CDCAN REPORT #201-2011: State budget "trigger cuts" announcement scheduled by Department of Finance director

STATE BUDGET "TRIGGER CUTS" ANNOUNCEMENT SCHEDULED FOR TUESDAY 12 NOON - DECEMBER 13TH

Governor's Department of Finance Director Will  Release Updated 2011-2012 State Budget Numbers and Make Announcement If One or Both State Budget 'Trigger Cuts" Will Be Pulled - Likely Televised and Webcast Live on CalChannel

SACRAMENTO, CA (CDCAN)  [Last updated 12/12/2011 06:20 PM] -  The decision on whether to pull one or both of the State Budget "trigger cuts" that could mean - if pulled - up to $2.5 billion in additional mid-year spending reductions, will be announced Tuesday, December 13th at 12 noon at the State Capitol by the Governor's Department of Finance Director Ana Matosantos according to Kevin Yamamura of the Sacramento Bee.  The press briefing will likely be televised and webcast live via CalChannel (check cable listings or go to www.calchannel.com)  CDCAN will provide a full report on the press briefing.

The Department of Finance director will present updated and revised 2011-2012 State Budget numbers - numbers that many believe will show revenues falling below what the Governor and lawmakers had hoped for last June when the budget was passed and signed into law.

In mid-November the non-partisan Legislative Analyst released his mid-year report on the 2011-2012 State Budget, showing that California is facing a $13 billion budget deficit by June 30,. 2012 unless the Governor and Legislature take action to correct the problem.  The Legislative Analyst, in that same report, believed that state revenues would fall significantly below what was budgeted and result in the 'trigger cuts" being pulled.

State Budget "Trigger Cuts"

• The State budget "trigger cuts" that would - if pulled - implement additional new automatic spending cuts - was part of the 2011-2012 State Budget that was passed by the Legislature and signed into law by Governor Brown in late June.
• Lawmakers and the Governor had hoped that additional State revenues would come in between July 1, 2011 and June 30, 2012  totaling $4 billion - which in turn,  avoided the need to make additional spending cuts in June to balance the budget then.
• To add credibility to the forecast of increased revenues - a forecast that some budget analysts and the Republican legislative leadership felt was unrealistic - "trigger cuts" were included, that would be pulled if revenues fell below what was hoped for in California, the State budget "trigger cuts" will be pulled - triggering up to $2.5 billion in automatic spending cuts in specific budget areas - if the State's $88.5 billion in projected revenues do not come in at a certain level as budgeted.
• If State revenues are forecast in December 2011 to be lower by $1 billion to $2 billion, the first State budget "trigger" is pulled, triggering  $600 million in automatic spending cuts for specific programs, effective on or sometime after January 1, 2012.
• If State revenue numbers in December 2011 are forecast to be lower by more than $2 billion,  then the second State budget "trigger" is pulled, triggering spending cuts of up to $1.9 billion.

What's Next

• The Governor's Department of Finance is required to release (by December 15th)  its own forecast of revenues and spending - and from that (and also from the Legislative Analyst Office's report) make a determination whether or not revenues will come in as hoped for. That will determine whether or not one or both of the State budget "trigger cuts" are pulled. The automatic cuts would go into effect on or sometime after January 1, 2012 - the exact timing depends on the department budget, and in some cases if additional legislative approval is required to approve certain cuts.
• The Governor will release his 2012-2013 State Budget proposal on or by January 10th - that could include additional mid-year budget reductions.  He called also call a special session of the Legislature to deal with the budget crisis - though at this point it is not likely the Legislature will return to Sacramento before January.
• Some of the automatic reductions will need additional legislative approval - such as those impacting the developmental services budget if spending cuts were made to provider payments, or cuts to certain programs and operations that are mandated or established in state law.   Some reductions - such as the 20% cut to In-Home Supportive Services - is currently temporarily blocked by a federal district court from being implemented.
• The Legislature is not scheduled to reconvene in Sacramento until January.

Outline of the State Budget "Trigger Cuts" Process

• Requires the Governor's Department of Finance to provide notification to the Joint Legislative Budget Committee by December 15, 2011, with an updated revenue forecast for the 2011-2013 State Budget that is based on the higher of either the November 2011 Legislative Analyst’s revenue forecast, or the Department of Finance’s December 2011 revenue forecast.
• Requires that the Director of Finance notify the Joint Legislative Budget Committee of any trigger reduction within 10 days of the reduction.
• Certain reductions could require additional legislative approval - including those to developmental services if spending reductions were made, for instance, to provider payments or to many programs that are established in state law.
• There are some questions - and differences of opinion - under just what conditions can a trigger be pulled - or not - and if pulled, the effective dates of cuts and whether or not all of the savings (reductions) have to be achieved before the end of the 2011-2012 State Budget year (that ends June 30, 2012).
• There are different opinions on whether or not the trigger cuts are one time (meaning this budget year only) or on-going (meaning cuts that continue into future budget years)
• In addition there are OTHER "trigger cuts" in the 2011-2012 State Budget, including a different one impacting In-Home Supportive Services if it is determined in 2012 that a certain level of savings will not be achieved via proposals that hope to bring down $140 million in new federal matching funds. That "trigger cut" is not part of the "trigger cuts" tied to the overall State Budget projected revenues described below.

