Sacramento Head Start Alumni Association

Fiscal Year 2003-04 Summary

Aug 11, 2003

Sacramento Office

1225 8th Street, Suite 415

Sacramento, California 95814

Telephone: 916/442-0753; FAX 916/442-7966

www.wclp.org





Fiscal Year 2003-04 Summary



January Budget and May Revise

On January 10, the Governor released the January budget proposal and estimated that the state?’s budget deficit was $34.6 billion over the next 18 months. In May, the deficit was updated to reflect a $38.2 billion deficit. More than half (60%) of the January budget relied on program reductions and elimination of services. In addition, the budget proposed to realign state programs to the county level, thereby adding additional fiscal responsibility to local governments for the funding and implementation of a variety of child care, health care and human service programs. The proposed realignment would be funded with a combination of revenues from a proposed 1% increase in the state?’s sales tax rate, a reinstatement of the 10% and 11% personal income tax brackets on the wealthiest Californians, and a $1.10 per pack increase in the tax on cigarettes and tobacco products. While continuing to advocate for the three new taxes, the May Revise scaled back the Governor?’s realignment proposal to certain health care programs and CalWORKs administration and employment services.



Conference Committee Unable to Reach Agreement

On June 4, the Conference Committee met for the first time, charged with resolving the differences in the Senate and Assembly versions of the Governor?’s budget. The Assembly adopted the May Revise, thereby rejecting the 6.2% grant reduction and suspending the current year and budget year COLAs for both programs. The Senate rejected the 6.2% grant reduction but also funded the two COLAs for CalWORKs and SSI/SSP.



Other notable differences between the Senate and Assembly included:

The Senate rejected the Governor?’s proposal to transfer TANF funds to the In-Home Supportive Services (IHSS) program. IHSS provides services to aged, blind and disabled individuals that allow them to remain safely in their home as an alternative to out-of-home care. The May Revise of the Governor?’s January budget proposes an unprecedented transfer of $102.4 million in TANF funds to cover increased IHSS costs. The Assembly adopted the Governor?’s proposal.



The Assembly adopted key major reforms in the Food Stamps programs while the Senate rejected them. The Assembly Version adopts placeholder trailer bill language (1) allowing Food Stamp recipients to receive transitional food stamps for another five months after they leave welfare, (2) excluding the value of one car per family for Food Stamps and CalWORKs families, and (3) eliminating the face-to-face interview requirement for Food Stamp applicants.



On June 9, the Conference Committee temporarily closed without resolving the majority of health and human service issues. Typically, the ?“Big 5?” (the Governor, Senators Burton and Brulte and Assembly Members Wesson and Cox) works in conjunction with the Conference Committee to resolve outstanding issues. This year, the Big 5 played a larger role but was unable to resolve the ?“open?” issues in a timely manner.



Moderate Caucus Introduces Plan

A bipartisan group of 18 moderates from the Assembly had been meeting to draft their own version of a budget. On June 17, Assembly Members Joe Canciamilla and Keith Richman presented a budget. No other moderate assembly members signed on initially. The Canciamilla-Richman budget included the following provisions:

Increased CalWORKs sanctions,
Suspending the CalWORKs COLA for three years,
Reducing SSI/SSP grants to the MOE floor, and
Eliminating state-only human services (CAPI, CFAP).



Although not specifically mentioned in their document, the Canciamilla-Richman budget assumed the suspension of the SSI/SSP COLA for the current year (June 2003) and the budget year (January 2004). The Canciamilla-Richman budget worked off the Assembly Budget and therefore assumed most of the proposed cuts included in the Assembly Budget proposal. A few days later, Assembly Member Lois Wolk (D-Woodland) announced her support of the moderates?’ budget in an editorial to the Sacramento Bee newspaper.



With the start of the fiscal year looming, the Senate decided to vote on their version of the budget on June 24, June 25 and June 26 but were unable to muster the necessary votes to pass the budget. Two Republican votes are needed in the Senate while the Assembly requires four Republican votes in order to meet the two-thirds requirement.



Meanwhile the Assembly Democrats returned to their districts on June 24 and June 25 in an attempt to garner support for their budget and the quarter-cent sales tax increase. The Assembly convened on June 26 and also attempted to pass a budget, but without success.



