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Governor Unveils Proposed FY 2018–19 Budget

Press Conference Remarks Highlight Continued Fiscal Prudence, Protection of Transportation Funding, Status of State-Federal Relations and Upcoming Court Decision on Pensions

January 10, 2018
This morning Gov. Jerry Brown held a press conference in the Capitol to unveil his budget proposal for the upcoming fiscal year, which includes $131.7 billion in General Funding spending and — with proposed special fund and bond proceed allocations — totals $190.3 billion. 
 
 Despite increased revenue from growing economy and booming stock market, the Governor urged continued prudence and caution, and proposes to put most of the projected $6.1 billion surplus into reserves.
 
Pointing to charts highlighting California’s past boom-and-bust revenue cycle and the length of the current economic expansion, the Governor reminded reporters of inevitability of a future downturn. Also highlighted were federal policy changes that could cause uncertainties for the state budget, including recent and potential changes affecting health care and tax reform. 
 
The Governor proposes to allocate $5 billion to ensure the state’s Rainy Day Fund is funded to its full constitutional target of 10 percent of the General Fund, at $13.5 billion. In other areas, the budget document summarizes areas of achievement since 2011 when the state faced a $27 billion deficit, to stabilizing state finances and paying down an accumulated “Wall of Debt” from $35 to less $6 billion. Also highlighted is the Administration’s work on corrections policies aimed at reducing the state prison population, addressing transportation and other state infrastructure deficits and climate change. Estimates also are included for allocations of the pending $4 billion park and water bond (June ballot) and $4 billion housing bond (November ballot) should voters approve them.
 
The proposed budget includes $4.5 billion in new funding for state and local transportation projects from League-supported SB 1 (Beall). In FY 2018–19 cities and counties will receive $2.7 billion total for local streets and roads, with $1.2 billion being generated by SB 1. The first payments FY 2017–18 the new transportation revenues will begin flowing to cities in February.
 
The Governor delayed expenditure plans on an estimated $600 million generated through legalized recreational cannabis sales until the May Revise. Department of Finance Director Michael Cohen said this estimate is based on a great deal of uncertainty. Cohen said revenues are collected in year one and spent in year two. When asked if the tax rates were so high that those in the black market will opt not to operate in the legalized environment, Cohen responded that it hard to tell. He stated that the state is working to get the regulatory structure all in place.
 
With the additional funding available for schools under Proposition 98 funding formulas, the Governor proposes to fully fund the Local Control Funding Formula, which directs additional funds to assist schools serving needier students. Another initiative would create an online university designed to assist working adults upgrade their job skills.
 
Highlights of Press Repartee with Outgoing Governor
 
Given this is Governor Brown’s final budget proposal, his comments and reporter’s questions strayed into other areas.
  • Effort to Repeal Transportation Funds: When asked about the ballot effort to eliminate new transportation funding, Governor Brown responded that no measure had yet qualified, but stated there would be major opposition to the measure and thought it could be defeated. He also cautioned that eliminating this funding source would be devastating to the economy and it would be at least a decade before lawmakers considered providing necessary money for highways, roads, streets and bridges.
  • State-Federal Relations: When questioned about the current tensions between the state and federal policies enacted by Congress and the President, the Governor stated that he did not like to emphasize divisions. He pointed out that the President’s Administration had been helpful on disaster response. When asked about the recent exemption from offshore oil drilling granted to Florida, the Governor responded that California would also request an exemption. On California’s reaction to federal tax deduction limits, the Governor said he was interested in Senator de León’s charitable deduction concept, but that it needed more analysis. He also opined that the results of the 2018 Congressional elections could restore some balance to the state-federal relationship.
  • Pension Sustainability: On pension issues, the Governor proclaimed that he had a “hunch” that the California Supreme Court, in their decisions on several pending cases, may modify what is known as the “California Rule” (a collection of prior court decisions interpreted to mean the terms of a public employee’s pension cannot be changed without providing the employee offsetting benefits). Governor Brown stated that he believes there is more flexibility in this area than is assumed. He mentioned recent briefs filed with the Court on this topic and lower court decisions by both liberal and conservative judges that state that employees are entitled to a reasonable pension but not to any amount of remuneration.
  • On Being Governor: Asked to comment on the differences in being Governor now compared to the 1970s, the Governor mentioned the increase in partisanship and the post-Prop. 13 insertion of state government into local decision-making has changed the nature of government in California. 
Details budget areas of importance to cities are outlined below.
 
