BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 93| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- CONFERENCE REPORT NO. 1 Bill No: AB 93 Author: Weber (D) Proposed: 6/11/15 Vote: 21 CONFERENCE COMMITTEE: 4-2, 6/9/15 AYES: Senator Leno, Senator Lara, Assemblymember Weber, Assemblymember Bloom NOES: Senator Nielsen, Assemblymember Melendez SUBJECT: Budget Act of 2015 SOURCE: Author DIGEST: This bill contains the 2015-16 Budget Act, as it was reported out by the 2015 Conference Committee on the Budget. This bill authorizes General Fund expenditures of $117.5 billion and assumes $119.9 billion in total General Fund resources. Under the Budget, there would be combined total reserves in the Budget Stabilization Account (BSA) and the Special Fund for Economic Uncertainties (SFEU) of $5.7 billion. Conference Committee Amendments delete the prior version of this bill, which expressed legislative intent to enact the Budget Act of 2015, and instead add the current language. ANALYSIS: On June 9, 2015, the Budget Conference Committee AB 93 Page 2 completed its work to reconcile the Senate and Assembly versions of the 2015-16 Budget. The Conference Committee built upon the extensive framework of both the Senate Budget and Fiscal Review Committee and the Assembly Budget Committee in establishing the Legislature's version of the Budget. Working from the general framework of the Governor's Budget and May Revision, the Legislature incorporated significant and important budgetary and policy changes to the state expenditure plan. JANUARY BUDGET The Governor's Budget included $114.8 billion in General Fund revenues and other resources and $113.3 billion in total General Fund expenditures ($66.3 billion in non-Proposition 98 and $47.0 billion in Proposition 98), provided for a $534 million SFEU and set aside an additional $1.2 billion for the BSA. Expenditures in 2015-16 were proposed to be about $1.6 billion higher than revised 2014-15 expenditures. The Budget also included the continuation of established efforts to pay down budgetary debt from past years, and as set forth through the passage of Proposition 2. Significant additional funding was proposed for K-14 education, higher education, and debt repayment, with some increases for health and human services, and corrections and rehabilitation. Additional resources that allowed for measured expansions and workload growth are the result of positive revenue growth based on the general economic upturn. MAY REVISION On May 14, the Governor released his May Revision for 2015-16. The Governor projected General Fund expenditures of $115.3 billion, revenues of $115.0 billion, and an SFEU of $1.1 billion. Compared to January, the revenues represented an increase of $1.7 billion and the reserve level an increase of $579 million. In addition, the Governor adjusted some assumptions in the current year and budget year regarding expenditures in certain programs. The May Revision reflected a significant increase in the Proposition 98 guarantee, based on robust revenues and a significantly greater General Fund cost. The Governor's overall budgetary framework continued to be balanced over most of the forecast period and the budget plan would continue to reduce the budgetary and other obligations. The proposal continued to include a deposit to the BSA of three percent of revenues, with a diversion of half that amount to AB 93 Page 3 retire certain long-term budget debt. CONFERENCE VERSION The Conference Report on the 2015-16 Budget was adopted on June 9, 2015. The Conference Committee approved various conference actions between June 1 and June 9, 2015 that, when combined with previous actions taken in both the Senate and Assembly, comprise the Conference version of the 2015-16 Budget Act. The Conference version balances the need for additional public investment in child care, education, health care and other programs, with the necessity of maintaining the state's fiscal stability through increased reserves and debt reduction. The General Fund budget summary for the Legislature's version of the Budget, compared to the Governor's May Revision, is shown in the following table: --------------------------------------------------------------- | Conference Committee Version | | General Fund Summary | | (Dollars in Millions) | --------------------------------------------------------------- --------------------------------------------------------------- | | May Revision | Conference | | | | Version | --------------------------------------------------------------- |---------------------------+--------+--------+--------+--------| | |Revised |Proposed|Revised |Proposed| | | | | | | |---------------------------+--------+--------+--------+--------| | |2014-15 |2015-16 |2014-15 |2015-16 | |---------------------------+--------+--------+--------+--------| |Prior