Highlights of The Governors Budget Proposal

SUMMARY OF GOVERNOR'S PROPOSED
2011-12 BUDGET
JANUARY 10, 2011
Bob Blumenfield
CHAIR, ASSEMBLY BUDGET COMMITTEE
TABLE OF CONTENTS
Overview ....................................................................................................... 2
Public Safety Realignment ......................................................................... 3
K-12 Education ............................................................................................. 5
Higher Education ......................................................................................... 9
Transportation ............................................................................................ 17
Human Services ......................................................................................... 19
Health Care Services................................................................................. 24
Natural Resources and Environmental Protection ............................... 28
Public Safety ............................................................................................... 30
General Government ............................................................................... 35
Local Government .................................................................................... 38
Summary of Tax Solutions ......................................................................... 39
Summary of Borrowing Solutions ............................................................ 41
Summary of Charts .................................................................................... 42

Summary of Governor's 2011-12 Proposed Budget January 10, 2011
OVERVIEW
The Governor has released the 2011-12 budget that contains $26.4 billion in
solutions to address a projected $25.4 billion General Fund deficit.
The chart below illustrates the proposed solutions, by category:
2010-11 and 2010-11 General Fund Solutions

(in millions)
Source 2010-11 2011-12 Total Percent
Expenditure Reductions $422 $12,075 $12,497 47%
Revenues 3,163 8,864 12,027 46%
Other 506 1,379 1,885 7%
Total $4,091 $22,318 $26,409
The proposed budget's reserve is $1 billion.
The Governor’s budget envisions that, by March, the Legislature would adopt
some of the proposed programmatic changes and authorize two ballot
measures for a June special election. The Governor's Budget also assumes that
the actual budget bill will not pass until after the election in June.
The Assembly will begin the Subcommittee hearing process in January in order
to begin vetting and considering the various details of the budget. The process
will conclude in time to allow a Conference Committee and floor actions to be
concluded in time for the special election deadline proposed by the Governor.
This report is intended to provide an immediate understanding of the Governor's

proposed budget in the limited timeframe available. More information will
follow as the process moves forward.
Assembly Budget Committee 2

PUBLIC SAFETY REALIGNMENT
The Governor’s budget assumes $5.9 billion from the continuation of the Vehicle
License Fee and Sales Tax rates of 2009, to allocate to local governments for
public safety programs. The realignment proposal would be included in a
Constitutional Amendment that would both stipulate the programs that would
be assumed by the local governments, as well as the continuation of the tax
revenues. The tax revenues, which would have ended this year, would be
extended an additional five years but the State would commit to provide
ongoing funding for these local programs. The following chart outlines the
programs and revenues contained in this realignment package:
Programs ($ millions) 2011-12 2014-15

Cal FIRE, Fire and Emergency $250 $250
Response Activities
Court Security 530.0 530.0
Vehicle License Fee 506.4 506.4
Local Jurisdiction for Lower
Level Offenders and Parole
Violators
Local Costs 298.4 908.1
Reimbursement of State Costs 1,503.6 -
Realign Adult Parole to Counties
Reimbursement of State Costs 627.7 -
Realign Remaining Juvenile
Justice programs
Reimbursement of State Costs 179.6
Mental Health Services
Early Periodic Screening, - 579.0
Diagnosis and Treatment
Mental Health Managed Care - 183.6
AB 3632 - 104.0
Existing Community Mental - 1,0770.0
Health Services
Substance Abuse Treatment 184.0 184.0
Foster Care and Child Welfare 1,604.9 1,604.9
Services
Adult Protective Services 55.0 55.0
Unallocated Revenue Growth - 621.1
Total $5,931.0 7,255.0

1 Percent Sales Tax 4,549.0 5,567.0

0.5 Percent Vehicle License Fee 1,382.0 1,688.0
Total Revenue $5,931.0 $7,255.0
The realignment proposal does not appear to dramatically expand the authority
of counties to change the rules and operations of the programs targeted for
realignment. Instead, the realignment proposal relies on existing flexibility
already within most of these programs, and assumes that counties will use the
enhanced financial discretion with the dedicated tax revenue to meet their
community needs.
The Administration expects additional savings to the commensurate state

departments of at least 25 percent that will be achieved over time.
“Phase 2”
The Administration alludes to a second round of realignment that would reflect

the transfer of health care programs like Children’s Services and In Home
Supportive Services to the State, in exchange with counties assuming all non-
federal costs for CalWORKs, Food Stamp Administration, Child Support, and
Child Care. This second round of realignment would be adopted with the
implementation of the federal health care reform efforts.

K-12 EDUCATION
Overall Proposition 98
 Maintains the Proposition 98 funding level of $49.7 billion for 2010-11. This
was the funding level that was provided under the suspension of
Proposition 98 last year.
 Provides $49.3 billion in Proposition 98 funding for 2011-12. According to

the Administration, this level of funding would have declined to $47.3
billion, absent any policy changes. Further, by providing $49.3 billion in
2011-12, the Administration maintains they are providing the same level of
Proposition 98 programmatic funding in effect in 2010-11.
 Defers $2.2 billion in K-12 and Community College costs to 2012-13.
 Stipulates that the funding level provided for 2011-12 is predicated upon
about $2 billion in additional revenues for Proposition 98 that are subject
to voter approval.
 Does not provide cost-of-living adjustments (COLA), projected to be 1.67

percent, for 2011-12. This would have resulted in an increase of $964.5
million for K-14 programs.
K-12 Adjustments
 Provides $7,344 per pupil (Proposition 98) in 2011-12, down from the $7,358
per pupil provided in 2010-11.
 Withholds funding for the California Longitudinal Pupil Achievement Data

System (CALPADS) and the California Longitudinal Teacher Integrated
Data Education System (CALTIDES), pending further review. The
Governor’s office intends to convene an interagency working group to
conduct the review.
 Eliminates the Office of the Secretary of Education (OSE). This results in a

net decrease of $1.6 million to the General Fund (non-Proposition 98) for
2011-12 and $400,000 for the current year. This decrease includes a
transfer of $274,000 from the General Fund for state operations under the
State Board of Education.

 Provides $89.9 million in ongoing Proposition 98 funding for reimbursement

of state-mandated local costs. This funding is provided for mandates not
included in the three-year suspension of mandates.
 Provides an increase of $16.1 million (proposition 98) for charter school

categorical programs due to growth in average daily attendance (ADA).
 Increases special education funding by $7.4 million (proposition 98) to

account for growth.
 Provides an increase of $36.1 million in federal local assistance funds for

the Child Nutrition Program to reflect growth.
 Proposes legislation to extend various flexibility options to school districts

for an additional two years, including categorical flexibility, routine and
deferred maintenance requirements, class size reduction, instructional
minutes and local budget reserve requirements.
Child Care and Development Program (Proposition 98)
General Fund Solutions
 Decreases direct child care services, except Preschool, by $716 million in

2011-12 through the following actions:
o Eliminates services for 11-and 12-year olds. Reduces by $34 million

CalWORKs Stage 1 (administered by Department of Social Services,
savings reflected in that section) related to the elimination of this
program.
o Reduces eligibility to 60 percent of the State Median Income from

75 percent of the State Median Income.
o Reduces the level of subsidies across the board.
 Provides greater flexibility at the local level to administer the remaining

child care funding in order to implement the across-the-board reductions.
In this regard, subsidized families would pay the difference between the
subsidy and regular day care provider charges as a co-payment directly
to the provider in lieu of the state’s administrative agents (Alternative
Payment agencies and Title 5 contractors) assessing and collecting
current family fees.