Transportation, Communications, and Public Works
 
The Governor’s budget proposes and $18.7 billion overall transportation budget, anticipated to deliver over $2.7 billion in fuel excise tax revenue to cities and counties. A significant portion of this revenue is derived from last year’s SB 1 (Beall), a historic transportation funding plan generating $54 billion over the next decade. SB 1 will provide $4.6 billion in transportation year in FY 2018–2019 fiscal year, with funding distributed from the Road Maintenance and Rehabilitation Account to the following programs:
 
Local Allocations:
  • $1.2 billion for local streets and roads, including $600 million for cities and $600 million for counties.
  • $330 million for the transit and Intercity Rail Capital Program (TIRCP).
  • $355 million for State Transit Assistance (STA).
  • $200 million for the State-Local Partnership Program (SLPP).
  • $100 million for the Active Transportation Program (ATP).
  • $36 million for Commuter Rail and Intercity Rail.
  • $25 million for Local Planning Grants.
State Allocations:
  • $1.2 billion for maintenance of the state highway system known as the State Highway Operation and Protection Program (SHOPP).
  • $400 million for bridges and culverts.
  • $250 million for commuter corridors.
  • $306 million for trade corridor enhancements.
  • $79 million for the Department of Parks and Recreation.
  • $25 million for freeway service patrol.
  • $26 million for the Department of Food and Agriculture.
  • $7 million for transportation-related research at the California State University and University of California.
  • $5 million for the Transportation Workforce Development Board.
  • $8 million for the Department of Motor Vehicles.
SB 1 funding in FY 2018–19 is generated from:
  • $1.5 billion from the tiered Transportation Improvement Fee ($25–$175 depending on vehicle value);
  • $1.8 billion from the 12 cent increase to the gasoline excise tax;
  • $672 million from the 11 cent increase to the diesel excise tax;
  • $286 million from the increase of four percent to the diesel sales tax; and
  • $235 million from the general fund for loan repayment.
In addition to providing transportation funding for local streets and roads, bridges, the state highway system, transit, active transportation, trade corridors, congestion management, self-help municipalities, intercity rail, commuter rail, transportation research and freeway patrols, the Governor’s January budget summary also notes the following:
  • $100 million in annual efficiencies are expected to be achieved by the California Department of Transportation (Caltrans) from reducing overhead costs, accelerating work, innovation in contracting tools, value engineering, environmental streamlining, and new technologies.
  • A new Inspector General has been appointed by the Governor to oversee the newly created Office of the Inspector General that has audit and investigative oversight over Caltrans.
  • $2.4 billion generated by new SB 1 revenue and Cap-and-Trade auction proceeds will bolster the Transit and Intercity Rail Capital Program, with awards expected to go out by April 30, 2018.
  • The California Transportation Commission (CTC) is expected to select projects by May 16, 2018 for matching funds through the SLPP.
  • Project selection for the ATP has already been completed.
  • The CTC expects to complete project selection for the Commuter Corridors program, Trade Corridors Enhancement program, and matching funds for the SLPP by May 16, 2018.
For city and county transportation funding, it is important to note the increase this year’s growth in new transportation dollars of $1.2 billion as compared to last year’s partial year of funding of $445 million, which are divided equally between cities and counties. As mentioned earlier, city and county funding will grow to approximately $1.5 billion by next fiscal year and grow over the following years as adjustments for inflation are made, and as all the revenue increases go into effect.
 
Enhanced Transportation Resulted From Years of Effort
 
For over 10 years, city officials had been raising concerns about the declining of local streets and roads. Beginning with a report in 2008, the League partnered with the California State Association of Counties and regional governments to review local conditions statewide through the biennial needs assessment report. The 2016 report documented $70 billion in unmet funding needs for the local transportation network, that absent any new funding would have grown by another $20 billion in just 10 years.
 
In addition to the shortfall for the local network, the state highway system faced a similar backlog exceeding $59 billion over the next 10 years, with similar underfunding for transit as well. In short, transportation infrastructure would have continued to deteriorate. 
 
After 25 years without new federal transportation funding, increased vehicle fuel efficiency standards, decades of lost purchasing power due to inflation, and severe storms finally taking their toll to wipe out aged infrastructure, 2017 represented the culmination of a perfect storm for the successful passage of the Road Repair and Accountability Act of 2017. With 25 other states increasing fuel taxes, vehicle and transportation related fees across the country, the chart below helps explain why California needed to do the same:
 
budget-chart.jpg
 
Therefore, securing funding for transportation, especially for our city streets was the League’s top strategic priority for a number of years. In partnership with other local governments, business, and labor, the League formed the Fix Our Roads Coalition and helped pushed for SB 1 to make it across the finish line.
 