Year Balance | $5,589| $2,359| $5,709| $2,620| |---------------------------+--------+--------+--------+--------| | Revenues and Transfers | 111,307| 115,033| 111,348| 117,297| |---------------------------+--------+--------+--------+--------| |Total Resources Available |$116,896|$117,392|$117,056|$119,917| | | | | | | |---------------------------+--------+--------+--------+--------| | Non-Proposition 98 | 64,929| 65,892| 64,861| *67,507| |Expenditures | | | | | |---------------------------+--------+--------+--------+--------| | Proposition 98 | 49,608| 49,416| 49,576| 50,000| |Expenditures | | | | | AB 93 Page 4 |---------------------------+--------+--------+--------+--------| |Total Expenditures |$114,537|$115,308|$114,436|$117,507| | | | | | | |---------------------------+--------+--------+--------+--------| |Fund Balance | | $2,084| $2,620| $2,411| | |$2,359 | | | | |---------------------------+--------+--------+--------+--------| | Reserve for | 971| 971| 971| 971| |Liquidation of | | | | | |Encumbrances | | | | | --------------------------------------------------------------- | Special Fund for | 1,389| 1,113| 1,649| 1,440| |Economic Uncertainties | | | | | |---------------------------+--------+--------+--------+--------| |Budget Stabilization | $1,606| $3,460| $1,606|$4,220 | |Account | | | | | --------------------------------------------------------------- *Includes $760 million of unallocated debt repayment. Overall Resources, Expenditures and Reserves The Conference Committee's version of the Budget includes total General Fund expenditures of $117.5 billion for 2015-16, an expenditure level which is roughly $2.2 above the May Revision levels. This amount includes an additional $760 million pay-down of Proposition 2 debt, and $1.4 billion in additional program expenditures. The total represents an increased level of spending (not including the additional expenditures on debt retirement) over that of the May Revision of approximately 1.2 percent. The Conference version of the Budget adopts the LAO's revenue assumptions for 2015-16 of $116.3 billion, which is $3.1 billion higher than the May Revision, and somewhat higher property taxes that offset Proposition 98 spending. The Conference plan provides for increased reserves, similar to the Governor's plan, and continues to pay down long-term and budgetary debt. In addition, the Conference version balances these actions with additional targeted prudent investments in education, health care, and other areas that will improve the state's human and social capital. The Conference Committee's version of the Budget provides for $5.7 billion in general reserves, comprising combined amounts AB 93 Page 5 attributable to the SFEU plus deposits to the BSA. This represents an amount about $1.1 billion above the reserve totals presented in the May Revision. In addition, under the Conference Committee plan, the state will have higher reserves and bigger operating surpluses in the out-years than projected in the May Revision. Expenditure Highlights The Budget package represents a comprehensive approach to continue restoring essential educational, social service and health programs, while maintaining the state's solid fiscal outlook. Specifically, the Conference Committee funding plan provides resources for many of its priorities, especially in the areas of child care, human services, health, and higher education. The architecture for the plan begins with much of the Governor's base level funding, but makes distinctive and important changes in program spending reflecting the Legislature's priorities. Early Education and Childcare. A centerpiece of the Conference Committee plan is a $409 million ($147 million Proposition 98 General Fund, $262 million General Fund) reinvestment in the state's childcare and early learning system. The approved plan includes $242 million ($112 million Proposition 98 General Fund, $130 million General Fund) for increases in center-based, voucher, and license-exempt rates; as well as $116 million ($10 million Proposition 98 General Fund and $107 million General Fund) for 27,000 slots for preschool and alternative payment programs. This initiative couples well with the Governor's proposed earned income tax credit, which provides a refundable tax credit for low-income wage earners. K-14 Education. In K-14 education, the Conference plan for Proposition 98 provides over $750 million more for K-14 education than the Governor's May Revision. The plan includes $500 million for educator quality and effectiveness; provides $500 million for adult education and $25 million for adult education data; continues to provide one-time funds for mandate claims/support of state-adopted academic content standards; and augments the Governor's proposed local control funding formula payments. For community colleges, the Conference plan