General Fund Policy Adjustments
 Sets aside $52.6 million in 2010-11 from one-time Proposition 98 settle-up

funding to continue services for Stage 3 families effective April 2011, at a
service level consistent with the policy solutions proposed for 2011-12.
These policy solutions affect age and income eligibility and reduce
subsidy levels across the board for all direct service child care programs.
 Decreases by $34.2 million in 2011-12 to reflect lower Stage 2 caseload

projections to conform with the 48-month time limit that replaces long-
term reforms as discussed in the Health and Human Services section.
General Fund Adjustments
 Increases CalWORKs Stage 2 by $241.5 million in 2011-12 to reflect a $4.2

million caseload increase and restoration of one-time funds used to
support services in 2010-11 ($201 million of Proposition 98 one-time savings
and $36.3 million American Recovery and Reinvestment Act (ARRA). Total
base workload costs for Stage 2 is $435.2 million.
 Increases CalWORKs Stage 3 by $256.2 million in 2011-12 that reflects a

caseload reduction of $42.4 million, restoration of one-time funds used in
2010-11 totaling $42.4 million ($23.7 million of prior year federal funds and
$18.9 million ARRA), and restoration of the $256 million partial-year veto.
Total base workload cost for Stage 3 is $342.4 million.
 Increases by $83.1 million in 2011-12 to restore General Child Care, State

Preschool, Migrant Child Care, and Allowance for Handicapped
programs that were required to utilize excess contract reserves to meet
costs in 2010-11.
Non-General Fund Adjustments
 Decreases the Child Care and Development Funds (CCDF) by $18.5

million in 2011-12 to reflect removal of one-time carryover funds available
in 2010-11 ($24.4 million), an increase of $3.2 million in carryover funds
reserved for expenditures that promote quality improvement, and $2.7
million in available base grant funds.
 Decreases the ARRA funds by $110.1 million in 2011-12 to reflect the one-
time nature of the fund source used for child care program for two years.

 Increases by $58 million in 2010-11 from unanticipated prior year federal

CCDF carryover funding in 2010-11 to reflect additional costs driven by a
court order to extend the date for Stage 3 funding termination from
November 1 to December 31, 2010.
 Decreases the Federal 21st Century learning Centers by $23.1 million in

2011-12 to primarily reflect a change in prior year federal carryover funds
utilized for this federally funded afterschool program in 2010-11.
 Increases the Early Learning Advisory Council by $948,000 for state

operations in 2011-12 from federal funds for the second year of the three-
year federal grant recently authorized for the support of state early
learning advisory councils.

HIGHER EDUCATION
University of California
General Fund Solution
 Decreases the University of California by $500 million in 2011-12 to reflect

necessary funding reductions to help solve the budget deficit. The
Administration will work with the Office of the President and stakeholders
to minimize fee and enrollment impacts on students by targeting actions
that lower costs of instruction and administration.
 Restores one-time reduction of $106 million in 2011-12 to backfill a like

amount of one-time Federal American Recovery and Reinvestment Act
(ARRA) funding received in 2010-11.
 Increases the Retired Annuitant Benefits by $7.1 million in 2011-12 to fund

additional costs for health and dental benefits to retired annuitants.
 Decreases the Lease Revenue Debt Services by $1 million in 2010-11 and

increases it by $726,000 in 2011-12 for required lease payments used to
pay lease revenue bonds issued for capital outlay projects.
 Decreases the Deferred Maintenance Loan Repayment by $2.4 million in

2011-12, which are now fully paid.
 Increases the University of California’s budget by $183.1 million in 2011-12

to reflect fee actions authorized by the Regents in November 2010,
including an 8-percent increase for undergraduates and graduates (from
$10,302 to $11,124) and increases in professional school fees that average
8-percent on a weighted basis (individual professional fees increase from
zero to 31 percent).
 Removes $107 million in 2011-12 to reflect the one-time nature of federal

ARRA funding utilized to offset General Fund support costs in 2010-11.
 Decreases the Breast Cancer Research program by $1.3 million in 2011-12

to reflect a decline in tobacco tax revenue.

 Increases the Lottery Revenue by $2.8 million in 2010-11 and 2011-12 as a

result of revised estimates of this fund source for the UC.
 Increases the umbilical Cord Blood Collection Program by $4.6 million in

2011-12 from special funds for grants and contracts with licensed and
accredited umbilical cord blood banks for the purposes of collecting and
storing genetically diverse umbilical cord blood for public transportation
purposes. Chapter 529, Statutes of 2010, transferred administration of the
program to the UC from the Department of Public Health and increased
birth certificate fees to fund its provisions.
California State University
 Decreases the California State University by $500 million in 2011-12 to

reflect necessary funding reductions to help solve the budget deficit. The
Administration will work with the Office of the President and stakeholders
to minimize fee and enrollment impacts on students by targeting actions
that lower costs of instruction and administration.
 Restores one-time reduction of $106 million in 2011-12 to backfill a like

amount of one-time Federal American Recovery and Reinvestment Act
(ARRA) funding received in 2010-11.
 Increases funding for CalPERS Retirement costs by $75.2 million in 2010-11

and 2011-12 to reflect higher employer share payments pursuant to
Section 3.60 of the 2010 Budget Act.
 Increases Retired Annuitant Benefits by $1 million in 2011-12 to fund

additional costs for dental benefits to retired annuitants.
 Decreases the Deferred Maintenance Loan Repayments by $2.3 million in

2011-12, which are now fully paid.

 Increases the California State University budget by $221.6 million in student

fee revenue in 2011-12 to reflect actions of the CSU Trustees in November
of 2010, annualization of the 5-percent mid-year fee increase for all
students and a 10-percent fee increase for the budget year.
Undergraduate fees thereby increase from $4,230 to $4,335 in the current
year and up to $4,884 in the budget year.
 Decreases the CSU budget by $6.5 million in student fee revenue in 2010-
11 based on revised estimates and enrollment patterns that offset the
increased revenue generated by the 5-percent mid-year fee increase
noted above.
 Removes $107 million in 2011-12 to reflect the one-time nature of federal

ARRA funding utilized to offset General Fund support costs in 2010-11.
 Increases Lottery Revenue by $1.3 million in 2010-11 and 2011-12 as a result

of revised estimates of this source for CSU.
California Community Colleges
Proposition 98 General Fund Solutions
 Decreases $110 million to apportionments in 2011-12 as a result of

increased local revenue from a $10 proposed fee increase from $26 per
credit unit to $36 per credit unit. A full-time student would pay $1,080 per
year for a full load – about one-third of the average fees charged by
comparable community colleges in the nation – and would still rank
California as the lowest in the nation based on 2009 data. Low-income
students will continue to receive Board of Governors’ fee waivers, which
provide fee exemptions for approximately half of students attending
CCC.
 Proposes to decouple the formula in current law for categorical fee

waiver administration funding that is linked to the dollar value of fee
waivers because it would require an increase in state expenditures that
does not relate to a change in administrative workload. This change
would eliminate $2.9 million in additional costs for the fee waiver
administration program associated with the fee increase noted above.

 Decreases Apportionments by $400 million in 2011-12 along with reforms to

census accounting practices to provide better incentives for maximizing
academic course sections available for students seeking vocational
certificates and transfer to four-year colleges within the diminished level of
funding.
 Decreases Apportionments by $129 million in 2011-12 as a result of

deferring another $129 million of community college apportionment
payments to the 2012-13 fiscal year. This brings total year-to-year deferrals
to $961 million, which provides a one-time savings in Proposition 98 funding
to help resolve the 2011-12 state budget deficit.
Proposition 98 General Fund Workload Adjustments
 Increases the Deferral Payment by $129 million in 2011-12 to reflect actions

taken in the 2010 Budget Act to defer a like amount of apportionment
payments to July of 2011. These funds were appropriated already in
Chapter 724, Statutes of 2010.
 Increases Property Tax Payments by $33.4 million in 2011-12 to reflect

reduced property tax estimates. Current law intends that property tax
should offset Proposition 98 General Fund costs for community college
apportionments. Because property taxes are estimated to decline,
General Fund costs are increased by a like amount. Although revised
estimates of property taxes in 2010-11 are estimated to decline by $14.7
million, there is no requirement to backfill shortfalls in law. Due to the
state’s large budget shortfall, no backfill is proposed.
 Increases Student Fee revenue by $18.7 million in 2011-12 to reflect revised

estimates resulting from higher than anticipated Board of Governors’ fee
waivers. Similar to property taxes, student fees are intended to offset the
costs of apportionments.
 Increases the Financial Aid Administration by $1.7 million in 2011-12 as a

result of a higher estimate for fee waivers. Current law requires specified
amounts be budgeted in a categorical program, based on the value of
fee waivers, to help the colleges with the administrative costs of
processing fee waivers.
 Decreases Lease Revenue Debt Services by $5.1 million in 2011-12 to

reflect revised costs of required rental payments used to pay lease-
revenue bonds issued for capital outlay projects.