Wildfire Response and Recovery
 
The wildfires in late 2017 in both Northern California and Southern California, were the most lethal and destructive in the history of the state. Estimates for the total costs will be in the billions of dollars and the budget suggests that the full economic impacts will not be realized for years to come. The May Revise may include further adjustments.
 
CALFIRE response costs require an increase for the FY 2017–2018 of $469.3 million provided through the Emergency Fund. Another $43.4 million was accessed from the State Fund for Economic Uncertainties for various departments for equipment, personnel, and other disaster response, including removal of hazardous waste. Additional resources were used to provide food, mortgage and rent vouchers, and utilities assistance to individual who were not eligible for federal assistance.
 
Housing, Community, and Economic Development
 
The Governor’s proposed FY 2018–19 budget highlights the passage of the 2017 “housing package” and does not call for any additional state intervention at the local level to spur housing construction. The Budget contains the following allocations that mainly support existing programs:
  • $277 million from the Veterans and Affordable Housing Bond Act (requires the passage of the Bond Act in November 2018) for the Multifamily Housing Program, which assists with new construction, rehabilitation and preservation of permanent and transitional rental housing for lower income households.
  • $262 million for Building Homes and Jobs Fund Programs (SB 2). $131 million of these funds are available for local governments to update or create general plans, community plans, specific plans, local coastal programs, and sustainable communities strategies. Local governments may also use the funds to conduct new environmental analyses that improve or expedite local housing permit processes.
  • $455 million for Strategic Growth Council for Affordable Housing and Sustainable Communities.
  • $1.5 billion for California Housing Finance Agency for single-family first mortgage lending.
  • $108 million for California Housing Finance Agency for single-family down payment assistance.
  • $259 million for Tax Credit Allocation Committee for low-income housing tax credits (federal).
  • $97 million for Tax Credit Allocation Committee for low-income housing tax credits (state).
  • $35 million for Department of Social Services for CalWORKS homeless assistance program.
  • $3 million for Department of Housing and Community Development for implementation of the 2017 statewide housing package. It is assumed that these funds will be largely used to hire additional staff.
Housing supply and affordability challenges are not just a California phenomenon. Nationally, individuals have found it difficult to find an affordable place to live, especially near booming job centers. State estimates calculate that California needs to add an estimated180,000 housing units per year to keep pace with population growth. The Governor’s Budget points out that 139,000 units annually are expected to be produced by 2019. This represents a 39 percent increase in housing production since 2013. While there has been much debate over California housing production, census data included in the Governor’s budget reveals that California’s production has rebounded since 2013 at a faster rate than the nation as a whole, which is projected to increase by 33 percent.
 
Numerous laws took effect in January aimed at streamlining the housing approval process, and provided new funding for important housing programs and local planning activities.  When combining California’s projected increase in housing production with the recently enacted 15 bill “housing package,” even more housing units could be produced. For more information, please see the League’s 2018 Guide to New Housing Law in California.
 
Homelessness
 
The proposal contains funding for the No Place Like Home Program by earmarking $262 million for permanent supportive housing for persons who are eligible for mental health services under Prop. 63 (2004) and are homeless, chronically homeless, or at risk of chronic homelessness. Technical Assistance Grant guidelines are available on the Department of Housing and Community Development (HCD) website. Distribution of funds are on hold until the Superior Court of the State of California validates the issuance of revenue bonds. HCD anticipates the court decision in Spring 2018 with Notice of Funding Availability (NOFA) in Summer 2018.
 
Workforce Development
 
The Budget contains new allocations that build on the workforce reforms in K-12 and higher education in recent years:
  • $212 million for K-12 local educational agencies to improve and expand their career technical education programs aligned with the goals of the Strong Workforce Program.
  • $20.5 million for a cost-of-living adjustment for the Adult Education Block Grant program, with $5 million for investments in a data collection and accountability system to ensure comprehensive and shared data reporting by Adult Education Block Grant regional consortia members.
  • $17.8 million ongoing for increased reimbursements to K-12 and community college-sponsored apprenticeship programs for instructional hours provided in FY 2018–19, with an additional one-time increase of $30.6 million to backfill shortfalls in reimbursements provided from FY 2013–14 to FY 2017–18.
Job Creation
 
In the wake of dissolving redevelopment agencies and repealing the enterprise zone program, the state redirected some of the saved state revenue to the California Competes tax credit program. California Competes is an income tax credit available to any business that wants to locate, stay, or expand in California.
 
