HomeMy WebLinkAboutMINUTES - 02032004 - D2 TO: BOARDOF SUPERVISORS ,tr - * * CONTRA
COSTA
FROM: John Sweeten,County Administrator
,.- COUNTY
BATE: February 3,2004
SUBJECT: Board'Positions on Propositions 55,57 and 58
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)& BACKGROUND AND JUSTIFICATION
RECQApff NDATION,(;
1. CONSIDER position on Proposition 55, The Kindergarten-University Public Education Bond Act of
2004
2. CONSIDER whether or not the Board should revisit its position on Proposition 57, the California
Economic Recovery Bond Act.
3. CONSIDER position on Proposition 58,the California Balanced Budget Act.
BACKGROUND/REASt3NSS FOR RECOlt�IlryIENT)ATION(S):
On February 5, 2004, the California State Association of Counties (CSAC) Board of Directors will be
considering possible positions on three March 2004 ballot initiatives:
➢ Proposition 58,the California.Balanced Budget Act
Proposition 57, the California Economic Recovery Bond Act
> Proposition 55,The Kindergarten-University Public Education Bond Act of 2004
CSAC staff is recommending that the CSAC Board adopt positions of support for all three propositions.
Supervisor Gayle Uilkema, the Contra Costa County Beard of Supervisors representative to the CSAC Board,
will be asked to present the County's position and so it would be appropriate for the Board to indicate a position
of support,opposition or no position at this time.
CONTINUED ON ATTACHMENT: i�_YES :SIGNATURE: 316'
RECOMMENDATION OF COUNTY ADMINISTRATOR—RECOMMENDATION OFD COMMITTEE___...APPROVE OTHER
SIGNATURE(S):
ACTION OF BOARD ON a r'Y 3, 20M APPROVED AS RECOMMENDED x OTHER
ADOPTED a position of support on Proposition 55,The Kindergarten-University
Public Education Bond Act of 2004; Proposition 57, the California Economic
Recovery Bond Act; and Proposition 58,the California Balanced Budget Act.
Speaker: Rollie Katz,Public Employees Union Local One, P.O. Box 222, Martinez.
VOTE OF SUPERVISORS
I HEREBY CERTIFY THAT THIS IS A
X UNANIMOUS(ABSENT M ) TRUE AND CORRECT COPT'OF AN
AYES: NOES: ACTION TAKEN AND ENTERED
ASSENT: ABSTAIN: ON MINUTES OF THE BOARD OF
SUPERVISORS ON THE DATE SHOWN.
Contact:Sara Hoffman,336.1098
ATTESTED. Eebrtaa 3, 2004
cc: CAO JOHN SWEETEN,CLERK OF
Nielsen Merksamer THE BOARD OF SUPERVISORS
AND COUNTY ADMINISTRATOR
Deputy Clerk.
BACK ROUIYl3WASON.M. OLt I CUMMNDAT O S kont'd):
Proposition 55-The Kinderamen»Univers Public Edu att n Bond Act of 2004
The Kindergarten-University Public Education Bond Act of 2004 would provide for issuance of bonds in the
amount of $12.3 billion for construction, renovation and repair of school facilities K-16. CSAC staff is
recommending support of Proposition 55 in recognition of its collaboration with other local governments
through the CCF Partnership and its previous support of Proposition 47 in 2002 ($13.04 B school construction
bond, which was approved by the voters). CSAC staff states that "better school facilities will improve the
quality of education and life in all 58 California counties."
No information is available on the impact of this bond measure on the State's debt capacity or credit rating,
although, the Legislative Analyst's Office does state that the average payment for principal and interest would
be about$823 million per year,based on a 5.2%interest rate repaid over 30 years.
Proposition 57-The California Economic Bond Recovery Act
On January 20, 2004, the Beard of Supervisors deferred taking a position on Proposition 57 pending more
information about the Governor's proposed shim of$1.3 billion of local property taxes to the schools. The
CSAC Executive Committee had voted at its January 15'' meeting to consider recommending a position of
opposition to Proposition 57 to the Board of Directors, depending upon the outcome of discussions with the
Governor's office on the proposed ERAF shift.
Since the Board of Supervisors and the Executive Committee took their actions, CSAC Executive Board
members met with representatives of the State Department of Finance and expressed the grave concern of
counties over the proposed permanent shift of local property tax revenues. The CSAC staff has indicated that
the meeting was positive in that the message was apparently understood and there was a premise to
communicate the counties' concerns to the Governor's office. In addition, a follow up meeting with
representatives from the Governor's staff was promised.
In light of these developments, and in ease there are further developments prior to the Board of Supervisors
February 3rd meeting, the Board may want to determine whether or not it wishes reconsider its position on
Proposition 57.
Proposition 57 is co joined with Proposition 58, so it would only become operative if both pass.
Proposition 58-The California IiaianSed Bud et Act
Proposition 58 makes constitutional changes that require a balanced state budget, a rainy day budget reserve,
provide additional midyear budget reduction authority to the executive branch and disallows future borrowing
to pay off deficits. It is co joined with Proposition 57, so it would only become operative if both pass.
Please see the attached LAO analyses of Propositions 55, 57, and 58 as well as background provided by the
CSAC staff.
.... ....... _
ll+ tll3 '�7.36s28 CALIFORNIA STATE A-? 915 4415507 TD:STBVF SMAY Page @ill
The fUnderBatrton-Univei rsirty
Pubilic Education faaviiifiern
Sond'Act of 2004
November 10,2003
To: Stave$=toy
Califamia State Association of Counties
From: Barbara Kerr,Prsalden%California Teachers Association
Canis MAO, President,California its PTA
Bill Hauck,Pres dsrtt, California Business roundtable
Lang McCarthy,Proaddsnt California Taxpayers`Asscclsticn
Re: Support for Prop.35–Statswlds School Construction and Modsmization Act
We hope you will join 'us In supporting Proposition as - the: statewide school construction and
modernization bond on California's March 2004 ballot,This important.measure will help provide our
children %Ath the classrooms and schools that are headed to Improve student learning, to relieve
classroom*overcrowding,and to prepare Caiifomla students fora successful future. Below are just a
few of the 1,rnportant reasons a diverse coalition of parents, teachers, taxpayer groups,business and
community leaders are all supporting Prop, 55. We hope you will join us by formally endorsing this
measure:
✓ Prop. 86 will make building qualllty4chool facilities a priority by helping local oormunitles build
and repair the schools that aver do'sperately needed all over the state. California needs to build
more than 22,000 classrooms to reffave overcrowding and deaf with Increasing student
enrollment, it will also repair older school facilities needing basic modernization like fbdng broken
bathrooms and providing heating air conditioning.
