The LAO warned that the stock market fluctuations and other “volatile and unpredictable” economic factors make it difficult to project the state’s finances too far out. Regardless, the LAO estimates that the state would be fine through 2020-21. 

The projections would change with any new obligations, both at the state and federal levels.

Gov. Jerry Brown has been quick to veto new spending or tax cuts that aren’t paid for, like the ill-fated effort to remove sales tax on tampons and other feminine hygiene products, but the impending negotiations on transportation issues may call for new spending. The LAO also pointed to the possibility that a new president and Republican-controlled Congress may change federal policies that affect that state’s budget.

“Any such state or federal policy changes could have a significant impact on the state’s ‘bottom line,'” wrote the LAO. 

• Transparency duel
• Budget by midnight
• Welfare rule to be repealed
• Gun control advances
• Crisis looming for energy grid expansion?

Lawmakers will consider two transparency bills today in an effort to head off a ballot measure that would go to greater lengths.

The Constitutional Legislative Transparency Act, backed by Republican donor Charles T. Munger, Jr., is a constitutional amendment requiring the Legislature make available online the final version of a bill at least 72 hours prior to a vote on either the Assembly or Senate floor. The Legislature-introduced versions, however, would make this apply to only votes in the second house.

CalWatchdog has more. 

In other news: 

• Midnight is the deadline for the legislature to pass a budget, which should avoid any major drawn-out battles, writes The Sacramento Bee. Highlights of the budget deal include: “a hefty deposit into the state’s rainy day fund, $1.3 billion for new state office work (potentially including Capitol renovations) and the repeal of a rule denying welfare payments for new kids that lawmakers have attacked for years as cruel and counterproductive.”
• And about that welfare rule, “Gov. Jerry Brown has agreed to repeal the so-called maximum family grant policy that prohibits people from receiving increased welfare income if they have more children while receiving public assistance,” writes The San Jose Mercury News/AP. “The change would cost the state about $220 million a year.”
• The legislature advanced a dozen gun-control measures on Tuesday, reports the Los Angeles Times.
• Gov. Brown’s plans to expand California’s energy grid is being panned by critics who say “it isn’t so much about spreading the clean energy gospel but returning the state to the era of manipulated energy markets that led to the 2000-2001 energy crisis,” reports the Los Angeles Times.   

Assembly:

• In at 3 p.m. Several hearings.

Senate: 

• In at 3 p.m. Full slate of hearings, including Budget and Fiscal Review Committee.

Gov. Brown:

• No public events scheduled.

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New followers: @StopCEQAAbuse @xoneli

Lawmakers look to increase gun restrictions, but will that work?

Good morning and happy Tuesday!

In the wake of the tragic shooting in Orlando, California lawmakers are renewing a push for expanded gun control, with a wide range of measures to be considered today.

According to the Los Angeles Times, some of the bills “would close loopholes that allow the sale of semiautomatic rifles with detachable ammunition magazines,” while others would “outlaw the possession of magazines with a capacity of more than 10 bullets and require background checks for people who buy ammunition.”

But California already has tough gun laws, at least compared to Florida, including a ban on most guns like the one used on Orlando. Could expanded restrictions deter similar tragedies in California, asks The San Jose Mercury News. 

“Firearms policy experts say the limits on guns and ammunition may have reduced the number of casualties in Orlando,” writes The Mercury News. “But California’s background checks would not have stopped (the Orlando shooter) from purchasing firearms capable of doing plenty of damage.”

In other news: 

• A $10-per-year increase to the vehicle registration fee was part of a budget deal negotiated by lawmakers in the last few days, reports Capital Public Radio. 
• Increasing legal, financial and political troubles threaten to derail the state’s cap and trade program, possibly taking Democrats’ climate agenda down in the process writes the Los Angeles Times.
• California lawmakers look to broaden the definition of rape, reports The Sacramento Bee. 
• Are gut and amend tactics OK for ballot measures, asks CalWatchdog. 

Assembly:

• Full slate of hearings. 

Senate:

• Full slate of hearings.  

Gov. Brown:

• No public events scheduled.

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New followers: @SenBillEmmerson @dotDomain

While the state’s finances have substantially improved from the last economic downturn, Brown has often said the state’s over-reliance on capital gains tax revenue will force dramatic cuts when the economy goes south if the state is not prepared.

Since earlier this year when the initial budget was unveiled, tax revenue projections were reduced $1.9 billion to reflect April’s personal income tax receipts missing expectations by $1 billion plus “sluggish” sales tax revenue.

“Things don’t last forever and right now the surging tide of revenue is beginning to turn, as it always does,” Brown said on Friday. “That’s why it’s very important and best that we prepare for our time of necessity.”

Rainy-day fund

Just last month, Moody’s rated California as the least prepared to withstand a recession of the largest states, for the over-reliance on income tax revenue, a lack of flexibility due to Constitutional mandates and entitlement spending and and weak reserve funding.

