Wednesday, October 6, 2010

Budget Details Released

Source: Sac Bee Budget Story 10.6.10

The pending state budget agreement includes the repeal of the 1999 law that set higher pension benefits, as well as an assumption of $5.3 billion in federal funds, based on an eight-page outline released by the joint legislative budget committee today.

A vote is scheduled for Thursday.

Under the budget agreement, newly hired state workers would be subject to stricter formulas for determining pension benefits. The pension changes would only apply to workers in bargaining units without new state contracts. For employees in the "miscellaneous" category, the change means that workers would have to wait an additional five years -- age 60 instead of age 55 -- to receive benefits equal to 2 percent of pay for each year worked.

The agreement also seeks to address pension "spiking" by requiring that the final three years of compensation be used to determine benefits.

The budget document does not have line-item details but provides a Democratic analysis of the plan. The deal:

• Reduces the 2010-11 Proposition 98 school funding level to $49.7 billion -- from about $52 billion. It provides schools with a deferral of $1.9 billion to be paid in 2011-12, as well as $300 million as a repayment for cuts absorbed in 2009-10. It also defers $189 million for community colleges. We should note that school officials are nervous about this deferral. The state essentially is telling schools they can spend $1.9 billion more now and expect repayment in 2011-12, but that requires faith that the state will have extra money to spare or approve another deferral in the next fiscal year.

• Assumes $5.3 billion in new federal relief. This is significantly more than the $3.4 billion projected by Gov. Arnold Schwarzenegger in his May revision. The document does not explain how the state expects to receive this additional money.

• Relies on about $1.5 billion in state employee compensation cuts. This includes $896 million in direct reductions to current state worker pay, as well as roughly $600 million in savings from attrition and reduced operating costs.

• Provides $5.5 billion for the University of California and California State University systems. The deal includes $199 million for each system to restore previous cuts, which is less than the $305 million initially proposed.

• Includes $1.1 billion in corrections savings, the bulk of which comes from a roughly $820 million savings in inmate medical care.

• Assumes the Democratic conference committee proposals for most health and human service programs. The changes have to do with a 3.6 percent reduction to In-Home Supportive Services, a $48 million reduction in certain child care rates, and additional savings by using federal or special funds. The deal preserves welfare and child care funding.

• Includes a 2012 ballot measure that sets the "rainy-day fund" at 10 percent of general fund revenue, smaller than the 12.5 percent required by last year's Proposition 1A. It also adds restrictions on how much of the reserve fund can be used in any deficit year, as well as an exclusion that protects school funding.

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