✓ Prop. 85 will help iac>�tcr cjasss, Izog, ro�ll�v_o classroo,� v�rLy—o ding and provide students
with the learn}ing environment they need to lrrtorov�r test scores and met the state's naw
adcountablilty standards.
Strict aceotrntabluty slamdgrds,inoludipg Independent audits and annual reports by school
boards,will help'ensure that all funds are spent on needed school ci onstruction and repair, not
on administrative overhead or bureaucracy. School construction funds will be carefully managed
to assure cost effectiveness. f
✓ This measure,is a diMet Investrnont In oba.and economic e in every coMmunliv.
Prop. 55 projects will create hundreds of thousands of new jobs throughout California.
This measure contairis funding to improve and build new facilities at our state's public
universities and community collages, in addition to K-12 schools.
(more)
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11/18/83 17:97 :11 CALZF[IB11IA STAB A; 916 4 TD:STM ZALAit Pe�gre i3>Z
We were able to successfully pass Proposition 47 In 2002 because of active support from
organizations like yours. Proposition 65 Is the second half of our commitmept to our public schools
and our students.The need to build and repair classrooms and schools Is still great Please help us
finish what we started and join the coalition In support of this Important measure,
Enclosed is a fact sheet and endorsement form.To be listed as a formal supporter, please fax the
completed endorsement form right away to 916-442-3510,or you can sign up on-line at
wwW,YasoRS6,00m.For more information, please visit the campaign'websits or oait 918-443-0872.
Thank you In advanos for your support.
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, 111FVT13 1713735 CALIFINNIA STAT A-X 916 4415587 '�l—%S.TRYE SZALAY Page 883
= They Kindergar -Universityn
Publ c Education Facllltles
Band Act. of 2004
FACTS AT A GLANCE
www.YeacriS3.com
Yes on 551 Provide Clean, Safe Classrooms. Improve Student Learning.
Invest In Our Kids' Future. Enact Strict Accountabllltyl
One way to knpr�ve test scores and help students mesh higher standards Is to reduce classroom overcrowding and provide kids
with a clean,oafs p.lam to loam.Prop. 65 will invest in our kids and their fuh ue by providing funds to repair classrooms and build
new schools. Prop. 56 targets funds where they're needed most-seve*ovewrowded classrooms, outdated schools in rimed
of repair, and fasl�grorwing communities that need new schools, And Prop. 65 contains strict acocr ntability standards that.
guarantee school bond fps will go directly to repair and build,new classrooms - not on bureaucracy or waste. ,lain the
California Teao here Association, California Chamber of Commerce, California State PTA, California Bu sines,Roundtable,
California Taxpayers'Assocntkrn,and trillions of Californians who support our schools.Vote Yes on Prop.65 to:
Fix Old and Outdated Classrooms In, Require S•trlct Accountabllltyl
Need of Rep air ' The California Taxpayers' Association supports Prop 55
Many .students are aid to loam in classrooms that are because strut accourrdabilty provisions,Including independent
rundown and overcrowded. Recent surveys show that one audits, cost controls and other requirements guard against
million men attend schools with broken bathrooms.Severity waste and mismanagement and provide oversight of all school
three percent of ciassrooms are more than 25 years old. Our projects.Funds can only to spent to repair or buticlachools,not
kids damns better. Prop. 56 will fix. rundown classrooms, on bureaucracy or wasteful overhead. And Prop. 55 Is a
repalrleaky roofs and ffx broken.bathrooms so.our odds can-do general obligation bond that wil not raise taxes!
better.
Build New Schools and Classrooms Target Funds,Where They're Needed
to Relieve Ov'*rcrowding and Reduce Most
Class Sizes Prop. 55 targets funds to upgrade schools and classrooms
California curreritly has the mrd most overcrowded schools most In nsed.'Piop. 55 primes speoft funding to build new
In the •dation. We need to build more than 22,000 schools in areas where classrooms are severely overcrowded
classrooms to relieve overcrowding and deal with increasing and to fix schools that are old and rundown.hiew and growing
student enrolment. Prop. 55 will build the new schools and commumltles also receive their fair share to build the schools
classrooms we need to reileve overcrowding and reduce and classrooms they need.
class sizes.
Provide:, Matching State Funds for Create Jobs and Boost the Economy
Locally Approved School Bonds School construdon is a direct Imstrnent In the local economy.
School construction and repair In Callbmia Is a sta#efiocal Studies show Prop.55 Will create hundreds of thousands of
partnership. Prop. 65 provides matching state funds to help now jobs and add billions In local economic aeWltles
communities with their local school repair and construction throughout California,
projects.
PAID FOR BY YES ON 55•CAU M- FINIANS R)R A,MOUNTAEIILfCY AND BETTER SCHOOLS
A coailtion of taxpayers,parents,seniors,educators,builders,labor and business,California Teachers Association and Californians for Higher Education.
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1131 1 3 17.30•57 CAL IFORKIA ,STATE A—> 916 441558? M:STEVE SZALAV Page 004
WHO SUPPORTS THE
2004 STATEWIDE
SCHOOL BOND MEASURE?
California State PTA
Califomia Teachers Association
California Chamber of Corrunerce
CallifforriiaBssiness Roundtable
California Taxpayers Association
Coatition`forAdequate School Housing
Catiforni= for I-1igher Education
The Regents of the University of California
Ctlifornia StateUniversity Board of Trustees
The Hoard of Governors of the California Community Colleges
EdVoice
Association of California School Administrators
Califbrnia School Boards Association
•California Building Industry Association
State Building and Construction Trades Council of California
League of Women Voters of California,
California Association ofSchool Transportation Officials
California,Faculty Association
California Postsecondary Education Commission
California State University Foundations
California County Superintendents Educational Services Association
Community College League of California
Parent institute for Quality Education
California,Association for Local Economic Development
California Association for the-Gifted.
Faculty Association of California Community Colleges
California State Student,Association:
California,League of High Schools
California League of Middle Schools
California,School Employees Association.
California Federation of Teachers
University of California Student Association
California Association of School Business Officials
California Association of Suburban School Districts
California School Library Association
Small School Districts'.Association
Mexicans American Legal Defense and Educational Fund (MA:LDEF)
Chi State (The Delta.Kappa Gamma Society International)
California State Conference of the NAACP
California Network of Educational Charters
Children Now
Asian American Vater Education Fund
California Legislative Council for Older Americans
California Latino School Board Member Association
PAIL?FOR BY YES ON 56—CALIFORNIANS FOR ACCOUNTABIL17Y AND BETTER SCHOOLS
A coalition of taxpayers,parents,seniors,educators,builders,labor and business,California"Teachers Assoclailsn and Californians for`l ligher Education.
