Dave Cox Senate Report: January 2006

State Budget Highlights

The annual state budget process has started with the release of the Governor’s proposed budget. The Governor proposes a $125 billion budget, $98 billion of which comes from the state General Fund. This amount is nearly $8 billion more than the current year’s spending (an 8.5% increase). General Fund revenues are estimated to be $91.5 billion, leaving a structural budget gap (deficit) of $6.5 billion. The Governor covers this gap by using $7 billion in revenue that is coming in the current year in excess of expectations. The Governor has proposed no new taxes.

The largest portion of the budget is, of course, education. The Governor proposes to spend $54 billion on kindergarten through community college education. This is more than $4 billion over the current amount being spent this year (an 8.7% increase). Community colleges receive a total of over $8.6 billion, a $600 million increase over the current year. This will allow the fees paid by community college students to remain at $26 per unit, the lowest in the nation.

The University of California and the California State University systems also receive increases of $530 million to a total of $10.4 billion. This includes funding to avoid a fee increase for UC and CSU students next year.

Transportation funding receives a significant increase in the proposed budget. The Governor proposes to spend all gasoline tax revenues on transportation, as required by Proposition 42. This is a significant victory for those of us who got Prop 42 passed in the 2002 election. The Governor’s budget also proposes to repay $920 million of the “loans” of Prop 42 revenues that were made in the 2003 and 2004 budgets to bring them into balance. If this repayment goes into effect this year, another $900 million will still need to be repaid.

In the area of Corrections, the Governor’s budget includes an increase of $644 million to a total of over $8 billion to be spent on prisons, parolees, and rehabilitation. This is a growing area of the budget because our criminal population continues to increase, and the need to hire additional prison personnel is at a crisis level. Many prison guards and parole officers are forced to work overtime because of significant staff shortages at all of our prison institutions. The budget proposes to deal with this problem by hiring and training over 2,000 new guards in the next year. It also proposes to open prisons run by the private sector.

Finally, the Governor’s budget contains the Rural Law Enforcement grants that are important for the 24 smallest counties in our state. These $500,000 grants are often the difference between having an officer to patrol large rural areas and not having one.

The Governor’s budget will now be reviewed by the Budget committees of both houses of the Legislature. In May, the Governor will announce a revised budget proposal based on the latest revenue estimates by the Department of Finance. Then in June and July, the Legislature will enact a final budget. It will be different than the budget that is proposed in January. I will watch this process closely this year, as I always do, to assure that the Legislature and the Governor continue to deal with the problem of the structural deficit without raising taxes.

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Infrastructure

We will be hearing this word a lot this year: Infrastructure. Governor Schwarzenegger made it the focus of his State of the State address. The broad term means a lot of things: roads, bridges, schools, and universities that we need to function as a society. But there are other things not usually considered within the definition of infrastructure in which we need to invest in order to maintain a good quality of life: ports, water treatment facilities, and dams and levees for water supply and flood control.

The Governor’s Strategic Growth Plan is a $222 billion program to build transportation, education, water and correctional facilities over the next ten years. Only $68 billion of this will be in new bond proposals spread out over the decade. He proposes to pay the remaining amount from existing revenues, local funds, or expected federal funding.

As a Sacramento resident, I know how important it is to invest in our flood control system. There have been many close calls when it comes to the American and Sacramento River levee systems handling a large winter storm. I welcome the Governor’s recognition of the severity of the problem not just in Sacramento, but statewide. The water bond proposal, which includes $9 billion in new bonds and $26 billion in non-state funding, includes funding for watershed management programs in all the major watershed regions of the state. It also establishes a fee schedule to fund an ongoing Water Resources Investment Fund for water quality and flood control projects. I am hopeful that we can make progress on the flood control problem this year.

On transportation, the Governor is proposing $12 billion in new bond authority. This is part of a $107 billion spending plan. One attractive element is the use of existing revenue from gasoline taxes ($47 billion) to maintain an ongoing construction program over the next decade. California voters took a critical step forward in 2002 by passing Proposition 42, which requires that all gasoline sales taxes be dedicated to transportation projects rather than the state General Fund. The Governor proposes to make Proposition 42 permanent, and prevent the state from ever again raiding this revenue source to cover General Fund deficits. He also proposes to use fast track contracting methods to speed up the construction of projects, and the use of toll roads where feasible.

Our review of the initial proposal is that this program relies heavily on existing plans and revenues, especially the new federal funds allocated by the new federal transportation bill, and local revenues raised by local sales taxes. It does not at this point include many specific projects that are needed by residents of the First Senate District. I will watch the development of this overall infrastructure plan over the next few months. My vote on this proposal will depend on the overall level of debt imposed on taxpayers. The insidious thing about debt is that you have to pay it back. There is no question that California’s infrastructure needs to be upgraded, but there are legitimate questions as to how to pay for these improvements. Any bond package must ensure that projects are completed as timely and inexpensively as possible. So we need to look at streamlining environmental review and contracting procedures. This keeps costs down and delivers more projects on a shorter timeline. Finally, it is essential that all communities (including rural communities) see the benefits of this investment in California’s future.

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The Solar Energy Initiative

After a legislative bill to enact a $3 billion program to encourage the deployment of solar energy in California stalled last year due to Democrat’s insistence on union-only solar installers, the California Public Utilities Commission decided to adopt a similar program, and put it into effect this year.

The California Solar Initiative provides $2.9 billion in incentives to solar energy installations over the next ten years. The PUC itself will administer an incentive program through rebates to customers who install photovoltaic panels on their homes. The California Energy Commission will manage a $350 million program targeted at new home construction.

The funds for the program will be generated by charges on all energy customers of approximately $12 per year. However, the net effect on customer’s bills will be minimal because of the 2007 expiration of a surcharge on energy bills that has been used to repay the rate reduction bonds authorized in 1996 for the infamous electric utility restructuring plan adopted that year by the State Legislature.

For more information about the California Solar Initiative go to:
http://www.cpuc.ca.gov/static/energy/051214_solarincentive.htm

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DMV Office Hours

On January 1st, the Department of Motor Vehicles did away with the experiment of closing some offices during the week in order to open them on one Saturday per month. The practice proved too inconvenient for the public. Now all offices will be open from 8:00 a.m. to 5:00 p.m. every day of the week except Wednesday, when the offices open at 9:00 a.m.

In the first Senate District several offices will be open on the third Saturday of each month. These offices are located in the communities of Folsom, Roseville, Sacramento (Broadway), and South Sacramento (Florin). For constituents in Amador and Calaveras counties, the Stockton office will be open on the third Saturday of each month.

Remember: There are many DMV services that you can perform online: such as registration and driver’s license renewals. You can access the DMV’s website at: www.dmv.ca.gov

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Quotes of the Month

“The multiplication of public offices, increase of expense beyond income, growth and entailment of a public debt, are indications soliciting the employment of the pruning knife.” - Thomas Jefferson

“He that goes a borrowing goes a sorrowing.” - Benjamin Franklin

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