Schwarzenegger: May Revision Keeps California Financially Strong and Fiscally Responsible

Spending Plan Fully Funds Education, Contains No Tax Hikes

05/14/2007 -- California Governor Schwarzenegger today presented his May Budget Revision to the state Legislature, which reduces the state’s deficit, builds the reserve and pays down debt. In addition, this fiscally-responsible spending plan fully funds education and maintains California’s public safety, environmental and health care priorities. The May Revision achieves these goals without raising taxes and maintains some of the nation’s highest funding to support vulnerable populations.

“I am very excited about what we have achieved as we continue to get our fiscal house in order and prepare for the future. We have sound and creative new ways to increase our revenue and give taxpayers more value for the hard work they’ve done in building California’s $1.7 trillion economy - and that is without raising taxes and without making deep cuts to important programs,” said Governor Schwarzenegger.

* The May Revision increases the state’s reserve to $2.2 billion. This is critical insurance for California’s economy.
* The Governor’s May Revision invests in California’s future by paying down $3.1 billion in bond debt. As a result of this aggressive Economic Recovery Bonds repayment schedule, these bonds will be fully retired 14 years ahead of schedule.
* Governor Schwarzenegger has reduced California’s projected deficit by more than $15 billion through policies that keep our economy strong. The Governor lowered our deficit to $1.4 billion. When the Governor took office, the state’s projected deficit for this year was $16.5 billion.

California’s budget leaves little room for flexibility, but the Governor lowered spending and limited new growth anyway, without making deep cuts to key programs. More than 90 percent of the state’s General Fund spending is required by the constitution, federal law, court orders and other mandates. Despite these constraints, the Governor’s May Revision proposes $430 million in additional savings over the proposed Budget—for a total savings of $2.9 billion. In addition, the revision holds spending increases to just over 1 percent.

Highlights of the Governor’s May Revision include:

Investing In Students and Schools: The May Revision fully funds Proposition 98 and K-12 education for a $68.6 billion ($41.1 billion General Fund, $27.5 billion from other funds) total from all sources. The revision also maintains the Higher Education Compact with the University of California and California State University and adds millions in additional funding for our community colleges.

K-12

* Provides total per-pupil funding of $11,562, a 21 percent increase in per-pupil funding since the Governor took office.
* Fully funds Proposition 98 at $57.6 billion, a 4 percent increase over the Governor’s budget estimate.
* School Safety: $100 million one-time block grant to develop and improve safety plans.
* Career Technical Education (CTE): $100 million in one-time funding split equally between public schools and community colleges for CTE equipment and minor facilities improvements; $50 million in Proposition 98 funds to support hiring 1,000 additional CTE teachers; and $25 million to increase the number of school counselors that specialize in CTE.
* Teacher Shortage: More than $75 million to address the teacher shortage and improve teacher quality, including $50 million in Proposition 98 funds for grants to help hire more college preparatory course instructors.
* Healthy School Meals: More than $48 million in Proposition 98 funds to increase students’ access to healthy foods in our school cafeterias.
* Family Literacy: $50 million in Proposition 98 funding to promote literacy among the parents of pre-school students living in attendance areas of schools ranked in the lowest three deciles of the 2005 Academic Performance Index.
* California High School Exit Exam: $8.5 million to provide school districts with instructional assistance to help students pass the Exit Exam.

Higher Education

* Universities of California: The May Revision proposes no General Fund change to the January 2007 proposal of $5.5 billion ($3.3 billion General Fund).
* California State Universities: The May Revision proposes a $3.6 million General Fund increase to support additional undergraduate nursing students.
* California Community Colleges: The May Revision proposes a $115 million current-year increase and a $9 million increase in General Fund and Proposition 98-related funding for the California Community Colleges.

Protecting Vulnerable Californians: The Governor increases General Fund spending for Health and Human Services, including programs that make critical health care services available to Californians, by $239 million in this year’s budget. The May Revision continues to fund services for vulnerable Californians at some of the highest levels in the country.

