Latest: Highlights of Calif. budget proposal (2/15/09)

[Turner]

http://www.mercurynews.com/ci_11710953
Highlights of Calif. budget proposal
By The Associated Press
Posted: 02/15/2009 07:00:54 AM PST

California lawmakers failed on Saturday to pass a compromise plan to
close the state's $42 billion budget shortfall and were trying again
on Sunday. The proposal uses a mix of tax increases, spending cuts and
borrowing. It also contains provisions aimed at resuscitating the
economy. Here are the most recent details:
Revenue
The proposal would raise up to $14.4 billion through June 2010 by
imposing a variety of temporary taxes. The higher taxes would be in
effect for two years. However, Republicans would allow taxes to remain
longer—two more years—if voters approve a state spending cap during a
special election in May.
Here are the specific taxes:
— Increases the state sales tax by 1 cent on the dollar, generating
$5.8 billion through the next fiscal year.
— Raises the fee for licensing vehicles to 1.15 percent of market
value, up from the current .65 percent. The move is projected to
generate $1.5 billion. A portion of the fee will be dedicated to local
law enforcement.
— Adds a 12-cent gasoline tax, raising $2 billion.
— Imposes a one-time, 5 percent surcharge on people who owe personal
income tax at the end of 2009 to generate $3.2 billion. If the state
receives more than expected from the federal government, the surcharge
would be reduced to 2.5 percent.
— Reduces the amount taxpayers can claim on a dependent care credit to
the federal level of $100 instead of $300, adding $1.4
billion.
— Redirects $201.6 million of tribal gambling revenue from the state
Department of Transportation to the general fund over the two-year
period. The money is intended to offset the effects of increased
traffic around Indian casinos.
Cuts
Reduces state general fund spending by $15.1 billion through the end
of June 2010 by forcing education and social service programs to
absorb much of the pain. Among other cuts, the budget proposal:
— Reduces education spending by $8.6 billion over two years, likely
forcing schools to lay off teachers, slash salaries and postpone
spending on construction and textbook purchases. The proposal also
would give districts greater flexibility in spending money that is
normally dedicated to specific programs.
— Imposes a 10 percent across-the-board cut to the University of
California and California State University systems, saving $264.4
million.
— Continues a two-day-a-month furlough for 238,000 state workers,
trims overtime pay and eliminates Lincoln's Birthday and Columbus Day
as paid state holidays, saving $1.4 billion.
— Cuts the medical budget for the state prison system by 10 percent,
saving $181 million.
— Eliminates annual cost-of-living increases for recipients of the
state's welfare-to-work program, known as CalWORKS, to save $79
million.
— Eliminates the state and federal cost-of-living increase for seniors
and the disabled who are receiving Supplemental Security Income/State
Supplementary Payment, saving $594.1 million.
— Depending on whether the federal government provides additional aid,
the budget compromise would make further reductions to the courts;
Medi-Cal, the state's health insurance program for the poor; CalWORKS;
in-home support for seniors; and other social service programs by $948
million.
Borrowing
— Approves a $5 billion plan to borrow against the value of the
lottery's future revenue. Voters must approve changes to the lottery
to make it more marketable in the hope that it will bring in more
money, and then the state would have to entice investors to buy the
bonds.
— Authorizes the state to take out $6 billion in bonds to cover bills
that will not get paid in the current fiscal year. Lawmakers hope to
avoid this loan by using federal aid.
— $432.6 million transferred from various special funds.
Ballot Questions
— Spending cap: Asks voters to impose a limit on the amount the state
can spend each year based on revenue growth over the previous 10-year
period. Money above that amount would be saved in a rainy day fund.
That fund would be capped at 12.5 percent of revenue, and any amount
above that could be used to pay debt or for one-time purposes. If
voters approve the cap, then temporary taxes that are part of the
budget would be extended for an additional two years.
— Education: Asks voters to modify Proposition 98, the voter-approved
minimum school funding guarantee, to protect education funding when
state revenue rebounds after lean budget years.
— Mental health: Asks voters to shift $227 million in voter-approved
funding from Proposition 63, the state mental health fund, for two
years to pay for a low-income child development program known as the
Early Periodic Screening, Diagnosis and Treatment Program.
— Child development: Asks voters to redirect $608 million in First 5
money for early child development to other children's programs for
five years. Voters approved Proposition 10 in 1998, adding a 50-cent
tax to each pack of cigarettes.
— Lottery: Asks voters for permission to hand out larger lottery
jackpots as a way to sell more tickets. Also grants the state
permission to stop using lottery proceeds for education programs.
Instead, school funding would be paid through the general fund.
Economic stimulus
— Grants up to $400 million in tax credits for companies with 20 or
fewer employees that hire new workers over the next two years. Allows
businesses to claim a credit of up to $3,000 per full-time job
created.
— Provides up to $100 million a year for five years in tax incentives
for movie studios to film in California, known as the runaway
production credit.
— Reformulates taxes for corporations that operate in multiple states.
Republicans say the tax break would encourage investment in California
while critics called it a giveaway that could cost the state $690
million a year.
— Allows unlimited public-private partnerships on state transportation
projects through 2017.
— Speeds up construction on 15 state public works projects, 5 local
transportation projects and 10 redevelopment agency projects by
allowing one company to do both the design and construction.
— Removes environmental hurdles and accelerates permit approval for 10
road projects in seven counties through 2010. Allows the state to
expand partnerships with private companies to build projects from
design to construction.
— A 2007 off-highway diesel regulation requires bulldozers, airport
baggage trucks and ski resort snowcats to begin reducing emissions
from their fleets in 2010. The rule phases in the regulation through
2020 for fleets of large vehicles. The budget proposal would delay the
initial phase-in requirements, requiring fewer vehicles to comply in
the early years.
— Exempts environmental reviews for selling surplus state property.
— A state grant program offers funding to companies that take steps to
reduce harmful emissions from their vehicles before state air
pollution requirements go into effect. The budget proposal would allow
farmers to access that money even if the requirement has already taken
effect.
— Exempts some rural communities from paying prevailing wage on public
work projects.