6-22-07 Budget Talks Simmer as Legislature Likely to Miss State Budget Deadline

Volume 20 For Publication Date: June 22, 2007 No. 14

Budget Talks Simmer as Legislature
Likely to Miss State Budget Deadline

Common knowledge among denizens of the Capitol is that the temperature must exceed 100 degrees in Sacramento for at least three days in a row before the Legislature can pass a budget. Well, this week we had two 100+ degree days. Unfortunately, the necessary third day didn’t appear and the deadline for passing the 2007-08 State Budget will likely go by with budget talks continuing to remain on a slow simmer instead of the frenetic boil required to complete their task.

At the only meeting of the Budget Conference Committee this week, the Chair of the committee, Assembly Member John Laird (D-Santa Cruz), indicated there is little pressure for the Budget to be passed by the Legislature in time to meet the constitutional deadline. According to Article IV, Section 12, of the California Constitution, lawmakers must send the Governor a budget by midnight on June 15. However, the last time this deadline was actually met was in 1986. “It’s not going to happen . . . Big surprise,” said Assembly Republican leader Mike Villines (R-Clovis) during remarks before the Sacramento Press Club.

These comments reflect the reality of the six Conference Committee members who so far have been unable to reach consensus. While the number of issues holding up full approval appears to be small, they carry large price tags. They include:

· Use of Public Transit Act funds to balance the budget

· Early prepayment of Proposition 57 bond debt

· Cost-of-living increases for the aged, blind, and disabled

· Cuts to social services programs

Even though the Conference Committee is not meeting, working groups of legislators and staff continue to meet outside of the public view with hopes of ironing out the differences and competing priorities. The group meeting on Proposition 98 continues to focus on how to fill the $364 million hole created by a budgeting error in the May Revision. It has been reported that the “Big Five” have met at least briefly, but have not discussed education issues.

However, the budgeting error isn’t the only problem the Governor and legislators are grappling with as they try to close the new year’s spending plan. Last week, the Department of Finance informed legislative leaders that May tax receipts came in below projections, with total revenues for the 2006-07 fiscal year down by more than $750 million. How this current year revenue shortfall in the plays into the 2007-08 fiscal year is still not fully known.

This shortfall has caused Budget writers to pause to reconsider the Proposition 98 assumptions for the Budget and current year. Of critical importance is what the shortfall will mean for the Proposition 98 settle-up funds. The May Revision included $400 million for the settle up. For community colleges, this is about $100 million.

According to insiders, Budget staff and working groups are meeting regularly to tackle the large issues, such as education and health care. The Big Five, which consists of leadership from both houses (Senate and Assembly) and the Governor, have met a few times to work on the large ticket items. However, the surprise around the Capitol is the Budget meetings of the Big Four (which is leadership from both houses). Tradition indicates that leadership meetings take place with the Big Five, but, in a new twist to resolve the differences between the two houses, the Big Four are meeting regularly and almost daily to address Budget issues and move closer to reconciliation when they meet with the Governor.

Lawmakers historically feel more pressure to meet the June 30 deadline for an enacted budget than the June 15 deadline for the Budget bill to be sent to the Governor. According to Assembly Speaker Fabian Núñez, “We are optimistic that we will be able to send the Governor the Budget on time with strong bipartisan support.”

—Terry Anderson, Dave Heckler and Jamillah Moore, Ed.D.