1121 L 13t me-Suite 803.8rcramaro;CA 659#4•°fat:008.583.OM•Fax 616442$510
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L/16/-03 17#48•85 CALIMIA STATE A—> 91.6 4415567 TB,STM S?ALAY pawoses '
LOCAL EMDQ=MHbW ca=
Anaeriran.Concxete Pavement Association, Arena Union Elementary School District {Point
Was t�--M States chapter Acme.
American Fence Coaactoce'Association, Aromas--San Juan Unified School District(Sin
Cadifoc ip Chapter• Juan Bautista)
American Ina tituteof Architects.California A.aaoci. led General Contractors,San Diego
Council Chapter
.American Planning Asso6ition,California Associated Students of-California.State University
Saccammto
A.s�iean
Chapter
Environmental Network. AtwaterMementacy School District
Associated General Contractors of California Bakersfield City School District
Aasociation.ofMexicati-American Educator BeniciaL3niGed School District
Caldorrsia Association Sheet 1vletal Air Beverly FTtlls Unified School District
Conditioning Contractors Bishop Union Momentary School District
Cslif6mia Business Alliance Brentwood Union School District
California Business Properties Association Binding Industry Association of Central
Califocssia Cement Promotion Count California
CsliforisiW Council for Environmental.& Building Industry Ass odaatioa of Kern County
Economic Balance Buildirig Industry Association of Southern
California Fence Contractors'Association California
California Rebuild America Coalition Building Industry Association of Southern
California Ret ced'T`eachen Association California resect Chapter
Cadifornism For School Facilities SuildrssgladustryAssociation of Superior
Congress of California Seniors C;alifocnia
Construction Management Association of Building Industry Association of Superior
Aaserica California,North Valley Chapter
.Consulting Engineers anis Land Surveyors of Building industry Association of the Sacs Joaquin .
California valley
Engineering and UtilityContractors Ass ociatioa Btiading Industry Ass ociationofTuiam/Kings
Engineering Contractors'Associa.tiou Counties
Flasher/Bacricade Association Butte-�Glen Community College District
�Frienda Committee on Legislation Calaveras County Board of Education
Gray Psathera California Cal"tfomiaPoly hnic State University,Academic
Lutheran Office of Public Policy—California Senate
National Asian Pacific American Families Against California.Polytechnic State University,Alumni
Substance Abuse Association
Palating&Decorating Contras ora of Caltfoarsia California State University Bakecsfceld Academic
Priming Bar Conservation League' Senate
Service Employees International Union,California California State University Bakersfield Alumni
state Council Association
Stake Employees 'Trades Couac:R--United Caltfomca State University Chico Acaderrscc
Wine Institute Senate
California State University Chico Alumni.
LOCAA L ENT)t37xSEMEN,'I, Association
Albany Uaified School District California State University Fresno Academic
Alpine Unioa School District Senate
Alta Loma School District California State University Fullerton A.caderaic
American GI Focum,Modesto City Chapter Senate
American Inatitute of Architects,San Francisco California State University Hayward
Chapter Cali.fomia State University Hayward Alurnai
American Institute of Architects.Santa Clara Association
valley Chapter California State University Los Angeles
Anaheim City School District California State Unitre�rsity Los Angeles Academic
Anderson Valley Unified School District Senate
(Boonville) California State University Monterey Bay Alumni
Antioch Unified School District Association
2
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13./10/03 Yi'i41:tl1 GALIIF#]HILIA STATE f2-4 915 44L%87 'TU:STEVE SZALAY Wage @lam
California State University Seto Faculty Humboldt County Board of Education
Senate Henn Beat City.Schod District
California State University Sin Bemaxdino Impeciad County Office of Education
CAdomis State University San Bershaxdiao Faculty Irvine Unified School District
Senate Jumps.Unified School District Nversidee)
Ket=n Unified School District
DORSE NxTS•CONT kern County TaVeyersAssociation
California State University San Francisco Alumni LorAr,, +1`�Y#3►i} 4�?M l'' 'a CQ=,D
Association Kixnadle Union School District
California State University Sanjose:Alumni La Canada Unified School District
Association Laguna Nigurl Blementary'PTA
California State*UniversitySin Marcos Lake County Board of Education'
California State University Lake Elsinore Unified School District
Capistrano Unified School District Lake Tahoe Community College District
Cainhet Unified School District Lake Tahoe Unified School.District
Castro Valley Unified Schooi District Lauamecsville Elemenmrc School District (Tmq)
Central Unwed School District(Freano) Lan eswc School District
ChgHay joint Union High School District Lawndale Elementary School District
Chico Unified School District' Lemon Grove School District
Chula Mata Elementary Schhool District Liberty School District(Petaluma)
Ciay.Jchint•Eleeiaentary School District Livermore Valle Joint Unified School District
K ngsburg) Lorna Prieto joint Union Elementary School
Coalinga-Huron Unified School District District(Los Gatos)
Coast Unified School District(Cwnbris..) Lompoc Unified School District
CoLusa Unified School District Los Alunitos Unified School District
Covina-Valley Unified,School District Los Bangs Unified School District
Covina-Valley Unified School District Bond Los Niece Sehxhol District(Whittier)
Overs ightComrnit:tee Luther'Buxbenk School District(San Jose)
Del Norte County Unified School District Metiers County Economic Development
Delano joust Union High School District Commission
Dexair Unified School District Ma=nn-Illinois Union School District(East
East Nicdaus joint Union High School District mcolaus)
Etiwanda School District Marin Builders'Exchange
Eureka Union School District(Placer County) Mariposa County Unified School Distxici
Fallbrook Union High School District Mattole Unified School District
Filipino American Service Group McCabe Union Elementary School District
t
Ficat DistrictPTA(San Gebrua Voll") Merced Union High School District
Folsom Cordova Unified School District, Mono County Boacd of Education
Fontana Unified School District Monrovia Unified School District
Forestville Union School District Mountain Vimr Chamber of Commerce
Fortuna Union Elementary School District Napa Valley Unified School District
Franklin—McKicileey School District(San joie) NeeawfiA School District
Fremont Unified District Teachers Association North County Joint Union School District
Fresno Cornpeect (Hollister)
Fresno County Office ofEdum don North Sacramento School District
Fresno Economic Development Corporation . Noraralk-I.a Mirada.Unified School District
Fresno Unified School District Novato Unified School District
Gateway Unified School District(Redding) Oak Park Unified School District,
Gold Trail Union School District(Placerville) Ojai Unified School District
Grana Vi dley School District Orange Chamber of Commerce—Visitors Bureau
Grenada Elementary School District Orange County Business Council
Harbor Council PTA (Fourth District/Newport Orange County De partmeat of Education
Beach) Orc:utt Union School District
Health For All(S•acraraeato) . Oxnard Union High School District
Horne Builden Associiadon of the Central Cant Petaluma City(Elementary)School District
H.O.P.E.&Latinos for FF hence in Education Petaluma joint Union High School District
Hugihscm Unified School District Piedmont Unified School District
3
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I.1116A3 17.'42:87 CAL IP13RH IA STATE A--> 516 441SS07 TO:STEVE'SZALAY Page 007,
Pierce Joint.Unified School District(Arbuckle) Tulelake Basin Jaiat Unified School bis trict
Piner-Qtivet Union School District(Santa Ross) Ukiah Unified School District
Pleasant Valley School District Ventura Unified Education Aaaociati m
Poway Unified School District Vineland School District(Bakersfield)
PTA 33,dDistrict(Lakewood) Visalia Unified School District
Redlands UaiftedSc3hod District , Weaver Union School District
Redwood Cow t Home Builders Association West Coats Costa Unified School District
Redondo Beach Unified School District Winters Joint Unified School District
Rio Linda.Union Schaal District Winton School District
LOC&L E f]AS�MEI'►1TSIMbMD Yucaipa-Callmesa Join Unified school;District
Riverside Unified•School District TINDMIQLt'A•T ENDURSEMEN'T-5
Rowland Unified School District State Treasurer Philip Axigelides
Sacramento Builders'Exchange Senator Gil Cedillo
Saddleback Valley Unified School District Senator Joseph L.Dunn
Prange County) Senator Sheila James Kuehl
Salinas Valley Builders Exchange Senator Bruce McPherson
Salvadoran American Leadership and Education Senator Kevin Murray
Fund Senator Tom Todsloon
San Bernardino City Unified School District Speaker of the Assembly Herb J.Wesson,Jr.
