California state budget (2009-2010)

The California State Legislature passed substantial amendments to the budget in July 2009. Gov. Schwarzenegger responded to the July legislation by using his line-item veto powers to produce a final FY 2010 budget with a $500 million surplus to be used as a reserve.^[1]

California’s FY 2010 general fund budget had $90 billion in revenues and transfers with $85 billion in expenditures. The $5 billion surplus would pay the $4.5 billion deficit from FY 2009 and leave a $500 million reserve. General fund expenditures were $103 billion for FY 2008 and $92 billion for FY 2009.^[2]

The size of the two-year deficit for all funds (FY 2009 and FY 2010), estimated in January of 2009 to be $41.6 billion, grew to almost $60 billion by July 2009. The February 2009 budget package included $14.5 billion in spending reductions, $12.5 billion in temporary tax increases, $8.5 billion in federal stimulus funds, and $0.3 billion in borrowing for a total of $35.9 billion.^[2]

The July 2009 budget package added $18 billion in spending cuts, $3.5 billion in one-time measures and transfers, and $2.2 billion in borrowing. The combined February and July budget packages closed the entire two-year gap by $59.5 billion.^[2]

Proposed budget cuts[edit]

According to reports, the proposed FY 2011 total budget was estimated to be $118.8 billion. The general fund, however, was $82.9 billion, $3.1 billion less than the previous year. Proposed budget cuts included cuts to health, social services and transportation programs. Additionally, state workers' salaries would be reduced and corporate tax breaks would be rolled back.^[3]

Proposed budget cuts are outlined below:

• Health and human services: a total of $2.9 billion cut, which included a $950 million cut to the in-home supportive services program for the disabled.^[3]
• State employee salaries: a 5% across the board cut and 5% increase in employee contributions to pension funds; additionally, should federal funding fall short, an additional 5% pay cut would be implemented; a total of $1.6 billion in savings.^[3]
• Prisons: the proposed budget included cuts in the form of health care reductions and moving nonviolent state inmates to county jails - a total of $1.2 billion in cuts.^[3]
• Education: spending on education would not increase or decrease under the proposed plan but instead remain at the $48 billion level. On the other hand, state university systems were scheduled to receive a $225 million increase.^[3]
• Transportation: millions of dollars were expected to be eliminated from the transportation fund in light of a plan to eliminate the fuel sales tax and increase the per-gallon excise tax on gasoline.^[3]

Budget background[edit]

See also: California state budget and finances

California’s fiscal year starts July 1. The governor is required to present the legislature with a proposed budget by January 10 and the legislature is required to pass a budget by June 15. A two-thirds majority is required to pass the budget in the legislature.^[4] In November 2010, voters would vote on Proposition 25, a ballot measure that would lower the vote threshold down from two-thirds, so that lawmakers could pass budgets with a simple majority.^[5]

Over the past 10 years state spending from state sources had more than doubled in nominal terms (not adjusted for inflation).^[6]

The California controller delayed payments in February 2009 and issued IOUs in July and August 2009. This was only the second time since the Depression that the state issued IOUs for some of its budgeted payments. In effect, the IOUs forced recipients (such as state vendors and local governments) to provide the state with a loan involuntarily. The IOUs were redeemable with interest, paid at a 3.75 percent annual rate. “Priority payments”—including school, payroll, and debt service payments—were not subject to IOUs.^[7] As of August 2010, of the 450,000 IOUs totaling $2.6 billion that were issued, 66,350 remained un-cashed, leaving $29 million of debt still outstanding, according to the state controller's office.^[8]

Governor Schwarzenegger and legislative leaders formed the Commission on the 21st Century Economy (COTCE) to suggest changes and reforms for more reliable and stable state revenues. The Commission released its report on September 29, 2009.^[9]

Budget spending[edit]

Over the past 10 years state spending from state sources had more than doubled in nominal terms (not adjusted for inflation), and during the then-current governor's tenure state spending from state sources had risen almost 40 percent:^[10][6]

Note: California's legislators had declined to put details of the state's spending online.

General fund spending by major program area (in millions)^[11]

General fund^[12]

Fiscal year 2010 tax collections compared with projections used in adopting fiscal year 2010 budget (millions)^[12]

Accounting principles[edit]

See also: California government accounting principles

Elaine M. Howle had been California State Auditor since 2000. The auditor and her office report to the Joint Legislative Audit Committee (JLAC), a 14-member committee comprised of seven Senators and seven Assembly Members or through legislation.^[13] The California State Auditor’s Office publishes its reports online.

