1. The California State Budget Senator Carol Liu, Chair Senate Budget & Fiscal Review Subcommittee on Education

2. Normal Year Budget Process Fiscal Year: July 1-June 30 Fiscal Year: July 1-June 30 January: Governor Proposes Budget January: Governor Proposes Budget May: Governor Proposes Revised Budget May: Governor Proposes Revised Budget January-June: Legislature holds public hearings to review Governor’s proposal January-June: Legislature holds public hearings to review Governor’s proposal June 15: Deadline for Legislature to pass a balanced budget June 15: Deadline for Legislature to pass a balanced budget BIG 5 meet and reach compromise to secure 2/3 vote in each house BIG 5 meet and reach compromise to secure 2/3 vote in each house Governor signs the budget (may use line-item veto authority) Governor signs the budget (may use line-item veto authority)

3. Background At the end of 2008, the state had a projected budget shortfall of $30 billion – 1/3 of the state’s budget. At the end of 2008, the state had a projected budget shortfall of $30 billion – 1/3 of the state’s budget. Legislature has been in continuous budget process and negotiations with the Governor throughout the last 18 months. Legislature has been in continuous budget process and negotiations with the Governor throughout the last 18 months. In 2009 and earlier this year, the Legislature came to agreement on severe budget cuts to education and social services programs while still preserving the safety net. In 2009 and earlier this year, the Legislature came to agreement on severe budget cuts to education and social services programs while still preserving the safety net.

4. General Fund Expenditures (‘09-’10 enacted)

5. Current Picture - 1 California’s economy shows signs of improvement: California’s economy shows signs of improvement: State exports have improved State exports have improved Retail sales and sales tax revenues are up Retail sales and sales tax revenues are up BUT unemployment remains high and Personal Income Tax receipts were $3 billion lower than expected in April. BUT unemployment remains high and Personal Income Tax receipts were $3 billion lower than expected in April. Projected State Budget Deficit is $19.1 billion. Projected State Budget Deficit is $19.1 billion.

6. Current Picture - 2 Funds from the federal government are half ($3.5 million) of what was expected Funds from the federal government are half ($3.5 million) of what was expected Revenue increases enacted last year expire in 2011: Revenue increases enacted last year expire in 2011: Increased current state sales tax rate from five percent to six percent effective April 1, 2009 ($4.6 billion) Increased current state sales tax rate from five percent to six percent effective April 1, 2009 ($4.6 billion) Increased Vehicle License Fee (VLF) from 0.65 percent of a vehicle’s value to 1.15 percent effective May 19, 2009 ($1.2 billion) Increased Vehicle License Fee (VLF) from 0.65 percent of a vehicle’s value to 1.15 percent effective May 19, 2009 ($1.2 billion) Added a Personal Income Tax (PIT) surcharge of 0.25 percent to base rate. ($3.7 billion). Added a Personal Income Tax (PIT) surcharge of 0.25 percent to base rate. ($3.7 billion).

7. Governor’s Proposed Budget – May Proposes additions to January budget to bridge the budget gap with a combination of cuts, federal funds, alternative funding, and fund shifts: Proposes additions to January budget to bridge the budget gap with a combination of cuts, federal funds, alternative funding, and fund shifts: ($ amounts are in millions) January Budget May Revision TotalPercentage Expenditure Reductions $5,844.5$6,523.4$12,367.9 64.6 % Federal Funds 1,967.91,414.13,382.017.7% Alternative Funding 1,025.9252.41,278.36.7% Fund Shifts and Other Revenues 477.11636.52,113.611.0% Total$9,315.4$9,826.4$19,141.8100%

8. Governor’s Major Proposals Reduce K-12 Education per-pupil funding to $7,088 (almost $1,100 below the 2007-08 level of $8,175). Reduce K-12 Education per-pupil funding to $7,088 (almost $1,100 below the 2007-08 level of $8,175). Eliminate CalWORKs and General Fund support for child care and development programs, excluding pre-school. Eliminate CalWORKs and General Fund support for child care and development programs, excluding pre-school. Realign Local County Mental Health by shifting tax funds compensating counties for mental health costs to fund State costs in food stamps and child welfare programs. Realign Local County Mental Health by shifting tax funds compensating counties for mental health costs to fund State costs in food stamps and child welfare programs. Furlough state employees one day per month, reduce compensation, and increase employee health insurance contribution. Furlough state employees one day per month, reduce compensation, and increase employee health insurance contribution. Contain Health Care Costs by setting hard caps on optional benefits rather than eliminating services. Contain Health Care Costs by setting hard caps on optional benefits rather than eliminating services. Institute 30-day IHSS "Stakeholder" process in which Administration works with advocates and the Legislature to save $750 million. Institute 30-day IHSS "Stakeholder" process in which Administration works with advocates and the Legislature to save $750 million.

9. Budget Perspectives: Cut NOW Pay LATER K-12 Education K-12 Education Higher Education Higher Education Foster Children Foster Children Corrections/Rehabilitation Corrections/Rehabilitation Seniors, disabled Seniors, disabled Freeways/Mass Transit Freeways/Mass Transit Infrastructure Infrastructure Kids unprepared for future Fewer college educated workers Future Unemployed/Homeless Cycle of Crime & Recidivism Costly institutional care Congestion/Air pollution Job loss/public safety impacts

10. Follow the Process www.senate.ca.gov www.senate.ca.gov www.senate.ca.gov Click on Committees then Budget Committee Click on Committees then Budget Committee www.assembly.ca.gov www.assembly.ca.gov www.assembly.ca.gov Click on Committee Directory then Budget Committee Click on Committee Directory then Budget Committee Legislative Analyst's Office www.lao.ca.gov Legislative Analyst's Office www.lao.ca.govwww.lao.ca.gov California Department of Finance www.ebudget.ca.gov California Department of Finance www.ebudget.ca.govwww.ebudget.ca.gov www.senate.ca.gov/Liu www.senate.ca.gov/Liu www.senate.ca.gov/Liu Click on Budget Click on Budget Next10, www.next10.org Next10, www.next10.org