In 2014, voters passed Prop. 2, a rainy-day fund. The revised budget showed contributions to the fund had been reduced $1.6 billion since January. Brown on Friday continued to call for a robust reserve fund at the expense of new programs.

“We’re going to have a very productive, substantive debate over the next month,” Brown said of the budget negotiations. “But at the end of the day, we’ve got to come out with a sizable reserve. We can’t have any significant new spending and we’ve got to get ready for the downturn.”

Prop. 30

Voters appear likely to decide in November whether to extend Prop. 30 for 12 years — a “temporary” tax on the top incomes that was originally used to bolster education funding. The revised budget notes that letting this lapse would create the better part of a $4 billion budget shortfall by 2019, requiring cuts.

“Until the voters decide this important question, no significant new ongoing spending commitments should be made,” according to the budget summary.

Brown would not take a public position on the Prop. 30 extension, saying he was “leaving it to the people of California.”

Brown’s revised budget

Good morning! And since it’s Friday the 13th, good luck.

Gov. Jerry Brown will release his revised budget today.  

Although the state’s economy has been growing, last month’s personal income tax revenues missed their mark by $1 billion. So expect Brown to renew calls to limit new spending. 

Capital Public Radio has more. 

ICYMI: CalWatchdog looks at the problem looming in the state’s budget.

In other news:

• Is the rise of Donald Trump hurting the chances of Republicans hoping to replace Barbara Boxer in the U.S. Senate to advance past the June primary? CalWatchdog has more. 
• A panel on Thursday approved a $15 million plan to protect anchor rods on the Bay Bridge from further corrosion. The bridge was completed in 2013, but the state has spent millions since then to fix it. The San Francisco Chronicle has more.

• “California ballot: Is a new law that allows activists to yank measures working?” asks The San Jose Mercury News. 

• The Assembly approved a measure on Thursday that rewards drivers of plug-in hybrid vehicles by continuing to grant access to HOV lanes. But critics say the move only helps wealthy drivers who can afford those vehicles and perpetuates traffic in those lanes, hurting carpoolers. The Sacramento Bee has more. 

Assembly: 

• Gone ’til Monday.

Senate: 

• Gone ’til Monday.

Gov. Brown:

• Releasing his revised budget at 10 a.m. in Sacramento. 

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New followers: @DonnaWares @JuriSense 

• Is the state headed for budget trouble?
• Caltrans unclear on spending needs
• Some water restrictions made permanent
• Bathrooms for all
• UC’s admissions process under fire

Good morning!

With Gov. Jerry Brown’s revised budget expected to be released sometime this week, it’s important to note that while the state’s finances have improved substantially during his most recent terms, many see a crisis ahead.

Multiple credit agencies, observers, lawmakers and even the popular governor have pointed to the fact that the state is too dependent on a small group of the wealthiest individuals to fund state activities — a problem because their income is largely tied to the volatility of the stock market, which, in an economic downturn, could dramatically reduce revenue.

Around 150,000 tax returns (according to the the Franchise Tax Board), provide 33 percent of the state’s total revenue. 

But while there’s consensus that something needs to happen, there’s little consensus as to what that something is.

CalWatchdog has more. 

In other news: 

• The budget may have some answers as to how much Caltrans “borehole mitigation” plan will cost. It is currently asking for around $6.6 million for just next fiscal year, as part of a five-year plan. The plan is to go around the state and “resolve” around 20,000 boreholes drilled improperly (while defying state and local laws) between 1990 and 2014. So far, Caltrans has refused to provide specifics on how much this plan will cost. CalWatchdog has more. 
• A bill requiring gender-neutral restrooms on all public and state property was approved by the Assembly on Monday, while another barred state employees from being required to “travel to states that are deemed to be discriminating based on gender identity or sexual orientation,” according to the Los Angeles Times.
• “Some of the temporary water-saving measures imposed on homeowners and water agencies — including how you wash your car at home and how you water your lawn — are now permanent under an executive order issued Monday by Gov. Jerry Brown,” The Orange County Register reports. 

Assembly:

• A subcommittee will take a look at the UC enrollment trends, following a scathing report suggesting the enrollment process favors out-of-state students. The Los Angeles Times has more. 

Senate:

• Full slate of hearings. 

Gov. Brown:

• No public events scheduled. 

Politics:

• Debate in the U.S. Senate race is tonight. 

Tips: matt@calwatchdog.com

Follow us: @calwatchdog @mflemingterp

New followers: @SocialInSB @von4senate

National Sunshine Week — an effort to increase and encourage government transparency — has come and gone in California while multiple types of state secrecy continue to draw fire from lawmakers and citizens.

