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BUDGET UPDATE: Legislature Holds Rare Saturday Session to Meet June 15 Deadline

June 17, 2013

Last Friday the League published a story with the status of the state budget happenings.

The Legislature had not completely finished its business at that time. This article is an update to that story now that the Senate has taken action on one of the two remaining budget trailer bills.
The Legislature spent Friday and Saturday in session to pass the FY 2013–14 budget, most of which mirrors the Governor’s proposal. It’s the second year in a row that the Legislature has passed an on-time and seemingly balanced budget. If someone were to score state budget negotiations, there would be a clear and undisputed winner: Gov. Edmund G. Brown.  
The first clues that the Legislature was going along with the Governor’s proposal came several days earlier when news began leaking that the Legislature had adopted more conservative revenue proposals than originally expected.  
Balanced, but Not Necessarily Stable 
While the Governor and Legislature have heralded this budget as balanced, there are signs that the state’s fiscal condition continues to be on the edge of a cliff. One such sign is that internal borrowing continues even with a balanced budget. Significantly, the budget loans $500 million from Cap and Trade auction revenues to the General Fund. These revenues are meant to fund programs that would decrease greenhouse gas emissions. The Governor argues that the state isn’t ready to spend the funds. However, environmental groups are disappointed with the move. Cities were also interested in the funding with an eye toward funding energy efficiency projects and sustainable community strategies implementation.  There are examples of internal borrowing in other areas as well, including courts and health programs. 
Funding for state agencies, departments, and commissions continues to be creatively financed. Possibly the most notable example is the California Commission on the Status of Women and Girls.  The Commission is now funded entirely by private donations. And if the Governor signs AB 98/SB 92, the Seismic Safety Commission will be financed by a new assessment on property insurance. 
In addition, mandates continue to be turned into optional items. This budget makes parts of the California Public Records Act voluntary. In addition, several law enforcement mandates are now optional or “encouraged” making them ineligible for mandate reimbursement.  
Not Everything Included
While the majority of the budget is what the Governor proposed, there are a few issues that didn’t make the cut for one reason or another. The Governor’s plan to link new university funding with performance measures is not included, nor is his plan to eliminate (or even reform) enterprise zones.  
Legislative leadership also had to forgo some of their priorities, either postponing implementation of health and social service programs or not including them altogether.  
But these issues are sure to come back in the next year. As the Legislature adopted the more conservative revenue projections, legislators made it clear that they were keeping a list of items to fund if revenues are higher than expected when they return in January. Likewise, the Governor is not known for letting go of a proposal to which he is attached. 
In addition, SB 72 regarding Natural Resources is still pending. The Senate failed to take the measure up Monday afternoon. It is unclear if or when SB 72 will be acted upon.  
No Significant Win or Loss for Cities
Overall this budget does not bring bad news for cities. There are certainly areas in which there could have been better news, namely in Proposition 39 and cap-and-trade funds. But even in cap-and-trade the story isn’t over. The related proposals were all held. And the two proposals cities were supporting — AB 416 (Gordon) and AB 574 (Lowenthal) — were not dependent on an appropriation this year. The League will continue to advocate for our proposals as the legislative year progresses.  
Controller Issues Prop 1A Repayment
As legislators began to vote on the FY 2013–14 budget bills today some California cities were dealing with a budget issue from four years ago. The Controller issued repayments for the cities that did not securitize the Proposition 1A loan from 2009. Prop. 1A (2004) requires that the amounts be repaid within three years with interest. 
Budget Trailer Bills
Below is a short summary of the bills passed as part of the budget package. The Governor has until July 1 to sign the budget. 
AB 110: Main Budget Bill
This is the main FY 2013–14 budget bill and includes FY2013–14 appropriations, including:
$500 million loan from cap and trade auction revenues to the General Fund; 
$500,000 in start-up funds for the Middle Class Scholarship Program;
$27.5 million for local assistance grant funding for frontline public safety; and
$433 million to K-14 schools and workforce training for Prop. 39 grants.
AB 74: Human Services
Makes various statutory changes to human services programs including mediation requirements, open meeting requirements for collective bargaining, extending time limitations for foster youth in group care, and CalWORKS and CalFRESH benefits. 
AB 75: Alcohol and Drug Programs
Transfers responsibilities of the Department of Alcohol and Drug Abuse Programs to the Department of Health Care Services and Department of Public Health. Updates other department and agency names as required. Appropriates $2 million from a Federal Trust Fund for mental health programs. 
AB 76: State Government
Makes various changes to state law, most to save the state money. Provisions of interest to cities include: 
Makes optional various requirements of the California Public Records Act for local agencies.
Deletes the limit on the amount of fees the Department of Industrial relations can charge to enforce prevailing wage requirements. Limits the amount of state bond proceeds that can be used for these purposes. 
Makes optional the following law enforcement-related mandates:
o Providing portable manual mask and airway assemblies for CPR to peace officers;
o Adopting written policies and standards for domestic violence calls;
o Maintaining a complete and systematic record of all protection orders; and 
o Recording of all domestic violence calls and supporting written reports. 
Transfers emergency communications duties from CalEMA, Department of Technology, and State Chief Information Officer to the Office of Emergency Services. Enacts the Public Safety Communications Act of 2013.
Adds the Secretary of the Business, Consumer Services, and Housing Agency to the Strategic Growth Council. 