The budget seeks to extend the California Competes program as follows:
  • $180 million for an additional five years with an additional $20 million to provide direct assistance to small businesses.
A separate program will provide $50 million per year credit to encourage businesses to hire individuals with employment barriers. 

State Infrastructure Funding Plan
 
Pursuant to the California Infrastructure Planning Act of 1999, the Governor is required to submit a five-year infrastructure plan to the Legislature for consideration with the annual budget bill, which focuses limited resources on the state’s core responsibilities. Below are some highlights noted in the 2018 five-year infrastructure plan:
  • Integrating Climate Change and Resiliency into Planning and Investment
    • The Governor’s Executive Order B-30-15 of 2015 directs all state agencies to consider climate change in all planning and investment decisions, including the Governor’s greenhouse gas emissions reduction target of 40 percent below 1990 levels by 2030, which was adopted in 2016 (SB 32). The Governor’s Office of Planning and Research (OPR) established a guidance document in coordination with the Strategic Growth Council and the Government Operations Agency. In addition, the permanent Technical Advisory Council was established to coordinate resiliency efforts across state, local, and regional agencies to meet these goals.
  • Maintenance of Existing Infrastructure
    • $55 billion in new revenue over the next 10 years to repair and maintain the existing transportation network.
  • Affordability — Debt Management
    • While the administration has taken action to reduce the growth of debt financing, preferring pay-as-you-go financing (i.e. SB 1), debt service on infrastructure bonds are still expected to increase to $8.5 billion in FY 2021–22 assuming the Housing and Parks Bonds are approved by the voters in 2018. While debt service is expected to grow, the debt ratio is actually projected to decline slightly because of higher projected revenues.
  • Judicial Branch
    • The proposal includes $32.2 million from the Immediate and Critical Needs Account to complete design of courthouse projects in Riverside, Sonoma, and Stanislaus County. The Budget also commits to completing construction for another ten courthouse projects in Imperial, Riverside/Indio, Shasta, Siskiyou, Tuolumne, Glenn, Sacramento, Sonoma, and Stanislaus County.
  • Housing
    • The Veterans and Affordable Housing Bond Act of 2018 would generate a $4 billion bond if approved by the voters in November 2018. The first $3 billion will support affordable multifamily housing, farmworker housing, transit-oriented development, infill infrastructure, homeownership programs, as well as matching grants for Local Housing Trust Funds (awarded over five years). $1 billion is set aside to support homeownership for veterans with downpayment assistance, competitive interest rates, reduced fees and closing costs. The Governor’s January budget also includes $277 million local assistance for the Multifamily Housing Program, if voters approve the 2018 Housing Bond.
  • Natural Resources
    • If approved by the voters in June 2018, the California Drought, Water, Parks, Climate, Coastal Protection, and Outdoor Access for All Act of 2018 would authorize $4 billion in general obligation bonds, where funding would be prioritized for existing programs and shovel-ready projects.
  • California Conservations Corps
    • The budget includes $14 million in General Fund dollars to initiate four new residential center projects in Auberry, Los Pinos, Greenwood, and Yountville and to rehabilitate two centers in Ukiah and Fortuna, adding capacity for up to an additional 390 corps members.
  • Department of Corrections and Rehabilitation
    • The proposal includes $60 million to replace roofs at the California Substance Abuse Treatment Facility, Salinas Valley State Prison, and Ventura Youth Correctional Facility. It contains $20 million for mold remediation at various facilities and $35.9 million in General Fund dollars for projects to support CDCR’s programs, including mental health crisis beds, statewide medication distribution, and cognitive behavioral treatment classrooms.
  • K-12 Education
    • Over the last two years, voters have approved 208 local bond measures authorizing more than $28 billion for school construction and modernization and $7 billion in state general obligation bonds to support the existing K-12 School Facilities Program. Additionally, the Governor’s proposed budget includes $640 million in bond authority for new construction.
  • Department of Veterans Affairs
    • The proposal includes $15.7 million in General Fund dollars for the preliminary plan phase of a Skilled Nursing Facility at the Veterans Home of California, Yountville, which represents CalVet’s top priority. There’s also $571,000 for the working drawings phase of the California Central Coast Veterans Cemetery Project in Seaside, CA.
Environmental Quality
 
Cap-and-Trade
 
As a result of extending the Cap-and-Trade program through 2030, the state has garnered additional Cap-and-Trade revenues. The budget proposes $1.25 billion will be available for appropriation in FY 2018–19. The Governor will announce a plan for spending Cap-and-Trade funds during his State of the State Address scheduled for Jan. 25.
 
