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Gov. Jerry Brown’s May Budget Revise Expected on Monday, May 14

Proposal Could Include Revisions Affecting Redevelopment

May 9, 2012

Gov. Jerry Brown is expected to issue his budget May Revise on Monday, May 14, containing updates to state revenue and cost projections. The question remains what, if any, proposals the Governor may include affecting the dissolution of redevelopment agencies.

 

There has been much activity on redevelopment since the agencies were dissolved as of Feb. 1.  City officials have spent significant time working with successor agencies and oversight boards, and disputes are forming over the decisions by the Department of Finance on Recognized Obligation Payment Schedules (ROPS), concerns about the ability to retain community assets, audits by county auditor-controllers and the State Controller.

Legislation has been introduced to clean up provisions of AB x1 26 supported by the League, which includes AB 1585 (Pérez), SB 986 (Dutton) and SB 1335 (Pavley). There have been significant efforts by Speaker John A. Pérez (D-Los Angeles) to move AB 1585 to the Governor in advance of the May Revise. The bill received bipartisan support in the Assembly and positive signals from Republican leadership in the Senate, but its progress was slowed by Senate President pro Tem Darrell Steinberg (D-Sacramento), who has maintained that he wanted to see the May Revise before proceeding.

The prospect of retaining the remaining affordable housing funds clearly hangs in the balance. While Sen. Steinberg carried legislation seeking to preserve these funds earlier in the year, he has since sent signals that some or all of those funds could be needed to address the state budget deficit, especially since state revenues have been coming in a lower levels than projected.

Local officials should also remain alert for potential changes to AB x1 26 that could be proposed by the Administration.  Changes may include provisions from AB 1585, although they could also contain efforts by the Administration to strengthen its hand in dealing with ROPS and other matters.

The California State Constitution requires the Legislature to send a budget to the Governor by June 15 and subsequently requires the Governor to sign the budget by July 1.

State Budget

Controller John Chiang released his April cash report Tuesday, which indicates that the state’s revenues are $2.44 billion below the Governor’s projections.

The Governor's initial FY 2012-13 budget proposal included a total of $10.3 billion in cuts and revenues to balance the budget and create a $1.1 billion reserve, and assumed that voters would pass his ballot measure to raise taxes by $7 billion.

Read the League’s full analysis of the Governor’s initial budget from January.

City officials were also given an in-depth analysis of the Governor’s budget during the League’s recent Legislative Action Days in April. The presentation is available online.

Tax Measure

Last Thursday, the Governor announced that he had collected enough signatures to qualify his tax initiative and that he would soon submit the signatures to county election officials. His initiative would temporarily raise income taxes on people who make more than $250,000 annually and raise the statewide sales tax by a quarter cent, bringing it to 7.5 percent.

Should the tax measure fail, the Governor’s budget also includes a variety of trigger cuts totaling $5.4 billion and targeting mainly K-12 schools, higher education, courts, fire protection and park services.

His tax plan is facing opposition from Republicans as well as a competing tax measure backed by Molly Munger and the California PTA. The Munger plan would instead raise an estimated $10 billion for the state’s K-12 school and early childhood programs and contribute $3 billion in the first four years to the state’s general fund budget.

Proposition 25

Proposition 25, passed in November 2010, purported to stop legislators from receiving their paychecks if they failed to pass a balanced budget on time. Last year, legislators lost 12 days of their salary after Controller John Chiang, acting under Prop. 25, determined that the budget was unbalanced and halted their paychecks.

However, in January, legislators filed a lawsuit challenging the Controller’s decision and in April, Sacramento Superior Court Judge David Brown sided with legislators finding that Controller Chiang violated the separation of powers clause in the California State Constitution.  It is unclear what, if any, effect this will have on this year’s budget process.

Next Steps

The League will produce an analysis of the May Revise when it is released.



 
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