increases funding for Foster Youth Education Opportunity Program; increases financial aid for community college students; and AB 93 Page 6 provides funding to help transform basic skills remediation through researched-based best practices. Higher Education. The Conference plan maximizes the state's dollars in opening up opportunities for Californians. The plan: For the University of California, provides an additional $25 million contingent on increasing California resident enrollment by 5,000 students, holding resident tuition flat in 2015-16 and 2016-17 and redirecting non-resident institutional aid to support resident students. Provides additional student support services to increase the graduation rates of low income and underrepresented students; and provides $2.5 million for the implementation of the California Dream Loan Program. For California State University, provides an additional $70 million; increases enrollment for California residents by 10,400 students; provides additional support for student services, course sections and tenure-track faculty; reestablishes a California freshman eligibility study; and provides $2.5 million for the implementation of the California Dream Loan Program. For Cal Grants, repeals the financial aid cuts for students in private non-profit colleges; increases the number of competitive Cal Grant awards by 16,250; and increases the Cal Grant B access award to $1,796. Additionally, the plan makes modifications to the Middle Class Scholarship by adopting a four or five year participation time-limit and an asset ceiling of $150,000. Cap-and-Trade Expenditures. The Conference plan approves staff resources necessary to continue existing workload related to cap-and-trade expenditures, but rejects all of the discretionary expenditure proposals, so that discussions continue to further refine the state's expenditure plan for the 40 percent of the cap-and-trade revenues that are not continuously appropriated according to statute enacted last year. Other Significant Investments and Initiatives. In other important legislative initiatives, the plan funds additional significant activities and programs: AB 93 Page 7 For In-Home Supportive Services, restores the seven percent cut in hours and implements overtime payments. For CalWORKs, eliminates the maximum family grant provision and temporarily suspends the 24-month clock. For immigration services, provides more funding for non-profits to help undocumented immigrants with documentation required under the President's deferred action, and creates a fund to support the newly-created Office of New Americans, which is charged with creating a statewide strategic plan for the integration of California's new Americans. For foster youth and child welfare services, provides $25 million General Fund to support foster parent recruitment, retention, and support; $7 million General Fund for housing supports for child welfare families, and $3 million General Fund to support the federal Strengthening Families Act. For Medi-Cal, sets aside money to provide coverage to undocumented children; provides funds for provider payment increases; and restores most optional benefits, including full adult dental benefits. For developmental services, approves rate increases for community-based providers and regional center operations and sets requirements for the department when submitting their plan to close one or more developmental centers. For the Office of Emergency Services, adopts a fee structure to create a response network for the transport of hazardous materials by rail through the state. For California veterans, appropriates an additional $3 million in General Fund to support County Veteran Service Officers; and establishes 36 permanent positions within the Department of Veterans Affairs to address the continued federal claims backlog. For the Department of Justice, establishes permanent position authority within the Bureau of Firearms. AB 93 Page 8 For farmworker housing, provides nearly $20 million for farmworker housing related programs. For local government, includes approval of various legislative changes that address several long-running issues associated with state-local fiscal relations, and will facilitate the completion of the wind-down of redevelopment agencies. The Conference Committee plan also reduces caseloads in dependency court cases and provides some additional funding for previously-authorized judicial positions and provides relatively small - but vital - augmentations for other programs, such as support for libraries, the arts council, and natural resources programs. FISCAL EFFECT: Appropriation: Yes Fiscal Com.:YesLocal: No SUPPORT: (Verified 6/15/15) None received OPPOSITION: (Verified 6/15/15) None received Prepared by:Mark Ibele / B. & F.R. / (916) 651-4103 6/15/15 12:25:34 **** END **** AB 93 Page 9