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Legislature Adopts Partial Budget Package, Negotiations Continue

Trailer Bills on Cap-and-Trade, RDA Dissolution, Drought Response Still Under Discussion

June 15, 2015
The Legislature today adopted a partial FY 2015-16 budget package by passing the main budget bill (AB 93) and four trailer bills.
 
The remainder of the budget continues to be negotiated between the legislative leadership and Gov. Jerry Brown. Approving small clean-up bills after the budget deadline has become standard practice for the Legislature since 2010, when voters approved Proposition 25. It allows lawmakers to pass a budget on a majority vote. This year marks the first since the ballot measure’s passage that legislators have made their deadline while punting on most major issues.
 
The negotiations, however, may not last long. The Governor has until July 1 to act on the budget passed today, and there seems to be momentum in the Legislature to pass the remaining trailer bills before that date.
 
The budget adopted today would increase discretionary spending over the Governor’s proposal by $749 million. During budget committee hearings, the Department of Finance (DOF) repeatedly raised concerns and expressed that that Governor Brown could not support this level of funding. In addition, DOF argued that the legislative proposal would increase spending even more in future years. 
 
AB 93 also contains a legislative alternative to frontline public safety grants. The Governor’s FY 2015-16 budget proposed to continue the $40 million local law enforcement grants that cities have received for the last three fiscal years. The Legislature, however, has argued that the agreement to fund those grants expired in FY 2014-15. Instead, the Legislature has proposed to allocate $20 million to a variety of specific programs, including training, anti-terrorism grants, and three infrastructure projects. While the $20 million legislative alternative has been sent to Governor Brown, the League understands it is still being negotiated.
 
The main budget bill was adopted along mostly partisan lines. Democrats stressed that the budget invested in people, especially those who had suffered the most during the recession. Republicans argued that the priority should have been infrastructure, especially water infrastructure. 
 
Many major issues for cities remain open for negotiation, including:
  • Redevelopment (RDA) Dissolution and Related Proposals: The Governor’s budget proposal outlined major changes to the RDA dissolution process, and linked several non-RDA proposals to the RDA package. The League has an opposed this measure for the many negative impacts on cities related to the attempt to overturn several court decisions. While there are some beneficial elements, many legislators have voiced concerns with aspects of this proposal.
  • Cap-and-Trade-Related Allocations: The FY 2014-15 budget provided a continuous appropriation for 60 percent of the Cap-and-Trade auction revenues, which will continue uninterrupted. However, the remaining 40 percent will be negotiated annually. AB 93 includes language to fund the staff positions to keep the programs funded in FY 2014-15 running, but all other decisions remain open for negotiation.
  • Transportation: While not officially part of any budget proposal, transportation revenues continue to be a priority for the League and many legislators. The League does not expect transportation revenues to be adopted as part of the budget package, but it is important to remind legislators that the need continues.
  • Drought Response: AB 93 includes various appropriations in response to the drought, mostly from Prop.1 (2014). However, the Governor’s budget proposed using Cap-and-Trade auction revenues for some drought response measures, including technology programs, appliance rebate programs, and water and energy efficiency projects. 
Budget Trailer Bills

Summaries below include points that may be the most interesting to cities from the bills adopted today. For more details, bill language can be found at www.cacities.org/billsearch.
 
AB 93 (Weber) – Main Budget Bill
This bill is the main budget bill and includes FY 2015-16 appropriations. Numerous provisions in AB 93 remain open for negotiations. The League will provide a more complete summary of this bill when the final budget package is released. 
 
AB 95 (Committee on Budget) – Transportation
  • Provides a one-year extension of an exemption to continue to provide more flexibility in the use of State Transit Assistance Funding for transit operators whose cost increases have exceeded the Consumer Price Index (CPI).
  • Requires Caltrans to report to the Legislature on potential benefits to safety, greenhouse gas reduction, service levels, and operating costs by improving grade separations at key intersections along the state’s intercity rail system.
  • Increases the cap on the number of low-emission and energy efficient vehicles allowed to use high-occupancy vehicle lanes.
AB 114 (Committee on Budget) – Public Works
Makes various changes regarding the financing of capital projects approved by the State Public Works Board. Most changes do not impact local projects, except for some changes to the amount of revenue bonds, notes, or bond anticipation notes that can be issues to finance local jail facilities. 
 
AB 116 (Committee on Budget) – Budget Act of 2014: Supplemental Appropriations
Makes several allocations to cover shortfalls in various programs in FY 2014-15.
 
AB 119 (Committee on Budget) – Skilled Nursing Facilities
Extends various skilled nursing facility fees payments, and exemptions. Sets new performance measures for skilled nursing facilities to receive funding.
 
Next Steps
 
The Constitution requires the Governor to sign the budget by July 1. Given that what the Legislature passed today is not a finished product, it is unclear what Gov. Jerry Brown will do. His options include signing the legislation, reducing the level of appropriations through the use of his “blue pencil,” vetoing the measure or delaying action until the Legislature sends him a revised package that reflects a broader agreement.
 
The League will keep its members updated on any developments in the coming days.
 


 
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