Budget Subcommittee Spotlight: March 23, 2017

Thursday, March 23, 2017

Below is a summary of budget subcommittee activities from the past week:

Subcommittee #1 (Education)

Portantino (D-Los Angeles) Chair, Moorlach (R-Costa Mesa), Jackson (D-Santa Barbara)

Adult Education Outcomes Missing; One-time Funds Provide Protection: The subcommittee heard testimony on the progress of the state’s new regional Adult Education Program. Senator John Moorlach (R-Costa Mesa) noted that the state is spending half a billion dollars annually for adult education and pressed for data that will show whether that spending is buying positive student outcomes. Senator Moorlach also lauded the inclusion of over $175 million in one-time funding in the community college budget, noting that one-time funds will provide insulation for the colleges in the event of an economic downturn. 

Subcommittee #2 (Resources, Environmental Protection, Energy, and Transportation)

Wieckowski (D-Fremont) Chair, Nielsen (R-Tehama), McGuire (D-Santa Rosa), Mendoza (D-Cerritos)

Billions in New Taxes Could Push California over Spending Limit: The governor has proposed to raise taxes and fees on California drivers to the tune of $4.3 billion annually for repair and maintenance of state and local highways and roads, as well as more funding for transit projects.  Senator Jim Nielsen (R‑Tehama) raised a larger budget issue that additional state taxes and increased spending could push the state over a spending limit established by California voters in the state constitution. The governor is choosing not to count $22 billion in state spending toward the limit, a move the Legislature’s nonpartisan budget advisor believes “contradicts long-standing policies”, “violates [the] spirit” of the spending limit, and would be “highly vulnerable to legal challenges.” The subcommittee did not vote on the transportation infrastructure package, because legislative Democrats are separately seeking support for their own larger transportation tax increase.

High-Speed Rail Outlook Remains Dismal: The subcommittee also received a brief update on the high-speed rail project. The budget includes $1.1 billion to continue construction on a line from San Jose to north of Bakersfield, known as the Valley-to-Valley segment.  For many years the project has been plagued with funding issues: a lack of any private investment, a limited commitment from the federal government, and a shrinking pot of funds from the state’s “Cap-and-Trade” greenhouse gas program. The limited money available results in a funding gap of nearly $50 billion, or about 78 percent of the cost of the system. This discussion was an oversight item with no votes taken.

Subcommittee #3 (Health and Human Services)

Pan (D-Sacramento) Chair, Stone (R-Temecula), Monning (D-Santa Cruz)

$1.9 Billion Error Could Mean Doctors Won’t Get Paid on Time: The subcommittee heard testimony from the Department of Health Care Services, which took responsibility for $1.9 billion in accounting errors in the Medi-Cal budget. Because these costs have already been paid, Medi-Cal will soon exceed its approved budget, leaving the department unable to pay its bills in the late spring. Senator Jeff Stone (R-Riverside County) asked if Medi-Cal doctors were at risk of not receiving payments for their services. The department confirmed this risk, but indicated that the governor is asking the Legislature for a bill that would increase the department’s $1 billion cap on short-term cash borrowing. Senator Stone then questioned whether the Legislature should avoid these problems in the future by storing more General Fund in the state’s discretionary reserve. The subcommittee held the item open to discuss again at a later date.

Subcommittee #4 (State Administration and General Government)

Roth (D-Riverside) Chair, Wilk (R-Antelope Valley), Glazer (D-Orinda)

Payroll System Shows Government’s Technology Incompetence: The subcommittee heard and voted on the governor’s request for $3 million for the State Controller’s Office to begin examining alternatives for replacing the state’s payroll system. The request received bipartisan votes in support. In 2013, the Controller’s Office finally ended its previous attempt to build an IT system after multiple years of cost overruns, schedule delays and testing problems. The previous project was a classic example of taxpayer dollars being wasted due to the state’s inability to successfully plan and implement a significant IT system within budget and on time. State government’s lack of effectiveness and accountability for numerous IT failures stands in sharp contrast to the world- renowned innovation of Silicon Valley, just a short distance away.  

Subcommittee #5 (Corrections, Public Safety, and the Judiciary)

Skinner (D-Berkeley) Chair, Anderson (R-San Diego), Beall (D-San Jose)

Action Needed to Solve Criminal Justice System Funding Woes: The subcommittee discussed (but did not vote on) the governor’s proposal to address an ongoing shortfall in special revenues that pay for various criminal justice programs and the courts. These revenues are generated from fines and penalties on criminal convictions and traffic infractions, which have been steadily declining since 2009. The proposal would eliminate funding for some programs, like the California Gang Reduction, Intervention, and Prevention grant program, and reduce support for others, like reimbursements to local law enforcement agencies for peace officer training costs. Senate Republicans believe that while the governor’s proposal would technically address the problem of insufficient revenues, it also would harm local criminal justice programs without adequately exploring funding alternatives.

Ending Driver’s License Suspensions Could Worsen Budget Problems: The subcommittee also discussed the governor’s related proposal that would eliminate the current practice of suspending driver’s licenses for drivers who fail to pay court-ordered debt, which includes the fines and penalties discussed above. While the proposal would alleviate the double whammy that sometimes occurs when low-income individuals cannot afford to pay their fines, it also would remove one of the few effective tools courts have to encourage defendants to pay. Senator Joel Anderson (R-San Diego) expressed concern about ending the suspensions without also accounting for the likelihood of additional lost revenues for the criminal justice system. The subcommittee voted 3-0 to approve the proposal, but took no action to fix the revenue problem that will likely result. Senate Republicans believe the budget needs to include a plan to address this possibility.

You can view the agendas for next week’s budget subcommittee hearings here.