Posted on 10/01/2005 10:35:22 PM PDT by NormsRevenge
The LAO analysis of the governor's budget initiative from Legislative Analyst Elizabeth Hill is available for review.
You can read it HERE.
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Proposition 76: Main Provisions
-- An Additional State Spending Limit
- Places a second limit on state expenditures, which would be based on an average of revenue growth in the three prior years.
-- Budget-Related Changes
- Grants the Governor substantial new authority to unilaterally reduce state spending under certain conditions.
- Continues spending based on prior-year budget when new budget is late.
-- School Funding Changes (Proposition 98)
- Changes several key provisions in the State Constitution relating to the minimum funding guarantee for K-12 schools and community colleges.
-- Other Changes
- Makes a number of other changes relating to transportation funding; loans between state funds; and payments to schools, local governments, and special funds.
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New Spending Limit
-- Spending from the state’s General Fund and special funds combined limited to the prior-year level, adjusted for the average growth rate in General and special funds revenues for the three previous years.
-- Revenues in excess of this limit allocated between the General Fund and each of the special funds.
- Special fund’s portion held in reserve for expenditures in future years.
- General Fund’s portion allocated for specified purposes, including reserves, schools, transportation, and other construction.
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Main Budget-Related Provisions
-- New Powers for Governor. Grants Governor substantial new authority to unilaterally reduce state spending under certain conditions. Specifically:
- Governor can declare a fiscal emergency if his or her administration finds that revenues are falling below estimates or reserves are declining by more than one-half.
- If Legislature and Governor cannot agree on solutions within 45 days (30 days in case of late budget), Governor is given power to reduce spending in most programs.
-- Late Budgets. When new budget is not enacted, spending authorized in prior-year’s budget continues.
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Proposition 98 Provisions
-- Eliminates provisions that allow school funding to automatically slow in low-revenue years (Test 3) and automatically rebound in high-revenue years (payment of maintenance factor).
-- Eliminates obligation to keep track of funding gap when state provides less than the main guarantee (Test 2) through suspension or Governor’s reduction (creation of maintenance factor).
-- Converts $3.8 billion in long-term obligation to increase the annual funding guarantee (maintenance factor) to a one-time obligation paid over the next 15 years.
-- Eliminates current requirement that spending in excess of the guarantee in a single year raises the minimum funding guarantee in future years.
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Combined Effects of Proposition 76
-- Effects on Spending
- The additional spending limit and new powers granted to the Governor would likely reduce state spending over time relative to current law. These reductions also could shift costs to local governments (primarily counties).
- The new limit could also “smooth out” state spending over time, especially to the extent reserves set aside in good times are available in bad times.
- The new spending-reduction authority given to the Governor and other provisions of the measure could result in a different mix of state spending. That is, some programs’ share of total spending would rise and others would fall relative to current law.
-- Effects on Schools
- The provisions changing school funding formulas would make school funding more subject to annual decisions of state policymakers and less affected by a constitutional funding guarantee.
- Budget reductions resulting from the spending limit or Governor’s new authority could apply to schools.
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How Proposition 76 Would Change School Spending Guarantee for K-12 and Community Colleges
How Current Guarantee Works
-- Proposition 98 Minimum Guarantee. Is based on the operation of three formulas (“tests”). The operative test depends on how the economy and General Fund revenues grow from year to year.
Test 1—Share of General Fund. Provides 39 percent of General Fund revenues. This test has not been operative since 1988‑89.
Test 2—Growth in Per Capita Personal Income. Increases prior-year funding by growth in attendance and per-capita personal income. This test is generally operative in years with normal-to-strong General Fund revenue growth.
Test 3—Growth in General Fund Revenues. Increases prior-year funding by growth in attendance and per-capita General Fund revenues. Generally, this test is operative when General Fund revenues fall or grow slowly.
-- Suspension of Proposition 98. This can occur through the enactment of legislation passed with a two-thirds vote of each house of the Legislature, and funding can be set at any level.
-- Long-Term Target Funding Level. This would be the K-14 education funding level if it were always funded according to the provisions of Test 2. Whenever Proposition 98 funding falls below that year’s Test 2 level, either because of suspension of the guarantee or the operation of Test 3, the Test 2 level is “tracked” and serves as a target level to which K-14 education funding will be restored when revenues improve.
-- Maintenance Factor. This is created whenever actual funding falls below the Test 2 level. The maintenance factor is equal to the difference between actual funding and the long-term target amount. Currently, the K-14 funding level is $3.8 billion less than the long-term target funding level—that is, the current outstanding maintenance factor is $3.8 billion.
