintain the health of California’s finances in the years to come.”

Posted on Thursday, May 15th, 2014
Under: Assembly, Bob Huff, California State Senate, Darrell Steinberg, Ellen Corbett, John Perez, state budget | 1 Comment »

What they’re saying about Brown’s budget

We’ve included some reactions to Gov. Jerry Brown’s May budget revision in our main story, but here are some more.

From Assembly Speaker Toni Atkins, D-San Diego:

Toni Atkins“The Governor’s revised budget provides a solid starting point for the final phase of our deliberations. I am particularly pleased the Governor has built upon the framework Assembly Democrats proposed for a STRS solution earlier this year. That, and the Rainy Day Fund we are poised to pass this week, are two great steps forward to ensure California’s economic stability. As we finalize the budget over the next few weeks, we will also look to expand opportunity by combatting child poverty, improving access to higher education, increasing funding for transportation projects, and taking strides to expand affordable housing. Based on the Governor’s May revision and the more than 50 hearings the Assembly has already held, I am confident we are on track for another on-time, balanced budget – one that will help solidify the state’s fiscal position for years to come.”

From State Senate Budget Committee Vice Chair Jim Nielsen, R-Chico:

Jim Nielsen“The Governor should be commended for proposing to set aside $1.6 billion for the Rainy Day fund; and to pay down $11 billion in debt but this is a mere 3 percent of the state’s $340 billion debt.

“Unfortunately, his budget also includes increased spending on permanent programs that will inevitably take us back to deficit spending.

“More money needs to be set aside for the Rainy Day Fund and for emergencies like wildfires, natural disasters and public safety.

“State revenues are forecast to increase by $2.4 billion. While this appears to be good news, this is a veneer generated by a temporary tax that was promised for education and public safety; and will expire in three years.

“The high speed rail from Merced to Bakersfield is a boondoggle not worthy of precious taxpayers’ dollars.

“In the coming months, the Legislature must rectify the Governor’s failure to help counties protect their citizens by providing more funding for realignment. Counties need money for rehabilitation, inmate housing and supervision, and court costs.

“The administration is releasing the second class of realignment prisoners, making our communities more dangerous. State leaders shouldn’t wait for a catastrophe before we fix this ill-conceived program.”

From state Senate Majority Leader Ellen Corbett, D-San Leandro:

Ellen Corbett“Coupled with last week’s bipartisan Rainy Day Fund agreement, today’s budget revision further sets California on track to fiscal health and economic growth so that all Californians may benefit from our state’s improving economy.”

“I praise the Governor’s short and long term commitment to supporting education at all levels, including career technical education at our state’s community colleges and high speed internet access at our K-12 schools that need it the most. California’s future depends largely on our continued investment in today’s students, so we must ensure that California’s education system is strong and offers students the needed preparatory tools to enter an increasingly global and technological job market.”

“I also thank the Governor for committing to help ensure the long term solvency of the teacher pension system. It is critical that we help secure the retirements of California’s educators.”

“I am pleased that the Governor’s revised budget also proposes significantly increased access to health care for millions of Californians through Medi-Cal and Covered California. We must certainly continue to restore the frayed safety net upon which many of my 10th State Senate District constituents rely during these still tough economic times.”

From State Board of Equalization member George Runner:

“The Governor is on the right track in proposing a budget that has no new taxes, contains ongoing expenses, pays down debt and begins to address the state’s growing pension costs.

“I just wish the Governor would repeal the fire tax and stop the bullet train.

“In addition, California continues to rank as the worst state to do business in an annual survey of business leaders.

“The next test for the Governor will be how he deals with legislators who want to raise taxes and spend billions more. Will he hold the line?”

More, after the jump…
Read the rest of this entry »

Posted on Tuesday, May 13th, 2014
Under: Assembly, Bob Wieckowski, California State Senate, Ellen Corbett, Gov. Jerry Brown, Jerry Brown, state budget, Toni Atkins | No Comments »

Reich visits Capitol on CEO pay, oil extraction tax

It’s Robert Reich day at California’s State Capitol.

No, there hasn’t been an official proclamation. But the former U.S. Secretary of Labor, now a UC-Berkeley public policy professor, will be under the dome Thursday to speak on behalf of two bills introduced by Bay Area lawmakers.

Reich is doing a news conference with state Sen. Mark DeSaulnier, D-Concord; state Sen. Loni Hancock, D-Berkeley; and California Labor Federation Executive Secretary-Treasurer Art Pulaski in support of DeSaulnier’s SB 1372, which would create a new corporate tax table that increases taxes on businesses with big disparities between the salaries of their workers and their CEOs. The bill is being heard Thursday morning by the State Governance and Finance Committee.