Climate Resiliency and Adaptation
 
The budget acknowledges the role of climate change in coastal storm surges, drought, wildfires, floods, and heat waves and proposes to hold targeted stakeholder discussions on climate change and adaptation with stakeholders to discuss climate adaption for state and local governments as well as private industry.
 
SB 5 Park and Water Bond
 
The budget proposes $1.02 billion for the first year of implementation if the voters pass this measure in June. This includes $123 million for climate resiliency and adaptation programs, including coastal protection. The budget proposes to fund “shovel-ready” projects with SB 5 funds in FY 2018–19.
 
Water
 
The Governor’s budget proposes a water action plan made up of the components below.
  • Groundwater Sustainability: Proposes the following funding to support 2014 groundwater management bills that require local agencies to work together to manage groundwater:
    • SGMA Implementation: Proposes to use $61.8 million from SB 5 for the Department of Water Resources (DWR) to support groundwater sustainability agencies: (1) technical assistance to develop and evaluate plans, (2) supplement planning grants, and (3) grants to implement groundwater projects.
    • Groundwater Treatment: Proposes to use $84 million from SB 5 for the State Water Board for regional groundwater treatment and remediation activities that prevent or reduce contamination of groundwater that serves as a source of drinking water, including $10 million for technical assistance for drought and groundwater investments.
  • Flood Management: Proposes $98.5 million from SB 5 for flood control projects for public safety and fish and wildlife improvement, as well as funding for a new Floodplain Management, Protection and Risk Awareness Program.
  • Salton Sea Restoration: Proposes $30 million from SB 5 for the Natural Resources Agency to construct water management infrastructure and habitat conservation and dust mitigation projects, consistent with the Phase I ten-year plan.
  • Drinking Water: The proposal states that many local water systems continue to fail to provide safe drinking water and a stable funding source is needed for long-term operations and maintenance for those parts of the state, which are primarily serve disadvantaged communities. It makes two proposals to address this:
    • Safe and Affordable Drinking Water Fund: Establishes a new special fund for the State Water Resources Control Board (SWRCB) to assist communities in paying for the short-term and long-term costs of obtaining access to safe and affordable drinking water. The Administration is proposing statutory language, consistent with the policy framework of SB 623 (Monning) to establish a program that provides grants, loans, and administrator contracts or services to assist communities and households in securing access to safe and affordable drinking water. Proposes $4.7 million in 2018-19 for the SWRCB and the Department of Food and Agriculture to begin implementation of this new program, including (1) developing and implementing fee collection systems, (2) conducting an assessment to estimate funding needs, and (3) a map of high-risk aquifers used as drinking water sources.
    • Safe Drinking Water Projects: Proposes $63 million from SB 5 to the SWRCB for grants to public water systems in disadvantaged communities for infrastructure improvements for drinking water and wastewater treatment projects. Of this, $27 million would be designated for regional water supply improvements in the San Joaquin River watershed.
Department of Water Resources
 
The budget proposes $3.4 billion ($119.4 million General Fund) and 3,214 positions for the department. In addition to the new dam safety requirements put into place in 2017, the budget continues to propose fixes to the Oroville Dam in 2018, following the spillway emergency in February 2017.
 
Department of Forestry and Fire Protection (CALFIRE)
 
The budget proposes $2.3 billion (including $1.4 billion from the General Fund) and 7,014.5 positions for CALFIRE. While recognizing that fire season has become longer and more intense in recent years, the budget proposes the following changes:
  • $42.2 million of new ongoing funding to expand the states firefighting capabilities.
  • $200 million from Cap-and-Trade fund to support healthy and fire resilient forests.
  • $97.6 million for four helicopters to replace the existing aging fleet.
  • $4 million to add 6 permanent positions and 6.1 seasonable positions to staff and operate the McClellan ReLoad Base for rapid deployment of air tankers.
  • $26.6 million for an 18-month firefighter training program for 80 ex-offenders at the Ventura Conservation Camp in Venutra County. The funding is proposed for appropriation to CALFIRE, the Department of Corrections and Rehabilitation, and the California Conservation Corps.
Department of Fish and Wildlife
 
The proposal includes $609.7 million ($93.9 million General Fund) and 2,171.8 positions for the Department. To continue to implement recommendations from the 2012 California Fish and Wildlife Strategic Vision report, the budget proposes $50.6 million of ongoing funding ($6.6 million
General Fund, $18 million Motor Vehicle Account and $26 million Tire Recycling
Management Fund). The $50.6 million is proposed to be allocated for the continuing services and augmenting services: 
  • $19.6 million to allow the department to continue critical programs supported by the Fish and Game Preservation Fund, and
  • $31 million augmentation to implement specific priorities identified through the stakeholder process and detailed in the future vision for the department.
Community Services
 