San Bemurdiao Community College Dis tcict As semblymember Patty Berg
San Diego County Office of Education Assemblymember Rudy Bermudez
San Diego County Building&Construction Assemblymember Ronald Calderon
Trades Council Assemblymember Wilma Chan
San D'iegaito Union Highschool District Assemblymember Ed Chavez
San Francisco State University Alumni Assemblymember Judy Chu
Association Aasemblymember Rebecca.Cohn
San Jose-Unified School-Distc'dct Aasemblymember Ellen'M.'Co tett
San Juan Unified School,District(Carmichael) Assemblyrnembec Lou Correa
San Mariao Unified School District Assemblymember Lynn Daucher
San Rain=Valley Unified School District Assemblymem ber Manny Diaz
San Yaidro School District Assemblymember John Dutra
Sanger Unified School District . Assemblymen
Mervyn M.Dymslly
Santa Clara County Cities Association Assemblymea ber Marco Fi.r augh
Santa Clara Unifted School District Assemblymernber facie a Goldberg
Sausalito Mari h City School District Assemblymember Loni Hancock
Shasta County Board of Education Assemblymember Hannah—Beth Jackson
Silicon Valley Manufactuting Group Assemblymember Christine Kehoe
Sinai Educators Association (Simi Valley) Assemblymember Paul Koretz
Showtine joint Unified School District(Phelan) .Assemblymember John Laird
Society of Hispanic Professional Engineers, Assemblymember Mark Leno
California State University Northridge Chapter Assemblymember Lloyd Levine
Solana Beach School District Assernblymember Sally Lieber
Somis Union School District Assemblymember Jahn Longville
Sonoma County Junior College District Assemblymernbec Alan Lowenthal.
Sonoca Union High School District Assemblymember Barbara.Matthews
South Whittier School District Assemblymembec Cindy Montanez
Stanislaus Union School District Assemblymember Gene Mullin
Sundale Elementary School District(Tulare) Assemblymember George Nakano
Sunnyvale School District Assemblymernber Gloria.Negrete McLeod
Sunol Glen Unified School District Assemblymembec Fabian Nunez
Tamalpais Union High School District Assemblymembec Robert Pacheco
Temecula Valley Chamber of Commerce As a emblymemb er Fran Pavley
Temecula Valley Unified School District Assemblymember Mark Ridley-Thomas
Temple City Unified School District Assemblymembec Simon Salinas
Thermalito Union School District Assernblytnember Joe Simifiisn
Tracy Joint Unified School District Assemblymexnber Darrell Steinberg
Tulare Joint Union High School District Assemblymember Juan Vargas
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a l/1t71�t10 l t:'to:1rj LIMLI11'111 n im 5'1'tilk rMp 2so Mrs.iaan r iu-Q xrJrL .JAWS+"" 4 agc uuu
Assemblymember Patricia Wiggins
Assemblymember Lois Walk
Assetablymember Leland Yee
Cdifornis.Comm unity Colleges Chancellor
Thomas J.Nussbaum
California State PTA Director of Legislation
Cecelia Mans*field
California State PTA.Legislative Consultant
Harriet Batson
IrrfibiVTb„UAL Ei T lfMENT`S C
California State University Fresno President
John D.Welty
Clovis Unified School District Superintendent
Terry Bm&ey
Former California Secretary of Education
Ma.rian Bergeson
Sonoma Valley Unified School.District Trustee
Ssndra.Lowe
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Proposition 55: Kindergarten-University Public Education Facilities Bond Act of 2004 Page 1 of 4
legislative
analyst's
60 YEARS OF SERVICE
office
November, 2003
Proposition 55
Kindergarten-University Public Education Facilities
Bond Act of 2084
Background
Public education in California consists of two distinct systems. One system includes local school
districts that provide elementary and secondary (kindergarten through 12th grade, or"K-12")
education to about 6.2 million pupils. The other system(commonly referred to as "higher education")
includes the California Community Colleges (CCCs), the California State University (CSU), and the
University of California (UC). The three segments of higher education provide education programs
beyond the 12th grade to the equivalent of about 1.6 million full-time students.
K-12 Schools
School Facilities Funding, The K-12 schools receive funding for construction and modernization
(that is, renovation) of facilities from two main sources---state general obligation bonds and local
general obligation bonds. General obligation bonds are backed by the state and school districts,
meaning that they are obligated to pay the principal and interest costs on these bands.
• State General obligation Bands. The state, through the School Facility Program (SFP),
provides money for school districts to buy land and to construct and renovate K-12 school
buildings. Districts receive funding for construction and renovation based on the number of
pupils who meet the eligibility criteria of the program. The cost of school construction projects is
shared between the state and local school districts. The state pays 50 percent of the cost of
new construction projects and 6€3 percent of the cost for approved modernization projects.
(Local matches are not necessary in "hardship"cases.) The state has funded the SFP by
issuing general obligation bonds. General Fund revenues would be used to pay these costs.
These revenues come primarily from state income and sales taxes. Over the past decade,
voters have approved a total of$20.1 billion in state bands for K-12 school construction. About
$1.9 billion of these funds remain available for expenditure.