Budgeting has topped the list of recent complaints. “The state of California spends nearly a quarter trillion dollars annually, but taxpayers aren’t allowed to see where that money goes,” warned OpenTheBooks.com, which has demanded state officials release its line-by-line state vendor payments. “This information should be available through California’s open records law, but the last two controllers, John Chiang and currently Betty Yee, told us: stop asking because the records aren’t accessible,” the organization’s founder and CEO claimed.

“The Controllers of California – John Chiang and Betty Yee – aren’t arguing against the law. Instead, they’re ignoring the law and a transparency revolution that is sweeping this country at all levels of government. The Controllers don’t cite a single provision of the California Open Records Act or a legal exemption to justify their behavior, and they aren’t fulfilling their fiduciary duty under the law to ‘assist us’ in gathering the public records.”

Chiang has tried to build a reputation as a relatively pro-transparency reformer. He proposed a law, introduced as Assembly Bill 2833 by Assemblyman Ken Cooley, D-Rancho Cordova, “that would require alternative investments such as hedge funds to publicly disclose their fees to public pension plans,” as the San Francisco Chronicle reported. “The state has committed to contribute $96 million this year toward the university [of California]’s unfunded pension liability. Yet, last year alone, UC’s pension plan paid out $97 million in fees to the hedge fund managers who are delivering mediocre returns for the plan, according to our analysis.”

String of controversies

But in recent months, transparency and accountability have become watchwords for reform across a host of flashpoint issues in California politics and policy.

In education, trouble with the state’s community college system has led its governing board to “begin searching for a replacement for the Accrediting Commission for Community and Junior Colleges, Western Association of Schools and Colleges,” as the Sacramento Bee reported. “The organization, which regulates two-year schools in California, Hawaii and American territories in the Pacific, has been under fire for an inconsistent, oblique and overly punitive accreditation process.”

“Brown wants to combine three state-funded early education programs, strip their requirements and let each local school district decide how to best spend the money,” Capital Public Radio reported. “But there’s a catch: districts must prioritize low-income and at-risk four-year-olds.”

Michael Cohen, Brown’s finance director, told CPR that negotiations over the details will happen at the right time. “It’s important to set up the structure and get consensus on what the program will look like,” he said. “And then at that point, it will become an annual budget decision about what amount of funding makes sense.”

Continued conflict

The disagreement deepens a conflict that intensified among California Democrats late last year. In October, Brown gave his left wing fits when he shot down a big preschool bill that had even drawn support from some Sacramento Republicans. “The Preschool for All Act (AB47), authored by Assemblyman Kevin McCarty, D-Sacramento, passed with bipartisan support, but failed to get backing from Brown,” as EdSource reported at the time. “The bill would have set a deadline of June 30, 2018 for granting all low-income 4-year-olds access to transitional kindergarten or state preschool. It was meant to firm up a promise made in last year’s legislation (SB837) that set the eventual goal of providing pre-kindergarten schooling for all low-income 4-year-olds. Because of that previous commitment, Brown said in his veto message that the bill was unnecessary and that future preschool funding should be addressed in the budget-setting process.”

Contrary to Brown’s wishes, the bill merely presumed that future funding would materialize in the years to come. To his irritation, estimates of its total cost “varied greatly, ranging between $147 million and $240 million, depending on how many children are placed in full-day vs. half-day programs,” as EdSource added.

A two-front battle

But Brown’s adversaries got their revenge when he released his latest budget. As the Washington Post reported, Chris Hoene, executive director of the California Budget & Policy Center called the budget a “missed opportunity to use the state’s strong revenues to boost key public investments that help individuals and families advance, such as child care and preschool, welfare-to-work services, affordable housing, and higher education.” At the same time, the Post noted, the California branch of the Children’s Defense Fund said Brown was “using the threat of future recession to justify not making critical investments of our most vulnerable children today.”

The governor’s block grant proposal, which would allocate over a billion and a half dollars to early learning, aggrieved activists who have demanded that the state use its recent surpluses to restore education spending to pre-Great Recession levels. “During the recession the state cut early education by over $1 billion, which amounted to almost 100,000 lost preschool seats. In recent budget years some of those cuts have been restored, but spending on early care is nowhere near 2008 levels when the budget was about $3.2 billion,” as Southern California Public Radio noted.

Meanwhile, however, Brown also incurred the wrath of education reformers, including some fellow Democrats, who have grown increasingly frustrated with the inability of the state’s teachers unions to deliver a satisfactory level of education to all students enrolled in public schools. “As Democrats pull back from holding educators accountable for results, they risk alienating old allies as well,” UC Berkeley education professor Bruce Fuller wrote in the Sacramento Bee. “California parents lost a tool this month when Gov. Jerry Brown trashed a well-known achievement index, pleasing union chiefs while infuriating civil rights advocates who can no longer pinpoint listless campuses.”