 Decreases the Oil and Mineral Revenue by $1.1 million in 2011-12 as a

result of a higher estimate of revenue from this source which offsets
General Fund for apportionments similar to property taxes.
Proposition 98 General Fund Policy Adjustment
 Increases by $110 million in 2011-12 for 1.9 percent apportionment growth

to help preserve and expand course sections to meet the demand of
students seeking transfer, career technical certificates, and retraining. This
funding is sufficient to fund approximately 22,700 Full-Time Equivalent
Students (FTES).
 Increases Career Technical Education (CTE) by $20 million in 2010-11 to

reflect Proposition 98 Revision Account funding appropriated to the
Department of Education that was allocated to the Chancellor’s Office to
augment the CTE Initiative pursuant to the Budget Act of 2010.
 Increases the Lottery Revenue by $12.4 million in 2010-11 and 2011-12 for
local assistance apportionments as a result of revised estimates of this
revenue source.
 Increases the Oil and Mineral Revenue by $1.1 million in 2010-11 and 2011-
12 for local assistance apportionments as a result of revised estimates of
this revenue source.
 Increases Bond Accountability by $136,000 in 2011-12 for state operations

to fund ongoing accountability for the use of general obligation bonds by
the colleges.
 Decreases the Property Tax Revenue by $14.7 million in 2010-11 and $33.4
million in 2011-12 as a result of revised estimates of local property taxes
that support local assistance apportionments.
 Decreases Student Fee Revenue by $15.2 million in 2010-11 and $18.7

million in 2011-12 as a result of revised base estimates primarily resulting
from higher-than-anticipated fee waivers.
 Decreases the CCC budget by $5 million in 2011-12 to reflect the one-time

nature of federal ARRA funding utilized for a variety of categorical
programs in 2010-11.

Non-General Fund Policy Adjustment
 Increases the Federal Care Certification Project by $750,000 in 2010-11

and $748,000 in 2011-12 as a result of the receipt of a new federal grant
for training students to become personal care and home care aids. Of
these funds, $53,000 and $75,000 is available for state operations in 2010-
11 and 2011-12, respectively, with the remainder for local assistance.
California Student Aid Commission
General Fund Solutions
 Decreases by $30 million in 2011-12 based on the expected receipt of a

like amount from ECMC for Cal Grant costs. The U.S. Department of
Education has indicated they expect to approve payments back to the
state for this purpose from the revenue derived from the California federal
student loan guaranty portfolio.
 Offsets $946.8 million in 2011-12 of Cal Grant costs with Federal Temporary
Assistance to Needy Families (TANF) Reimbursements. The TANF funds
would be available through an interagency agreement with the
Department of Social Services pursuant to CalWORKs reduction proposals
discussed in the Health and Human Services section.
 Increases by $147.2 million in 2010-11 to reflect revised estimates for the

Cal Grant program. These adjustments include a significantly higher
number of new Cal Grant entitlement awards than originally anticipated
($141.4 million) and implementation of a 5-percent mid-year fee increase
by the CSU Trustees that increases the award amount for students
attending that segment ($5.8 million).
 Increases by $369.5 million in 2011-12 to reflect increased estimates of Cal

Grant costs resulting from higher participation levels in the entitlement
programs recognized in the current year that are projected to continue
($279 million), annualization of the 5-percent mid-year CSU fee increase
noted above ($17.6 million), and higher award amounts conforming to
the fee increases approved for 2011-12 by the CSU Trustees ($25 million)
and UC Regents ($48 million).

 Increases by $100 million in 2011-12 to backfill one-time surplus Student

Loan Operating Fund revenues that were used for Cal Grant costs.
 Increases the Loan Assumption Program costs by $1 million in 2010-11 and

$2.3 million in 2011-12 for anticipated costs in the APLE and other loan
assumption programs.
 Increases by $842,000 in 2011-12 for state operations for the ongoing cost
of staff and operating expense costs approved in the Budget Act of 2010
for replacing the shared services formerly provide by EdFund, the auxiliary
that formerly carried out the federal student loan guaranty activities for
the CSAC.
General Fund Policy Adjustment
 Decreases by $1.2 million in 2010-11 and $842,000 in 2011-12 to reflect the

replacement of shared services. Based on a new agreement with the
successor guarantor agency for California, Educational Credit
Management Corporation (ECMC), the shared services provided by
EdFund will continue to be provided to the CSAC by the entity assigned
by the U.S. Department of Education to take over the federal student
loan guaranty functions.
 Increases by $52,000 for state operations and $889,000 for local assistance
from reimbursements in both 2010-11 and 2011-12 resulting from an
interagency agreement with CalEMA that received a federal grant to
administer and make awards for a new program designed to attract and
retain qualified individuals to serve as public defenders and prosecutors.
 Increases the Federal Leveraging Educational Assistance Partnerships by

$389,000 in 2010-11 and decreases by $5.6 million in 2011-12 as a result of
federal reallocations and policy decisions, respectively, for these sources
that offset the state’s Cal Grant costs.

Hastings College of the Law
 Reduces Hastings budget by $1.5 million in 2011-12 to reflect necessary

funding reductions to help solve the budget deficit. The Administration will
work with the Office of the President and stakeholders to minimize fee and
enrollment impacts on students by targeting actions that lower costs of
instruction and administration.
General Fund Adjustment
 Increases the Retired Annuitant Benefits by $71,000 in 2011-12 to fund

additional costs for health and dental benefits to retired annuitants.
Non-General Fund Adjustment
 Decreases $1.6 million in student fee revenue in 2010-11 and $638,000 in

2011-12 reflecting decreased enrollments and increased fee waivers. The
change in 2011-12 also reflects actions by the Hastings Board of Directors
to increase fees by 3 percent in the budget year that will raise annual
professional fees from $36,000 to $37,080.
California State Library
 Decreases the General Fund assistance for local libraries by $30.4 million in
2011-12, resulting in the elimination of General Fund for the following
programs: Public Library Foundation, California Library Literacy and English
Acquisition Services, and the California Library Services Act.

TRANSPORTATION
Gas Tax Swap
 Proposes to maintain General Fund savings achieved in the Transportation

Gas Tax Swap by using revenues from Weight Fees, rather than the Fuel
Excise Tax as was approved in the Transportation Gas Tax Swap (Tax
Swap), to fund transportation related general obligation bond debt
service. This shift is necessary since the passage of Proposition 22 prohibits
the State from using Fuel Excise Tax revenue for bond debt service. This
action will achieve a General Fund savings of $262.4 million in 2010-11 and
$700 million 2011-12. Additionally, the Governor proposes to uses $77.5
million in transportation revenues that are not restricted by the constitution
to reimburse the General Fund for debt service payments made on
Proposition 116 transit bonds. Both proposals will together achieve the
same level of General Fund savings that was provided for in the 2010
Budget Act.
 Proposes to reenact with a 2/3rds vote the fuel excise tax increase and
fuel sales tax decrease that was approved in the 2010-11 Tax Swap. By
approving it with a 2/3rds vote, rather than a majority as it was approved
in the 2010, this action will protect this revenue source for transportation
funding and General Fund relief from being rescinded by the passage of
Proposition 26.
 Proposes statutory changes to maintain current funding levels for Local

Transit Assistance funding that were approved in the Tax Swap.
Proposition 22 reduced the amount of diesel tax revenue that is allocated
to Local Transit Assistance from 75 percent to 50 percent. This proposal
would increase funding from the State Highway Account to Local Transit
Assistance to bring funding back to the 75 percent ratio that was
approved in the Tax Swap. Additionally, this proposal will ensure that other
non-article XIX revenue allocations that were approved in the 2010-11
Budget Act are sustained.
 Proposes to loan $494 million in weight fee revenues to the General Fund
in 2010-11 and $166.3 million in 2011-12.