• Local General Obligation Bonds. School districts are authorized to sell general obligation
bonds to finance school construction projects with the approval of 55 percent of the voters in the
district. These bonds are paid off by taxes on real property located within the district. Over the
last ten years, school districts have received voter approval to issue more than $37 billion of
general obligation bonds. Although school facilities have been funded primarily from state and
local general obligation bonds, school districts also receive significant funds from:
http://www.lao.ca.gov/initiatives/2004/55-03-2004.htin 1127/04
Proposition 55: Kindergarten-University Public Education Facilities Bond Act of 2004 Page 2 of 4
. Developer Fees. State law authorizes school districts to impose developer fees on new
construction. These fees are levied on new residential, commercial, and industrial
developments. Statewide, school districts report having received an average of over
$400million a year in developer fees over the last decade.
• Special Local Bonds (Known as "Mello-Rocs"Bonds). School districts may form special
districts in order to sell bonds for school construction projects. (These special districts generally
do not encompass the entire school district.)The bonds, which require two-thirds voter
approval, are paid off by charges assessed to property owners in the special district. Statewide,
school districts have received on average about $270 million a year in special local bond
proceeds over the past ten years.
K-12 School Building Needs. Under the SFP, K-12 school districts must demonstrate the need for
new or modernized facilities. Through September 2004, the districts have identified a need to
construct new schools to house nearly 1 million pupils and modernize schools for an additional
1.1 million pupils.The state cost to address these needs is estimated to be roughly $16 billion.
Higher Education
California's system of public higher education includes 141 campuses in the three segments listed
below, serving about 1.6 million students:
• The CCCs provide instruction to 1.1 million students at 108 campuses operated by 72 locally
governed districts throughout the state. The community colleges grant associate degrees and
also offer a variety of vocational skill courses.
• The CSU has 23 campuses, with an enrollment of about 331,000 students. The system grants
bachelor and master degrees, and a small number of joint doctoral degrees with UC.
• The UC has nine general campuses, one health sciences campus, and various affiliated
institutions, with a total enrollment of about 201,000 students. This system offers bachelor,
master, and doctoral degrees, and is the primary state-supported agency for conducting
research.
Over the past decade,the voters have approved $5.1 billion in general obligation bonds for capital
improvements at public higher education campuses. Virtually all of these funds have been committed
to specific projects. The state also has provided almost$1.6 billion in lease revenue bonds
(authorized by the legislature)for this same purpose.
In addition to these state bonds, the higher education segments have other sources of funding for
capital projects.
• Local General Obligation Bonds. Community college districts are authorized to sell general
obligation bonds to finance school construction projects with the approval of 55 percent of the
voters in the district. These bonds are paid off by takes on real property located within the
district. Over the last decade, community college districts have received local voter approval to
issue over$7 billion of bands for construction and renovation of facilities.
• Gifts and Grants. The CSU and UC in recent years together have received on average over
$100 million annually in gifts and grants for construction of facilities.
• UC Research Revenue. The UC finances the construction of new research facilities by selling
bonds and pledging future research revenue for their repayment. Currently, UC uses about
$130 million a year of research revenue to pay off these bonds.
http://www.lao.c&gov/initiatives/2004/55_03_2004.htm 1/27/04
Proposition 55:Kindergarten-University Public Education Facilities Bond Act of 2004 Page 3 of 4
Higher Education Building Plans. Each year the institutions of higher education prepare capital
outlay pians in which they identify project priorities over the next few years. Higher education capital
outlay projects in the most recent plans total $5.3 billion for the period 2003-04 through 2007-08.
Proposal
This measure allows the state to issue $12.3 billion of general obligation bonds for construction and
renovation of K-'12 school facilities ($10 billion) and higher education facilities ($2.3 billion). Figure I
shows how these bond funds would be allocated to K-12 and higher education.
Figure t
Proposition 55
Useg of ffond F nils
Amount
in mullons
K-12
New construction projects $5,26x$
Modernization projects 2,250
Critically overcrowded schools 2,440
Joint use 5o
Subtotal K-12 $10 a00 b
Ntaher Education
Community Colleges $920
California State University 690
University of California 680
Subtotal,Higher Education ($2,300)
Total $12,300
a Up to$300 million available for charter schools.
b Up to$20 million available for energy conservation projects.
Future Education Sandi Act if the voters do not approve this measure, state law requires the same
bond issue to be placed on the November 2004 ballot.
K-12 School Flacllkles
Figure 1 describes generally how the $10 billion for K-12 school projects would be allocated.
However, the measure would permit changes in this allocation with the approval of the Legislature
and Governor.
New Construction. A total of$5.26 billion would be available to buy land and construct new school
buildings. A district would be required to pay for 50 percent of costs with local resources unless it
qualifies for state hardship funding. The measure also provides that up to $300 million of these new
construction funds is available for charter school facilities. (Charter schools are public schools that
operate independently of many of the requirements of regular public schools.)
Modernization. The proposition makes $2.25 billion available for the reconstruction or modernization
of existing school facilities. Districts would be required to pay 40 percent of project costs from local
resources.
http-//www.lao.ca.gov/initiatives/2004/55_03_2004.htm 1/27/04
Proposition 55: Kindergarten-University Public Education Facilities Bond Act of 2004 Page 4 of
Critically Overcrowded Schools. This proposition directs a total of$2.44 billion to districts with
schools which are considered critically overcrowded. These funds would go to schools that have a
large number of pupils relative to the size of the school site.
Joint-Use Projects. The measure makes a total of$50 million available to fund joint-use projects.
(An example of a joint-use project is a facility constructed for use by both a K-12 school district and a
local library district.)
Higher Education Facilities
The measure includes$2.3 billion to construct new buildings and related infrastructure, alter existing
buildings, and purchase equipment for use in these buildings for California's public higher education
systems. As Figure 1 shows, the measure allocates $590 million each to UC and CSU and
$920 million to CCCs. The Governor and the Legislature would select the specific projects to be
funded by the bond monies.
Fiscal Effect
The cost of these bonds would depend on their interest rates and the time period over which they are
repaid. If the $12.3 billion in bonds authorized by this proposition is soldat an interest rate of
5.25 percent(the current rate for this type of bond) and repaid over 30 years, the cost over the period
would be about$24.7 billion to pay off both the principal($12.3 billion) and interest($12.4 billion).
The average payment for principal and interest would be about$823 million per year.
