It is budgeting season for our state, county and cities. The fiscal year, beginning on July 1st, requires plans for how California will spend over $1 billion, how Placer County will spend nearly $800 million, and how Auburn, as our county seat, will spend over $1 million.
At the state level, our governor and Legislature disagree and negotiate over various points before approving the budget by June 15, the constitutional deadline.
Here are examples of differences of opinion between Governor Brown and the Legislature on several issues in the fiscal year beginning July 2015.
Issue: Amount of Money coming into California will be more than earlier expectations.
Governor Opinion: Assumes state will take in $115 billion.
Legislature Opinion: Assumes state will take in $119 billion based on Legislative Analyst Office estimate.
Issue: Child Care funding is $1 billion less than before the recession.
Governor Opinion: Add $101 million to create 4,000 new slots.
Senate Opinion: Add $300 million to create 17,500 new slots and allow collective bargaining for workers.
Assembly Opinion: Add $605 million to create 20,500 new slots and allow collective bargaining for workers.
Issue: University of California raised fees last fall, then agreed to a 2 year tuition freeze for in-state students and pension overhaul.
Governor Opinion: Increase UC’s funding by $119.5 million in the coming year.
Legislature Opinion: Increase UC funding $25 million above governor’s proposal contingent on UC increasing enrollment by 5,000 in-state students in one year and not raising tuition in the next two years.
Issue: Medi-Cal Health care providers want to rescind the 10% cut in reimbursement for Medi-Cal patients.
Governor Opinion: Do not restore the 10% cut to Medi-Cal reimbursement that would have saved the state $200 million.
Legislature Opinion: Eliminate half of the Medi-Cal reimbursement reduction July 1 for dental at a cost of $15 million. Eliminate half of the reduction to all other providers on April 1.
Issue: Home-care workers hours were reduced during the recession, triggering unions and disability advocates to sue the state.
Governor Opinion: Raise $1.7 billion from a tax on health plans and use 10-15% of that to restore home-care service hours.
Legislature Opinion: State pays most of what it costs to restore hours effective in October and tax on managed-care organizations pays the rest.
Noteworthy in the Placer County budget are growth plans to the west of Highway 65. A key development is the University of Warwick campus that will grow to 6,000 students over the next 15 years. The 600-acre campus west of Roseville is part of one of England’s leading universities founded in 1965 and widely respected for excellence in research and innovation. The University of Warwick was declared University of the Year by the Times for 2014/2015. Placer County leaders are counting on economic development brought on by faculty jobs for local residents and skilled college-educated workers graduating locally.
“The Placer County Conservation Plan”, as Placer County Board of Supervisor Chairman Kirk Uhler puts it, “is Placer County’s Development Plan”. The plan, not yet finished, will be implemented starting next year.
While on the surface budget projections look good, looming liabilities are not as public. Recent estimates project unfunded pension liability for state and local governments in California at $4.7 trillion. Placer County is obligated to pay $100 million in employee pensions that it does not have. For too long, pension fund officials and politicians increased payouts in excess of the contributions to support the payouts. As a result, there is now not enough money to pay the promised benefits. Accounting practices do not make the true cost obvious to the public, and yet the public is now on the hook to make up the difference between promises and money to cover them.
While a growing share of budgets go to pensions, less is spent on public libraries, maintenance, parks, as well as feet on the street policemen and firefighters at the bottom of their organization who are directly responsible for the safety of our communities. In Oakland, for example, given the option to contribute 9% of their salary to their pensions and save 80 police jobs, the union voted to continue paying nothing and bypassing the option to hire additional officers.
Being unable to modify pensions Vallejo, Stockton and San Bernardino have declared bankruptcy.
The Governmental Accounting Standards Board is implementing new rules to require governments to report unfunded pension liabilities on their 2015 balance sheets. The new rule will provide transparency to allow a better understanding for the public. Also, look for legislation in the 2016 election that will give state and local governments more options to adjust pensions.