Other Caltrans Proposals
 Proposes a reduction in staffing for the Department of Transportation

(Caltrans) of $3 million (State Highway Account) and 35 positions as a
result of efficiencies gained through the implementation of the Enterprise
Resource Planning Financial Infrastructure (E-FIS) program).
 Proposes to increase overall funding to Caltrans' budget by $2.4 million

and 18 positions to complete Project Initiation Document (PID) workload
for state and locally funded projects on the state highway system. This
augmentation includes a reduction of $4.9 million in State Highway
Account funds and an increase of $7.2 million in reimbursements from
local agencies to fund PIDs.
 Appropriates $2.3 billion (Prop 1B) to Caltrans for capital funding of bond
projects, including $631.2 million for corridor mobility, $972.3 million for
trade corridors, $117 million for public transit modernization, $200 million for
state-local partnership projects, $22 million for local bridge seismic safety,
and $391 million for State Route 99.
High Speed Rail
 Augments the High Speed Rail Authority's (HSRA) budget by $1 million in

2011-12 for increased oversight and review of the program Management
team's work products and schedules.
 Augments the HSRA's budget by $1.136 million as a result of interagency

agreements with the Department of Justice and the Department of
General Services.
 Reduces the HSRA's budget by $37 million as a result of a reduction in the

cost of the contract with the Program Management Team.
 Approves a total of $89.7 million in Federal Funds to the HSRA for partial
design and environmental work for the project. While the HSRA has been
awarded several billion dollars in Federal Funds for construction, details of
the grants have not been finalized and appropriation of these funds may
not be needed until 2012-13.

HUMAN SERVICES
Department of Social Services
CalWORKs
 Eliminates monthly CalWORKs benefits for families that have received aid
for 48 months or more. Child-only benefits, provided now when the adult
is removed from the case, would continue beyond the 48-month time limit
for families fully meeting work participation requirements. Child-only
benefits would also continue for families with unaided adult recipients of
SSI/SSP and non-needy caretaker relatives. Currently, California provides
aid to eligible families up to 60 months and provides benefits to children
until the age of 18 years. This new, shorter time limit of 48 months would
result in a $698.1 million reduction to the program in 2011-12. This proposal
assumes enactment of legislation by March 1 and implementation on July
1, 2011.
 Reduces CalWORKs grants by 13 percent, resulting in a lowering of the

maximum monthly grant for a family of three in a high-cost county from
$694 to $604 effective June 1, 2011, for a savings of $13.9 million in 2011-11
and $405 million in 2011-12. This proposal assumes enactment of
legislation by March 1 to effectuate the June 1 implementation. The
current grant level is lower than grants in 20 other states after adjusting for
housing costs and has not been adjusted over time to match inflation or
increases in the cost of living, thus making it lower than it was in 1989,
dollar for dollar. CalWORKs provides benefits to more than 580,000
families with over 1 million children.
 Continues the reduction in the CalWORKs single allocation for 2011-12,

resulting in savings of $376.9 million. The single allocation is the funding for
CalWORKs employment services, child care, and county administration,
the programmatic elements that make the CalWORKs program a welfare-
to-work model to enable self-sufficiency over time for unemployed
parents and low-income families. This funding reduction severely inhibits
the ability for counties to assist needy families in their search for and ability
to maintain work that would allow them to meet work participation
standards and continue to receive basic assistance to meet shelter, food,
clothing, transportation, and other living needs.

Supplemental Security Income/State Supplementary Payment (SSI/SSP)
 Reduces monthly SSP grants for individuals to the federally required

minimum payment standard. The maximum monthly SSI/SSP cash grant
for individuals would be reduced by $15 per month, from $845 to $830,
beginning June 1, 2011. SSP grants for couples were previously reduced
to the federal minimum in November 2009. This proposal would result in
savings of $14.7 million in 2010-11 and $177.3 million in 2011-12. These
savings are net of increased General Fund costs necessitated in the
Department of Developmental Services budget as a result of the SSP
grant cut. This proposal assumes enactment of legislation by March 1 to
effectuate the June 1 implementation.
In-Home Supportive Services (IHSS)
 Proposes a series of reductions in IHSS as outlined below. Each reduction

proposal assumes enactment of legislation by March 1 and
implementation of each proposal by July 1, 2011.
 Imposes an 8.4 percent reduction to assessed hours for all IHSS recipients,
numbering 429,000 in 2009-10, for General Fund savings of $127.5 million in
2011-12. This proposal, combined with the 3.6 percent reduction enacted
in the 2010-11 Budget, brings the total across-the-board reduction in
assessed hours for IHSS recipients to 12 percent. The Governor states that
qualified recipients at risk of out-of-home care placement due to the
reduction could apply for supplemental hours. The Governor’s budget
estimates that approximately 21,000 recipients will receive full restoration
of their assessed hours as a result.
 Eliminates domestic and related services, which includes meal

preparation, meal cleanup, laundry, grocery shopping, and housework,
for consumers living with their provider. In addition, this proposal would
eliminate domestic and related service hours for recipients under 18 years
of age who live with a parent who is able and available to provide the
named services. The proposal provides an avenue for an IHSS
applicant/recipient to petition for authorized domestic and related
services hours if a medically verified condition inhibits the ability for other
members of the household or the parent of the applicant/recipient child
to perform these tasks. The Governor’s budget estimates that this will
impact 300,000 recipients and result in General Fund savings of $236.6
million in 2011-12.

 Eliminates IHSS services for recipients without a physician’s written

certification that personal care services are necessary to prevent out-of-
home care. The proposal requires a medical review for all IHSS
applicants/recipients to ensure services are needed to avert out-of-home
placement. The Governor’s budget assumes that this proposal would
result in the loss of services for 43,000 recipients, yielding General Fund
savings of $120.5 million in 2011-12.
 Eliminates state funding for IHSS advisory committees for General Fund
savings of $1.6 million in 2011-12. The Governor states that counties would
continue to have the option to continue advisory committees at their own
expense and that those counties that choose to do so would be eligible
for matching federal funds.
Child Welfare Services
 Reduces funding for the Transitional Housing Program by $19 million

General Fund in 2011-12 by reducing funding for Transitional Housing
Program-Plus services. The Governor states that his intent is to save
General Fund while allowing those 18- and 19-yeard old youth wishing to
participate in a transitional housing program to move to the recently
enacted AB 12-funded program for which the state is able to draw down
federal funds.
Realignment
 Proposes to realign funding and primary program responsibility for

California’s Child Welfare Services (CWS) system, which includes Foster
Care, Adoptions, and Child Abuse Prevention programs. As part of the
Governor’s Phase One Realignment, $1.6 billion would be realigned in
2011-12, with this amount sustained through full implementation of
realignment in 2014-15. Currently, the federal government’s role is to
establish overall programmatic requirements and goals, provide funding,
and ensure compliance with federal standards. The state supervises and
monitors these program activities while counties administer services. The
Governor states that this shift of funding and responsibility to counties will
provide flexibility to operate the program and better serve vulnerable
children.

