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News from the Capitol 6/16/2011
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June 16, 2011
FROM:           Mike Dillon, CLA Lobbyist
                        Christina DiCaro, CLA Lobbyist
RE:                 News From the Capitol
Early yesterday afternoon, the Senate, and subsequently the Assembly, passed, on a party-line vote, what is being labeled the “On-Time Budget,” meeting the June 15th Constitutional deadline for the first time in 25 years. Absent an agreement by the Republicans to extend the temporary sales tax, VLF, and personal income tax increases due to expire June 30th, for another five years, the Democrats drafted an alternative proposal, known as “Plan B” in an attempt to address the nearly $10 billion shortfall created without the tax extensions. The new Budget closes the original $26 billion shortfall, with over $12.5 billion in spending cuts, put in place largely with the March Budget plan, and provides a reserve of roughly $600 million.
Some of the major “solutions” include:
·         Deferring close to $3 billion in funding for K-12 schools and community colleges;
·         Selling prominent state buildings to generate $1.2 billion;
·         A complex formula to restore a ¼ cent local sales tax resulting in additional property tax revenues going back to schools, and therefore reducing the General Fund portion that has been going to schools ($900 million);
·         Continuing the Budget action taken in March that will use $1 billion in Proposition 10 revenues for state rather than local purposes;
·         Maintain the 0.15% VLF fee which is about to expire for local public safety programs, thus freeing up $506 million;
·         Deferring $540 million in payments to the University of California until August of 2012;
·         Programmatic reductions to UC ($150 million), Cal State University ($150 million), the Courts ($150 million). 
·         The proposal also creates the Alternative Redevelopment Program, under which redevelopment agencies (RDA’s) will be able to continue if they give up $1.7 billion in 2011-12, and $400 million in subsequent years (contents in “trailer bill”).
The plan also assumes about $800 million in revenue growth above the recent projections for the current year and the Budget year, based on the most recent Controller’s estimates, and banks on the “receipt of owed Medicare funds” from the federal government that would result in $700 million for California if the Governor’s request of the funds were to be granted. 
In the meantime, judging by comments made on the Senate Floor, there may be a willingness to continue discussions on the tax extension proposal, along with pension reform, a spending cap, and regulatory reform sought by Republicans. During the Floor debate, Senate President pro Tem Steinberg stated he still wanted to work with Republicans to “achieve a bipartisan plan for additional revenues… we will reform pensions, plus regulatory reform, hopefully with you.” Several Republican members hinted that they would have voted to place the tax extensions before the voters, but laid the blame for the inability to reach agreement on any of their demands at the feet of the “powerful unions” who they say objected to the pension package, spending cap, and regulatory reform. However, as Senator Mark Leno closed the debate on AB 98, the Budget bill, he stated: “I believe we will have pension reform in the next few weeks because we agree something needs to be done.”  
While the Governor had 12 days to act on the new “Plan B” Budget (AB 98), he surprised most Capitol observers with his quick veto of the bill this morning. He also vetoed SB 69, the larger Budget bill that was put together and passed several months ago that contained $15.3 million in funding for the California Library Services Act, The Public Library Foundation, and the Literacy Services. That bill was also sent to him last night after having sat in “engrossing and enrolling” pending further Budget negotiations. 
In his video message and press release issued shortly before noon today, the Governor commented, “I am vetoing it today because I don’t want to see billions in borrowing, legal maneuvers that are questionable, and a Budget that will not stand the test of time.” He also stated, “I am once again, calling on Republicans to allow the people of California to vote on tax extensions for a balanced budget and significant reforms.” This action today sends the Legislature back to the drawing board. In the coming days we will give you an update of how the legislature is going to proceed, and any specific instructions relative to reaching out to the legislators or the Governor regarding the library funding. 
As reported, AB 438 by Assemblyman Williams (outsourcing of library services) recently passed the Assembly on a mostly party-line vote of 43 “ayes” and 28 “noes.” AB 438 was substantially amended on June 1st to include significant amendments pertaining to contract requirements and disclosure provisions when outsourcing library services. (See latest version of the bill here).   We have been informed that AB 438 will be scheduled to be heard in the Senate Committee on Governance and Finance on Wednesday July 6th