CTA Protects COLA, Other Priorities
California is inching nearly $12 billion closer to bridging its two-year $26-35 billion budget gap with the governor's signing of two measures cutting current year spending and the release of a new legal opinion that could raise more than $4 billion in revenues annually.
On the spending reduction side, Gov. Davis on March 18 signed two special session bills that will reduce 2002-2003 appropriations for education and non-education programs by nearly $3.5 billion.
One of the measures, SB 18x, by Senate Budget Committee Chair Wes Chesbro (D-Santa Rosa), carries the current-year education reductions, worth about $2.4 billion. A second measure, SB 19x, also by Sen. Chesbro, reduces another $1 billion from current year state spending for non-education programs.
A third measure, SB 11x, would provide additional cuts in non-education funding, but the measure has been held up in the Senate.
While about $2.5 billion of the current year cuts affect schools, CTA was successful in keeping out of the legislation across-the-board reductions, cuts in Cost-of-Living Adjustments, and boosts in class-size caps, as well as reductions to the base revenue limits. Most of the current year school cuts take the form of deferrals of 2002-03 Proposition 98 funds until the 2003-04 fiscal year.
On the revenue side, on March 10, attorneys for the Governor's Department of Finance and Controller Steve Wesley announced they had agreed that existing state law will automatically restore the Vehicle License Fees (VLF) to their 1998 level under certain fiscal conditions.
It was the release of the new legal opinion that helped break a legislative logjam. Right after the opinion was released, the Assembly approved the package of current year reductions and sent them back to the Senate for a concurrence vote.
Prior to the new legal opinions, lawmakers had approved other current-year reduction measures that were tied directly to a companion bill raising the VLF. When the governor threatened to veto the VLF boost bill, lawmakers decided to hold onto those spending reduction bills that were "double-joined" to it.
Reflecting the new legal counsels' opinion, the reduction bills lawmakers passed and were signed into law without any companion legislation restoring the VLF.
The 10-page legal opinion specifies that the license fees will automatically increase $4 billion each year if the state treasury does not have sufficient funds to reimburse local governments by a like amount. Prior to the 1998 fee reduction, local government received the VLF revenues as a significant portion of their funding. The legislation that reduced the VLF in 1998 also guaranteed these local governments the state would make up the difference.
The new legal opinion says, in essence, the fees will go up when the state can't make that payment. Budget experts insist that scenario will play out later this year.