 Proposes to realign the Adult Protective Services (APS) program, which

provides services to persons aged 65 and older who are functionally
impaired, unable to meet their own needs, and who are victims of abuse,
neglect, or exploitation. As part of the Governor’s Phase One
Realignment, $55 million would be realigned in 2011-12, with this amount
sustained through full implementation of realignment in 2014-15.
Currently, APS is administered by the 58 local APS agencies with oversight
provided by DSS. The Governor states that the transfer of this entire
program will give counties full flexibility to determine the appropriate level
of service and priority for their community.
Department of Child Support Services
 Proposes to suspend the county share of child support collections in 2011-

12, withholding $24.4 million from local child support agencies, allowing
the entire non-federal portion of child support collections to benefit the
General Fund. The Governor states that this would not reduce the
revenue stabilization funding of $18.7 million ($6.4 million General Fund)
that counties currently receive.
Department of Alcohol and Drug Programs - Realignment
 Proposes to realign all Department of Alcohol and Drug Programs

activities currently implemented via contracts with 57 counties to provide
inpatient and outpatient alcohol and drug treatment services. As part of
the Governor’s Phase One Realignment, $184 million would be realigned
in 2011-12, with this amount sustained through full implementation of
realignment in 2014-15. The Governor states that this movement of
funding and responsibilities would enable counties to implement creative
models of integrated services for the new probation population and for
those who suffer from the dual diagnosis of mental health and substance
abuse problems, as well as for other low-income persons currently
receiving treatment services.

Health and Human Services Agency - Realignment
 Indicates that, consistent with the Governor’s Realignment proposal, it is

the Administration’s goal to eventually reduce state operations for
affected programs by at least 25 percent, which will result in hundreds of
state positions being eliminated. The Governor indicates that the state will
continue to act as the single state agency for federal purposes, maintain
data collection for oversight, serve as the fiscal and program reporting
entity to the federal government, retain licensing and certification
responsibility, and maintain minimum federal audit requirements.
Department of Aging
 Eliminates funding for the Multipurpose Senior Service Program (MSSP) for
a General Fund savings of $19.9 million in 2011-12. Local MSSP sites
provide case management services for elderly clients who qualify for
placement in a nursing facility but who wish to remain in the community.
The program has 41 sites statewide and services approximately 11,789
recipients per month. Recipients are 65 years of age or older, currently
eligible for Medi-Cal, in need of case management services, and certified
or certifiable for placement in a nursing facility.

HEALTH CARE SERVICES
Department of Health Care Services (Medi-Cal)
 Includes dollar caps on various services, for savings of $9.8 million in 2011-
12, pending federal approval. The Administration estimates that these will
affect 10 percent of the Medi-Cal populations that utilize each of the
following:
o Hearing aids ($1,510)

o Durable medical equipment ($1,604)
o Incontinence supplies ($1,659)
o Urological supplies ($6,435)
o Wound care ($391)
 Limits prescriptions (except life-saving drugs) to six per month, for savings
of $11.1 million in 2011-12.
 Limits doctor visits to ten per year, for savings of $196.5 million in 2011-12.
The Administration estimates that this would reduce the number of
physician visits from 3.3 million to 2 million annually. This would require
Federal approval.
 Includes mandatory copays including:
o $5 copay for physician, clinic, dental, and pharmacy services ($3 on

lower-cost preferred drugs), for savings of $294.4 million in 2011-12;
o $50 copay for emergency room services, for savings of $111.5 million in
2011-12; and
o $100 per day ($200 maximum) for hospital stays, for savings of $151.2
million in 2011-12.
 Eliminates adult day health care, for savings of $1.5 million in 2010-11 and
$176.6 million in 2011-12. 27,000 people utilize adult day health care
services.
 Eliminates over-the-counter cough and cold medications and nutritional

supplements, for savings of $556,000 in 2010-11 and $16.6 million in 2011-
12.

 Reduces Medi-Cal rates by 10 percent for physicians, pharmacy, clinics,

medical transportation, home health, adult day health care, certain
hospitals, and nursing facilities, homes and other long-term care facilities,
for savings of $9.5 million in 2010-11 and $709.4 million in 2011-12. The
Administration states that this proposal assumes the state prevails in
pending rate litigation.
 Replaces $1 billion in General Fund with Proposition 10 (First 5) funds for

health care for children ages 0 -5, subject to voter approval.
 Extends the existing hospital quality assurance fee for an additional six
months (December 31, 2010 – June 31, 2011), for additional savings of
$160 million.
 Includes General Fund increases resulting from the loss of other funds
including: expiration of $2.9 billion of federal economic stimulus funds; and
expiration of $1.1 billion in revenue from the hospital fee.
Department of Mental Health
 Includes $98.6 million General Fund to cover mental health services for
students, mandated under federal law, for prior year costs incurred by
counties per a state mandate created by AB 3632.
 Shifts Proposition 63 funds to the Department of Mental Health, to replace

General Fund, for AB 3632 services, Early and Periodic Screening,
Diagnosis and Treatment (EPSDT) Program and Mental Health Managed
Care (MHMC), for General Fund savings of $861.2 million in 2011-12.
 Realigns to counties AB 3632, EPSDT, and MHMC and replaces Prop 63

funding with dedicated revenue.
Department of Public Health
 AIDS Drug Assistance Program (ADAP)
o Increases General Fund by $22.1 million in 2010-11 and $55.1 million in

2011-12 to cover projected increases in prescription drug costs and
caseload, and includes a one-time General Fund decrease of $76.3
million in 2010-11 as a result of additional federal funds available
through the safety Net Care Pool.

o Increases client share-of-cost to the maximum allowed under federal

law and lowers cost-sharing for clients with private insurance or
Medicare Part D, for savings of $16.8 million.
 Every Woman Counts Program (Breast and Cervical Cancer Screening).
o Reduces $10.6 million in 2010-11, and re-appropriates these funds in

2011-12, due to a five-month delay in implementing the program
reforms adopted in the 2010 Budget Act.
o Increases $7.7 million General Fund in 2011-12 to meet expected

caseload projections.
Emergency Medical Services Authority (EMSA)
 Eliminates $5.8 million in annual support funds for mobile field hospitals.
Managed Risk Medical Insurance Board (MRMIB)
 Eliminates vision coverage for children in the Healthy Families program, for
savings of $11 million.
 Increases premiums for families in the Healthy Families program for savings
of $22 million. Premiums were increased in 2005 and twice in 2009. The
premiums would increase as follows:
Family Current Proposed Proposed Current Proposed Proposed

Income Per Child Per Child Per Child Family Family Family
(% FPL) Premium Premium Increase Maximum Maximum Max
Increase
Under $7 No N/A $14 No N/A
150 change change
150-200 $16 $30 $14 $48 $90 $42
200-250 $24 $42 $18 $72 $126 $54
 Increases Healthy Families copayments, for savings of $5.5 million, as

follows:
o Emergency room visits: $15 to $50

o Hospital stays: $0 to $100 per day ($200 maximum)

 Extends and makes permanent the tax on managed care plans for
savings of $97.2 million in 2011-12.
Department of Developmental Services
 Decreases 2010-11 by $69.4 million General Fund as a result of revised

population estimates and increases 2011-12 by $61.5 million General Fund
given current population estimates.
 Proposes a $750 million General Fund unallocated reduction. The General

Fund is proposed to be alleviated in the following ways: (1) pursuit of $10
million in federal funds for treatment services to individuals residing in the
secure facility at Porterville Developmental Center, (2) extension of the
4.25 percent reduction to regional center and service provider payments,
(3) $50 million in Prop 10 funds, (4)savings from increased accountability
and transparency, (5) increase efforts to maximize federal funds including
Money Follows the People, the federal 1915(i) and multiple waivers, and
(6) tasks the Department to work with the stakeholder group to establish
service standards for purchase of services and achieve the remaining
savings.
 Increases funds by $134.1 million in general funds due to the end of

federal stimulus funds that will end.
 Includes savings in 2010-11 and 2011-12 from Workforce Force Cap

adjustments and Personnel Cost savings by extending furlough days to
employees without contracts.
 Increases general fund contribution in 2010-11 by $1.5 million, as a result of

establishing mandatory co-payments for all health related visits.
 Includes an increase of $54 million general fund in 2011-12, in anticipation

of the eliminating ADHC and reducing SSI/SSP grants.