Return to Initiatives and PropoSitioriS
Re-tu n to Le�gi tivee An—alyst's }ff€ce Horne gape
http://www.lao.ca.gov/initiatives/2004/55_03_2004.htm 1127104
California State Association of Counties
January 20, 2004
1100 K Street To: CSAC Board of Directors
Suite 101
Saamwo
Ca*mb From: Steven C. Szalay, Executive director
95814
,„ Re: Propositions 57 and 58
916.327.7500 Staff Recommendation: Support
PC"
916.441.5507
The Governor's Office has requested CSAC's support of Propositions 57 and 58,the California
Economic Recovery Bond Act and the California Balanced Budget Act,both of which will appear
on the;March 2,2004 primary election ballot. These measures were negotiated between the
Governor and the Legislature and placed on the March ballot as an alternative to the$10.7 billion
deficit recovery bond passed as part of last summer's budget package. The language of each
measure is attached for your review.
After extensive discussion of the Governor's 2404-05 budget proposal at its January 1 e meeting,
the CSAC Executive Committee voted to consider recommending a position of"oppose"on these
measures to the CSAC Board of Directors.
Proposltlon 57
This measure allows the state to sell up to$15 billion 1n bonds to refinance a portion of the 2002-
03 and 2003-04 budget deficit.
Specifically,the California Economic Recovery Bond Act authorizes, subject to voter approval,
the Issuance of up to$15 billion in bonds to finance the negative General Fund reserve balance
as of June 30,2004 and other General Fund obligations undertaken prior to June 30, 2004. The
Act requires that the state use the bond proceeds only on the prior year debt and will only
become operative If voters approve Proposition 58,the Balanced Budget Amendment.
This Act, If approved, replaces the currently authorized Deficit Recovery Bonds. However,the
repayment of the bonds remains the"Triple Fllp,'mechanism,as approved last summer. The
bonds will be repaid with a dedicated pledge of revenues from an Increase in the state's share of
the sales and use tax of one-quarter cent starting July 1, 2004. Local governments'share of the
sales and use tax will be decreased by a commensurate amount. Then,beginning In 2004-05,
local governments'share of the local property tax will be Increased by an amount equal to the
one-quarter cent reduction in the local sales and use tax. When the bond is repaid,the sales and
use tax rates will automatically revert to current levels.
The original $10.7 billion deficit recovery bond requires repayment with a one-half cent portion of
the sales and use tax—about$2.4 billion In 2004-05 and Increasing moderately each year
thereafter—until the bond Is repaid (an estimated 5 years). This deficit bond is currently being
challenged In court and has not yet been Issued.
Proposition 57's bonds would be repaid with a one-quarter cent portion of the sales and use tax—
about$1.2 billion In 2004-05 and Increasing moderately each year thereafter—until the bond Is
repaid. According to the Legislative Analyst's Office,with the maximum contribution of$5 billion
from Proposition 68 reserve (outlined below), In addition to the dedicated sales and use tax
-105-
............-..... ...........-................... ...................-......I......I........................
revenue, the bond would be repaid In approximately 9 years. With sales and use tax revenue
only,the bond would be repaid In approximately 14 years.
It Is also Important to note that, as a component of the 2003-04 budget, the state borrowed a total
of$14 billion In short-term notes. These notes are due to be repaid in June 2004.
Proposition 58
This measure makes constitutional changes to require a balanced budget,a rainy-day budget
reserve, establishes additional mid-year reduction authority for the executive branch, and
disallows future borrowing to pay off deficits.
Specifically,this measure would ensure that the state enacts budgets that keep expenditures
within available resources. It would also require the state to contribute to a special reserve of I
percent of revenues In 2006-07,2 percent In 2007-08, and 3 percent In subsequent years. This
special reserve will be used to repay the Economic Recovery Bonds(in addition to the dedicated
sales tax revenue)and provide a rainy day fund for future economic downturns or natural
disasters. It would allow the Governor to declare a fiscal emergency whenever he or she
determines that General Fund revenues will decline below budgeted expenditures,or
expenditures will Increase substantially above available resources. Finally, It would require the
Legislature to take action on legislation proposed by the Governor to address fiscal emergencies.
Balanced Budget Requirement. The current constitutional provisions for a balanced budget
only require that the Governor submit by January 10 a proposed budget for the upcoming fiscal
year that Is balanced. This requirement only applies to the Governor's January budget proposal,
not the final budget ultimately passed by the Legislature and signed by the Governor. Proposition
58 would require that the state enact a budget that is balanced.
Rainy Day Fund. The Constitution currently requires that the Legislature establish a prudent
reserve fund. However, it does not specify the size of the reserve or the conditions under which
funds are placed in the reserve. Proposition 58 requires the establishment of a special reserve
fund called the Budget Stabilization Account(BSA). A portion of estimated annual General Fund
revenues would be transferred by the State Controller Into the account no later than September
30 of each fiscal year. The specific transfers are I percent(about$850 million)In 2006-07, 2
percent(about$1.8 billion)In 2007-08, and 3 percent(about$2.9 billion) In 2008-09 and
thereafter. These transfers would continue until the balance In the account reaches $8 billion or 6
percent of General Fund revenues,whichever Is greater. The annual transfer requirement would
be In effect whenever the balance falls below the$8 billion or 5 percent target. The annual
transfers could be suspended or reduced for a fiscal year by an executive order Issued by the
Governor no later than June I of the preceding fiscal year.
Each year, 50 percent of the annual transfers Into the BSA would be allocated to a subaccount
that Is dedicated to repayment of the deficit recovery bonds authorized by Proposition 57. These
transfers would be made until the subaccount reaches a total of$6 billion. Funds from this
subaccount would be automatically spent for debt service on that bond. The remaining funds In
the BSA would be available for transfer to the General Fund.
Funds In the BSA could be transferred from this account to the General Fund through a majority
vote of the Legislature and approval of the Governor, Spending of these funds from the General
Fund could be made for various purposes, generally with a two-thirds vote of the Legislature.
Mid-Year Adjustment Authority. There are currently no formal constitutional provisions that
address mid-year budget adjustments. Proposition 58 sets out a procedure by which the
Governor may propose and request action on mid-year budget adjustments. The Governor may
declare a state of emergency If he or she determines that the state is facing substantial revenue
shortfalls or spending deficiencies. Then, the Governor must propose legislation to address the
problem and call the Legislature Into special session to enact those changes. If the Legislature
-106-
-----------
............................. ............
falls to pass and send to the Governor legislation to address the budget problem within 46 days, It
Is prohibited from acting on any other bills or adjourning In joint recess until such legislation is
passed.
Future Borrowing. Subsequent to the Issuance of the bonds authorized In Proposition 57, this
proposal would prohibit most future borrowing to cover budget deficits. This restriction applies to
general obligation bonds,revenue bonds,and certain other forms of long-term borrowing. The
restriction does not apply to certain other types of borrowing, such as revenue anticipation notes
(RANs) or revenue anticipation warrants(RAWs)and borrowing between state funds.