Department of Parks and Recreation
 
The budget proposes $1.2 billion ($147 million General Fund) and 2,304.2 positions for the Department of Parks and Recreation. It proposes to modernize state parks system and improve access to both state and local parks largely through proposed appropriations of SB 1 and SB 5 funds.
  • Local parks/SB 5 : Should SB 5 pass in June, this budget proposes to expend the $464 million allocated for local parks:
    • $277 million for the Statewide Park Development and Community Revitalization Program for grants to create new parks and rehabilitate existing parks.
    • $186 million for per capita grants to local governments.
  • State parks/SB 5: Should SB 5 pass in June, this budget proposes to expend $200 million for state park enhancements, including project identification and planning. Of this, $1.9 million is proposed for implementation of the Redwoods Rising project to enhance old growth coastal redwoods.
  • State parks/SB 1: Using funding garnered by SB 1 (Beall, 2017), the budget includes ongoing funding of $80 million to the State Parks and Recreation Fund to be used in the following ways:
    • $42 million and 364 positions to increase services that improve park access and fix and maintain park infrastructure, including to help address the more than $1 billion in deferred maintenance projects. 
    • $26.6 million in permanent funding to address the structural imbalance in the State Parks and Recreation Fund and to $8.5 million to establish a reserve.
    • $1 million in permanent funding for a recruitment and training program for hard-to-fill classifications and diversity that was established in the FY 2017–18 budget.
    • $1 million for off-highway vehicle recreation, including law enforcement, environmental monitoring, and maintenance grants to support federal off-highway vehicle recreation
    • $1 million for the Abandoned Watercraft Abatement grant program to remove abandoned watercraft from waterways.
Child Care
 
In 2016, the state committed to a three-year deal to expand child care and preschool slots and increase rates after these programs faced major cuts during the Great Recession. This budget proposes to build upon these investment with the following adjustments:
  • $31.6 million to increase the Standard Reimbursement Rate by approximately $2.8 percent.
  • $32.3 million increase for: (1) costs of new policies associated with an update of the Regional Market Reibumrsement Rate to the 75th percentile of the 2016 regional market rate survey beginning Jan. 1, 2018 and (2) 2,959 additional full-day State Preschool slots beginning April 1, 2018.
  • $5.2 million increase for CalWORKS Stage 2 and 3.
  • Decrease of $120.1 million from federal TANF funds for $707 million in total spending from federal TANF and Child Care and Development Fund.  
Public Safety
 
First-Responder Communications

The Governor’s January 2018 budget proposes $11.5 million for the State Emergency Telephone Number Account (SETNA) to modernize the state’s 9-1-1 system with a Next Generation 9-1-1 system and improve public safety communications during emergency events.

The budget summary also acknowledges that the current SETNA fee model is no longer sufficient to support the legacy 9-1-1 system or the buildout for the Next Generation 9-1-1 system. The budget proposes to revise the fee structure to a per-subscription flat rate on all voice and data plans similar to other states, which is currently only charged on intrastate voice plans. Additionally, the Administration has formally opted into the federal FirstNet program, which was awarded to ATT and anticipates to deliver a dedicated telecommunications spectrum to law enforcement and first responders.
 
Department of Corrections and Rehabilitation
 
The Governor’s budget emphasizes continuing progress on efforts to manage the prison population consistent with the federal court order to maintain that population at 137.5 percent of the correctional system’s design capacity. Despite the state taking the initiative with AB 109 (2011), and the separate development of Prop. 47 (2014), which reclassified a host of felony offenses as misdemeanors, in late 2016 CDCR’s adult inmate population projections indicated the prison population would continue to increase by 1,000 inmates per year. This frustrated the state’s goal of adhering to the federal court’s directive. 
 
To maintain compliance with the court-ordered population cap, the Governor sponsored Prop. 57, providing inmates with incentives in the form of good time credits for significant rehabilitation programming, granting courts discretion as to whether young offenders should be tried as adults, creating a parole consideration process for non-violent offenders who serve 100 percent of their baseline sentence. The proposed FY 2018–2019 budget seeks to advance the goals of providing offenders a greater opportunity for rehabilitation, improving offender outcomes and enhancing public safety in the long run.   
 