NATURAL RESOURCES AND ENVIRONMENTAL PROTECTION
CAL FIRE
 Reduces CAL FIRE's budget by $30.7 million (General Fund) in 2011-12 as a

result of reducing staffing levels to three firefighters per engine, rather than
four. Beginning in 2003, CAL FIRE increased staffing levels from three to
four firefighters per engine during peak fire season in the summer and
early fall. The Administration reports that these increases in staffing have
not measurably changed CAL FIRE's initial attack effectiveness.
 Proposes to realign fire protection services in the most highly populated

state responsibility areas to local governments. This proposal detailed
further in the realignment section of the review.
 Increases funding for CAL FIRE by $10.6 million (General Fund) to fund
additional unemployment insurance claims for seasonal firefighters.
 Augments CAL FIRE's budget by $1.7 million (General Fund) and 9 positions
in 2011-12 to investigate and pursue cost recoveries for wildfires caused by
negligence or illegal activity. As a result of these efforts, CAL FIRE has
been able to recover over $10 million annually. It is anticipated by the
Department that this augmentation will generate a net General Fund
savings of $5.1 million.
Department of Parks and Recreation
 Reduces funding for the Department of Parks and Recreation by a net of

$4 million 2011-12. In the 2010-11 Budget, the department incurred a one-
time reduction of $7 million. Under this proposal, this reduction is restored
but the overall budget is reduced by $11.0 million on an ongoing basis. It is
expected that this cut will result in the closure, or partial closure of various
parks – the amount is unknown at this time. The Department is currently
working with stakeholders and local communities to explore partnership
opportunities and the Administration anticipates that closures and
transfers of state parks will ultimately produce $22 million in ongoing
General Fund savings.

California Environmental Protection Agency
 Augments the Department of Food and Agriculture (CDFA) budget by

$2.6 million from the Department of Pesticide Regulation fund for
enhanced analytical chemistry analyses and equipment of pesticides.
 Proposes to shift $12.8 million in funding for the State Water Resources
Control board (Water Board) from the General Fund to increased Waste
Discharge Permitting Fees. In order to achieve this savings, this proposal
also includes a statutory change to authorize the inclusion of basin
planning activities as an allowable expenditure for Waste Discharge
Permit Fees.
 Shifts $2.3 million in funding for the Office of Environmental Health Hazard
Assessment from Safe Drinking Water and Toxic Enforcement Fund to the
General Fund. This shift will sustain the program pursuant to Proposition 65
as authorized by the voters.

PUBLIC SAFETY
Department of Corrections and Rehabilitation
 Increases $395.2 million to correct previous budget shortfalls and more

accurately reflect the operational costs within the adult institutions’
budgets. This augmentation for the Department will:
o Fund the salary and wages of authorized Correctional Officers,

Sergeants, and Lieutenants, which is critical to ensuring that the
adult institutions have the resources to pay security staff. The
augmentation also provides funding to correct for a decline in the
number of overtime hours available to the California Department of
Corrections and Rehabilitation (CDCR) to use within its adult
institutions. The decline in funded overtime hours has been a
primary cause for redirections of funding from other activities.
o Allow the adult institutions to operate a minimal level of ―swing

space beds‖ — empty beds necessary to allow for the continuous
population movements that take place between CDCR institutions
and between the counties and local jails. This augmentation will
provide funding for an adequate level of staff to maintain a
reasonable number of empty ―swing space‖ beds.
o Address the medical guarding and transportation deficits that have

occurred consistently from the increased usage of outside medical
care, and fully fund the Office of Legal Affairs for the costs they
incur related to settlements, judgments and other court ordered
costs associated with the Department’s various class action lawsuits.

 Increases of $98.6 million General Fund in 2010-11 and $161.3 million in

2011-12 for various costs directly related to changes in the budgeted
populations of adult inmates, juvenile wards, and adult and juvenile
parolees, including increased funding resulting from smaller population
reduction projections compared to previous savings estimates. These
changes reflect an increase of 118 adult inmates in the current year,
compared to previous projections, and a decrease of 529 in the budget
year, for a total of 163,799 in 2010-11 and 163,152 in 2011-12. The
projection also reflects decreases in the estimated parolee population of
5,510 in 2010-11 and 12,198 in 2011-12, declining to a total of 113,690 in the
current year and 107,002 in 2011-12. For juveniles, the population funding
request projects a decrease of 95 wards and an increase of 34 parolees in
the current year and a decrease of 130 wards and 56 juvenile parolees in
the budget year, resulting in totals of 1,304 wards and 1,554 parolees in
2010-11 and 1,269 wards and 1,464 parolees in the budget year.
 Increases $200 million in 2010-11 and 2011-12 to reverse a population

savings adjustment included in the 2010 Budget Act. Population
decreases that would have been necessary to achieve this reduction
have not materialized and are not expected.
 Increases $643.4 million in 2010-11 and $562.8 million in 2011-12 to restore a

large portion of the savings included in the 2010 Budget Act associated
with the delivery of medical care to inmates. The Budget included a
reduction to the Medical Services Program of $820 million. However, the
Receiver indicates that the Program will only be able to achieve $94
million of the target, and has requested a restoration of $726 million. While
the Budget recognizes much of the unrealized savings, the Administration
believes the Medical Services Program can achieve a greater level of
savings than proposed by the Receiver. As such, the Budget restores less
that the Receiver has requested by $82.6 million in 2010-11 and $163.2
million in 2011-12, which represents five-percent and ten-percent
reductions, respectively. Through administrative actions and statutory
changes, the Receiver has implemented a utilization management
program to reduce the reliance on costly outside medical care,
centralized its pharmacy operations to provide a more efficient and
effective dispensing process, and reduced costs of outside hospital and
specialty care by capping reimbursement rates and contracting with a
provider network.

CDCR Realignment
 Decreases $485.8 million by implementing a change in mission for the

state’s prison system, which includes proposing that offenders convicted
of non-violent, non-serious, non-sex offenses, and without any previous
convictions for such offenses, would fall under local jurisdiction. The
realignment also includes parole violators serving their time locally and
shifting responsibility for adult parole to counties. The savings amount also
includes a one-time reduction of $150 million for rehabilitative programs.
Funding for rehabilitative programs would be restored in 2012-13, after
CDCR has reconfigured its program delivery model in accord with its
changed population mix. Upon full implementation, the proposal will save
approximately $1.4 billion. Additional revenue will be provided to support
local governments and the provision of public safety services at the local
level (detailed in Realignment section).
 Eliminates the Division of Juvenile Justice by June 30, 2014, and transfers
jurisdiction for these offenders to local governments. This proposal builds
upon the efforts by local jurisdictions to retain offenders at the local level,
as well as the statutory changes from 2007 that prohibit counties from
committing non-serious, non-violent, and non-sex offenders to the state.
This will result in savings of $78 million in 2011-12, and upon full
implementation the proposal will save approximately $250 million. The
Budget also proposes to provide additional revenue to support local
governments in making this mission change (detailed in Realignment
section).
Courts
 Reduces funding by $200 million, on an ongoing basis, for the state's trial
courts. The Administration proposes to work with stakeholders and the
Judicial Branch to identify ways to implement this reduction in a manner
that is least harmful to the courts and preserves service levels provided to
the public. Some options include looking at potential duplication of some
state operations functions, and evaluating the availability of fund reserve
balances for short-term savings.