The Institute for Truth in Accounting (IFTA) rated California “tardy” in filing the state’s Comprehensive Annual Financial Report (CAFR) – the annual report of state and local governmental entities. IFTA rated 22 states timely, 22 states tardy, and 6 states as worst. IFTA did not consider California’s CAFRs, and those of the other states, to be accurate representations of the state’s financial condition because the Generally Accepted Accounting Principles (GAAP) basis did not include significant liabilities for the pension plans and for other post employment benefits, such as health care.^[15] California’s State Controller is responsible for filing the CAFR. John Chiang was elected State Controller in November 2006.^[16]

Budget transparency[edit]

See also: States with spending online and Evaluation of California state website

As of 2009, California had no statewide, official spending database online, despite multiple attempts to pass legislation that would create one. However, Assembly Member Kevin de León introduced AB 400, a bill that would bring partial transparency to California's state spending. It was to be heard on June 23, 2009 and was re-referred to the California Senate's Committee on Appropriations.^[17] In addition, on June 19, 2009, California launched a transparency website that detailed government contracts of $5,000 or more.^[18]

Twenty other states had put their spending online since 2007.

• In light of California lawmakers' success in coming to a budget agreement, the National Taxpayers Union said that although they were pleased that lawmakers had not added new tax increases, they were concerned about fiscal reform in the state. Real fiscal reform, they said in a statement, "will not be achieved until we control government spending, and the only way to do that is if citizens know where their tax money was going- not simply by employing accounting gimmicks to make the numbers look good." The organization was advocating for the approval of AB 400.^[19]

Economic stimulus transparency[edit]

• The American Recovery and Reinvestment Plan of 2009 designated $787 billion to be spent throughout the nation. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.^[20]

• It was estimated that California would receive at least $17.3 billion in federal funding.^[21] In the next two years, that number was expected to be approximately $85 billion.^[22]

Thirteen California projects were noted in Senator Coburn's and Senator McCain's "Summertime Blues, 100 stimulus projects that give taxpayers the blues" report. In one project, the California Academy of Sciences received nearly $2 million to send researchers to the Southwest Indian Ocean Islands and east Africa to capture and analyze thousands of exotic ants.^[23] Another project gave $308 million to Hydrogen Energy California, LLC (HECA), owned largely by BP, to “generate more environmentally friendly electricity by capturing carbon dioxide from the burning of fossil fuels.”^[24] A third project awarded Boeing a $16 million no-bid contract in stimulus money to clean up a California site it helped pollute.^[23]

Error in ARRP[edit]

According to Recovery.gov, the plan showed funds would go to 884 congressional districts, though there are only 435.^[25][26]

The ARRP website claimed to have to created jobs in 9 congressional districts in California that did not exist.^[27]

Transparency evaluation[edit]

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database.

Criteria for evaluating spending databases

State database	Searchability	Grants	Contracts	Line item expenditures	Dept./agency budgets	Public employee salary
Reporting transparency		N		N	N
E Budget	N	N	N	N		N

Supporters of online budget[edit]

On March 18, 2008, Americans for Tax Reform sent a letter to Californian legislators, urging them to support SB 1494, the Taxpayer Transparency Act of 2008, which was sponsored by Sen. Tom McClintock.

Public employee salaries[edit]

See also: California state government salary

See also[edit]

• California budget deal: Federal stimulus funds
• California budget deal: New revenue
• California budget deal: Governor's vetoes
• California government sector lobbying
• California public pensions
• California state budget and finances

External links[edit]

Budget links[edit]

• California Department of Finance
• Gov. Schwarzenegger 2010 State of the State Address
• Gov. Schwarzenegger's 2010 proposed budget
• 2008-2009 California Budget
• The Legislative Analyst's Office
• California Budget Frequently Asked Questions
• Amendments to the Budget Act of 2009 (dead link)

Additional reading[edit]

• Los Angeles Times, "The worst budget mess ever," January 11, 2010
• Appeal Democrat, "Schoolkids, public employees prime budget crisis victims," January 25, 2009
• Napa Valley Register, "California's budget disaster," January 22, 2009
• Los Angeles Times, "California's budget breaking point," January 15, 2009
• California National Organization for Women, "2009 California State Budget Crisis Worsens," January 7, 2009 (dead link)
• San Francisco Chronicle, "California's budget mess gets worse," November 14, 2008

Footnotes[edit]

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