The URL can be used to link to this page

Home My WebLink About2009-05-05; City Council; 19794; Discussion of state propositionsCITY OF CARLSBAD - AGENDA BILL 16 AB# 19,794 MTG. 05/05/09 DEPT. CM Council discussion of May 19, 2009 state propositions DEPT. HEAD fU CITYATTY. lfl{ CITYMGR. //\u^ RECOMMENDED ACTION: To discuss the upcoming May 19, 2009 ballot measures and determine if Council will make a statement in support of or opposition to any of these measures. ITEM EXPLANATION: At the April 7, 2009 city council meeting Councilmember Packard proposed that council have a discussion regarding the upcoming May 19, 2009 ballot measures. Council will discuss these measures and determine if they wish to make a statement in support of or opposition to any of these measures. A summary of these six measures is attached. FISCAL IMPACT: None. EXHIBITS: 1. Summary of the six propositions on the May 19, 2009 ballot. DEPARTMENT CONTACT: Rob Houston 760-434-2958 rhous@ci.carlsbad.ca.us FOR CITY CLERKS COUNCIL ACTION: USE ONLY. APPROVED DENIED CONTINUED WITHDRAWN AMENDED D D D D D CONTINUED TO DATE SPECIFIC CONTINUED TO DATE UNKNOWN RETURNED TO STAFF OTHER -SEE MINUTESCouncil discussed tbe items, D Dn D no action was taken. Proposition 1A State Finance Summary of Legislative Analyst's Estimate of Net State and Local Government Fiscal Impact • Higher state tax revenues of roughly $16 billion from 2010-11 through 2012-13 to help balance the state budget. • In many years, increased amounts of money in state "rainy day" reserve fund. • Potentially less ups and downs in state spending over time. • Possible greater state spending on repaying budgetary borrowing and debt, infrastructure projects, and temporary tax relief. In some cases, this would mean less money available for ongoing spending. Ballot Label Fiscal Impact: Higher state tax revenues of roughly $16 billion from 2010-11 through 2012-13. Over time, increased amounts of money in state rainy day reserve and potentially less ups and downs in state spending. Overview of the Proposal Measure Changes the State's Budgeting. This measure would make major changes to the way in which the state sets aside money in one of its "rainy day" reserve accounts and how this money is spent. As a result, Proposition 1A could have significant impacts on the state's budgeting practices in the future. The measure would tend to increase the amount of money set aside in the state's rainy day account by increasing how much money is put into this account and restricting the withdrawal of these funds. Measure Results in Tax Increases. If this measure is approved, several tax increases passed as part of the February 2009 budget package would be extended by one to two years. State tax revenues would increase by about $16 billion from 2010-11 through 2012-13. Fiscal Effects Tax Increases Extended If Proposition 1A passes, the tax increases included in the February 2009 budget package would be extended for one or two additional years. (The extensions of the tax increases are included in a part of a law that will only go into effect if Proposition 1A passes.) • The Sales and Use Tax (SUT) increase of 1 percent would be extended for one year through 2011-12. • The Vehicle License Fee (VLF) tax increase would be extended for two years through 2012-13. • The Personal Income Tax (PIT) related tax increases would also be extended for two more • years, through the 2012 tax year. Excerpt from State Legislative Analyst's Office proposition analysis http://www.lao.ca.gov/ballot/2009/lA 05 2009.aspx Proposition IB Education Finance Summary of Legislative Analyst's Estimate of Net State and Local Government Fiscal Impact • Fiscal impact would depend on how current constitutional provisions would otherwise be interpreted. • Potential state savings of up to several billion dollars in 2009-10 and 2010-11. • Potential state costs of billions of dollars annually thereafter. Ballot Label Fiscal Impact: Potential state savings of up to several billion dollars in 2009-10 and 2010-11. Potential state costs of billions of dollars annually thereafter. Overview of the Proposal EDUCATION FUNDING - PAYMENT PLAN • Requires supplemental payments to local school districts and community colleges to address recent budget cuts. • Annual payments begin in 2011-12. • Payments are funded from the state's Budget Stabilization Fund until the total amount has been paid. • Payments to local school districts will be allocated in proportion to average daily attendance and may be used for classroom instruction, textbooks and other local educational programs. Fiscal Effects This measure's fiscal effect would depend on a number of key factors, including: • Interpretation of Current Law. Because there is uncertainty over how the Constitution would be interpreted in its current form, it is unknown how Proposition 98 funding would work in the future under current law. As a result, it is difficult to know how this measure would change the state's finances. • Economic and Revenue Outlook. The Proposition 98 minimum guarantee changes each year in large part due to changes in the state's economy and revenues. Thus, shifts in the economy and revenues can change the minimum guarantee by billions of dollars. • Passage of Proposition 1A. If Proposition 1A is not approved by the state's voters, this measure would have no fiscal effect. Funding for Proposition 98 would be determined by interpreting the Constitution in its current form. Savings in Near Term. In 2009-10 and 2010-11, the measure could result in annual savings. This is because the measure could postpone maintenance factor payments that otherwise would have been made in these years. Any such savings could be up to several billion dollars each year. Under other interpretations of current law, however, this measure would result in no savings in 2009-10 and/or 2010-11. Costs in Long Term. In 2011-12, the state would begin making supplemental payments. The $9.3 billion in payments likely would be paid over a five-to-six year period. As noted above, the long-term effect of these payments is