“For example, if the CEO makes 100 times the median worker in the company, the company’s tax rate drops from the current 8.8 percent down to 8 percent. If the CEO makes 25 times the pay of the typical worker, the tax rate goes down to 7 percent,” Reich wrote on his blog Monday. “On the other hand, corporations with big disparities face higher taxes. If the CEO makes 200 times the typical employee, the tax rate goes to 9.5 percent; 400 times, to 13 percent.”

“Pushing companies to put less money into the hands of their CEOs and more into the hands of average employees creates more buying power among people who will buy, and therefore more jobs,” he wrote. “For the last thirty years, almost all the incentives operating on companies have been to lower the pay of their workers while increasing the pay of their CEOs and other top executives. It’s about time some incentives were applied in the other direction.”

And, Reich will testify to the Senate Public Education Committee in favor of SB 1017 by state Sen. Noreen Evans, D-Santa Rosa, which would create an oil extraction tax to fund higher education, health and human services, state parks and more.

Reich endorsed a similar student-organized ballot measure effort last year, saying that using oil severance tax revenue for education “should be a no-brainer. It will only improve our schools. The real question is why California hasn’t done this long before now.”

The California Chamber of Commerce this month put both bills on its list of “job killers,” arguing they create barriers to economic development.

“The economic recovery is still the number one issue for Californians,” Chamber President and CEO Allan Zaremberg said when announcing the list. “These bills pose a serious threat to our economy and, if enacted, would dampen job growth in the state.”

Of Evans’ bill, Zaremberg said “an oil extraction tax will drive up consumer prices, push jobs away and upset a fragile economy that is showing strong signs of life.”

Posted on Thursday, April 24th, 2014
Under: economy, education, state budget, taxes | 12 Comments »

Signatures sent in for Medi-Cal funding measure

Health care providers and community groups have gathered and are submitting 1.3 million signatures to put a measure on November’s ballot that they say will provide stable funding for health care for children and, through Medi-Cal, for seniors and low-income residents.

“California voters will get the chance this fall to strengthen this critically important law, and improve access to quality affordable medical care for those who need it most,” California Hospital Association President and CEO C. Duane Dauner said in a news release.

The Medi-Cal Funding and Accountability Act of 2014 “will ensure California receives ongoing access to approximately $3 billion annually in federal matching funds,” Dauner said. “This is California’s fair share, money that would otherwise be left on the table in Washington, D.C.”

California’s hospitals for the past several years have taxed themselves to get access to the federal funds, but the budget-crunched state at times has diverted some of that money to its general fund. Last year’s SB 239, passed by the Legislature without any opposing votes and signed into law by Gov. Jerry Brown, extended this fee through 2017 and specified how the money could be spent.

This measure would make that law permanent, and would require that “any changes in the program or to how the money is spent would have to be approved by voters first,” Christopher Dawes, president and CEO of Lucille Packard Children’s Hospital Stanford and Stanford Children’s Health, noted in the release.

Patients aren’t assessed any fees, and there are no new or increased taxes.

“We don’t have a single voice of opposition – this is a win-win for everybody… and it doesn’t cost a dime to California taxpayers,” said Anne McLeod, the California Hospital Association’s senior vice president of health policy.

The money must be spent to provide health care services to children and, through Medi-Cal, to elderly and low-income Californians. Without the federal funds, money would have to come from privately insured patients; the nonpartisan Legislative Analyst’s Office finds the measure would save state taxpayers $500 million for children’s health coverage starting in 2016-17, growing to more than $1 billion per year by 2019-20.

Dauner said people with private insurance shouldn’t face higher rates to subsidize unpaid Medi-Cal bills if federal money is available to cover the cost. “The Act is a common-sense answer to helping people provide health care to those who need it most, at great benefit to California taxpayers.”

Posted on Wednesday, April 23rd, 2014
Under: ballot measures, state budget | No Comments »

Brown calls special session on Rainy Day Fund

Gov. Jerry Brown on Wednesday called a special session of the Legislature to replace the “Rainy Day Fund” measure on November’s ballot with a dedicated reserve to let the state to pay down its debts and unfunded liabilities.

“We simply must prevent the massive deficits of the last decade and we can only do that by paying down our debts and creating a solid Rainy Day Fund,” Brown said in a news release, which accompanied a proclamation convening the special section next Thursday, April 24.

Voters enacted the current Rainy Day Fund in 2004 by approving Proposition 58, which directs 3 percent of annual revenues into the Budget Stabilization Account. The current system has no restriction on when funds can be withdrawn and requires deposits even in deficit years, unless the law is suspended.

Lawmakers in 2010 approved the proposal on the November 2014 ballot – ACA 4, which would raise the fund’s cap from 5 percent to 10 percent of the General Fund, among other things. But Brown said Wednesday it doesn’t address the volatility of capital gains revenue, doesn’t provide a reserve for schools to help cushion future downturns, and limits California’s ability to pay down long-term liabilities.

