Governor's 2015-16 State Budget Proposal
Governor Jerry Brown unveiled his budget proposal for Fiscal Year 2015-16 on January 9, once again striking a balance between maintaining fiscal discipline and investing in critical programs important to all Californians. As he has in past years, he proposed using the state's improved revenues to pay down debt and increase spending on education and healthcare. His warning against spending too much for ongoing programs is based on his desire to avoid, in his words, "stop and start" budgeting in favor of "steady as you go."
Chief among counties’ interests has been repayment for mandates owed to local governments for more than a decade. The Governor’s budget proposes an additional $533 million to accelerate that debt repayment. Of that, 73 percent or $390 million would go to counties to help enhance public safety and provide health care and other vital services.
To account for an increase in caseload and continued system functionality problems, the Governor has proposed an increase of $150 million for county Medi-Cal administration. He has also made a number of proposals and outlined factors that together could affect counties' MOE requirement for In-Home Support Services.
The Governor proposes using $1 billion in cap and trade funding for programs that will reduce greenhouse gas emissions, including $200 million to fund the Affordable Housing and Sustainable Communities program.
Proposition 1 funds make their first appearance in this year's budget, as the Governor's proposes using $532.5 million of the water bond, including $22 million for groundwater and $135 million for safe drinking water.
For county probationefforts, SB 678 has been calculated at $125 million for 2015-16. These funds will continue to provide an incentive for keeping those on probation from reoffending.
The Governor is proposing a number of changes to the laws governing the dissolution of redevelopment agencies. The changes, under the general heading of “streamlining” aim at minimizing the erosion of the return of property taxes, clarifying various ambiguities in the
dissolution statutes, and maintaining the expeditious wind-down of RDA activities while adding new incentives for substantial compliance with the law.
As he did last year for CalSTRS—the teachers' retirement system—the Governor has introduced a plan to deal with the state's enormous retiree healthcare liability. The plan would begin prefunding those costs in the budget year with a goal of funding them completely within thirty years.
Although it doesn’t directly affect counties, the largest part of the state’s budget is K-14 education. The Governor is proposing a total increase of $2.5 billion in the Proposition 98 guarantee. Compared to 2011-12, this represents an increase of about $2,600 per student.
The budget proposal also includes $478 million for deferred maintenance at universities, parks, prisons, hospitals, and other state facilities. However, there is no specific plan to fund the huge maintenance needs of the state and local road systems.
LAO Analysis of the Governor's Budget
The Legislative Analyst's Office (LAO) released its Overview of the Governor's Budget on January 13, 2015 (click here). The LAO provided the following comments on the Governor's Budget:
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Governor's Priorities Generally Prudent Ones. The LAO notes that the Governor's budgeting philosophy continues to be prudent for the most part. The Governor's reluctance to propose significant new program commitments outside of Proposition 98 could help avoid a return to the boom and bust budgeting of the past.
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Budget Vulnerability Remains. The LAO notes that the state's finances remain vulnerable to sudden tax revenue declines and that the complex budget formulas could complicate budget planning.
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Higher Revenue Projections. The LAO states that the Governor's plan reflects higher revenue projections compared to the estimates in June 2014. However, the LAO notes that there is a strong possibility that revenues for 2014-15 will be significantly above the administration's new projections - as much as $1 to $2 billion above the Governor's projections.
Other comments on specific proposals:
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HHS Budget Uncertainty. The LAO points out that the Governor's budget proposal for health and human services reflects uncertainty related to federal actions in a number of areas including immigration, CalFresh, Foster Care, and IHSS overtime.
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Proposition 47 Implementation. The LAO notes that the Governor's proposal raises several issues for consideration including that the Governor's budget likely underestimates the reduction in the prison population that will occur due to Proposition 47, the Legislature needs to work with the administration to develop a plan for reducing prison capacity, and the Legislature could consider providing guidance on how state savings from Prop 47 will be spend on various services.
IHSS Overtime Ruling
On January 14, 2015, the U.S. District Court invalidated the U.S. Department of Labor's changes to its rules regarding home care workers. With this ruling, the Department of Social Services (DSS) announced on January 15, 2015 that it would halt the implementation of overtime, travel and wait time pay for IHSS workers that was supposed to begin on January 1, 2015. According to DSS this means that recipients of services will continue to receive all of the monthly hours they have been authorized.
CEQA Bill Introduced
SB 122 (Jackson, Hill and Roth) was introduced on January 15, 2015. This bill is a vehicle for consensus issues on CEQA that the Senators are interested in pursuing. While the bill currently only addresses changes to the concurrent preparation of the record, the authors of the bill intend to add provisions relating to Internet resources and late data dumps.
Cap and Trade Update
Last week, the Strategic Growth Council approved the final guidelines for the Affordable Housing and Sustainable Communities (AHSC) program. This program will provide grants and loans for affordable housing, infill and transit-oriented development, and infrastructure that connect these projects to transit. There is approximately $130 million for these programs. It is also important to note that several projects are precluded from applying.
Concept proposals are due February 19 and full applications are expected to be approved in June. The Strategic Growth Council will be hosting a number of technical assistance workshops across the state in February.
Budget Proposal Restores Property Tax Postponement Program
One item that the Governor included in his January Budget is the Senior Citizens’ Property Tax Postponement Program. As the budget itself describes the program:
“The Senior Citizens' Property Tax Postponement Program allows eligible homeowners to defer payment of residential property tax. The state pays the deferred taxes to local governments on behalf of the participants, and places a lien on their property to assure repayment when the property is sold or transferred. The Senior Citizens' Property Tax Postponement Loan Repayments Program captures repayments from individuals that participated in the Senior Citizens' Property Tax Postponement Program and transfers to the General Fund the amount in excess of what is required to fund the Postponement Program claims. The Program was suspended in 2009 and was reestablished via legislation in 2014 (Chapter 703, Statutes of 2014).”
The program first began in 1977 and over the following twenty-two years allowed thousands of low-income seniors and people who were blind or disabled stay in their homes by deferring their property taxes. In most years the program resulted in a net benefit to the state. However, in the wake of the housing crash it resulted in a slight cost and the Legislature indefinitely suspended it.
Assembly Member and former CSAC President Rich Gordon carried AB 2231 last year, which reinstated the program with some changes to assure its solvency. The bill specifically allows counties to postpone the tax sale of eligible homes that were affected when the Legislature suspended the program, and even waives some of the penalties, fees, and interest associated with these properties.
Assuming the program remains in the final version of the budget, the State Controller’s Office will be ready to accept applications in September 2016. The program will be open to residents who are 62 or older, blind, or disabled, who have an annual income of less than $35,500, and who have at least 40 percent equity in their home. Mobile and floating homes are not included in the program.
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