The Assembly Republicans proposed their version of a budget on July 6 and the Senate Republicans presented numerous amendments to the budget bill. Both Republican plans were defeated in their respective houses. Table One is a comparison between the two Republican plans and the bipartisan Moderates plan:



Table One ?– Comparison of Republican and Moderate Caucus Plans

Issues
Assembly Republican Plan
Senate Republican Plan
Moderates Caucus Plan

Increasing CalWORKs sanctions for non-compliance with work requirements
X
X

Suspending the CalWORKs COLA for three years
X

for 3 years
X

July 2003 and October 2003
X

for 3 years

Reducing CalWORKs grants by 6.2 percent
X

Reducing SSI/SSP grants to the MOE floor
X
X

Eliminating the SSP COLA
X

permanently
X

July 2003 and January 2004

Eliminating CAPI and CFAP
X
X
X

Funding IHSS with TANF funds
X





Running Out of Money

On June 25, State Controller Steve Westly held a press conference to announce that approximately $1.5 billion in state money would stop flowing to schools, colleges, and medical providers on Tuesday July 1 (the start of the fiscal year) unless the Legislature and the Governor broke the budget stalemate. With a dwindling cash reserve, officials also feared that the state would run out of cash on September 1.



In past years, the Controller had more flexibility to determine which services could get paid. However, in May the state Supreme Court ruled that the State Controller had limited flexibility in determining payments absent a budget and the state had no legal authority to make many payments without a budget. Although CalWORKS services could be paid without a budget, other services including child care and Cal Grants for low-income higher education students would not be paid.



Senate Adopts Budget

Twenty-seven days after the start of the fiscal year, the Senate adopted a budget on a 27-10 vote last night. 3 Democrats did not vote for the budget: Senators Alarcon (D-Sun Valley), Soto (D-Pomona) and Vasconcellos (D-Santa Clara), who was absent due to an illness. Because the Senate requires a two-thirds vote (27 votes) to pass a budget and 3 Democrats did not vote, 5 Republicans votes were needed. They included Senators Brulte (R-Rancho Cucamonga), McPherson (R-San Cruz), Ashburn (R-Bakersfield), Johnson (R-Irvine) and Knight (R-Palmdale).



The Senate budget relied on $10.7 billion in borrowing and $7.3 billion in additional reductions. Since last November, the Legislature has trimmed spending three separate times. The plan also assumed the tripling of the vehicle license fee and over $500 million in fee increases, which only require a majority vote. However, Republicans held firm on their ?“no new taxes?” position and the final version of the Senate budget did not include any new tax proposals. Instead, the $10.7 billion in debt refinancing will be financed with a complex tax swap, called the ?“triple flip?” which includes dedicating a certain portion of the existing sales tax to pay for the 5-year ?“deficit bond?” and reimbursing local governments with revenues from the existing property tax. The Legislative Analyst?’s Office estimates that the Senate plan results in a $7.9 billion deficit, largely because of borrowing and creative accounting.



The Senate plan retained the June 2003 COLAs for CalWORKs and SSI/SSP but suspended the budget year COLAs for both programs. The Senate Plan also continued to fund the Statewide Fingerprint Imaging System (SFIS) and provided for five months of transitional food stamps for those families leaving welfare.



Assembly Adopts Budget

After 27 hours of a floor session, the Assembly adopted the Senate version of the budget on Tuesday, July 29. The final vote was 56-22, with two more votes than necessary ?– 54 Democrats and 11 Republicans voted for the final budget bill. Although the Assembly Democratic Caucus had previously voted to suspend both COLAs in CalWORKs and SSI/SSP, the final budget included the June 2003 COLA and suspended the budget year COLAs for both programs. The Assembly plan made minor changes to the Senate plan, in response to last-minute pressure from Assembly Republicans.



Governor Signs Budget

On Saturday, August 2 the Governor signed the budget act. The following are summaries of the human services issues.



CalWORKs

In human services, the January Budget proposed to reduce CalWORKs grants by 6.2% as well as suspend the cost-of-living adjustments (COLA) in the current year (FY 2002-03) and budget year (FY 2003-04) for CalWORKs. The May Revise withdrew the Governor?’s proposal to reduce grants by 6.2% but maintained the suspension of the CalWORKs COLAs in June 2003 and October 2003. Table Two shows the current maximum monthly grant for a family of three in Region 1 and compares it to the Governor?’s January Budget, May Revise and final budget. The final budget funds the June 2003 COLA for CalWORKs but suspends the October 2003 COLA.