 Reduces $17.4 million to reflect the elimination of statutory requirements to

implement the Omnibus Court Conservatorship and Guardianship Act of
2006. Funds that would allow the courts to fully implement the Act have
been deferred for several fiscal years on a one-time basis and as a result
the program has never been operational statewide. This proposed
change would relieve the courts of the mandated responsibilities under
the Act, but would still allow for individual courts who have been
implementing parts of the Act to continue doing so.
 Proposes shifting $860 million in funds that historically would have gone to
redevelopment agencies to offset trial court General Fund costs.
Courts Realignment
 Transfers responsibility for the funding of court security to the counties.

Revenue ($530 million) will be provided through the extension of current
tax measures (discussed further in the realignment section). Security for
the trial courts is currently provided by county sheriffs with the exception
of two small counties. In recent years, there have been several attempts
to change the way court security has been provided and to contain
costs. Currently, while the state has assumed the costs of operation of the
trial courts, and there have been some modifications in the employment
status of court employees, the function of court security largely remains a
county sheriff responsibility. The state has a role in court security standards,
but has no control over what level (and cost) of deputy is assigned to the
court.
Department of Justice
 Converts all of the Department of Justice's (DOJ) state clients to fee-for-

service (billable). To accomplice this, the Budget includes a reduction of
$50.2 million General Fund and an increase of $60.1 million Legal Services
Revolving Fund. The Budget provides General Fund allocations to the 11
largest non-billable clients based on past actual hourly usage. The
remaining clients will receive legal services from an allocation that the
DOJ will reconcile annually to ensure that appropriate funds are being
used to pay for legal services. The Administration expects that converting
these remaining ―non-billable‖ clients to the same system that has been
used by many state departments for years will result in better
management of legal workload.

Local Law Enforcement
 Proposes $420 million General Fund for various local law enforcement
programs, which will be backfilled on a dollar-for-dollar basis with
realignment funding. In addition to these funds, the Budget also provides
$57 million General Fund for local grant programs administered through
the California Emergency Management Agency and $29 million General
Fund for local grant programs administered by the Department of
Corrections and Rehabilitation. These funds also will be fully backfilled with
realignment funding. The $420 million in funding in the General
Government portion of the Budget will be distributed as follows:
o $107 million for the Citizens’ Option for Public Safety

o $107 million for the Juvenile Justice Crime Prevention
o $35 million for Jail Booking Fee Subventions
o $152 million to support juvenile probation efforts at the county level.
o $19 million for the Small/Rural Sheriffs

GENERAL GOVERNMENT
Employment Development Department
Unemployment Insurance Program
 Increases the Unemployment Insurance Interest Payment by $362.3 million

in 2011-12 on funds borrowed from the federal government to pay
California’s UI benefits.
 Includes $19.5 million in General Fund for continuation of the EDD’s

Automated Collection Enhancement System (ACES). The ACES will
improve EDD’s ability to track, collect, and audit the payment of
employer payroll taxes, including unemployment and personal income
taxes. The ACES solution is anticipated to increase General Fund revenue
by $27 million in 2011-12 by improving collection capabilities for
delinquent accounts.
 Authorizes a loan from the Unemployment Compensation Disability Fund

to the General Fund to pay for the UI interest expense. The loan will be
repaid by the General Fund over the next four fiscal years. This achieves a
General Fund savings of $362.3 million in 2011-12.
Disability Insurance Program
 Updates estimates for the payment of UI and DI benefits two times each
year in October and April. The Budget reflects a decrease of $171.2 million
2011-12 in 2011-12 for DI benefit payments and does not change the
estimate for UI benefits payments.
Department of Food and Agriculture
 Reduces $15 million (General Fund) from the Department of Food and
Agriculture's budget. The details of this reduction are not specified at this
point and there is direction by the Administration to the Secretary of
Agriculture to hold a consortium with stakeholders to determine how these
reductions will be achieved.
 Eliminates state support, $32 million (General Fund), from the statewide
network of California fairs.

Public Utilities Commission
 Augments the budget for the California Public Utilities Commission by

$498,000 (PURA and Federal Funds) and 4 positions to increase natural gas
inspections and oversight.
Housing and Community Development
 Decreases housing bonds by $99 million in non-general fund, to reflect a

one-time pause in the issuance of state bonds for new loans and grants –
projects underway will not be affected.
 Decreases local assistance by $106.8 million non-general fund, to reflect

one-time funding for loans and grants.
 Shifts $1.1 million from state operations to local assistance in the federal
Community Development Block Grant program, to comply with federal
regulator findings.
Secretary of Business, Transportation and Housing
 Reflects an increase of $84.4 million in federal funds to the Small Business

Loan Guarantee Program, and as a result, reverts $20 million in General
Funds.
Inspector General
 Eliminates the Inspector General, which was created by Governor

Schwarzenegger to act as an additional oversight to the American
Recovery and Reinvestment Act. The remaining well established oversight
entities will continue to provide oversight (BSA, SCO and the Recovery
Task Force).

California Science Center
 Reduces funds for support of the California Science Center by $3.7 million
general fund commencing in 2011-12, and authorizes the California
Science Center to offset the reduction by implementing a nominal fee.
This reduction is unallocated and ongoing.
California Department of Veteran Affairs

 Eliminated all General Fund support for County Veterans Service Offices
(CVSO's) and Operation Welcome Home, totaling $9.9 million general
fund.

LOCAL GOVERNMENT
The Governor’s Budget proposals include substantial changes in local

government funding, programs and responsibilities. As discussed elsewhere, the
proposal requires a shift of programs and responsibilities from the state to local
governments. As a part of this overall proposal for local governments, the
Governor’s Budget proposes a new funding mechanism for local
redevelopment and a shift in property taxes to other local entities. The proposal
calls for:
 A Constitutional amendment that would allow for 55 percent voter approval

for limited tax increases and bonding against local revenues for
development projects.
 De-establishment existing redevelopment authorities. Existing property tax

revenue would continue to be used for debt service and used for core
services provided by local government in the budget year.
 Additional property taxes in excess of debt service would be distributed on

an on-going basis to cities, counties and K-14 education beginning in 2012-
13.
 Increased property tax revenues would flow to local governments as existing

redevelopment authority debt is retired.
The Governor’s Budget does not include any local tax relief other than (1) the
Constitutionally-mandated exemption of the first $7,000 of the value of a
principal residence, and (2) the Williamson Act subvention. The Williamson Act
subvention is continued but the $10 million appropriated as part of the 2010-11
budget is proposed to be eliminated and no funding of the subvention program
is proposed in the budget year.

SUMMARY OF TAX SOLUTIONS
The Governor’s Budget includes substantial tax and revenue solutions that would
be used for General Fund purposes. Under the budget proposal, the personal
income tax (PIT) surcharge and the reduction in the PIT dependent exemption
credit would continue for the next five years. The budget proposal also includes
two permanent changes to the state’s income taxes that would (1) affect how
the income of multistate corporations is apportioned to California, and (2)
eliminate tax benefits for businesses locating in enterprise zones. Finally, the
Governor’s proposal calls for two new tax administration programs that would
result in increased compliance with and enforcement of the state’s income
taxes. In the budget year, these proposals would together result in additional
General Fund revenues of $4.8 billion. Specifically, the proposals are:
 Personal Income Tax Surcharge. The 0.25 percent PIT surcharge imposed
for tax years 2009 and 2010 would continue for 2011 through 2015. This
measure is expected to result in additional revenues of $1.2 billion in 2010-
11 and $2.1 billion in 2011-12.
 Dependent Exemption Credit. As part of the 2009-10 budget the

dependent credit exemption was reduced to equal the personal
exemption credit for tax years 2009 and 2010. This reduced level would
continue through 2015 and result in PIT revenues of $725 million in 2010-11
and $1.2 billion in 2011-12.
 Mandatory Single Sales Factor. The 2009-10 budget allowed as an option

apportionment of multistate corporation income using only a sales factor
for determining California taxable income. This proposal would eliminate
the optional component and instead require such single sales factor
apportionment, resulting in revenues of $468 million in 2010-11 and $942
million in 2011-12.
 Repeal Enterprise Zones Programs. Businesses located in designated

enterprise zones throughout the state can benefit from such preferential
tax treatment as a hiring tax credit, credit for sales taxes paid, a special
wage credit and advantageous deduction for interest paid. These
programs would be eliminated, generating revenues of $343 million in
2010-11 and $581 million in 2011-12.

