Which of the following options is the most realistic for ...assets1c.milkeninstitute.org/.../2009/Slide/sos09_9351035.pdf · General Fund revenues and expenditures California, FY

Polling Question 1:Which of the following options is the most realistic for overcoming near-term

revenue shortfalls in the state’s budget?

1.

Privatization

2.

Tax hikes

3.

Bonds

4.

Reducing government spending

5.

Combination of all the above

Polling Question 2:What long-term

strategy should be proposed to improve the budgetary situation in California?

1.

Two-year budget

2.

Reduce the budget vote requirement

3.

Rainy-day fund

4.

New, broader and higher tax structure

5.

Combination of 1, 2 and 3

General Fund revenues and expenditures

California, FY 1993-1994 to 2009-2010

Source:

California Department of Finance.

200920072005200320011999199719951993

110

100

90

80

70

60

50

40

30

US$ billions

General Fund revenues and transfersGeneral Fund expenditures

Percent change in revenues and expenditures

General Fund, California, FY 1993-1994 to 2009-2010

Source: California Department of Finance.

200920072005200320011999199719951993

30

20

10

0

-10

-20

-30

Percent change from preceding year

General Fund revenues and transfersGeneral Fund expenditures

Revenues and transfers in FY 2009-2010 California, enacted budget, US$ millions


General Fund

Special Fund Total

Personal income tax 48,868 706 49,574Sales tax 27,609 4,519 32,128Corporation tax 8,799 - 8,799Highway users tax - 3,145 3,145Motor vehicle fees 1,682 5,593 7,275Insurance tax 1,913 - 1,913Liquor tax 332 - 332Tobacco tax 102 835 937Other 236 8,625 8,861Total 89,541 23,423 112,964

Total spending in FY 2009-2010 California, enacted budget, US$ millions


General Special BondLegislative, judicial, executive 1,884 2,529 187 4,600State and consumer services 569 708 19 1,296Business, transportation and housing 2,585 5,755 4,206 12,546Resources 1,842 2,061 1,584 5,487Environmental protection 73 1,197 514 1,784Health and human services 24,953 7,665 208 32,826Corrections and rehabilitation 8,210 22 2 8,234K-12 education 35,042 106 505 35,653Higher education 10,547 47 1,612 12,206Labor and workforce development 64 369 - 433General government -1,186 4,664 702 4,180Total 84,583 25,123 9,539 119,245

Type of fundsTotalCategories

General Fund budget gap*

California, FY 1997-1998 to 2009-2010


20092008

20072006

20052004

20032002

20012000

19991998

1997

6

4

2

0

-2

-4

-6

-8

-10

US$ billions

* Operating deficits/surpluses including/after.

Primary expenditures in FY 2009-2010 California, enacted budget


Corrections and

rehabilitation6.0%

Higher education

9.0%

Health and human

services26.0%

Other20.0%

Business, transportation and housing

10.0%

K-12 education29.0%

Revenue sources in 2009-2010 budget

California, enacted budget


Corporation tax8.0%

Other8.0%

Sales tax28.0%

Highway users tax

3.0%Motor vehicle

fees6.0%

Insurance tax2.0%

Tobacco tax1.0%

Personal income tax

44.0%

Primary General Fund expenditures

California, FY 1998-1999 to 2009-2010


20092008

20072006

20052004

20032002

20012000

19991998

45

40

35

30

25

20

Percent

K-12 educationHealth and human services

Spending on health and human services

California, general fund, FY 1998-1999 to 2009-2010


20092008

20072006

20052004

20032002

20012000

19991998

30

28

26

24

22

20

18

16

14

US$ billions

Spending on K-12 education

California, General Fund, FY 1998-1999 to 2009-2010


20092008

20072006

20052004

20032002

20012000

19991998

45

40

35

30

25

20

US$ billions

Proposition 98 funding in 2009-2010 California, enacted budget, US$ millions

Source: California Legislative Analysts’s

Office.

Expenditures 54,904 K-12 48,315 Community colleges 6,482 Other 107Revenue 54,903 General Fund 39,461 Local property tax 15,442

Highest state-local tax per capita states

2008

Source: U.S. Census Bureau.

Tax revenue Tax per capita(US$ billions) (US$)

1 Alaska 5 7,2682 New York 134 6,8983 Wyoming 3 6,2054 Connecticut 21 6,0445 New Jersey 51 5,9446 Hawaii 7 5,1397 Massachusetts 32 4,9668 Maryland 27 4,8179 California 173 4,75410 Vermont 3 4,714

Rank State

State-local tax burden California vs. U.S. average

Source: Tax Foundation.

0806040200989694929088868482

11.0

10.5

10.0

9.5

9.0

Percent

CaliforniaUnited States

State-local taxes As percent of per capita income, 2008

Source: Tax Foundation.

Rank State Percent1 New Jersey 11.82 New York 11.73 Connecticut 11.14 Maryland 10.85 Hawaii 10.66 California 10.57 Ohio 10.48 Vermont 10.39 District of Columbia 10.3

10 Wisconsin 10.211 Rhode Island 10.2

U.S. average 9.7

ARRA funds for California Top 10 agencies awarding funds, US$ billions, 2008

Source: Recovery.gov.