Total funding: $12 billion (increase of $599 million over last fiscal year) with the preliminary breakdown being:
  • $11.7 billion General Fund.
  • $313 million other funds.
Inmate Population:
  • Current estimated Average Daily Inmate Population: 130,317 (up 2.1 percent over what was projected a year ago).
  • Adult inmate population projected to decline by 0.2 percent in FY 2018–19 to 127,412
  • Proposition 57 is estimated to reduce CDCR’s inmate population by 6,300 in 2018-19, increasing to 11,500 in 2020-21. (NOTE: Budget document concedes these numbers are uncertain – in part due to the threat of Police Chiefs-Retailers Initiative, although it is not explicitly mentioned).
Parolee Population:
  • Increase of $23.1 million general fund for Adult Parole Operations.
  • FY 2018–19 population projection: 49,794 (increase of 5.1 percent).
Division of Juvenile Justice Average Daily Population:
  • Total population of 615 in FY 2017–18, and 645 in FY 2018–19.
Rehabilitation Programming Generally
 
While the budget states rehabilitation funding has “been re-established to prior levels,” it does not put this statement into context. 
 
Core Rehabilitation Programs
 
The Administration maintains the following have been extended to all prisons:
  • Substance abuse treatment programs.
  • Cognitive behavioral treatment programs.
  • Academic education classes.
  • Career technical education, with additional resources to expand programming slots.
  • Arts-in-Corrections programs.
  • Transitional preparations courses focused on job readiness.
  • Community College courses with in-person instruction.
Additional Programs (not claimed to be system wide):
  • Implementation of TV-based education program for those unable to attend in-person instruction.
  • Programming grants intended to encourage nonprofit providers to expand their programs.
  • Expansion of programs tailored to long-term offenders:
    • Substance abuse disorder mentor certification.
    • Cognitive behavioral treatment for those before Parole Board.
Programs Addressing Post-Release Wrap-around Services:
  • Cal-ID program providing released inmates with state ID cards.
  • Pre-enrolling inmates into Medi-Cal prior to release.
  • Community Re-entry programs allowing eligible ex-offenders to serve the final year of their sentence in community-based re-entry centers.
  • New transitional housing program providing meals, support services, peer-driven programming and other resources for first six to 12 months post-release.
Expenditures on Rehabilitation Program Expansions:
  • Career Technical Education: $6.7 million General Fund for 13 additional sites, 338 additional programming slots plus $1.5 million General Fund for equipment replacement. (Education aligned with state boards and national organization certifications):
    • Allows capacity for to serve up to 9,100 offenders/year.
    • Does not include information as to the amount of increase over the last fiscal year.
  • Self-Help Groups: $2.5 million for Inmate Activity Groups eligible under Proposition 57 for Rehabilitative Achievement Credits.
    • Supports expansion from 1,100 programs in 2016-17 to over 3,000 programs by 2018-19
  • Rehabilitative Programming Grants: $4 million GF to the Inmate Welfare Fund to provide these grants to Non-Profits with demonstrated track-record of success.
  • Statewide Prison to Employment Initiative:
    • $16 million GF for this partnership between the California Workforce Development Board, CDCR, the California Prison Industry Authority to provide services for regional and local programming implementation to integrate re-entry and workforce services – also to direct services to ex-offenders.
  • Firefighter Training and Certification Program (New):
    • $26.6 million General Fund to establish this 18-month program for ex-offenders for education and training to become a firefighter. 
    • Creates a training center at the Ventura Conservation Camp for 80 ex-offenders
    • California Conservation Corps to be employer of record, program allows up to 20 CCC members to participate in training courses.
    • California Department of Forestry and Fire Protection (CAL FIRE) to be in charge of administration, fire training and certification.
  • Infrastructure Maintenance
    • $131.1 million for system-wide infrastructure investments, consisting of:
      • $60.7 million to replace roofs at various facilities;
      • $20 million for mold remediation efforts;
      • $32.9 million to replace the public safety radio communication system at nine institutions that have not yet upgraded them;
      • $17.5 million to replace health care vehicles used to transport inmates to health care appointments outside the prisons.
  • Inmate Medical Care and Mental Health Services:
    • $3.1 billion General Fund for health care services programs:
      • Mental Health.
      • Medical and Dental Care.
Federal Receivership Overseeing Prison Medical Care:
  • Established by federal court in 2005.
  • To date, the Receiver has transferred oversight of 15 institutions back to the state (roughly half of the prisons).
  • Budget includes $2.1 billion for prison medical care, an increase of $12.8 million:  
    • $8.3 million to complete integration of an Electronic Health Records System
    • $4.5 million to lease automated drug cabinets for controlled substances, and establish a Correctional Clinic Model for non-patient specific medications
Increase to In-Patient Mental Health Treatment Bed Capacity:
  • $20.1 million to address mental health bed capacity, and resources to monitor health care data reporting and patient referrals:
    • $8.7 million for conversion of two existing housing units to allow them to transition between different levels of care;
    • $6.8 million to add 15 Mental Health Crisis beds and 5 Psychiatric In-patient beds at the California Institute for Women;
    • $2.4 million to improve patient movement in and out of in-patient treatment beds;
    • $1.2 million for related utilization management reviews; and
    • $1 million to transfer 20 Mental Health Crisis beds from Northern California to Southern California to address a greater need for treatment beds.
Juvenile Justice Reform
 
