HomeMy WebLinkAboutMINUTES - 06121990 - 2.1 TO: BOARD OF SUPERVISORS S� ` Contra
FROM: \
Phil Batchelor, County Administrator Costa
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DATE: June 7 , 1990 �ti;_ Count
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SUBJECT: STATE BUDGET CRISIS
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION
RECOMMENDATIONS
Accept report and determine whether the Board wishes to take any
action in response to the current. deficit in the State' s Budget.
BACKGROUND-
Governor Deukmejian has reported to the Legislature and the
public that the 1990-91 State Budget would require $3 . 5 billion
to maintain the current level of services.
The Legislative Analyst has summarized for the Joint Legislative
Budget Committee some of the reasons for this potential deficit
and some of the problems the Legislature will face in trying to
eliminate it. Most of the following information is abstracted
from a letter the Legislative Analyst, Elizabeth Hill, sent to
the Chairman of the Assembly Ways and Means Committee, John
Vasconcellos, on May 17, 1990. 'These include the following:
Reasons for the Funding Deficit:
* In February, the Legislative Analyst indicated that the
1990-91 budget had a $1. 9 billion funding gap. This gap has
now widened to $3 . 5 billion.
* For the current fiscal year ( 1989-90 ) , General Fund revenues
are $595 million below estimates through the month of April
CONTINUED ON ATTACHMENT'.YerYES SIGNATURE:
RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE(S):
ACTION OF BOARD ON June 121 1_990 APPROVED AS RECOMMENDED X & OTHER X
ACCEPTED report from County Administrator on current deficit in the
State budget ; and ADOPTED Resolution No . 90/378 expressing opposition
to the County Health Services/AB 8 Program reduction proposed in the
State budget .
VOTE OF SUPERVISORS
I HEREBY CERTIFY THAT THIS IS A TRUE
X UNANIMOUS(ABSENT ) AND CORRECT COPY OF AN ACTION TAKEN
AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD
ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN.
CC: County AdministratorATTESTED XR /990
PHIL B TCHELOR,CLERK OF THE BOARD OF
SUPERVISORS AND COUNTY ADMINISTRATOR
M382 (10/88)
BY a&.., DEPUTY
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and may fall even further behind before the end of the
fiscal year.
* The shortfall in revenue includes $319 million in personal
income taxes below what had been estimated through April.
* Bank and Corporation Taxes are now $219 million below what
had been estimated to be received through April.
* While sales taxes for the month of April were $154 million
above the estimate for the month of April, this may be a
one-time aberration, since through the month of March sales
tax revenue was $5 million below what had been estimated.
* It is reasonable to conclude that based on the current
year' s revenue shortfall, a similar revenue shortfall can be
expected in the 1990-91 fiscal year budget, perhaps at least
$600 million.
* Expenditures are estimated to be $400 million above what was
anticipated in the Governor' s Budget.
* With the combination of the revenue shortfall this year, the
projected revenue shortfall for 1990-91, the expenditure
overruns and the need to restore a $1 billion Reserve for
Economic Uncertainties, the 1990-91 State Budget is $3 . 5
billion short of maintaining the current level of services.
Reasons Why There are Structural Problems in the State Budget:
There is a general agreement that the problems being faced now
are not simply errors in estimating revenues or inaccuracies in
projecting expenditures. There are very significant, real
structural problems build into the current budget process.
* The type of deficits which are discussed above are not going
to go away since there are some fundamental structural
problems built into the current budget process.
* The Governor asserts that the Administration and Legislature
have control over only 10a of the State Budget expenditures.
While the Legislative Analyst believes the figures is closer
to 30% than 10%, she agrees that the Administration and the
Legislature have very limited discretion in finding ways to
balance the budget.
* The Governor attributes much of the structural problem to
the statutory cost-of-living adjustments (COLA' s) which have
been built into many programs like AFDC. While the
Legislative Analyst agrees that automatic COLA' s are a part
of the problem, she points out that non-education COLA' s
amount to only $450 million a year.
* A greater part of the structural problem is that
non-education increases in expenditures for increased
program usage cost $600 million annually.
* The demographic changes which appear to be taking place in
California are resulting in a disproportionate growth in the
population of persons who use state funded services,
relative to the growth in the State' s economy. There is no
reason to believe that this will not continue in the future.
* Another factor in the State' s budget problem is the fact
that the State has funded new programs, many of which have
benefitted counties and the populations counties serve.
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Such programs as the Greater Avenues for Independence (GAIN)
Program and Trial Court Funding have eaten into the State' s
resources.
* While the. State' s expenditures have been growing at 11% a
year for all of the reasons noted above, the State' s
revenues have been growing at only 8% a year over the past
ten years, consistent with the growth of personal income and
historical trends. Obviously a continuing gap of 3% between
revenues and expenditures in a $50 billion budget cannot be
sustained for very long without running into significant
problems.
* The Legislative Analyst also points out that the State has
been using a practice of making overly optimistic revenue
projections. Frequently, spending is then allowed to
increase to match revenue projections which cannot be
sustained.
* The Legislative Analyst also notes that in some cases known
expenditures for items such as fighting forest fires are not
included in the budget, thereby overstating the state ' s
fiscal condition.
* The result of many of these practices has been to use the
year' s fund balance to cover unbudgeted expenditures or to
make up for unrealized revenue estimates. This reduces the
year-end fund balance. The next year' s budget is then
increased to restore the fund balance, thus diverting
current year revenue increases to pay for past year' s
shortfalls. The Legislative Analyst estimates that while
revenues will increase .8. 4% in 1990-91, the amount available
for funding next year' s spending is actually only 3 . 30
because of the need to divert more than half of the revenue
increase to pay for prior-year costs.
