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 FYI.  Note under “Public Employees” Cal Fire so far is exempted from any lay-offs. Normbc9

Today, the Governor released his May Revision to his proposed 2009-10 state budget.  If you would like to watch the press conference, please go to the Governor’s website at the following address: http://gov.ca.gov/.

Although the 2009-10 fiscal year budget was signed by the Governor on February 20, 2009, the revision recognizes that the continued degradation of the state revenues and the pending cash borrowing needs will require swift and immediate action.

The May Revision included two versions that project two scenarios—one in which all the measures on the May 19^th ballot are successful and one in which all of the measures fail—as the success of the provisions is expected to generate $5.8 billion difference in the State's fiscal position in 2009-10 fiscal year.

If the ballot measures pass the proposed budget would include $86.3 billion in available General Fund revenues, $84 billion in expenditures, and a reserve of $1.1 billion

Solutions if the ballot measures pass

• The $15.4 billion shortfall is closed with the following rough estimate of solutions:

• $6 billion in Revenue Anticipation Warrants (RAW);

• $3 billion in cuts to education in both K-12 and community colleges.

• $1 billion in reductions to Higher Education.

• $1 billion in one-time savings from the sale a portion of the State Compensation Insurance Fund book of business to a private entity.

• $1.8 billion in major cuts to health and human services including:

• $750 million in Medi-Cal reductions.  These reductions are achieved through rate reductions, benefit changes and a change to the long-term care program that would negotiated with the federal government;

• Reduction of Developmental Services by an additional $234 million;

• Cuts to IHSS services and IHSS provider pay;

• Elimination of "SSI-like" benefits elderly and disabled legal immigrants and limiting access to medical care to needy legal immigrants – all of whom have played by the immigration rules; and

• Reduction of the SSI-SSP grant level to the minimum level allowed by the federal government; and

• Adoption of various CalWORKS reductions.

• $100 million from the lease oil or gas extraction at the Tranquillion Ridge area off the Santa Barbara coast.

• $610 million in tax accelerations.

• $1 billion (approximately) in other solutions.

If the ballot measures fail the proposed budget would include $88.6 billion in available General Fund revenues, $85.5 billion in expenditures, and a reserve of $2 billion

Additional solutions needed if measures fail

• If the ballot measures fail, the Governor would add the following solutions:

• $2.3 billion in additional reductions to Proposition 98

• $200 million in additional cuts to Higher Education.

• Suspension of Proposition 1A for local governments a $2 billion savings.

• $282 million from corrections by reducing some crimes from felonies to misdemeanors and commuting the sentences of certain undocumented immigrants.

• $1.7 billion from adoption a 10 percent Personal Income Tax withholding increase.

• Makes additional reductions of approximately $864 million in major cuts to health and human services including:

• Eliminating funding for Proposition 36;

• Reducing foster care rates;

• Additional reductions of $300 million to the In Home Supportive Services program services;

• $100 million in reductions to various public health programs;

• $108 million in reductions to Healthy Family program by reducing eligibility to 200% of the federal poverty level; and

• $178 million in other additional reductions and fund shifts that will impact health and human services programs.

• Adds an ERI fee to pay for CalFIRE costs for a savings of $76 million. ]

• Reduce the RAW borrowing by $500 million.

Public Employees

Gov. Arnold Schwarzenegger will direct his administration to send 5,000 layoff notices to state workers Friday, according to governor's budget plan. He plans to eliminate 5,000 workers by the end of June. The workers will be among the 20,000 state workers who received layoff warnings earlier this year. Mike Genest, Director of the Department of Finance, said during the press conference that general fund employees will bear the brunt of the layoffs since laying-off special fund employees would result in no general fund savings.

The governor was considering, and mentioned the possibility of an additional furlough day, however, it is not included in the governor’s first attempt at dealing with this deficit.  So at this point, there will be no additional mandatory furlough day…..at least not yet. 

NOTE: CDF Firefighters are exempt from the lay-offs mentioned by the governor as part of his budget solution.

Public Employees' Retirement System (PERS)

Key Proposals:

• Proposes to reduce health care expenditures for state employee health coverage by an estimated $132.2 million, beginning in January 2010, by contracting for lower cost health care coverage either through CalPERS or directly from an insurer. 

·        This change could conflict with existing collective bargaining contracts.  Savings estimates are very difficult to project.

• Proposes to reduce the state's Other Post Employment Benefits (OPEB) unfunded liability by 38 percent over the next 30 years by requiring that new employee’s work for 25 years or more before becoming eligible for lifetime health benefits (vesting).

·        This proposal will not provide savings for at least 25 years, as it only applies to new employees. 

Department of Water Resources

Key Proposals:

• Shifts flood protection activities for floodplain evaluations and mapping and support for Delta levees to Proposition 1E from the General Fund.  This proposal will generate $7 million in temporary savings.

Department of Forestry and Fire Protection

Key Proposals:

• Proposes an interagency agreement to use $24.9 million from the Legislature's budget to fund baseline General Fund costs at the Department of Forestry and Fire Protection.  Prior to this proposal, this funding was used for special fund supported unemployment insurance costs at the Employee Development Agency.

Additional Proposals If Propositions Fail:

• Increases the Emergency Response Initiative surcharge on residential and commercial property insurance policies from 2.8 percent, as proposed in the January 10 budget, to 4.8 percent.  This surcharge would average approximately $48 a year per insurance policy holder and generate $120 million in additional revenue in 2009-10.  This proposal would delay all enhancements to emergency response proposed in the January 10 budget, generate $78 million in General Fund savings by offsetting current baseline costs for CAL FIRE and provide assistance to local agencies that participate in the statewide mutual aid system.

Capitalizing State Assets:

The Administration proposes to pursue legislation and administrative action to maximize the amount of money the state raises from state-owned property. They propose to accomplish this through long-term leasing of unused properties, selling of high-value property, refinancing of state-owned buildings, and accelerated selling of surplus property.