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Governor Unveils his "May Revision" of the Budget: Library Programs Saved From Further Cuts
This afternoon, Governor Arnold Schwarzenegger appeared before the media and legislative leaders to present his "May Revision" of the 2008-09 state Budget. The "May Revise," as it is commonly referred to at the Capitol, allows the Governor to make adjustments to his January Budget proposal, after April tax receipts have been accounted for and the state has a better idea of its fiscal picture. Unfortunately, and as news outlets have been reporting, this year's Budget picture is decidedly bleaker than even the Governor anticipated in January. During his press conference today, the Governor noted that if the legislature had not taken corrective action to reduce the $14.5 billion deficit during the "Special Session on the Budget" in February, there would be a $24.3 billion deficit today. However, even with the legislature's Special Session action, the Governor announced this afternoon that the state continues to face a $17.2 billion deficit.
The Governor stated "The people of California want us to live within our means...They don't want us to raise taxes. They want us to fix our dysfunctional Budget system." In addition to borrowing or shifting significant pots of money from various programs, there are several additional major components to the Governor's "May Revise" proposal. The Governor suggests that the state take a loan against (or securitize) the revenues of the California State Lottery. This proposal assumes that by expanding the games of the lottery, thus increasing revenue, the state would attempt to borrow up to $15 billion over the next three years, to use to shore up the state's General Fund. It is hoped that $5.1 billion would be realized this year to help balance the Budget. This proposal would need to be placed on the November ballot, and would be subject to voter approval. If voters reject the lottery proposal, an automatic 1 percent sales tax increase would be triggered, until June 2011, to pay off the Wall Street "loans."
The loans, secured by the lottery, from Wall Street (to be paid off over 32 years), would be placed in a new "rainy day fund" known as the Revenue Stabilization Fund (RSF). "Moneys in the RSF will only be available for transfers to the General Fund to bring revenues up to the long-term average (e.g. 10 year average) in years with below-average revenue growth, such as 2008-09. The Governor's May Revision proposes to capitalize the RSF in 2008-09 and provide $5.1 billion to the General Fund." (May Revision document)
Reporters asked the Governor, "Isn't this a gimmick?" The Governor responded, "The lottery is a terrific idea. We need to make it perform at a 100 percent level. There are billions of dollars there and I think people will approve (on the November ballot) as the money goes to education and other programs." Mike Genest, the Director of the Department of Finance, who subsequently answered reporters' questions, stated that "mass marketing the lottery would yield better performance." He also emphasized that the lottery proposal and the Governor's "Budget reform" were clearly tied together, "unless we can find $5.1 billion some place else."
Lastly, the Governor notes that he had to make "some very difficult cuts in Health and Human Services" because "it is the second largest part of the Budget." The Governor's "May Revise" makes controversial cuts in programs such as in-home supportive services, which will likely be rejected by Democratic legislators.
Fortunately, programs in the California State Library - such as the Public Library Foundation (PLF), Transaction Based Reimbursement (TBR) and literacy programs, have been saved from additional proposed cuts in the May Revise. You may recall that in the Governor's January version of the Budget, he recommends a ten percent across-the-board cut to the TBR and PLF. The Budget subcommittees in both the Assembly and Senate have been working for the last few weeks to review the Governor's January proposals (and have thus far tabled the PLF and TBR issues until post-May Revise), and will now begin meeting in earnest next week to address the Governor's revised plan. The work of the subcommittees will wrap up by the end of May, and, as is custom, the six member Budget Conference Committee will convene shortly thereafter.
We will keep CLA members apprised as to developments with the State Budget as they occur.
Submitted by Mike Dillon and Christina Dillon, CLA Lobbyists
Posted on May 14, 2008 4:31 PM | Permalink