The Difficulty of Solving the Problems in the State Budget:
Balancing the State Budget is not simply a problem of determining
everyone' s lowest priorities and cutting those programs. Because
of the limitations on the discretion the Governor and Legislature
have, as was alluded to above, the problems are almost beyond
comprehension. -
Proposition 98 guarantees education 40% of the State Budget.
Therefore, 40% of the Legislature' s discretion is gone.
* Spending on correctional programs is something which is
substantially outside the discretion of the Legislature, as
it is with boards of supervisors, since the judicial system
essentially determines how many people will go to state
prison and for how long. This system is generally directed
by independently elected department heads at the local level
(Sheriff, District Attorney, Judges) and a multiplicity of
local police departments which in turn are enforcing state
laws enacted by past Legislatures or by the voters through
numerous initiative efforts.
* Any effort to balance the State Budget, therefore, means in
reality that health and welfare programs are the only place
left . to cut. The vast majority of health and welfare
programs which are funded by the State are administered by
counties on the State' s behalf. Therefore, anything the
Governor and Legislature do to health and welfare programs
has an immediate and profound affect on counties.
* The Governor is proposing to eliminate all COLA' s (most of
which are in health and welfare programs) and to cut $150
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million out of the AB-8 funds which the county receives to
finance the county' s core public health, hospital and clinic
programs. It is estimated that this reduction alone would
cost the Health Services :Department between $600,000 and
$700,000. in the 1990-91 fiscal year.
* other reductions are being discussed in mental health, drug
and alcohol programs at the State level. Nearly all of
these programs are administered by counties and have been
severely underfunded for years.
Conclusion•
The Legislative Analyst agrees with the Governor that fundamental
budget reform is needed in order to avoid a scenario in which
cuts to various health and welfare programs continue to be the
only way the Legislature has to balance the State Budget. The
Legislative Analyst points out, however, that:
"The Administration has not revised its proposals so as
to provide a basis for resolving the larger problem.
Its original proposals would not be sufficient to
balance the 1990-91 budget, even if they were all
enacted. Moreover, some of these proposals would
increase the long-term structural problem, either
because they are more costly in the long-run than other
alternatives (use of revenue bonds to pay for equipment
purchases) or because they require future budgets to
bear the burden of paying for services already
delivered (deferral of University of California
retirement contributions) .
CSAC is urging boards of supervisors to adopt Resolutions
protesting the proposed reduction in AB-8 funding (see attached
sample Resolution) . The Board may also wish to urge that the
Governor and Legislature agree to the type of fundamental budget
reform which will be needed to insure that the State ' s Budget is
balanced and that doing so does not disproportionately impact
health and welfare programs at the local level.
IN THE BOARD OF SUPERVISORS
OF
CONTRA COSTA COUNTY, STATE OF CALIFORNIA
In the Matter of Expressing )
Opposition to the County Health ) RESOLUTION NO. 90/378
Services/AB 8 Program Reduction )
Proposed in the State Budget )
WHEREAS the Governor's 1990-91 State budget proposes severe cuts in health care
funds, specifically the reduction of $150 million from the County Health
Services/AB 8 Program and the repeal of the statutory annual AB 8 cost-of-living
adjustment of $23 million General Fund to the counties; and
WHEREAS the stated reason for the $150 million reduction in AB 8 funding is the
"availability of Medi-Cal OBRA services for persons who were previously provided
services under the County Health Services Program"; and
WHEREAS the County Health Services Program was established in AB 8 in 1979 as a
part of a permanent system of fiscal relief for local governments to provide block
grants to counties for funding for a broad spectrum of public health services; and
WHEREAS the Federal OBRA Act of 1986 made available limited Medi-Cal coverage of
emergency services and pregnancy-related services, including labor and delivery
costs, to undocumented persons and persons with visas, provided they meet income
and resource requirements. The State legislation implementing these OBRA changes,
SB 175 (Chapter 1441, Statutes of 1988) added prenatal and postnatal care as an
additional Medi-Cal benefit for this population. The SB 175 agreement that was
reached after lengthy negotiations between the Administration, the Legislature and
the counties, specifically did not include an offsetting reduction in any
State-funded local assistance, AB 8 included; and
WHEREAS the State of California has been incurring costs for this service
population for years under the Medi-Cal program and many counties did not pay for
these services out of funding provided for the County Health Services/AB 8 Program.
State and local AB 8 funds are used to support the entire scope of health services,
including in-patient and out-patient indigent care, environmental health services,
jail health, animal control, immunizations, Juvenile Court health services, public
health for sexually transmitted diseases, dental care, public health nursing and
California Children's Services; and
WHEREAS. counties across the State have "over-matched." the AB 8 program in order to
keep pace with local program requirements and service demands, counties have NOT
seen a local offset in cost of providing health services due to OBRA revenues, and
in fact, counties have nearly doubled the over-match expenditures in the last
fiscal year; and
WHEREAS counties are required to provide a dollar-for-dollar match on a portion of
AB 8 funds received, a reduction in State funds. would inevitably result in a
. statutory reduction in County funds; and
WHEREAS any reduction in County Health Services/AB 8 funds will mean massive
reductions in critical public health and indigent health care services and an
acceleration of the fiscal crisis facing counties;
NOW THEREFORE IT IS RESOLVED that the Board of Supervisors of Contra Costa County
hereby OPPOSES any reduction in State General Fund dollars from the County Health
Services/AB 8 Program.
PASSED on June 12, 1990 by unanimous vote of the Board members present.
I hereby certify that the foregoing is a true and correct copy of an
order entered on the minutes of said Board of Supervisors on the date aforesaid.
Witness my hand and the Seal of the
Board of Supervisors affixed this
12th day of June, 1990.
PHIL BATCHELOR, Clerk of the Board of
Supervisors and County Administrator
By: Deputy Clerk