This measure only becomes operative If voters approve Proposition 57, the California Economic
Recovery Bond Act.
-107-
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Proposition 7: The Economic Recovery Band Act Page 1 of 3
t legislative
analyst's0 '7:,w
LA
offie
60 YEARS OF SERVICE "''
December, 2003
Proposition 57
The Economic Recovery Bond pct
Background
California's Recent Budget Problems. California's General Fund budget supports a variety of
programs, including public schools, higher education, health, social services, and prisons. The
General Fund has experienced chronic shortfalls between revenues and expenditures since 2001-02,
when the economic and stock market downturns caused state revenues to decline sharply. To deal
with these shortfalls, policymakers have reduced program expenditures, raised revenues, and taken a
variety of other measures. They have also engaged in various forms of borrowing from special funds,
local governments, and private credit markets.
Deficit-Financing Bond One of the key actions taken to deal with the projected current-year (2003-
04) budget shortfall was the authorization of a$10.7 billion deficit-financing bond. The purpose of this
bond was to "wipe the slate clean"and eliminate the cumulative budget deficit that wouldhave
existed at the end of 2002-03. This would allow the state to avoid the more severe budget actions that
would have been necessary to eliminate the deficit all at once. The repayment of the currently
authorized'bond would be based on a multiple-step financing process (see shaded box for details). It
would result in annual General Fuad costs equivalent to one-half cent of the California's sales tax---or
about$2.4 billion in 2004-05 and increasing moderately each year thereafter—until the bond is paid
off(in about five years).
Repayment of Deficit Bonds
Existing$10.7 SIMn Bond.The previously authorized deficit-financing bond
was designed to be repaid through a multiple-step process that"freed up"a revenue
stream dedicated solely to repayment of the bond.This Involved:
•The diversion of a one-half cent portion of the sales tax from local governments
to a special fund dedicated to the bond's repayment.
•A diversion of property taxes from school districts to local governments to offset
their sales tax foss.
• Added state General Fund payments to school districts to replace their diverted
property taxes.
As a result of these diversions,there is no net Impact on local governments or
school districts.The full cost of the bond's repayment Is borne by the state's
General Fund.
$18 Billion Proposftfon 57 Bond.Under this proposition,the bond repayment
method described above would be the same,except that the amount of revenues
diverted would be equivalent to one-quarter cent of the state sales tax Instead of the
http://www.lao.ca.gov/inftiatives/2004/57-03-2004.htin 1127104
Proposition 57: The Economic Recovery Bond Act Page 2 of 3
one-half cent.The full cast of the bond would continue to be borne by the state's
General Fund.
This deficit bond is currently being challenged in court and has not yet been issued. (in the meantime,
the carryover 2002-03 deficit is being financed through short-term borrowing, which is due to be
repaid in June 2004.)
Protected ShortfsH in 2004-e5. The state is facing another large budget shortfall in 2004-05, which
we estimate will be in the general range of$15 billion. This estimate assumes that the currently
authorized $10.7 billion deficit-financing bondis sold and that the carryover 2002-03 deficit is thereby
taken off the books. Absent the bond proceeds from this sale, the budget shortfall would be much
larger.
Proposal'
This proposition puts before the voters authorization for the state to issue a bond of up to$15 billion
to deal'with its budget deficit. The bond authorized by this measure would be used in place of the
deficit-financing bond authorized last year by the Legislature.
Repayment of Proposed Bond. The repayment of the bond would result in annual General Fund
casts equivalent to one-quarter cent of California's sales tax revenues, compared to costs equivalent
to one-half cent of sales tax revenues for the currently authorized bond. In addition, certain funds
transferred to the state's Budget Stabilization Account (created in Proposition 58 on this ballot, if
approved) would be used to accelerate the repayment of the bond. The measure includes a backup
guarantee that if the sales tax revenues dedicated to the bond are insufficient to pay bond principal
and interest in any year, the General Fund will make upthe difference.
This measure would become effective only if Proposition 58 on this ballot is also approved by the
voters.
Fiscal Effects
The fiscal effects of the proposed bond are summarized in Figure 1, and compared to the currently
authorized deficit-financing bond. The proposed bond would result in near-term budgetary savings
compared to the bond authorized in current law, but added annual costs over the longer term.
Specifically:
http-//www.lao.ca.gov/initiatives/200`4/57-03-2004.htm 1/27/04
Proposition 57:The Economic Recovery Bond Act Page 3 of 3
Figure 1
Comparison of Bond Authorizedin Proposition 67
With Previously Au h rued Bond
Previously
Authorized
Deficit-Financing
Proposition 57 Bond Bond
Bond Amount $15 billion a $10.7 billion
Annual General Fund costs:
•Annual costs related to sales tax diversion. $1.2 billion b $2.4 billion b
•potential annual payments from Proposition 58 reserves $425 million in 2006-07 —
$900 million in 2007-08 —
$1.45 billion in 2008-09d `
Years to Pay Off Bond:
• Using only sates tax revenues. 14 5
• Assuming maximum$5 billion contribution from Proposition 58 9 —
reserve.
a Net proceeds to the General Fund would likely be less,depending on reserve requirements and other tactors.
b costs are Lor 2004-05.Amounts would increase moderately annually"teafter.
G Based on LAO out-year revenue protections and assumes no suspensions of transfer to reserve.
d These amounts would increase moderately annually thereafter until cumulative total from reserve equals$6 billion.
Near-Term Savings. The proceeds from the proposed bond would be up to $4 billion more than from
the currently authorized bond. This would provide the state with up to$4 billion in additional one-time
funds to address its budget shortfall. The state would also realize near-term savings related to debt
service on the bond. This is because the payments would be based on one-quarter cent of annual
sales taxes instead of one-half cent. As a result, annual General Fund costs would be one-half of the
currently authorized bond for the next few years.
Longer-Term Costs. The near-term savings would be offset by higher costs in the longer term.This
is because the proposed bond would be larger($15 billion versus$10.7 billion) and it would take
longer to repay. As indicated in Figure 1,the proposed bond would likely take between 9 and 14
years to pay back, compared to a 5-year period for the currently authorized bond.
Return to Initiatives and P_{^repositions
Return to Legislative Analyst's Of Home Pace
http://www.lao.ca.gov/initiatives/2004/57-03-2004.htm 1/27/04
Proposition 58:The California Balanced Budget Act Pagel of 4
legislative
LAO,-�� analyst's
Office
60 YEARS OF SERVICE
December, 2003
Proposition 58
The California Balanced Budget Act
Background
California's Budget Situation
California has experienced major budget difficulties in recent years. After a period of high growth in
revenues and expenditures in the late 1990s, state tax revenues plunged in 2001 and the budget fell
badly out of balance. Although policymakers reduced program spending and increasedrevenues to
deal with part of the shortfalls, the state has also carried over large deficits and engaged in a
significant amount of borrowing. The state budget fades another major shortfall in 2004-05 and it has
a variety of other obligations-such as deferrals and loans from special funds that are outstanding
at this time.