Expands the Displaced Janitor Opportunity Act to all contractors that provide food and beverage services at specified publicly owned entertainment venues in an enterprise zone until Dec. 31, 2014. (This provision was aimed at a recent dispute involving the Honda Center in Anaheim, but cities should review for potential broader applicability.)
SB72: Public Resources
Makes a variety of changes to environmental and resource programs, including:
Provides funding from the Renewable Resource Trust Fund to the New Solar Homes Partnership (NSHP). NSHP provides financial incentives to encourage the installation of eligible solar energy systems on new residential construction. The NSHP is focusing efforts on new residential buildings and seeks to achieve 400 megawatts of distributed solar photovoltaic electric capacity by the end of 2016.
Amends the Property Assessed Clean Energy Program (PACE) to allow the authority to develop and administer a PACE risk mitigation program for PACE loans to increase their acceptance in the marketplace and protect against the risk of default and foreclosure.
Requires the California Public Utilities Commission to conduct a zero-based budget for all of its programs by Jan. 10, 2015. The zero-based budget shall be completed for the entire Commission, rather than on a division-by-division basis.
SB 73: Proposition 39 Implementation
Transfers $28 million from the Job Creation Fund to the Education Subaccount, which is created in the State Energy Conservation Assistance Account. Appropriates the $28 million, in the Education Subaccount to the Energy Commission for the purpose of low-interest and no-interest revolving loans and loan loss reserves for eligible projects and technical assistance. All funds shall be available to local education agency or community college districts for energy efficiency projects.
Appropriates $3 million from the Job Creation Fund to the California Workforce Investment Board to develop and implement a competitive grant program for eligible community-base and other training workforce organizations preparing disadvantaged youth or veterans for employment. 
SB 74: Corrections
Makes a variety of changes to corrections programs, including: 
Creates the position of Undersecretary for Health Care Services within the Department of Corrections and Rehabilitation (CDCR).
The Division of Health Care Operations and the Division of Health Care Policy and Administration shall report to this undersecretary.
Each of these Divisions is to be headed by a director, appointed by the Governor
Adds the Secretary of the CDCR to the Board of State and Community Corrections, effective July 1, 2013.
Provides that the Department of Human Resources shall set the compensation of the chair of the Board of State and Community Corrections.
Charges the Inspector General (IG) with periodic review — upon the request of the Governor, Senate Rules Committee, or the Speaker of the Assembly — of CDCR’s policies, practices and procedures.
Specifies that the IG shall prepare both a confidential written report, and a separate public written report, based on that review.
IG shall have discretion to edit the public report appropriately.
Specifies that certain documents pertaining to whistleblower communications, as defined by statute, are not public records, nor are they subject to discovery in litigation.
Expands the scope of local agencies from which the IG cannot hire.
IG is charged with responsibility of investigating complaints vs. CDCR management, not merely reviewing them as previously required. 
Contains allocation of $750,000 to CDCR for capital outlay.
SB 75: Courts
Restores $63 million of previous budget cuts to courts system. Makes various changes to court operations and finances including an increase in some fees, authorization to borrow from special funds for cash management purposes, and adding a third tier to the probation failure reduction incentive payment to counties. Requires an evaluation of the Long Beach court building performance-based infrastructure project. 
SB 76: Public Safety
Includes provisions related to realignment, parole, re-entry, as well as the “inmate swap”. Specific provisions include:
Offenders convicted of serious or violent felonies, high risk sex offenders, or mentally disordered offenders will be subject to parole supervision by CDCR and the court in the county:
o In which they were released;
o In which they reside; and
o In which an alleged parole violation occurs.
Specifies that upon a motion by probation officers or district attorneys, courts can modify or terminate supervision:
o The Court in the county in which the offender is supervised has jurisdiction;  and
o For those on parole both the court in the county of supervision or the court in which the violation occurred, can exercise jurisdiction.
Offenders released on parole shall remain subject to supervision by CDCR’s Division of Parole after 60 days even if there is a determination that they should have been on PRCS (Post Release Community Supervision).
To assist with any PRCS transition, CDCR is directed to transmit inmate health record information to county authorities, unless the information is unavailable — contingent upon a determination by the U.S. Secretary of Health and Human Services that this provision is not pre-empted by HIPAA.
County Sheriffs are authorized to award good time credits for inmate participation in in-custody work or job training programs, on a 1-to-1 or 1-to-1.5 basis.
CDCR is required to provide counties with written notification for any changes in location, or closure of reception centers or parole offices.
Specifies that the part of a defendant’s sentenced term subject to supervision by a county probation officer is mandatory supervision, and begins immediately upon release from custody.
Inmate Swap: (The purpose is to reduce county jail exposure to liability for failure to provide proper medical/mental health service for long-term inmates). Provisions include the following:  
o Long-term county jail inmates (serving up to 10 years) will be transferred to state prison;
o Short-term state prison inmates will be transferred to county jails; and
o This proposal is population-neutral and revenue-neutral; it will not ease overcrowding in prisons or jails or create savings or more expenditures.
AB 82: Health
Makes various technical changes, including alignment of multiple reports to legislature with the January Budget proposal and May Revise. Partially restores funding for Medi-Cal Adult Dental and Nutrition Benefits.
SB 78: Medi-Cal Taxes
Reauthorizes a tax on sellers of managed care plans to fund managed care plans for children, seniors, persons with disabilities and dual eligible. Makes a $245 million appropriation to Healthy Families from the Federal Trust Fund.

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