December 11, 2003
| TO: | Cla Members/ Systems/ Network Contacts |
| FROM: | Mike Dillon, Lobbyist Christina Dillon, Lobbyist |
| RE: | News From The Capitol |
I. GOVERNOR EXTENDS "NEGOTIATING TIME"
Governor Schwarzenegger had been pressuring the Legislature to enact his proposal to issue $15 billion in deficit bonds (actually $17 billion with "stuff" included) along with his constitutional spending cap by last Friday, December 5th, the Secretary of State's "deadline" for getting constitutional amendments on the March ballot. Throughout last week, both the Assembly and Senate debated Democratic proposals for a modest spending cap, the Governor's proposal which calls for a stringent cap, and a middle ground proposal offered by Democratic Assemblyman Joe Canciamilla and Republican Assemblyman Keith Richman, with a number of moderate Democrats and Republicans as co-authors. In the end, Democrats were unable to receive Republican votes to reach the 2/3 vote requirements on their proposal, Republicans were unable to get Democratic votes for the Governor's proposal, and the Canciamilla proposal, with some bipartisan votes, also failed. Democrats complained that the Governor's proposal would prevent the Legislature from ever restoring many of the programs that have been cut in recent years, as the cap was too restrictive. With the failure to enact the Governor's plan, Senate Republican Leader Jim Brulte stated, "We will come back with an even stronger proposal for the November ballot."
It is the consensus of most of us around the Capitol that the issue of placing a $15 billion bond proposal on the ballot, or perhaps increasing the current $10.7 billion bond tied to the sales tax, could have been reached. However, the Governor and Republicans insist that the bonds and spending cap proposal be tied together. Yesterday, we received word that the Governor had extended the "negotiating time" by another 48 hours, i.e. yesterday and today. Earlier today, the Governor met with Assembly Speaker Herb Wesson and this afternoon, he met with Senate President pro Tem John Burton. It is our suspicion that an agreement will likely not be reached. While the Secretary of State's deadline could possibly be pushed forward another day or so, time is running out.
II. SUBCOMMITTEES DEBATE GOVERNOR'S MID-YEAR CUTS
As part of the current-year reductions proposed in special session, the Administration has identified $2.26 billion in current-year savings, and $1.62 billion in 2004-05 (The PLF and TBR have not been targeted for mid-year cuts). Of this amount, the Senate Budget Subcommittee No. 4 is responsible for reviewing approximately $1.7 billion of the reductions, representing the largest of cuts being reviewed by any of the subcommittees. A majority of the savings is attributed to cuts in the Department of Transportation ($930 million), tax relief ($475 million), and other reductions ($150 million). With respect to the "tax relief," the current-year budget agreement assumes that local governments will lose $825 million as a result of the implementation lag of the higher vehicle license fees. The General Fund is scheduled to repay this loss in the 2006-07 fiscal year. The Department of Finance estimates that the loss of revenues to local governments is now $1.3 billion ($475 million above projections). This proposal will add the additional $475 million to the amount scheduled for repayment in 2006-2007. It should be noted that SB 1 5X (Brulte), which is sponsored by the Administration, has been referred to the Senate Local Government Committee. The measure would appropriate $3.625 billion to pay the vehicle license fee backfill to local governments and VLF refunds for the 2003-04 fiscal year. While there has been much discussion of the VLF issue, it is not likely to be dealt with separately, but will be part of the overall budget negotiations after the Governor's Budget is released in January.