January 9, 2004
| TO: | Cla Members/ Systems/ Network Contacts |
| FROM: | Mike Dillon, Lobbyist Christina Dillon, Lobbyist |
| RE: | News From The Capitol |
GOVERNOR SCHWARZENEGGER RELEASES BUDGET - PUBLIC LIBRARY FOUNDATION AND TRANSACTION BASED REIMBURSEMENT PROGRAMS ARE PROTECTED
Shortly after 11 a.m. this morning, Governor Arnold Schwarzenegger released his January Budget in a large auditorium at the Secretary of State's Office, rather than the cramped quarters of the press room at the State Capitol. The Governor, in his opening remarks, noted that his Budget proposal would address a $14 billion deficit in the 2004-05 Budget, and called the targeted reductions "very difficult decisions that I did not take lightly." He stressed that the "Budget makes us live within our means. I will not spend more money than the state takes in." The Governor added that he would achieve this goal without raising taxes, rather he would be looking at ways to make the government "smarter and more effective." We are pleased to report that despite major cuts totaling $6 billion in areas such as health and welfare, transportation, corrections, and K-12 education (due to a compromise proposal reached between education leaders and the Governor), CLA's two most vulnerable programs were preserved - the Public Library Foundation and the Transaction Based Reimbursement program.
The Governor did not increase either the PLF or TBR baseline, but rather held them at their 2003-04 levels. Thanks to the Governor, the PLF baseline would remain at $15.8 million, and the TBR would remain at $12.1 million if untouched by the legislature during this upcoming year of Budget debates. As you may have read in our alert to the field yesterday, we were prepared for the so-called "shock and awe" Budget, and consequently prepared for the worst. Thankfully, lobbying efforts, assistance from Senator Jim Nielsen - the former architect of the PLF and member of the Governor's Transition Team - and perhaps new "friends" in the Department of Finance, made the difference. Now the work will begin to preserve the baseline for these two programs to spare them from additional cuts during the year, or modifications after the Governor's May Revision.
Also of note, the Governor is maintaining "up to $128.4 million for the California Cultural and Historical Endowment to encourage libraries and non-profits to develop and collect items of historical and cultural significance for the state." Lastly, he is maintaining "$5.3 million for the California English Acquisition and Literacy Program. The California Literacy Campaign provides one-on-one tutoring of illiterate adults and the recruitment and training of tutors."
Our interpretation, confirmed by Cameron Robertson of the State Library, is that the State Library budget was left largely intact. However, the State Library continues to have some concerns about across-the-board general government cuts that may affect their department.
$1.3 BILLION ERAF SHIFT
The Governor's Budget Summary notes, "During the State Budget crisis in 1992-93 and 1993-94, a series of measures were enacted requiring local governments to shift a portion of the property taxes that they receive to the Education Revenue Augmentation Fund (ERAF) that was created in each county for allocation to school districts and community colleges." By shifting property taxes from local government to schools, the State freed up General Fund monies that were used to fund state programs and balance the Budget."
"In 2003-04, local governments' vehicle license fee revenues were reduced by $1.3 billion due to lag time necessary to implement higher fees when the offset was eliminated on June 20, 2003. Legislation enacted at the time (Chapter No. 231-Statutes of 2003) provided that this 'gap' in funding would be repaid to local governments in 2006-07."
In one of this year's budget surprises, the Governor is proposing "to continue this gap level of reduction ($1.3 billion) to local governments in the form of an increased ERAF shift beginning in 2004-05. Local governments would shift approximately $1.3 billion of property tax revenues to the ERAF in order to decrease the State's General Fund Proposition 98 obligation." The Governor's Budget Summary notes that, "Details of the shift proposal will be forthcoming, but will adhere to the structure and methodology of the two prior shifts" (e.g. 1992-93 and 1993-94).
The bottom line: It appears to us that the Governor's Budget will provide $2.65 billion for VLF reimbursement in the 2003-04 fiscal year, and $4.06 billion in 2004-05. However, as we read the Budget, the $4.06 billion next year would be offset by the $1.3 billion ERAF reduction, which will become a permanent reduction. Additionally, we have been informed that the $1.3 billion ERAF shift will be in the same proportion as it was in the 1992-93 shift. Specifically, counties will lose $914 million, cities $188 million, special districts $98 million, and redevelopment agencies $135 million. We will provide you with more details on the ERAF shift as it becomes available.