Constitutional Provisions Relating to Budgeting and Debt
There are several budget- and debt-related provisions in California's Constitution that are affected by
this proposition.
• Balanced'Budget Requirement. The Constitution requires the Governor to submit by January
10 of each year a state budget proposal for the upcoming fiscal year(beginning on July 1')
which'is balanced---meaning that estimated revenues must meet or exceed proposed
expenditures. While this balanced budget requirement applies to the Governor's January budget
submission, it does not apply to the budget ultimately passed by the Legislature or signed by
the Governor.
• Mid-Year Budget Adjustments. The Legislature has met in special session during the past
three years to consider mid-year proposals to address budget shortfalls. However, there is no
formal process in the Constitution to require that mid-year corrective actions be taken when the
budget falls out of balance.
• Reserve Requirement. Reserve funds are typically used to cushion against unexpected budget
shortfalls. The Constitution requires that the Legislature establish a prudent state reserve fund.
It does not,however, specify the size of the reserve, or the conditions under which funds are
placed into the reserve.
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. Debt-Related Provisions. The Constitution generally requires voter approval for debt backed
by the state's general taxing authority. Over the years, courts have ruled that certain types of
borrowing (including short-term borrowing to cover cash shortfalls and some bonds repaid from
specific revenue sources) can occur without voter approval. The Constitution also requires that
bonds submitted to the voters for approval be for a "single object or work" as specified in the
respective bond act. For example, in past years, voters have been asked to authorize bonds for
such single objects as education facilities, water projects, or prison construction.
Proposal
This proposition amends the Constitution, making changes related to (1)the enactment and
maintenance of a balanced state budget, (2)the establishment of specific reserve requirements, and
(3) a restriction on future deficit-related borrowing. The provisions are discussed in more detail below.
Balanced'Budget Provisions
This proposition requires that the state adopt a balanced budget and provides for mid-year
adjustments in the event that the budget faits out of balance.
Balanced Budget. In addition to the existing requirement that the Governor propose a balanced
budget, this measure requires that the state enact a budget that is balanced. Specifically, estimated
revenues wouldhave to meet or exceed estimated expenditures in each year.
Mid-Year Adjustments. Under this measure, if the Governor determines that the state is facing
substantial'revenue shortfalls or spending deficiencies, the Governor may declare a fiscal emergency.
He or she would then be required to propose legislation to address the problem, and call the
Legislature into special session for that purpose. if the Legislature fails to pass and send to the
Governor legislation to address the budget problem within 45 days, it would be prohibited from (1)
acting on any other bills or(2) adjourning in joint recess until such legislation is passed.
Reserve Requirement
The proposal requires that a special reserve---called the Budget Stabilization Account(BSA)--be
established'in the state's General Fund.
Annual Transfers.A portion of estimated annual General Fund revenues would be transferred by the
State Controller into the account no later than September 30 of each fiscal year. The specific
transfers are 1 percent (about$850 million) in 2006-07, 2 percent(about$1.8 billion) in 2007-08, and
3 percent(about$2.9 billion) in 2008-09 and thereafter. These transfers would continue until the
balance in the account reaches $8 billion or 5 percent of General Fuad revenues, whichever is
greater. The annual transfer requirement would be in effect whenever the balance falls below the$8
billion or 5 percent target. (Given the current level of General Fund revenues--approximately
$75 billion---the required reserve level would likely be $8 billion for at least the next decade.)
Suspension of Transfers. The annual transfers could be suspended or reduced for a fiscal year by
an executive order issued by the Governor no later than June 1 of the preceding fiscal year.
Allocation of Funds. Each year, 50 percent of the annual transfers into the BSA would be allocated
to a subaccount that is dedicated to repayment of the deficit-recovery bond authorized by
Proposition 57. These transfers would be made until they reach a cumulative total of$5 billion. Funds
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from this subaccvunt would be automatically spent for debt service on that bond. The remaining funds
in the BSA wouldbe available for transfer to the General Fund.
Spending From the Account, Funds in the BSA could be transferred from this account to the
General Fund through a majority vote of the Legislature and approval of the Governor. Spending of
these monies from the General Fund could be made for various purposes--including to cover budget
shortfalls-generally with a two-thirds vote of the Legislature (same as current law).
Related Provisions In Proposition 56. Proposition 56 on this ballot also contains new, but different,
requirements related to a state reserve fund.
Prohibition;against Future Deficit Borrowing
Subsequent to the issuance of the bonds authorized in Proposition 57, this proposal would prohibit
most future borrowing to cover budget deficits. This restriction applies to general obligation bonds,
revenue bonds, and certain other forms of long-term borrowing. The restriction does not apply to
certain other types of borrowing, such as (1)short-term borrowing to cover cash shortfalls in the
General Fund (including revenue anticipation notes or revenue anticipation warrants currently used
by the state), or(2) borrowing between state funds.
Other Provisions
This measure also states that:
• With regard to the bond authorized by Proposition 57, the "single object or work"for which the
Legislature may create debt includes--for that measure only--the one-time funding of the
accumulated state budget deficit and ether obligations, as determined by the Director of
Finance.
• its provisions take effect only if Proposition 57 on this ballot is also approved by the voters.
Fiscal Effects
This measure could have a variety of fiscal'effects, depending on future budget circumstances and
future actions taken by Governors and Legislatures. Possible fiscal effects include:
• Balanced Budget and Debt Provisions. In recent years, as well as during difficult budget
periods in the past, the Governor and Legislature have at times allowed accumulated budget
deficits to carry over from one year to the next. This meant that spending reductions and/or
revenue increases were less than what they otherwise would have been in those years. The
provisions of this measure requiring a balanced budget and restricting borrowing would`limit the
state's future use of this option. As a result, the state would in some cases have to take more
immediate actions to correct budgetary shortfalls.
• Reserve Requirement. The S billion reserve target established by this proposition is much
larger than the amounts included in past budget plans. This larger reserve could be used to
smooth state spending over the course of an economic cycle. That is, spending could''be less
during economic expansions (as a portion of the annual revenues are transferred into the
reserve), and more during downturns (as the funds available in the reserve are used to
"cushion"spending reductions that would otherwise be necessary).
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• Other Possible Impacts. The proposition could have a variety of other impacts on state
finances. For example, to the extent that the measure resulted in more balanced budgets and
less borrowing over time,the state would benefit financially from higher credit ratings and lower
debt-service costs.
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