Table Two ?– Proposals for CalWORKs

January 2003
June 2003
July 2003
October 2004

Current Law

$679
3.7% COLA increases grant from $679 to $704
__
3.5% COLA increases grant from $704 to $728

January Budget

$679
No COLA, grant remains at $679
6.2% grant reduction, grant decreases from $679 to $637
No COLA, grant remains at $637

May Revise

$679
No COLA, grant remains at $679
__
No COLA, grant remains at $679

Final Budget

$679
3.7% COLA increases grant from $679 to $704
__
NO COLA, grant remains at $704





SSI/SSP

The January Budget proposed to reduce the SSI/SSP grants to the minimum allowed by federal law and suspend the COLAs in the current year (June 2003) and budget year (January 2004). The SSI federal COLA would continue to be ?“passed through?” to recipients in January 2004 but the state SSP COLA would be suspended. The May Revise withdrew the grant reduction but maintained the COLA suspensions. Table Three shows the current maximum monthly grant for an SSI/SSP individual and compares it to the January Budget, May Revise and final budget. The final budget funds the June 2003 COLA for SSI/SSP but suspends the January 2004 COLA while retaining the ?“pass through?” of the federal COLA in January 2004.





Table Three ?– Proposals for SSI/SSP

January 2003
June 2003
July 2003
January 2004

Current Law

SSI
$552
$552
__
$5661

SSP
$205
$226
__
$239

Total
$757
$778
__
$805

January Budget

SSI
$552
$552
$552
$566

SSP
$205
$205 (no COLA)
$156 (-6.2%)
$156 (no COLA)

Total
$757
$757
$708
$722

May Revise

SSI
$552
$552
__
$566

SSP
$205
$205 (no COLA)
__
$205 (no COLA)

Total
$757
$757
__
$771

Final Budget

SSI
$552
$552
__
$566

SSP
$205
$226
__
$226

Total
$757
$778
__
$592





Food Stamps

The January Budget proposed to realign the federal food stamp program at the local level thereby giving county governments more fiscal responsibility and flexibility in the program administration. The May Revise withdrew that proposal. The final budget funds five months of transitional food stamps to families leaving welfare and continues to fund the Statewide Fingerprint Imaging System.



The original Assembly budget bill excluded the value of one car per family for Food Stamps and CalWORKs families, and eliminated the face-to-face interview requirement for Food Stamp applicants. While these provisions were not in the final bill that reached the Governor?’s desk, the issues remain alive in Assembly Bill 231 (Steinberg). AB 231 is currently in the Senate Appropriations Committee?’s suspense file, to be acted on at a later date.



CFAP/CAPI

The January budget also proposed to reduce funding to the California Food Assistance Program (CFAP) due to the restoration of federal food stamp eligibility for most legal noncitizens by October 2003 and shift all remaining CFAP costs to counties. The May Revise withdrew the earlier proposal and proposed to fully fund CFAP and not shift costs to the local level. In addition, the May Revise fully funded the Cash Assistance Program for Immigrants (CAPI) and rescinded an earlier proposal to shift costs to the counties. The final budget funds the May Revise proposal even though the elimination of CFAP and CAPI continued to be the objective of both Republican plans.



Child Care

The January budget proposed to realign all the child care and development programs to the local level, except for the state preschool program. In addition, CalWORKs Stage 3 child care was proposed for elimination. Stage 3 child care provides subsidies to families that have left cash assistance two year ago and are working but remain poor. The May Revise withdrew both proposals. The final budget eliminates funding for grandfathered families receiving a child care subsidy, eliminates funding for 13 year olds and reduces the Regional Market Rate to the 85th percentile. License-exempt providers will receive 90% of the new Regional Market Rate.





Other victims of the budget include community college students who will see their tuition rise. See Table Four for a summary of the fee increases. In addition, effective January 2004 Medi-Cal recipients will be required to re-apply for benefits every six months rather than once a year, as is current law.



Table Four ?– Tuition Increases in Final Budget Act

Community College
California State University
University of California

Current
Enacted
Current
Enacted
Current
Enacted

$11 per credit
$18 per credit
$1,428
$2,046
$3,429
$4,484





Although last year the Governor ?“blue-penciled?” approximately $235 million in line-item vetoes, this year line-item vetoes totaled about $1 million in general fund spending. Most notably, although the Legislature had continued to fund the Child Development Policy Advisory Board (CDPAC), the Governor effectively blue-penciled the committee. CDPAC was instrumental in providing stakeholders with a voice regarding the Governor?’s proposals to reform the child care system.



There may be more developments to the budget as Wall Street firms continue to downgrade the state?’s credit ratings and the tripling of the vehicle license fee and the $10.7 billion deficit bond may be challenged in a court at a later date.






1 Pass through of federal COLA