08budgeting

08budgeting - Budget Process and Politics July 12, 2007...

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Unformatted text preview: Budget Process and Politics July 12, 2007 Today's Topics What does the budget look like? Where are we spending money? Budget process Budget politics Expenditures Direct 45% Utility 3% Insurance trust 13% Intergovernmental 39% Passed to Local Governments 80% 75% 70% % of Expenditures 65% 60% 1985-86 1987-88 989-90 1 1991-92 993-94 1 1995-96 997-98 1 1999-00 2001-02 003-04 2 2005-06 Local governance General Fund Expenditures (Billions of Dollars) Other Mandated Programs $58.3 (56%) Pre-Payments and Repayments $1.7 (2%) Discretionary $1.0 (1%) Payments Mandated by Courts or Contracts $0.9 (1%) Proposition 98 $41.9 (40%) General Fund Expenditures Function Prop. 98 HHS Medi-Cal Corrections/Rehabilitation Other Higher Education Other K-12 Judicial Prop. 42 Payment Pre-Payment of Debt Health for Retirees Discretionary Legal Mandates All Other Amount (Billions) $41.9 $15.0 $14.7 $9.3 $7.8 $3.7 $2.3 $1.5 $1.7 $1.1 $1.0 $0.9 $3.0 State Expenditures K-12 Education 39% Other 4% Debt Service 5% Higher Education 11% Social Services 11% Criminal Justice 10% Health Services 20% K-12 Per Pupil Spending 100% 90% 80% % of U.S. Average 70% 60% 1978979 980981982 983984 985986 987988989 990991 992993994 995996 997998 999000001 002003 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 Expenditure Sources $200 $180 $160 $140 $120 $100 Millions $80 $60 $40 $20 $0 1985-86 1988-89 1991-92 1994-95 1997-98 2000-01 2003-04 2006-07 1986-87 1989-90 1992-93 1995-96 1998-99 2001-02 2004-05 1987-88 1990-91 1993-94 1996-97 1999-00 2002-03 2005-06 FY Federal funds General funds Bond funds Special funds Expenditure Sources 100% 80% 60% Millions 40% 20% 0% 1985-86 1988-89 1991-92 1994-95 1997-98 2000-01 2003-04 2006-07 1986-87 1989-90 1992-93 1995-96 1998-99 2001-02 2004-05 1987-88 1990-91 1993-94 1996-97 1999-00 2002-03 2005-06 FY Federal funds General funds Bond funds Special funds Revenue (General Fund) Insurance Trust 34% Intergovernmental 24% Utility 2% Taxes 40% Where Does CA Rank? (Taxes) All State & Local State Corporate Income State Individual Income Alcoholic Beverage Tobacco Motor Fuels Property General Sales 0 10 19 20 30 40 50 35 32 44 6 8 39 14 Per Capita Revenue Texas Arizona Nevada Nebraska Illinois South Dakota Idaho Iowa Mississippi Pennsylvania New Jersey New Mexico California Hawaii Oregon New York Alaska $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 13th Where Does California Rank? $14,000 $12,000 California $10,000 $8,000 $6,000 Per Capita Expenditures $4,000 $2,000 $0 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 Alaska Wyoming North Dakota $14,000 $16,000 Per Capita Revenue Who Pays Taxes? 12% 10% 8% 6% 4% 2% Percentage of Income Paid in Taxes 0% <$18K $18-30K $30-47K $47-80K $80-168K Household Income 11.3% 10.1% 9.2% 8.7% 8.1% 7.6% 7.2% $168567K >$567K Today's Topics What does the budget look like? Where are we spending money? Budget process Budget politics Budget Cycle 18 month cycle Three budgets always in play: Current year budget (current FY) Budget year budget (next FY) Planning year budget (2 FY out) Dept. of Finance puts it all together Gov. submits on/before Jan. 10 May revision (first week) Fiscal Year: July 1June 30 Legislative Budget Process "Authored" by Assembly or Senate Budget Committee Chair on rotating basis LAO gets six weeks to analyze Three months of hearings and negotiations Conference committee resolves any chamber differences May cut spending but may not add spending Budget bill "has" to pass by June 15 and be signed by July 1 Budget Bargaining "The Big Five" often negotiate the real budget deal: The Governor Assembly Speaker Assembly Minority Leader Senate President Pro Tempore Senate Minority Leader Changes to Governor's Budget 25% 19.5% 20% 15% 14.4% 10% 8.4% 6.8% 5% 0% Dem Gov, 1980-81 Dem Gov, 20002001 Rep Gov, 1987-88 Rep Gov, 1997-98 "% Changes" represents the ratio of the total line-by-line changes made by the Legislature to the total final appropriation levels in health care, higher education, and business services. Proposed and Enacted Budgets $100,000.00 $90,000.00 $80,000.00 $70,000.00 $60,000.00 $50,000.00 $40,000.00 Millions $30,000.00 $20,000.00 $10,000.00 $0.00 1976-77 1980-81 1984-85 1988-89 1992-93 1996-97 2000-01 2004-05 1978-79 1982-83 1986-87 1990-91 1994-95 1998-99 2002-03 FY Enacted Proposed Governor's Vetoes 900 800 700 600 500 400 300 200 100 0 1966-671970-711974-751978-791982-831986-871990-911994-951998-992002-03 1968-691972-731976-771980-811984-851988-891992-931996-972000-012004-05 GF Vetoes Other Vetoes Governor's Vetoes $2,500,000 $2,000,000 $1,500,000 $1,000,000 Thousands $500,000 $0 1966-67 1972-73 1978-79 1984-85 1990-91 1996-97 2002-03 1969-70 1975-76 1981-82 1987-88 1993-94 1999-00 2005-0 FY GF $ Other $ Days after Deadline Signed 1977-78 1978-79 1979-80 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 -10 0 10 20 30 40 50 60 70 Today's Topics What does the budget look like? Where are we spending money? Budget process Budget politics Why Is It Hard to Get a Budget? It is so important Budget has to be balanced on paper State Budget Reserve $10,000 $8,000 $6,000 $4,000 $2,000 Millions $0 ($2,000) ($4,000) 1976-77 1979-80 1982-83 1985-86 1988-89 1991-92 1994-95 1997-98 2000-01 2003-04 1977-78 1980-81 1983-84 1986-87 1989-90 1992-93 1995-96 1998-99 2001-02 2004-05 1978-79 1981-82 1984-85 1987-88 1990-91 1993-94 1996-97 1999-00 2002-03 2005-06 A Balanced Budget? Not really. We borrow the money. $28 billion for 2002-03 to 2004-05. Also used other budget gimmicks Where did we borrow? Issued bonds Loans from local governments Loans from Prop. 98 funds Loans from special funds (e.g., Prop. 42) Why Is It Hard to Get a Budget? It is so important Budget has to be balanced on paper Must pass by 2/3 vote in both chambers Assembly: Need 6 Republican votes Senate: Need 2 Republican votes Hard when parties are polarized Why Is It Hard to Get a Budget? It is so important Budget has to be balanced on paper Must pass by 2/3 vote in both chambers Revenues much more closely tied to economic performance than for national government Determinants of Growth Spending Caseload Inflation Service level Revenue U.S. econ. growth rate CA econ. growth rate Federal transfers Tax rates MediCal Caseload & Spending 80% 70% 60% 50% 40% 30% 20% 10% 0% Poor Children and Families % of MediCal Enrollment Elderly and Disabled Residents % of MediCal Spending 35% 25% 75% 65% Why Is It Hard to Get a Budget? It is so important Budget has to be balanced on paper Must pass by 2/3 vote in both chambers Revenues much more closely tied to economic performance than for national government Initiative requirements Initiatives Control How Much? Mandated about 32% of 2003-04 general fund appropriations Most of this was for education (Prop. 98) Higher today -- over 40% 2003-04 General Fund Approp's Year 1988 1998 1988 2000 1994 1990 2000 1988 1990 1988 1988 2002 1974 1990 1986 Proposition 98 10 99 21 184 116 36 70 117 103 97 50 9 132 86 Description Education Early childhood development Tobaccos tax [funds for anti-smoking, wildlife research] Juvenile crime [for prisons] "Three strikes" [for prisons] Rail bonds [authorized $1.99 billion] Drug treatment Natural resources protection bonds [authorized $776 billion] Wildlife protection Auto insurance [administrative spending] Cal/OSHA Water projects bonds [authorized $3.44 billion] Political reform [California FPPC administration] Gill net ban [enforcement spending] Toxic discharge [enforcement spending] Total Billions $30.000 $0.522 $0.509 $0.428 $0.300 $0.131 $0.120 $0.042 $0.030 $0.023 $0.013 $0.007 $0.003 $0.002 $0.002 $32.132 Initiatives Control How Much? Mandated about 32% of 2003-04 general fund appropriations Prop. 4 limits expenditure growth Allows adjustments for population and cost of living Amended 4 times (Prop. 98, 99, 111, & 10) Initiatives Control How Much? Mandated about 32% of 2003-04 general fund appropriations Prop. 4 limits expenditure growth Only major revenue restrictions are Prop. 13 and Prop. 6 (no inheritance or gift tax) Why Is It Hard to Get a Budget? It is so important Budget has to be balanced on paper Must pass by 2/3 vote in both chambers Revenues much more closely tied to economic performance than for national government Initiative requirements Other factors: Term limits ??? ...
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