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LAO Revenue Forecast Could Mean "Trigger Cuts".
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November 16, 2011

FROM:           Mike Dillon, CLA Lobbyist
                        Christina DiCaro, CLA Lobbyist
RE:                 News From the Capitol
Today the State’s respected non-partisan Legislative Analyst released his highly anticipated revenue forecast that will be used to evaluate whether or not the so-called “Budget Trigger” will be pulled in the New Year. As you will recall from our previous memos to the field, the “Budget Trigger,” AB 121 (statutes of 2011) was created during the 2011 Budget negotiations to serve as a balancing mechanism should $4 billion in anticipated state revenues not materialize. (The trigger was also seen as a way to assure bond holders and investors that California was taking a serious approach to solving its chronic Budget challenges.) The trigger is comprised of two different “Tiers” and cuts to programs delineated in those tiers would be imposed if revenues lagged. What is at stake – and now very much at risk – for public libraries is close to $16 million in state library funding that could be completely eliminated should the “Tier 1 trigger” be pulled by the Governor.
Under the AB 121 legislation: “No 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 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, 2011…” What then follows is a list of the items that could be cut effective January 1, including all remaining state funding for library services – thus eliminating all funding for the CLSA, PLF, and literacy programs. Federal funds would also be seriously at risk.
As you can imagine, the Legislative Analyst’s Office forecast (and the soon-to-be revealed Department of Finance’s forecast) is a complex assessment using factors such as wages, dividends, auto sales, mortgage rates, housing permits, inflation, unemployment, personal income, and Capital gains. In the LAO’s report released today, they note that the “economic recovery has been slower than expected” and they project “continuation of this slow, arduous recovery, with California’s unemployment rate remaining above 10 percent through mid 2014 and above 8 percent through the end of 2017.” The Analyst expects revenues to be approximately $3 billion short of the anticipated $4 billion figure associated with the trigger, and compounded by an additional revenue shortfall of $10 billion for Budget year 2012-13 (mostly due to K-14 education guarantees and repaying the $2 billion in property taxes borrowed from local government in 2009) – leaving the state “with a year-end deficit of about $13 billion, absent any additional budgetary corrections.” The LAO also assumes that the state will be unable to capture savings in areas previously scored for savings such as in Medi-Cal and redevelopment (currently being litigated) and in departmental efficiencies. 
Thus, the LAO assumes that all “Tier One” reductions (public libraries, UC and CSU budgets, In Home Support Services, preschool funding, developmental services, etc. totaling about $600 million) would be enacted, and then 3/4ths of the “Tier Two” cuts would be implemented, which would require K-12 schools to make reductions in school bus transportation, shorten the school year, as well as a reduction to the community colleges budget. The LAO then adds: 
“The ultimate magnitude of the trigger cuts will be determined by the administration after it compares our revenue forecast with its December forecast. The higher of the two forecasts will be used to determine the level of reductions. (The administration may implement less than the maximum amount of trigger cuts. Our forecast, however, assumes the maximum amount of trigger cuts based on our forecasted revenue levels.)”   
Any Hope?
On October 27, we had a lengthy meeting with the Director of the Department of Finance, Ana Matosantos to plead our case, asking her and the Governor to “save libraries from the trigger.” We explained to her in great detail the critical need to maintaining the funding for the CLSA, literacy program, and PLF. Subsequent to that meeting, we have also been meeting with key staff for the leadership and Budget Committees, inquiring as to the options before the Governor and Legislature. We discussed the particulars in some length at our presentation in Pasadena last Friday at the CLA Conference, but it is important to note that while the “trigger” could be pulled, there may also be some alternatives that could be explored between the Governor and the leadership. We will be working very hard to ensure that library funding is a part of those discussions and we will keep you updated as talks progress. Certainly revenue increases are also not off the table, with the LAO’s report suggesting: “Given the potential consequences from the types of expenditure reductions discussed above, the Legislature will also want to consider revenue increases. For instance, the Governor has stated his desire to have certain increases in as yet unspecified taxes on the November 2012 ballot. We would recommend the Legislature continue to review tax expenditure programs and reconsider various proposals….”
Write the Governor
Please take a moment today to write the Governor and request that he spare public libraries from the “trigger.” Please cite examples of what the elimination of the CLSA, the literacy program, and the PLF would mean to your library. He will need to receive hundreds of letters as soon as possible for it to have the desired impact. Thank you for your help.
The Honorable Edmund G. Brown, Jr.
Governor, State of California
State Capitol, Room 1173
Sacramento, CA. 95814
Or fax your letter to the Governor: (916) 558-3160.
For additional information on how to cc’ your letters to the legislative leadership, please visit the CLA website and click on our November 8th memo.