subject to considerable uncertainty. Under most situations, however, costs for K-14 education likely would be higher than under current law—potentially by billions of dollars each year. Excerpt from State Legislative Analyst's Office proposition analysis http://www.lao.ca.gov/ballot/2009/lB 05 20Q9.aspx Proposition 1C California State Lottery Summary of Legislative Analyst's Estimate of Net State and Local Government Fiscal Impact • Impact on 2009-10 State Budget. Allows $5 billion of borrowing from future lottery profits to help balance the 2009-10 state budget. • Impact on Future State Budgets. Debt-service payments on the lottery borrowing and higher payments to education would likely make it more difficult to balance future state budgets. This impact would be lessened by potentially higher lottery profits. Additional lottery borrowing would be allowed. Ballot Label Fiscal Impact: Allows $5 billion of borrowing from future lottery profits to help balance the 2009-10 state budget. Debt-service payments on this borrowing and higher payments to education would likely make it more difficult to balance future state budgets. Overview of the Proposal LOTTERY MODERNIZATION ACT • Allows the state lottery to be modernized to improve its performance with increased payouts, improved marketing, and effective management. • Requires the state to maintain ownership of the lottery and authorizes additional accountability measures. • Protects funding levels for schools currently provided by lottery revenues. • Increased lottery revenues will be used to address current budget deficit and reduce the need for additional tax increases and cuts to state programs. Fiscal Effects This measure would affect finances of the state General Fund, the lottery, and educational institutions: State General Fund. This measure would allow the state to borrow $5 billion from future lottery profits in 2009-10 to help balance the 2009-10 state budget. The measure also would allow more borrowing from lottery profits in the future. While the General Fund would benefit in the future from lottery profits not needed to pay off the borrowing, these lottery profits probably would not be enough to cover higher payments to education required by this proposition. This means the state would have to identify new revenues or spending reductions to make these higher payments to education in the future. Lottery. If voters approve this measure, lottery profits probably would increase by hundreds of millions of dollars per year compared to what they would be under current law. Educational Institutions. Schools, community colleges, and universities would no longer receive payments from the lottery. Instead, these institutions would receive higher payments from the state General Fund. These payments would grow over time—likely faster and in a more consistent way than the schools' existing lottery payments. Excerpt from State Legislative Analyst's Office proposition analysis http://www.lao.ca.gov/ballot/2009/lC 05 20Q9.aspx M Proposition ID Budget Act of 2008. California Children and Families Act: Use of Funds: Services for Children Summary of Legislative Analyst's Estimate of Net State and Local Government Fiscal Impact • State General Fund savings of up to $608 million in 2009-10 and $268 million annually from 2010-11 through 2013-14, from temporarily redirecting a portion of funds from the California Children and Families Program in place of state General Fund support of health and human services programs for children up to age five. • Corresponding reductions in funding for early childhood development programs provided by the California Children and Families Program. Ballot Label Fiscal Impact: State General Fund savings of up to $608 million in 2009-10 and $268 million annually from 2010-11 through 2013-14. Corresponding reductions in funding for early childhood development programs provided by the California Children and Families Program. Overview of the Proposal PROTECTS CHILDREN'S SERVICES FUNDING - HELPS BALANCE STATE BUDGET • Provides more than $600 million to protect children's programs in difficult economic times. • Redirects existing tobacco tax money to protect health and human services for children, including services for at-risk families, services for children with disabilities, and services for foster children. • Temporarily allows the redirection of existing money to fund health and human service programs for children 5 years old and under. • Ensures counties retain funding for local priorities. • Helps balance state budget. Fiscal Effects The measure would have the following fiscal effects on state and local governments. Reduction in Funding Available for Existing State and Local Commission Programs. This measure would reduce state commission funding by up to $340 million on a one-time basis in 2009-10 by redirecting the state commission's reserve funds. In addition, this measure would reduce funding for the state and local commissions by $268 million annually from 2009-10 through 2013-14. State General Fund Savings. This measure would achieve state savings of up to $608 million in 2009-10 and $268 million annually from 2010-11 through 2013-14. This results from using a portion of Proposition 10 funds in place of state General Fund for state-supported health and human services programs for children up to age five. Other Potential Fiscal Effects. The reduction in state and local First 5 commission funding could result in other costs to the state and local agencies (primarily counties and schools). This would occur to the extent that some children and families rely on other health and human services programs instead of those now provided under First 5. However, absent this measure, other budget reductions or revenue increases would be needed to address the state's severe fiscal problems. The fiscal effects of these alternative budget-balancing solutions on state and local programs and state revenues are unknown. Excerpt from State Legislative Analyst's Office proposition analysis http://www.lao.ca.gov/ballot/2009/lD 05 20Q9.aspx Proposition