Brown in January proposed changes including increasing deposits when the state has spikes in capital gains revenue; allowing supplemental payments to speed up the state’s payoff of its debts and liabilities; limiting withdrawals to ensure the state doesn’t drain too much at the start of a downturn; and creating a Proposition 98 reserve, after school funding is fully restored to pre-recession levels, to smooth school spending and avoid future cuts.

UPDATE @ 11:15 A.M.: Assembly Speaker John Perez calls this “a welcome and helpful development.”

“Assembly Democrats first proposed a permanent rainy day fund last May, and we look forward to working with our Republican and Senate colleagues to build a reliable system that handles short-term revenue spikes differently than ongoing, stable revenue streams,” said Perez, D-Los Angeles. “We need to establish a solid system for saving money in good years, so that we can better weather the bad years. We need a mechanism that not only strengthens our constitutional reserve, but also gets us off the rollercoaster ride of revenue spikes and dips that has caused so much trouble in recent years.”

UPDATE @ 2:02 P.M.: State Senate Republican Leader Bob Huff, R-Brea, says he’s glad Brown is doing this, but doubts whether Democrats share the enthusiasm. “It’s just common sense for California to put away money during the ‘boom’ years to avoid future tax increases and spending reductions in the ‘bust’ years. However, we are mindful that legislative Democrats have undermined similar efforts in the recent past,” he said.

“Despite agreeing to, and voting for, the rainy day reserve fund in Assembly Constitutional Amendment 4 (ACA 4) as part of the 2010-11 budget agreement with Republicans, Senate Pro Tem Steinberg and Assembly Speaker Perez denied Californians the opportunity to vote for it on the ballot in 2012 as promised,” Huff continued. “Now they want to remove it from the 2014 election ballot, preventing the people of California from establishing strong protections against future budget crises. I think today’s announcement is a message to the Democrats that the Governor is serious about doing something.”

The California Chamber of Commerce supports Brown’s move, too. “Adopting an effective Rainy Day Reserve should be the state’s top fiscal policy. California’s budget crises were caused by the Legislature spending one-time revenues for ongoing programs,” said CalChamber President and CEO Allan Zaremberg. “A solid reserve requirement will remove the California budget from the fiscal roller coaster. It is crucial that the Legislature pass a consensus proposal that the Governor can support to get approval by voters in November.”

Posted on Wednesday, April 16th, 2014
Under: Assembly, California State Senate, Gov. Jerry Brown, Jerry Brown, John Perez, state budget | 4 Comments »

Ellen Corbett named to Senate Budget Committee

State Senate Majority Leader Ellen Corbett will serve out her final year in the Legislature with a seat on one of its most vital committees.

Ellen CorbettCorbett, D-San Leandro, was named to the Senate Budget and Fiscal Review Committee on Wednesday, and will chair its Health and Human Services subcommittee; the appointment made by the Senate Rules Committee takes effect immediately. The 16-member committee must analyze the state budget proposal that Gov. Jerry Brown offered this month.

“I look forward to working closely with all stakeholders to ensure that the state budget process continues to be transparent and constituent-oriented,” Corbett said in a news release.

She said she’s confident she and her colleagues can produce a final budget “that is both reasonable and ensures that the best interests of Californians are protected,” particularly in her subcommittee’s area. “After previous years of cuts to important health and human services programs, I look forward to approving a budget that minimizes the short- and long-term impacts to the most vulnerable segments of our population, including children, seniors and adults with developmental and other disabilities.”

Corbett also is campaigning this year to unseat fellow Democrat Rep. Eric Swalwell, D-Pleasanton, in the East Bay’s 15th Congressional District.

Posted on Wednesday, January 29th, 2014
Under: California State Senate, Ellen Corbett, state budget | 9 Comments »

Court: Chiang shouldn’t have held lawmakers’ pay

State Controller John Chiang overstepped his legal authority in 2011 by deciding to dock lawmakers’ paychecks because he deemed the budget they had passed to be unbalanced, a state appellate court ruled Friday.

“(W)here the Legislature is the entity acting indisputably within its fundamental constitutional jurisdiction to enact what it designates as a balanced budget, the Controller does not have audit authority to determine whether the budget bill is in fact balanced,” Court of Appeal Associate Justice M. Kathleen Butz wrote; associate justices Cole Blease and William Murray Jr. concurred in this affirmation of a lower court’s 2012 decision.

Proposition 25 of 2010, approved by 55 percent of voters, lets the Legislature approve budges on a simple-majority vote, but it also says lawmakers must forfeit their pay and per diems for each day the state is past its constitutional deadline without a budget.

Chiang announced in June 2011 that his office’s review of the budget, which had been passed on the day it was due, “found components that were miscalculated, miscounted or unfinished. The numbers simply did not add up, and the Legislature will forfeit their pay until a balanced budget is sent to the governor.” He ended up withholding about $583,000 from the lawmakers.