 Focused Tax Amnesty. The proposal calls for a limited tax amnesty for
taxpayers who participated in abusive tax shelters or underreported off-
shore income. The measure would also include new enforcement tools
and deterrence measures. The proposal will increase revenues by $270
million in 2010-11 and a decrease (due to acceleration of revenues in the
initial year) of $50 million.
 Financial Institutions Records Match. The financial institutions records

match (FIRM) would require financial institutions to provide on a timely
basis taxpayer information to the Franchise Tax Board (FTB) to facilitate the
collection of tax debts. This will generate revenues of $10 million in 2010-11
and $30 million in 2011-12.
The budget proposal incorporates additional revenue for the Local Revenue
Fund to support realigned programs and services. As part of the Governor’s
Budget, there is a substantial proposal to realign certain programs to various
local government entities. This realignment proposal will be partially funded by
the continuation of the following temporary taxes enacted as part of the 2009-
10 budget.
 Sales and Use Tax. The current 1 percent increase in the sales and use tax
(SUT) set to expire at the end of 2010-11 would continue for an additional
five years. This would generate $4.6 billion in 2011-12 for funding realigned
programs.
 Vehicle License Fee. The current 0.5 percent increase in the vehicle
license fee (VLF) set to expire at the end of 2010-11 would continue for an
additional five years. This would generate $1.4 billion in 2011-12 for funding
realigned programs.

SUMMARY OF BORROWING SOLUTIONS
In addition to the major tax and revenue proposals, the Governor’s Budget calls
for transferring surplus balances in special funds to the General Fund. These
actions are expected to result in revenues of $12 million in 2010-11 and $84
million in 2011-12.
The General Fund will also benefit from loans from special funds during both the
current year and the budget year. These actions will result in addition resources
for the General Fund of $494 million in 2010-11 and $516 million in 2011-12. The
delay of repayment of prior loans to certain special funds will result in additional
budget year resources of $291 million.

SUMMARY OF CHARTS
2011-12 General Fund Summary
(in millions)
2010-11 2011-12
Prior Year Balance -$5,342 -$3,357

Revenues and Transfers
$94,194 $89,696
Total Resources Available $88,852 $86,339
Non-Proposition 98 Expenditures
$56,000 $48,593
Proposition 98 Expenditures $36,209 $36,021

Total Expenditures
$92,209 $84,614
Fund Balance -$3,357 $1,725
Reserve for Liquidation of Encumbrances $770 $770
Regular Reserve (SFEU) -$4,127 $955

Budget Stabilization Account - -
Final Reserve -$4,127 $955

2011-12 General Fund Revenue Sources
(in millions)
Source Amount
Personal Income Tax $49,741
Sales Tax $24,050
Corporation Tax $10,966
Insurance Tax $1,974
Tobacco Taxes $90
Liquor Tax $326
Other $2,549
Total $89,696

General Fund Expenditures

(in millions)
2010-11 Revised Proposed Change %
Budget 2010-11 2011-12 Change
Act
Category
Education (K-12) $36,079 $36,353 $36,211 $-142 -0.04%
Health and $26,346 $26,961 $21,175 $-5,786 -21.5%

Human Services
Higher Education $11,490 $11,651 $9,814 $-1,837 -15.8%
Business, $905 $507 $691 $184 36.3%

Transportation
and Housing
Legislative, $3,149 $3,167 $2,507 $-660 -20.8%

Judicial,
Executive
General -$3,189 $1,578 $1,911 $333 21.1%

Government
Corrections and $8,931 $9,257 $9,165 $-92 -1.0%

Rehabilitation
Resources $2,108 $2,032 $2,066 $34 1.7%
Environmental $77 $75 $63 $-12 -16.0%

Protection
State and $598 $586 $597 $11 1.9%

Consumer
Services
Labor and $58 $42 $414 $372 885.7%

Workforce
Development
Total $86,552 $92,209 $84,614 $-7,595 -8.2%

Highlights of The Governors Budget Proposal

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Highlights of The Governors Budget Proposal

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SUMMARY OF GOVERNOR'S PROPOSED

Public Safety Realignment ......................................................................... 3

K-12 Education ............................................................................................. 5

Higher Education ......................................................................................... 9

Human Services ......................................................................................... 19

Health Care Services................................................................................. 24

Natural Resources and Environmental Protection ............................... 28

Public Safety ............................................................................................... 30

General Government ............................................................................... 35

Local Government .................................................................................... 38

Summary of Tax Solutions ......................................................................... 39

Summary of Borrowing Solutions ............................................................ 41

Summary of Charts .................................................................................... 42

2010-11 and 2010-11 General Fund Solutions

The proposed budget's reserve is $1 billion.

This report is intended to provide an immediate understanding of the Governor's

Assembly Budget Committee 2

PUBLIC SAFETY REALIGNMENT

Programs ($ millions) 2011-12 2014-15

Assembly Budget Committee 3

1 Percent Sales Tax 4,549.0 5,567.0

The Administration expects additional savings to the commensurate state

The Administration alludes to a second round of realignment that would reflect

Assembly Budget Committee 4

 Provides $49.3 billion in Proposition 98 funding for 2011-12. According to

 Defers $2.2 billion in K-12 and Community College costs to 2012-13.

 Does not provide cost-of-living adjustments (COLA), projected to be 1.67

 Withholds funding for the California Longitudinal Pupil Achievement Data

 Eliminates the Office of the Secretary of Education (OSE). This results in a

Assembly Budget Committee 5

 Provides $89.9 million in ongoing Proposition 98 funding for reimbursement

 Provides an increase of $16.1 million (proposition 98) for charter school

 Increases special education funding by $7.4 million (proposition 98) to

 Provides an increase of $36.1 million in federal local assistance funds for

 Proposes legislation to extend various flexibility options to school districts

Child Care and Development Program (Proposition 98)

General Fund Solutions

 Decreases direct child care services, except Preschool, by $716 million in

o Eliminates services for 11-and 12-year olds. Reduces by $34 million

o Reduces eligibility to 60 percent of the State Median Income from

o Reduces the level of subsidies across the board.

 Provides greater flexibility at the local level to administer the remaining

Assembly Budget Committee 6

General Fund Policy Adjustments

 Sets aside $52.6 million in 2010-11 from one-time Proposition 98 settle-up

 Decreases by $34.2 million in 2011-12 to reflect lower Stage 2 caseload

General Fund Adjustments

 Increases CalWORKs Stage 2 by $241.5 million in 2011-12 to reflect a $4.2

 Increases CalWORKs Stage 3 by $256.2 million in 2011-12 that reflects a

 Increases by $83.1 million in 2011-12 to restore General Child Care, State

Non-General Fund Adjustments

 Decreases the Child Care and Development Funds (CCDF) by $18.5

Assembly Budget Committee 7

 Increases by $58 million in 2010-11 from unanticipated prior year federal

 Decreases the Federal 21st Century learning Centers by $23.1 million in

 Increases the Early Learning Advisory Council by $948,000 for state

Assembly Budget Committee 8

General Fund Solution

 Decreases the University of California by $500 million in 2011-12 to reflect