IE The Mental Health Services Act: Proposition 63 Amendments Summary of Legislative Analyst's Estimate of Net State and Local Government Fiscal Impact • State General Fund savings of about $230 million annually for two years (2009-10 and 2010-11) from redirecting a portion of Proposition 63 funds to an existing state program in place of state General Fund support. « Corresponding reduction in funding available for Proposition 63 community mental health programs. Ballot Label Fiscal Impact: State General Fund savings of about $230 million annually for two years (2009-10 and 2010-11). Corresponding reduction in funding available for Mental Health Services Act programs. Overview of the Proposal MENTAL HEALTH SERVICES FUNDING - TEMPORARY REALLOCATION - HELPS BALANCE STATE BUDGET • Amends Mental Health Services Act (Proposition 63 of 2004) to transfer funds, for a two- year period, from mental health programs under that act to pay for mental health services for children and young adults provided through the Early and Periodic Screening, Diagnosis, and Treatment Program. • Provides more than $225 million in flexible funding for mental health programs. • Helps balance state budget during this difficult economic time. Fiscal Effects Funding Redirection from Proposition 63 Programs to EPSDT This measure would result in state General Fund savings of about $230 million a year for two years (2009-10 and 2010-11) from redirecting a portion of Proposition 63 funds to state-supported EPSDT mental health services. It would result in an equivalent reduction in Proposition 63 funding. Additional Potential Fiscal Effects Due to Redirection of Proposition 63 Funds. The proposed temporary redirection in Proposition 63 funding would make less money available for mental health programs. To the extent that such programs are reduced, state and local governments could incur added costs for homeless shelters, social services programs, medical care, law enforcement, and county jail and state prison operations. The extent of these potential costs is unknown and would depend upon the specific programmatic changes that resulted from the redirection of Proposition 63 funding. Potential Decrease in Federal Funds. As noted earlier, some Proposition 63 funds are used to draw down federal matching funds through the Medi-Cal Program. Thus, the redirection of Proposition 63 funds proposed in this measure could result in a decrease in federal financial support. The amount of any reduction is unknown, and would depend on how the state and counties choose to adjust their programs in response to this redirection. Impact of Alternative Budget Actions. Absent this measure, other budget reductions or revenue increases might need to be adopted to address the state's severe fiscal problems. The fiscal effects of these alternative budget-balancing solutions on state and local programs and state revenues are unknown. Excerpt from State Legislative Analyst's Office proposition analysis http://www.lao.ca.qov/ballot/2009/lE 05 2009.aspx Proposition IF State Officer Salary Increases Summary of Legislative Analyst's Estimate of Net State and Local Government Fiscal Impact • Minor state savings related to elected state officials' salaries in some cases when the state is expected to end the year with a budget deficit. Ballot Label Fiscal Impact: Minor state savings related to elected state officials' salaries in some cases when the state is expected to end the year with a budget deficit. Overview of the Proposal ELECTED OFFICIALS'SALARIES - PREVENTS PAY INCREASES DURING BUDGET DEFICIT YEARS. • Encourages balanced state budgets by preventing elected Members of the Legislature and statewide constitutional officers, including the Governor, from receiving pay raises in years when the state is running a deficit. • Directs the Director of Finance to determine whether a given year is a deficit year. • Prevents the Citizens Compensation Commission from increasing elected officials' salaries in years when the state Special Fund for Economic Uncertainties is in the negative by an amount equal to or greater than one percent of the General Fund. Fiscal Effects Cost Savings From State Officials' Salaries During Certain Deficit Years. This measure would prevent the commission from approving pay increases for state officials in certain cases when the state General Fund is expected to end the year with a deficit. Under current practice, the commission might have otherwise approved pay increases in those years. The commission does not grant pay increases every year, and the level of pay increases granted by the commission is not always the same. Since January 2000, the commission has raised the pay of elected officials four times. Over this period, the total pay increases for each official have been equal to or less than the rate of inflation. Currently, a 1 percent raise for the elected state officials costs the state about $160,000 per year. If, for example, the commission were inclined to grant the officials a 3 percent raise but were prevented from doing so under this measure, the state would save less than $500,000 that year. Consequently, savings in any year would be minor. May Contribute to Different Budget Decisions by the Legislature and Governor. The Constitution already requires the Legislature and the Governor to adopt a balanced budget each year. When the budget falls substantially out of balance during the course of a fiscal year, the Constitution allows the Governor to declare a fiscal emergency and call the Legislature into a special session to address the emergency. The Constitution, however, does not require the budget to end the year in balance. This measure may have the effect of influencing the Legislature and the Governor to make different budgetary decisions—decisions, for example, that reduce a projected state deficit or make it less likely a deficit emerges in the first place. These impacts, however, are not possible to estimate. Excerpt from State Legislative Analyst's Office proposition analysis http://www.lao.ca.qov/ballot/2009/lF 05 2009.aspx