Governor
Proposes $2.5 Billion in Midyear Budget Cuts—
Special Session Called for November 6
On November 6, 2008, Governor Arnold Schwarzenegger formally called for a special legislative session to address the growing State Budget shortfall and passage of an economic stimulus package. Noting that the state’s current economic “dramatic situation calls for dramatic solutions,” the Governor indicated that the latest current-year shortfall has grown to more than $11.2 billion and he is proposing a combination of cuts and increased revenues to close it.
The Governor noted that he will recommend a four-point plan, including $4.5 billion in reductions to schools, prisons, healthcare, and other programs and to close the remaining shortfall with $4.7 billion in additional revenues, including a 1.5% temporary sales tax increase. He also highlighted his plan to stimulate the economy by expediting infrastructure bond funding and mortgage relief to homeowners.
The Governor’s press release notes the following:
As a result of the decrease in the Proposition 98 guarantee, the Governor proposes a $2.5 billion cut in K-14 Proposition 98 expenditures in the current year, indicating that Proposition 98 funding will be funded at approximately $122 million higher than the minimum guarantee:
The Governor also proposes $132 million in cuts to the California State University and University of California budgets and achieves an estimated $1.868 billion by reducing CALWORKs grants and public safety programs, and requiring state employees to take a one-day furlough each month, along with other pay and overtime changes.
In addition to the 1.5% temporary sales tax increase, the Governor proposes to broaden the Sales and Use Tax to include certain services, effective February 1, 2009, to apply to appliance and furniture repair, vehicle repair, golf, and veterinarian services and, effective March 1, 2009, amusement parks and sporting events. He also proposes a tax increase on oil severance and alcohol.
For the community college portion of the $2.5 billion cut in Proposition 98 expenditures in the current year, the Governor proposes:
Elimination of the 0.68% current-year cost-of-living adjustment (COLA) for a savings of $39.8 million
Reducing general purpose apportionments by an additional $292.4 million, which is approximately 5%.
Flexibility to transfer categorical funds to the general fund for any purpose up to the amount of their share of the reduction. Districts utilizing this flexibility must adopt a transfer plan at a regularly scheduled meeting of their governing board and must report the amounts and programs from which transfers were made and the purposes for which they were used.
Similar proposals were also made for K-12 education.
The Legislature is scheduled to meet on November 6 to organize around the special session, but there is no word on when it will vote on a package of bills. Earlier the week of November 3, Senate President pro Tem Don Perata (D-Oakland) and President pro Tem-elect Darrell Steinberg (D-Sacramento) urged legislative leaders to begin meeting daily to negotiate an agreement that would close the Budget gap. Perata suggested increasing the Vehicle License Fee and other potential revenues. Republican leader Dave Cogdill (R-Fresno) was quick to express his party’s continued opposition to increased taxes, but signaled they are open to looking at other revenue sources. Assembly leader Mike Villines (R-Clovis) will hold a press conference later today.
As noted in earlier articles, a two-thirds vote is needed to increase taxes and a only a majority vote is needed to make reductions unless they go below the Proposition 98 minimum, whereas a two-thirds vote is needed. The Legislature has until November 30 to act in the current session. According to the Governor, the magnitude of the crisis is such that “we don’t have the luxury of waiting for the January Budget.”
—Nancy LaCasse, Terry Anderson, and Sheila Vickers