June 10, 2003
| TO: | Cla Members/ Systems/ Network Contacts |
| FROM: | Mike Dillon, Lobbyist Christina Dillon, Lobbyist |
| RE: | News From The Capitol |
I. "BIG 5" TO MAKE MAJOR BUDGET DECISIONS
Last week, the powerful six-member Budget Conference Committee began holding a series of hearings regarding the 2003-04 state Budget. The Conference Committee's charge is to reconcile the differences between the Governor's January Budget and May Revision proposals, as well as differences between the Assembly and Senate versions of the Budget. Facing a $34 billion Budget deficit, the Conference Committee's task has been daunting, with the Chair, Assemblywoman Jenny Oropeza, noting that many of the big decisions regarding tax increases, cuts, and loans and fund shifts, will have to be decided at the so-called "Big 5" level. The "Big 5" consists of Governor Gray Davis, and legislative leaders in both houses: Senate President pro Tem John Burton, Senate Republican Leader Jim Brulte, Assembly Speaker Herb Wesson, and Assembly Republican Leader Dave Cox. In recent years, the bulk of the Budget decisions have been made in the Budget Conference Committee forum, and "Big 5" negotiations were not engaged. However, this year presents a series of interesting challenges, and it is believed that the "Big 5" will be doing the lion's share of the actual Budget work.
With a June 15th deadline looming for the Conference Committee to conclude its work, the Republican and Democrat members appear to be at a stalemate. The Conference Committee was expecting a presentation today by the Senate Republicans to highlight their recommendations for additional Budget reductions. However, last night, Senator Dick Ackerman announced that they were rescinding that plan, as there appeared to be no agreement by Democrats on the panel for additional severe cuts to programs and Departments. The Conference Committee adjourned last night, after reaching an impasse on several packages pertaining to healthcare, corrections, and Proposition 50 water projects. Upon adjournment, Budget Chair Oropeza noted that the Conference Committee would like to "close out its work" in the next few days, and shift the major Budget issues to the "Big 5." However, as of this afternoon, the Conference Committee has yet to convene.
II. CUTS TO LOCAL GOVERNMENT TO HELP BALANCE BUDGET
The current Budget being considered by the six-member Budget Conference Committee is about $1.3 billion higher than the Governor's "Revised" Budget, submitted in mid-May. This is on top of approximately $2 billion needed per year over the next 5 years to repay $10 billion in anticipated borrowings from Wall Street. Rolling forward $10 billion in debt over the next 5 years has Republican support, however, the Governor wants to increase the state sales tax by ½ cent to pay off the debt. The Republicans continue to insist on "no new taxes." Democrats need at least 6 Republican votes in the Assembly and 2 in the Senate in order to obtain the 2/3 vote necessary for passage of the Budget. If the Republicans hold firm on the tax issues, the only way to balance the Budget is through more cuts and shifting some of the burden.
Some of the burden shifting currently under discussion includes not backfilling the Vehicle License Fee (VLF) revenues to local government for three months, which would mean a revenue loss to cities and counties of $900 million. In recent days, a Senate proposal has surfaced that has been revealed to some of the local government organizations, and involves permanent cuts to local government revenues of approximately $1.16 billion. The hit would be approximately 40% to counties, 40% to cities, and 20% to special districts. How the State would capture the money is still unclear. The estimated "contribution" is supposedly to be determined by the representatives of each of the respective governmental organizations.
As mentioned above, this is a Senate move, and several key Assembly staff we talked to last night were unaware of the proposal. We will keep you posted as details unfold.