More than 90 percent of the 23,000 workers at 23 CSU campuses represented by the California Faculty Association campuses have voted in favor of striking unless they receive three years of annual pay raises of 5 percent, not the 2 percent annual raises offered by the state. A rally last week in Long Beach called by the CFA was attended by more than 1,000 people, Reuters reported. The wire service’s story illustrated a seemingly united CSU faculty:

“People are suffering and hurting financially,” said Theresa Montaño, a vice president of the California Teachers Association. “Faculty members can’t pay off their debt, raise a family or buy a home.”

 

During the march, many protesters said that if faculty members don’t get the salary increase, they are ready to walk off the job. …

 

Jennifer Eagan, a president for CFA, said it’s “unfair to ask professors keep sacrificing year after year without a significant pay increase.”

Faculty seek help from union-friendly state agency

The CFA further escalated its fight with the state government on Thursday by filing an unfair labor practices allegation with the state Public Employment Relations Board. This description is from the CFA’s website:

The charge is based on language in HEERA [the Higher Education Employer-Employee Relations Act] which requires that the CSU and CFA reach an agreement on salary before the university sends a budget request to the Legislature and governor.

 

In fact, in both 2015-16 and 2016-17 the CSU made Support Budget requests that included their plan to implement a 2 percent faculty salary increase for each year. By making a budget request prior to reaching agreement with CFA on what would be needed to offer an adequate salary pool and by arguing that they have “allocated $65.5 million for a 2 percent compensation pool for all employees,” and limiting discussion of salary to that predetermined pool, the CSU has “violated its duty to meet and confer with CFA in good faith.”

 

In his remarks to the Board of Trustees on Wednesday November 18 Kevin Wehr highlighted the problem. “What you fail to understand is that deciding what you think is fair compensation for your employees before the bargaining process even begins is not bargaining in good faith,” Wehr said. “Indeed Section 3572b HEERA of recognizes that fact and says that once we reach an agreement ‘an appropriate request for financing or budgetary funding for all state-funded employees … shall be forwarded … to the Legislature and the Governor.’ You have put the cart before the horse.”

PERB has consistently ruled in favor of local government unions challenging “bad faith” decisions by governments on changes in compensation. This time, however, the ultimate target isn’t the cities of San Jose or San Diego or the Los Angeles Unified School District — it’s Gov. Jerry Brown, who cleaned house at PERB in 2011 and removed leaders chosen by Gov. Arnold Schwarzenegger, who had fought with the California Nurses Association for years.

State Treasurer John Chiang issued a report recently that praises California’s fiscal strides in dealing with debt but also raises warnings that the state is still in the deep end of the debt pool. The issue of debt will be on voters minds as they confront a number of likely ballot issues next year that deal with bonds.

First, the good news from Chiang’s report. The treasurer notes that over the last five years the state has finished paying off economic recovery bonds issued during the fiscal crisis of the last decade, strengthened the state budget rainy day fund, and potentially saved millions with pension reform. All this has lead to increased credit ratings from the credit rating agencies Moody’s, Standard & Poor’s and Fitch.  With the improved ratings the treasurer was able to refinance some of the state’s debt and save taxpayers up to $2 billion.

However, Chiang observed that despite the rise in credit ratings, California still has the third worst credit rating of all the states ahead of only Illinois and New Jersey. He raised concerns about health care and pension costs for public employees that add to the state’s debt.

Chiang, in his report, argued that adding to debt could be a good thing or bad thing depending on how the money is spent. He points to the value of Pat Brown’s State Water Project as a positive use of bonds. But he also warns too much debt can lead to catastrophic circumstances as it did in the cities of Stockton and San Bernardino.

Bonds on the Ballot

State voters will consider adding to the state’s debt in next year’s general election.

Already qualified for the November 2016 election is a school construction bond that came via the initiative process. It is backed by a combination of business and labor. If passed it would allow the state to sell $9 billion in general obligation bonds.

In addition, there is a discussion about another water bond. The argument is that the Proposition 1 water bond of 2014 was not enough to deal with issues related to the drought. The size of this bond proposal is not known. Proposition 1 approved a bond worth $7.1 billion.

There could be more bond ideas coming out of the special session considering ways to improve the roads and other infrastructure. In fact, Chiang touched on infrastructure in his report: “I strongly believe we need to conduct a full accounting of all the state’s capital assets – including its crumbling roads, bridges and levees. We then need to assess the remaining useful life of this deteriorating infrastructure and determine the cost of repairs and ultimate replacement.”

Finally, there likely will be a measure on the November 2016 ballot that will give voters a say on revenue bonds over $2 billion. Voters already have a say in general obligation bonds that are covered with tax dollars. Revenue bonds are repaid with funds generated from the services provided by the projects the bonds are used to build. This measure is controversial and will get much attention.

The issue of debt is once again front and center for California’s voters.