CSBA Forecast Conference

CSBA Forecast Conference

January 17, 2008January 17, 2008

Budget ShortfallBudget Shortfall

• $3.3 billion in 2007-08

• $14.5 billion in 2008-09

• $3.3 billion in 2007-08

• $14.5 billion in 2008-09

“We don’t have a revenue problem; we have a spending problem.”--The Governor, January 8, 2008

 “This budget also limits spending growth to less than one percent…”--The Governor, August 21, 2007 

“We don’t have a revenue problem; we have a spending problem.”--The Governor, January 8, 2008

 “This budget also limits spending growth to less than one percent…”--The Governor, August 21, 2007 

What Happened?What Happened?

• Revenues declined–$4.9 billion

• Beginning balance declined–$0.5 billion

• Spending declined–$2.0 billion

• Revenues declined–$4.9 billion

• Beginning balance declined–$0.5 billion

• Spending declined–$2.0 billion

Closing the Gap2007-08

Closing the Gap2007-08

• $3.3 billion from sale of economic recovery bonds• $400 million from Prop 98• $217 million 10% cuts• $200 million “other”• $60 million tax enforcement

• $3.3 billion from sale of economic recovery bonds• $400 million from Prop 98• $217 million 10% cuts• $200 million “other”• $60 million tax enforcement

Proposition 58Proposition 58

• Authorizes Governor to declare a fiscal emergency and call a special session of the Legislature• Legislature has 45 days to

act (by February 23)

• Authorizes Governor to declare a fiscal emergency and call a special session of the Legislature• Legislature has 45 days to

act (by February 23)

Building the 2008-09 Budget

Building the 2008-09 Budget

• Step 1: “Workload” budget

• Step 2: Apply 10% reduction

• Step 1: “Workload” budget

• Step 2: Apply 10% reduction

Closing the Gap2008-09

Closing the Gap2008-09

• $9.1 billion 10% cuts• $2.0 billion June 2009 PIT

accrual• $1.5 billion suspend

supplemental payment on deficit bonds

• $9.1 billion 10% cuts• $2.0 billion June 2009 PIT

accrual• $1.5 billion suspend

supplemental payment on deficit bonds

Closing the Gap2008-09 (cont.)

Closing the Gap2008-09 (cont.)

• $96 million “other”• $329 million tax

enforcement

• $96 million “other”• $329 million tax

enforcement

Proposition 982007-08

Proposition 982007-08

• Guarantee has declined by $1.4 billion• Governor proposes a $400

million reduction• Does not require

suspension

• Guarantee has declined by $1.4 billion• Governor proposes a $400

million reduction• Does not require

suspension

LAO—”Reduce current year Prop 98 funding to the minimum (by $1.4 billion)”

• Replace CY with PY unspent monies

• Unappropriate unspent CY monies

• Designate the difference as settle up funding.

LAO—”Reduce current year Prop 98 funding to the minimum (by $1.4 billion)”

• Replace CY with PY unspent monies

• Unappropriate unspent CY monies

• Designate the difference as settle up funding.

Proposition 982008-09

Proposition 982008-09

• Suspend Prop 98--$4 billion• Reduce K-14 “workload”

budget by $4.8 billion –$4.3 billion K-12 ($735/ADA)–$500 million community

colleges

• Suspend Prop 98--$4 billion• Reduce K-14 “workload”

budget by $4.8 billion –$4.3 billion K-12 ($735/ADA)–$500 million community

colleges

Proposed K-12 Cuts(from Workload Budget)

Proposed K-12 Cuts(from Workload Budget)• $2.6 billion-revenue limits–Creates a 6.99% def. factor

• $358 million-spec. educ.• $199 million-child devel.• $60 million-Prop 49• $14 million-nutrition• $1.1 billion-other categorical

• $2.6 billion-revenue limits–Creates a 6.99% def. factor

• $358 million-spec. educ.• $199 million-child devel.• $60 million-Prop 49• $14 million-nutrition• $1.1 billion-other categorical

K-12 Local Assistance Funding (Billions)

K-12 Local Assistance Funding (Billions)

SourceGF Prop 98FederalLocalLotteryTOTAL

2007-08$37.4$6.6

$12.9$0.9

$57.9

2008-09$35.5$6.5

$13.8$0.9

$56.7

Total Local Assistance Reductions

Total Local Assistance Reductions

• 1.99% from 2007-08

• 7% from “workload” budget

• 1.99% from 2007-08

• 7% from “workload” budget

Other K-12 ProposalsOther K-12 Proposals

• Defer the deferred apportionment until September–$1.3 billion

• Change COLA to CPI for Wage Earners and Clerical Workers (CPI-W)–4.94% vs. 3.65%

• Defer the deferred apportionment until September–$1.3 billion

• Change COLA to CPI for Wage Earners and Clerical Workers (CPI-W)–4.94% vs. 3.65%

CalSTRSCalSTRS

• Fully vest 80% purchasing power protection• Reduce payment to SBMA

from 2.5% to 2.2% of payroll–Saves $80 million in 2008-09

• Fully vest 80% purchasing power protection• Reduce payment to SBMA

from 2.5% to 2.2% of payroll–Saves $80 million in 2008-09

Budget Stabilization ActBudget Stabilization Act

• “Excess” revenues get deposited into a Revenue Stabilization Fund

• Automatic mid-year cuts

• “Excess” revenues get deposited into a Revenue Stabilization Fund

• Automatic mid-year cuts

“The proposed budget reforms represent a serious diminution of the Legislature’s appropriation authority. In addition, the proposal would limit future policy makers’ options to craft budgets.”

--Legislative Analyst

“The proposed budget reforms represent a serious diminution of the Legislature’s appropriation authority. In addition, the proposal would limit future policy makers’ options to craft budgets.”

--Legislative Analyst

What’s NextWhat’s Next• Special session and regular

session will run concurrently–Special session ends Feb 23

• Budget hearings February thru May

• Budget due:–June 15 from Legislature–June 30 from Governor

• Special session and regular session will run concurrently–Special session ends Feb 23

• Budget hearings February thru May

• Budget due:–June 15 from Legislature–June 30 from Governor

What We are DoingWhat We are Doing

• Lobbying• Grassroots activities• Coordinate with the

Education Coalition

• Lobbying• Grassroots activities• Coordinate with the

Education Coalition

CSBA Budget Resources

CSBA Budget Resources

www.csba.org/LegislationAndLegal/

Legislation/LegislativeNews/2008.aspx

www.csba.org/LegislationAndLegal/

Legislation/LegislativeNews/2008.aspx