Agency Announced

Made available

Paid out

Department of Education 9.9 6.7 4.9Department of Health and Human Services 5.0 5.5 3.6Department of Transportation 3.7 3.0 0.2Social Security Administration 1.3 0.0 0.0Department of Energy 1.2 0.3 0.0Department of Defense 1.1 0.0 0.0Department of Housing and Urban 1.1 0.8 0.2Department of Labor 0.7 1.8 2.6Environmental Protection Agency 0.5 0.5 0.0Department of Justice 0.5 0.5 0.1Total 26.1 19.8 12.0

Capital gains and stock options value

California, FY 1999-2000 to 2009-2010*

Source: California Department of Finance, California Legislative

Analysts’

Office, Milken Institute.*FY07-08 preliminary, FY08-09, FY09-10 estimated.

20092008

20072006

20052004

20032002

20012000

1999

200

180

160

140

120

100

80

60

40

US$ billions

Capital gains and stock option revenue

California, FY 1999-2000 to 2009-2010*

Source: California Department of Finance, California Legislative

Analysts’

Office, Milken Institute.*FY07-08 preliminary, FY08-09, FY09-10 estimated. An assumed tax rateof 9% was used to calculate the tax revenue.

20092008

20072006

20052004

20032002

20012000

1999

18

16

14

12

10

8

6

4

US$ billions

•

A bipartisan group of citizens from every walk of life who have come together to reclaim our power and make our government work again.

•

Our goal is fundamental change: government that's small enough to listen, big enough to tackle real problems, smart enough to spend our money wisely in good times and bad, and honest enough to be held accountable for results.

California Forward

Source: California Forward.

The California Forward 2010 reform plan Responsible budgets on time

•

Pay-as-you-go-

Require that new programs identify a funding source for any new spending they require.

•

Base budgets on results-

Require the Governor and lawmakers to set clear goals for programs, consider results and effectiveness when making budget decisions, oversee performance to improve efficiency, and consider eliminating outdated and duplicative programs.

•

Two-year budget -

Require the Governor and Legislature to craft two-year budgets with midcourse correction authority, and provide long-term revenue forecasts and capital investment plans.

Source:

California Forward.

The California Forward 2010 reform plan Responsible budgets on time (continued)

•

One-time use of one-time revenues -

Reduce future budget shortfalls by prohibiting the use of unexpected spikes in revenues to increase spending on programs that continue year after year.

•

Reduce the budget vote requirement-

Reduce the likelihood of budget stalemates by changing the legislative vote requirement for state budget approval to a simple majority (to be adopted in conjunction with the plan’s other fiscal reforms, and while retaining the two-thirds majority vote requirement for tax increases).

•

Provide Certainty Regarding Passage of Fees-

Clarify the circumstances in which the Legislature and the Governor can impose fees without a two-thirds majority vote to those areas with a clear and justifiable

nexus to the service provided.


The California Forward 2010 reform plan Government that’s closer to the people

•

Protect local revenue-

Give communities more control over community-related services and prevent the state from siphoning off local revenue by giving local governments legal ownership of specific funds for community services, including the property tax.

•

Foster and fund long-term collaboration-

Encourage community-level governments to coordinate and consolidate programs when it

makes sense. -

Allow cities, counties and school districts that craft long-term flexible plans to address community needs, to seek majority-vote approval to provide funds to pay for them, while retaining the vote thresholds established under Proposition 218.


The California Forward 2010 reform plan Constituent access and accountability

•

Term limit reform-

Reducing the total time newly-elected state legislators are allowed to serve from 14 years to 12 years, regardless of whether the time is spent in the Assembly or Senate.

•

Constituent access and accountability-

Requiring legislators to spend part of every year in their district, in consultation with constituents and local leaders.


Development of the $60 Billion Budget Gap

(Dollars in Billions)

Impact of Recession on Revenue Trend

How We Solved California’s $60 Billion Budget Problem

Major Cuts Enacted to Address the Budget Crisis of 2009

(Dollars in Millions)

The Budget Brings Spending Back In Line with Population and Inflation

Where Have We Been, Where Are We Going?

The Economy

Where Have We Been and Where Are We Going?

The Budget

Why the Deficit Returns

(Dollars in Billions)

Major General Fund Expenditures

Forecast for 2012-13

Proposition 98

General Fund

Proposition 98

General Fund

Corrections

General Fund

Corrections

General Fund

Medi-Cal

General Fund

Medi-Cal

General Fund

SSI/SSP and CalWORKs

SSI/SSP and CalWORKs

IHSS and DDS

General Fund

IHSS and DDS

General Fund

Judiciary

General Fund

Judiciary

General Fund

Debt Service

General Fund

Debt Service

General Fund

Higher Education

General Fund

Higher Education

General Fund

Documents

Which of the following options is the most realistic for ...assets1c.milkeninstitute.org/.../2009/Slide/sos09_9351035.pdf · General Fund revenues and expenditures California, FY