-- Restoration of Maintenance Factor. This occurs when school funding rises back up toward the long-term target funding level. Restoration can occur either through a formula that requires higher K-14 education funding in years with strong General Fund revenue growth, or through legislative appropriations above the minimum guarantee.
What This Measure Does
-- Eliminates Future Operation of Test 3. In low-revenue years, the Proposition 98 minimum guarantee would no longer automatically fall below the Test 2 level.
-- Eliminates Future Creation of Maintenance Factor. If in any given year K-14 education was funded at a level less than that required by Test 2 (through suspension or Governor’s reductions), there would no longer be a future obligation to restore that funding shortfall to the long-term target. These reductions would permanently “ratchet down” the Proposition 98 minimum guarantee.
-- Converts Outstanding Maintenance Factor to One-Time Obligation. The measure converts the outstanding maintenance factor (estimated to be $3.8 billion) to a one-time obligation. Payments to fulfill this obligation would be made over the next 15 years. These payments would not raise the future Proposition 98 minimum guarantee (in contrast to existing law).
-- Counts Future Appropriations Above the Minimum Guarantee as One-Time Payments. Spending above the minimum guarantee would not raise the base from which future guarantees are calculated.
ping to self to read later
Thanks for posting. Will read more tomorrow. On cursory review, looks interesting.
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Could the State Raise Taxes to Support New or Expanded Programs?
Yes, the state could raise taxes for either general or specific purposes under the proposed limit. If the state were under Proposition 76’s spending limit, it could immediately spend these new tax revenues. If, however, the state were at its limit, it would not be able to use the proceeds immediately. It would, however, eventually be able to use new tax proceeds as the impact of the tax increase worked its way into the new spending limit’s adjustment factors over several years.
Im about ready to dropoff too.. Monyana.
What Do the Changes to Proposition 98 Imply for the Minimum Funding Guarantee in Any Particular Year?
The impact of the Proposition 98-related changes in any individual year is uncertain. For example, by removing the formulas that allow school funding to automatically fall and rise with state revenues, the changes made by this measure would result in more steady growth in the minimum guarantee. As a result:
• If revenues were weak in a particular year, the effect of the changes would be a higher minimum guarantee, since the less generous Test 3 formula would no longer be operative.
• However, if revenues were strong in a particular year, then the effect of these changes would be a lower guarantee for schools, since the state would no longer be required to restore the maintenance factor (currently $3.8 billion).
How Would the Measure Affect Budget Deliberations Next Year?
(snip)
Provisions Expanding Governor’s Powers and Changing Proposition 98 Could Have Impact. We believe that the provision granting the Governor authority to unilaterally reduce spending could have a substantial impact on how the 2006-07 budget shortfall is addressed. The Governor would have greater control over both the general nature of the solutions (for example, tax increases versus spending reductions) as well as the specific programs that would be reduced in order to balance the budget.
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So, for talking purposes, if Angelides were Governor... we'd have new taxes, right? And our Republicans in the legislature would not be able to stop it?
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Nice twist, huh? no poliitcal subterfuge going on here, eh?
they are doing all their dirty work out in plain view and asking people to buy swill as pinot noir. ;-)
Thanks for the ping...
There you go, grabbing onto one statement, and ignoring everything else.
"Effects on Spending
· The additional spending limit and new powers granted to the Governor would likely reduce state spending over time relative to current law. These reductions also could shift costs to local governments (primarily counties).
· The new limit could also “smooth out” state spending over time,
especially to the extent reserves set aside in good times are available in bad times.
· The new spending-reduction authority given to the Governor and other provisions of the measure could result in a different mix of state
spending. That is, some programs’ share of total spending would rise and others would fall relative to current law."
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This is all about spending limits, NOT tax increases.
And since you claim you all are so good at "thinking for yourselves", why don't you read the text of the actual proposition itself?
http://www.ss.ca.gov/elections/bp_nov05/voter_info_pdf/entire76.pdf
BTW -- the Howard Jarvis Tax Payers Association is SUPPORTING Prop. 76 also.
Also, you seem to be forgetting that we used to have a spending cap in this state. It was law! And it was obliterated by the fine print in Proposition 111, the "Traffic Congestion Relief and Spending Limitation Act," backed by our Republican Governor, George Deukmejian. [see: Such a Deal - Californians have a history of buying ballot measures that are deceptively written and advertised, Orange County Register, February 29, 2004.]
For you to suggest that we should ignore all of the faults of new laws, and look only at the good parts is not only naive, but stupid, IMO. It may be good enough for the sheep and other bovine, but not for me. The devil is always in the details.
Scarey ain't it? Incramentalism at it's best.
Time will tell!
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