If the December 15, 2011, updated forecast of revenues predicts revenues less than $87.5 billion, the following additional  spending cuts - called “Tier I” reductions, which total about $601 million, shall occur up to the amount that is specified. These reductions, if triggered, would take effect on or after January 1, 2012:

• $100 million to the University of California.
• $100 million to the California State Universities.
• $100 million to the Department of Developmental Services.(can be reduced from the developmental services system, including State administration,Developmental Centers, and Regional Center expenditures. A "variety of strategies" may be used for purposes of identifying savings, including, but not limited to, savings attributable to caseload adjustments, changes in expenditure trends, or other administrative savings or restructuring according to the budget trailer bill language). The language in the budget trailer bill for this reduction is broad - and that means spending reductions of $100 million -unlike the IHSS cut - can be achieved in many ways, including budget savings.
• $110 million to the In-Home Supportive Services program, including $100 million in service hour cuts, and $10 million for local anti-fraud efforts (an across-the board reduction in IHSS services of 20% beginning January 1, 2012, with specified notice requirements and exceptions. According to legislative budget analysis of this cut, if this trigger is pulled, the resulting reduction would affect about 374,000 IHSS recipients and would generate approximately $100 million in State general fund reductions in 2011-2012 and $242.8 million in State general fund reductions (or savings) in subsequent full budget years.)
• $92 million to the Department of Corrections and Rehabilitation (CDCR), including
  • $72.1 million in increased county charges for youthful offenders sent to CDCR.
• $30 million to the California Community Colleges backfilled with a $10 per unit fee increase.
• $23 million to the Department of Education related to childcare funding.
• $16 million to the California State Library related to library grants.
• $15 million to the California Emergency Management Agency related to local vertical prosecution grants.
• $15 million to Medi-Cal from extending the March 2011 cuts to all managed care plans.

If the December 15, 2011, updated forecast of revenues (the higher forecast by either the Legislative Analyst Office or the Department of Finance) projects revenues less than $86.5 billion, then the second trigger is pulled and ADDITIONAL round of automatic spending cuts of $1.9 billion - called "Tier 2" reductions - on top of the $601 million would be implemented on or after January 1, 2012; however, the reduction impacting schools to the 2011-2012 school year would take effect on or after February 1, 2012:

• $1.5 billion from reducing the 2011-12 school year by up to 7 days.
• $248 million from eliminating dedicated funding for home-to-school transportation.
• $72 million to the California Community Colleges related to an apportionment decrease.

Summary of Budget Trailer Bill Dealing With Health and Human Services Trigger Cuts

For specific information about the trigger cuts as it relates to health and human services program cuts, see SB 73 (one of the 18 budget trailer bills that make up the 2011-2012 State Budget as passed and signed into law in June):

SB 73 - BUDGET TRIGGER: HEALTH AND HUMAN SERVICES

AUTHOR: Senate Budget and Fiscal Review Committee
CDCAN SUMMARY:  Makes changes in State law to allow for implementation of $200 million in reductions in State general fund spending in the health and human services budget, that is part of the $2.5 billion in "trigger cuts".  Would make $15 million in reductions to Medi-Cal impacting PACE (Program for All Inclusive Care for the Elderly, AIDS Foundation and Senior Action Network; $100 million in State general fund cuts to developmental services to be identified by the Department of Developmental Services from across the developmental services system and $100 million in across the board cuts in State general funding to In-Home Supportive Services
PREVIOUS ACTION 06/28/2011: PASSED Assembly by vote of 51 to 28. PASSED State Senate by vote of 23 to 17. Sent to Governor at 09:50 PM.
LATEST ACTION 06/30/2011: SIGNED by Governor.
EFFECTIVE DATE: Immediate upon signature of Governor.
COPY OF BILL (CHAPTERED VERSION AS APPROVED BY GOVERNOR) - HTML:  http://www.leginfo.ca.gov/pub/11-12/bill/sen/sb_0051-0100/sb_73_bill_201...
COPY OF BILL (CHAPTERED VERSION AS APPROVED BY GOVERNOR) - PDF: http://www.leginfo.ca.gov/pub/11-12/bill/sen/sb_0051-0100/sb_73_bill_201...
CDCAN COMMENT:
* There are a total of three bills dealing with the budget "trigger" - including one (AB 121) that gives authority to the Governor's Department of Finance to determine whether sufficient level of new revenues are coming in as projected by January 2012 - and then to implement certain levels of cuts up to $2.5 billion if it is determined that revenues are not coming in as projected.  AB 121 only lists budget area numbers and spending reduction amounts and the conditions that those reductions would be made)
For html version of AB 121:  http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_0101-0150/ab_121_bill_20...
For pdf version of AB 121: http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_0101-0150/ab_121_bill_20...
*  The other two bills deals with the specific levels of reductions that would occur in K-12 education and  - this bill (SB 73) - on health and human services should the triggers be pulled in January 2012.  
PRIORITY:  VERY HIGH