* $288.9 million to fully fund the AIDS Drug Assistance Program. This funding brings services to more than 32,000 clients while reflecting a 3.5 percent savings realized by increasing program efficiency since the January 2007 budget proposal.
* $214.3 million ($107.1 million general fund) to improve the Department of Health Care Services’ methodology for setting Medi-Cal rates and maintain California’s access to billions in federal funds.
* An increase of $65.6 million ($31.1 General Fund, $34.5 federal fund reimbursement) for community mental health services.
* An increase of $23.8 million ($8.2 million General Fund) for the Healthy Families Program, to fully fund the program at $1.1 billion ($400.4 million General Fund) in this year’s budget. Healthy Families is expected to serve more than 920,000 children by the end of the budget year.
* $17.8 million General Fund increase from the Governor’s budget for child welfare services, bringing the total funding for these services to $4 billion ($1.6 billion General Fund).
* $17.2 million ($8.6 million general fund) increase to maintain regular and perinatal drug Medi-Cal services.
* $8.3 million to backfill reduced Proposition 99 funding for the Access for Infants and Mothers program.
* $4.45 million in additional funding, above the $4.7 million already allocated from the General Fund, for food banks and the Foodlink serving communities impacted by last winter’s freeze.

Reforming Our Prisons and Local Jails: The May Revision proposes significant funding changes to implement AB 900, the Public Safety and Offender Rehabilitation Services Act of 2007. The May Revision includes $350 million for programs to increase rehabilitation and reduce overcrowding and directs nearly $10 million to immediately address overcrowding through out-of-state transfers.

* $284.6 million in AB 900 bond funding to construct six mental health and dental facilities at seven institutions. These funds are a portion of the $857.1 million in bond authority granted as part of Phase I of AB 900.
* $45.9 million General Fund to address various court requirements related to medical, dental and mental health services. The May Revision adds $25 million to upgrade prison healthcare for a total of $175 million, and includes more than $10 million to comply with other court-driven costs in state prisons.
* $18.7 million to support and increase California Department of Corrections and Rehabilitation’s peace officer recruitment efforts.
* $11.7 million General fund in 2007-08 and $27.8 million in 2008-09 to fill vacant teacher positions in adult institutions.
* $9.6 million in 2007-08 and $14.6 million in 2008-09 for out-of-state transfers, as authorized by AB 900.

Maintaining Law and Order: The May Revision continues the Governor’s commitment to public safety with funding for local law enforcement and critical new resources to fight and prosecute crime.

* The May Revision includes $610 million for local law enforcement. These funds will help counties house juvenile offenders; fund additional police officers and sheriffs deputies; support jail operations and district attorneys; expand programs to reduce juvenile delinquency, and support local law enforcement's fight against methamphetamine.
* $178 million in Proposition 1B bond fund for grants to increase security and fight terrorism at ports and in mass transit systems throughout California.
* $16.9 million to fully fund counties for various costs related to state inmates, including housing and prosecution for crimes committed while incarcerated. The May Revision increases the Daily Jail Rate reimbursement from $71.57 to $77.17 for 2008.
* $16.3 million ($7.4 million General Fund) for various Office of Emergency Services programs to protect Californians, including $4 million to fight the sexual exploitation of children over the Internet.
* $11.2 million General Fund increase for the DNA Identification Fund to maintain the Department of Justice's ability to process new samples for its databank.
* $3 million Restitution Fund to help district attorneys protect witnesses and their families from retribution for testimony.

Funding Environmental Protection: The May Revision continues Governor Schwarzenegger’s commitment to our environment by directing more than $100 million for air quality.

* $111 million in Proposition 1B funding to improve air quality along California’s main highways and trade corridors.
* The May Revision also add new positions and expand oversight and accountability of the Carl Moyer Air Quality Incentive Program.

Partnering with the Private Sector for New Revenue Opportunities:

* The Governor’s budget proposes selling California’s EdFund – which will generate about $1 billion for the state but won’t have an impact on students whose loans are currently guaranteed through the agency. In 1997 the state established EdFund, which guarantees in and out-of-state student loans. Because backing student loans is not a core mission or competency of state government, EdFund is a private non-profit that straddles the public and private sector. Recent analyses show there could be significant opportunities to increase EdFund’s efficiency and diversify into other businesses, generating greater revenues and profit margins for potential buyers.
* The Governor is considering leasing the state lottery in order to maximize its returns and improve performance for California’s taxpayers. By allowing a private firm to run the lottery more efficiently and profitably, California will receive more money without giving up ownership. Any lease deal will protect the lottery funding our schools get now and guarantee they’ll continue to receive funding at current levels. If the lottery performs better under leased management, education stands to get more money. This money isn’t future revenues we’ll bank today—these are brand-new funds resulting from higher profits. The May Revision does not assume the lease of California’s lottery. The Governor’s proposed 2007 budget and the May Revision already fully fund Proposition 98 and the Higher Education Compact.

Source: California Governor