Assembly Speaker John Perez, D-Los Angeles, and state Senate President Pro Tem Darrell Steinberg, D-Sacramento, sued on principle, without seeking recovery of that back pay.

Posted on Friday, January 24th, 2014
Under: Assembly, California State Senate, Darrell Steinberg, John Chiang, John Perez, state budget | 2 Comments »

How shutdown hurts California programs & budget

California won’t take too much of a hit in the short term, but stands to lose a lot if the federal government shutdown lasts more than a brief time, according to the state Department of Finance.

Deputy Director H.D. Palmer said federal funds for unemployment insurance benefits, MediCal, and supplemental security income/state supplementary payment grants for the elderly, blind or disabled will continue uninterrupted.

But while there’s enough money to keep the Supplemental Nutrition Assistance Program – formerly called food stamps – afloat through October for the 1.9 million California households that rely on it, that funding will dry up in November. It’s the same scenario for school nutrition programs that serve 4.5 million meals per day mostly to low-income students. And money for the Women, Infants and Children nutrition program will last only through late November. (I’d link to the SNAP and WIC programs, but the shutdown already has affected their web pages.)

“The longer this goes on, the greater uncertainty there will be for funding some of these programs,” Palmer said Tuesday.

Meanwhile, California – home to more federal employees than Washington, D.C., – will see a lot of government workers not drawing paychecks, and thus unable to spend their money in their communities or pay their bills. Communities near national parks such as Yosemite will suffer even more while those parks are shuttered, cutting off the tourist flow.

But the worst of it come if Congress refuses to raise the nation’s debt ceiling by Oct. 17 and the nation defaults on its debt, Palmer said. The resulting financial market instability could decimate the capital gains and stock options on which California depends for a huge chunk of its tax revenue, he said, blowing a big, red hole in a state budget that only recently was brought back into the black.

Posted on Tuesday, October 1st, 2013
Under: state budget | 3 Comments »

Fitch upgrades California bonds from ‘A-’ to ‘A’

Fitch Ratings today announced it has upgraded the rating on $72 billion in California general-obligation bonds from “A-” to “A” and upgraded the rating outlook from “stable” to “positive” – another sign of Wall Street’s resurgent confidence in the Golden State.

Fitch’s move, the first upgrade the state has seen in three years, follows similar action from Standard & Poor’s in January.

Gov. Jerry Brown tweeted Tuesday afternoon that it’s “a further move toward greater fiscal stability;” spokesman Evan Westrup said it’s a sign that Brown’s approach is working, and underscores the need for continued budgetary discipline.

“The upgrade is based on institutionalized changes to fiscal management in recent years, which combined with the ongoing economic and revenue recovery have enabled the state to materially improve its overall fiscal standing,” according to Fitch’s statement. “Notable progress includes timely, more structurally sound budgets, spending restraint, and sizable reductions in budgetary debt.”

Fitch said California’s economy is “wealthy and unmatched among U.S. states in its size and diversity. After severe, widespread recessionary conditions, growth has resumed, including in California’s housing market.” Meanwhile, “tax-supported debt is moderate, although it has grown in the last decade for infrastructure needs and budgetary borrowing. Pension funded ratios have declined and contributions to the teacher system remain inadequate, but the state has instituted some benefit reforms.”

It ain’t all roses. Fitch reports California’s finances “are subject to periodic, severe budget and cash flow stress due to economic cyclicality, revenue volatility tied to personal income taxes, carried over structural imbalances, a lack of reserves and institutional inflexibility.” But the state “expanded its ability to manage cash flow weakness during the last downturn, and other progress made to date can be expected to make the effects of future downturns more manageable,” the rating agency found.

“Deep recurring spending cuts in recent adopted budgets and a restrained approach to restoring past cuts have significantly lowered the state’s structural imbalance,” the statement says. “Nevertheless, the state carries a heavy burden of budgetary borrowing from the last two fiscal crises and its historical difficulty achieving and sustaining budgetary solutions poses an ongoing risk.”

Fitch also cautioned that voter initiatives “have reduced the state’s discretion to effectively manage budgetary challenges over time. However, more recent initiatives authorizing a simple legislative majority to approve spending and temporarily raising tax revenues have been instrumental to current fiscal progress.”

“Although California’s fiscal situation has improved significantly, Fitch views the state as being a long way from a full recovery from the effects of two fiscal crises over a little more than a decade,” the rating agency found. “Budgetary borrowing in the form of deferrals, internal loans and deficit bonds will remain a drag on current resources for several years even under optimistic scenarios. Despite the institutional reforms of recent years, unmet needs to address unemployment borrowing, underfunding of teacher pensions, and prisons represent material risks.”

Posted on Monday, August 5th, 2013
Under: Jerry Brown, state budget | 4 Comments »