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Plan C Budget is Sent to the Governor
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June 29, 2011
FROM:           Mike Dillon, CLA Lobbyist
                        Christina DiCaro, CLA Lobbyist
RE:                 News From The Capitol – Budget Update
 “Trigger Bill” Affecting Library Funding Also Passes During Late-Night Session
Late last night the Assembly and the Senate Democrats successfully passed the State Budget, SB 87, with a solid majority vote – using the powers that the voters bestowed on them when they enacted Proposition 25 (majority vote Budget) in November of 2010.  Over the last several weeks, when talks broke down with a group of Republican Senators, known as the “GOP 4,” over extending the current taxes that were set to expire on June 30th, the Democrats and the Governor worked to craft an alternative Budget, known as “Plan C.”  
The “Plan C” Budget makes substantial cuts of $14.6 billion to programs in order to reduce the $26.6 billion Budget deficit, provides additional resources of $1.4 billion, a reserve of $500 million, and assumes new Department of Finance revenue estimates indicating that the tax receipts have continued to grow in the positive by $4 billion. The Governor had indicated his strong desire to place a tax extension package on a special election September ballot, but with the resistance from the Republican party, he was forced to go in a different direction. There may still be, as the Governor has acknowledged, a desire to go to the ballot in November of 2012 with an initiative to increase state revenues. 
What was most surprising about last night’s debate on the Budget bills was the speed with which the legislature dispensed with the Budget bill and 7 related measures, including the so-called “Trigger bills.” (see next article)   There was only modest, brief debate from the Republican members about the assumption of the new revenues and if they were solid enough, the structure of the “trigger,” and complaints from the Minority Party that they had been “left out of the process.” Assembly Budget Chair, Bob Blumenfield, clearly frustrated said during the debate on the main Budget bill, “You can’t say that the new revenue assumptions ($4 billion) is not real and then say that the trigger cuts aren’t real. You can’t have it both ways. These are very real cuts.” In the Senate, several of the members of the so-called “GOP 4” rose to express their displeasure that the disintegration of the Budget talks had led to the Budget products on the Floor, which did not include reforms they argued for including pension and regulatory reform as well as a spending cap. Senator Tom Berryhill said that the package was “totally partisan. It’s a sad day. The Governor and the GOP 4 didn’t walk away from talks, but labor did. This is the Majority party protecting the status quo.” 
After the conclusion of all of the work in the Senate at approximately 10:30 p.m., the Senate President pro Tem thanked everyone for their thoughtful work on the Budget and said the night’s events caused “mixed feelings. A sense of accomplishment that we passed a Budget on time and addressed the structural deficit. But it was done making cuts that are going to hurt a lot of people…We don’t celebrate tonight. We did it with members who were willing to participate in the process, with the tools we had.” The Assembly received the final bill, an education Budget “trailer bill” from the Senate close to 11 p.m. and passed it on a vote of 51 “ayes” to 25 “noes” and then promptly adjourned, having concluded their work.
The Governor is in receipt of the Budget bill and the “trailer” bills, including the “trigger bills,” and is expected to sign them today or tomorrow. NOTE: $15.2 million in library funding - $8.5 million for CLSA, $3 million for the PLF and the maintenance of effort language, and $3.7 million for literacy, can be found in SB 87. The State Library begins on page 593 of the enrolled version sent to the Governor.
For the first time in recent memory, the Legislature has passed two measures that would enact very specified mid-year cuts to programs if revenues do not materialize, as anticipated by December 15, 2011. Called “trigger bills,” AB 121 is the major bill affecting cuts to UC/CSU, public libraries, K-12 and other programs, while SB 73 is a trigger bill pertaining to health and human services cuts.  Specifically, AB 121 proposes eliminating all remaining library funding ($15,866 million) should the economy not continue to recover and new revenues do not keep pace with expenditures.   You will recall that CLA worked very hard to preserve $15.2 million of the $30.4 million that the Governor originally proposed for total elimination in his January Budget. The $15.2 million reflects a compromise that was reached between CLA, the members of the legislature, and Governor Brown’s Administration, in order to save funding for the California Library Services Act, the Public Library Foundation, and the literacy program. The passage of AB 121 means that the remaining $15.2 million would be vulnerable under the “trigger” scenario, and it also calls for the elimination of the California Civil Liberties Public Education Program and the California Newspaper Project, if necessary, bringing the total potential cut to $15,866 million.
What Is the “Trigger” and How Does It Work?
In a briefing packet that was used by the Democrat caucus, it explains the Trigger as thus: 
“If revenues do not grow by at least $3 billion of the projected $4 billion, then scaled triggered cuts will occur. The concept of the Trigger is to provide assurances the budget holds together, but provide adequate time for follow up solutions and changes to be made to mitigate negative consequences of the potential cuts.”
The language in the legislation notes that: “Not later than December 15, 2011, the Director of Finance shall forecast General Fund revenues for the 2011-12 fiscal year and shall determine whether that revenue forecast or the Legislative Analyst’s November 2011 General Fund revenue forecast is higher. The Director of Finance shall notify the Joint Legislative Budget Committee of the determination and the amount of the higher forecast. If the higher revenue forecast determined pursuant to subdivision (a) projects General Fund revenues for the 2011-12 fiscal year of less than $87,452,500,000, the Director of Finance shall do all of the following on or after January 1, 2012.” What then follows is a list of the items that would be cut, such as the library programs, $200 million more to UC and CSU, $100 million to In Home Support Services, $30 million community college fee increase, $72 million cut to juvenile justice programs, etc. These are considered the “Tier 1” cuts. If additional cuts needed to be made beyond those included in AB 121, a second Tier would be triggered, prompting cuts of $1.9 billion to K-12 schools to reduce the school year by 7 days ($1.5 billion), eliminate Home-To-School transportation ($248 million), and community college apportionments ($72 million).  
Senate Budget Chair, Mark Leno said during the presentation of this bill on the Senate Floor, “Hopefully the trigger will not need to be pulled. We have 40% of it in the bank right now and short of something very dramatic on the U.S. fiscal scene, we [won’t have to pull the trigger].” His counterpart in the Assembly, Assemblyman Bob Blumenfield agreed, “This is truly a tale of tears….But we believe the revenue increases will continue.” In speaking with several key legislators in the hall last night, they told us they are cautiously optimistic that the state will continue its economic recovery and AB 121 will not have to be invoked.