Age of Jurisdiction:
  • The proposal includes reversal of change made in 2012 that lowered the upper age of jurisdiction from 25 to 23 for youth sent to Division of Juvenile Justice. The department will once again have jurisdiction over youth up to age 25.
  • This is based on new research on brain development, and juvenile case law re: diminished culpability of juvenile offenders, and will allow a larger universe of youth to access rehabilitative programming designed for young offenders, helping reduce their rate of recidivism upon release.
Youthful Adult Offender Pilot Program
  • $3.8 million General Fund allocation for a state pilot program to establish two housing units supporting a Young Adult Offender Pilot Program diverting a limited number of young adult offenders who have committed specified crimes from adult prison to a juvenile facility.
  • This is based on the success of a five-county pilot program authorized by SB 1004, Chapter 865, Statutes of 2016 providing housing for youth aged 18 to 21 in juvenile halls rather than county jails.
Local Public Safety
 
Community Corrections Performance Incentive Grant:
  • $106.4 million to continue this successful program, providing incentives for counties to reduce the number of felony probationers sent to state prison.
Post-Release Community Supervision:
  • $29 million GF for county probation departments to supervise temporary increases in average daily population of Post-Release Community Supervision offenders as a result of Prop. 57.
Prop. 47 Savings:
  • Department of Finance estimates net savings of $64.4 million in FY 2018–19, this is an increase of $18.8 million over estimating savings in FY 2016–17.
  • Ongoing savings currently estimated to be $69.9 million 
Department of Justice
 
New Sex Offender Registry: DOJ will proceed working with the Attorney General’s office on a funding proposal in the spring to implement SB 384, Chapter 541, Statutes of 2017, which mandates replacement of the lifetime sex offender registry with a tiered registration system beginning Jan. 1, 2021.
 
Judicial Branch
 
The proposal continues to honor the state’s commitment to fund new trial court construction, improve access to the courts, and to make the court system whole in the face of ongoing declining revenues from the State Penalty Fund.
  • Total Funding: $4.2 billion
    • $1.9 billion GF
    • $2.3 billion other funds (with $2.2 billion supporting trial court operations)
  • Breakdown:
    • $150 million GF to improve and modernize trial court operations, and increase access to courts
      • Trial Court Operations: $47.8 million for trial court operations in courts that are below 76.9 percent of their overall funding needs, based on Workload-Based Allocation and Funding Methodology
      • Discretionary funding for trial courts: $75 million for allocations based on Judicial Council priorities
      • Self-Help Services: $19.1 million to help prepare self-represented litigants (total budget: $30.1 million)
      • Language Access: $4 million for expanded availability of interpreters for civil matters in all courts
      • Civil Traffic Pilot: $3.4 million for a five-court pilot program to usher in a civil model for adjudication of minor traffic violations
      • Court-Appointed Special Advocate Program: $500,000 for grants to trained volunteers assigned by a juvenile court judge to youth in foster care — for direct services to 2,200 foster youth
      • California Courts Protective Order Registry: $200,000 to expand this registry serving as a central repository of restraining and protective orders safeguarding victims of violence and law enforcement officers in the field
State Penalty Fund
  • $34.1 million General Fund to backfill losses resulting from a continuing decline in fines and penalty revenues expected in 2018-19
Trial Court Employees
  • $25.9 million General Fund for trial court employee retirement and health benefit costs
Trial Court Construction
  • $32.2 million for completing the design of three courthouse projects in Riverside, Sonoma, and Stanislaus Counties.
  • Separate commitment to completing construction for next ten courthouse projects ready to begin construction from lease revenue bonds through 2020.
    • This includes projects in Imperial, Riverside/Indio, Shasta, Siskiyou, and Tuolumne in FY 2018–19, plus additional projects in Glenn, Riverside/Mid-County, Sacramento, Sonoma, and Stanislaus in FY 2019–2020.
Next Steps
 
Following the release of the Governor’s budget, an analysis by the Legislative Analyst is expected shortly. The League will continue to examine the details of this budget proposal and provide addition information to cities as warranted.
 


 
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