Legislative Analyst's Office, September 2001

California
Spending Plan
2001-02

Chapter 3

Part 3

Transportation

California Department of Transportation

The 2001-02 budget, as adopted by the Legislature, provides a total of $7.5 billion from state special funds and federal funds for the Department of Transportation (Caltrans), a 22 percent reduction in comparison to 2000-01. This reduction is primarily the result of deferring expenditures for the Traffic Congestion Relief Program (TCRP), as discussed later in this section.

Of the total Caltrans budget, approximately $2.9 billion is for capital outlay, $1.1 billion goes for highway capital outlay support, $1.5 billion is earmarked for local assistance in the highway, aeronautics, and planning programs, $794 million is for highway maintenance, $461 million is for Caltrans' mass transportation program, and $742 million is for administration, traffic operations, and legal programs.

Budget Increased Funding for State Staff and Contracting Out. As mentioned, the budget includes $1.1 billion for highway capital outlay support. This includes a $100 million augmentation for state staff and contracting out. Specifically, the final budget for capital outlay support increased the share of state staff by 315 personnel-years for a total of 11,154 personnel-years and provided a total of 1,646 personnel-year-equivalents for contracting out. While the budget is based on these staffing levels for state staff and contracting out, the department has the authority to move funds between support (used to fund state staff expenditures) and operating expenses (used to fund contracting out expenditures). Thus, to the extent that the department leaves positions vacant, they can use funds that were originally appropriated for state staff for contracting out.

Funding for Traffic Congestion Relief Program to Be Deferred. The significant reduction in Caltrans' funding level for 2001-02 is due primarily to the refinancing of the TCRP, as proposed by the administration as part of the May Revision. As originally enacted in 2000, the TCRP provided $2 billion in General Fund monies to the Traffic Congestion Relief Fund (TCRF) in 2000-01. Additionally, the program transfers gasoline sales tax revenues that previously were deposited in the General Fund to transportation purposes for 2001-02 through 2005-06. Of the amount transferred annually, $678 million is to be deposited in the TCRF to fund 141 designated transportation projects, while the remainder of the gasoline sales tax revenues (about $400 million) is to be deposited in the Transportation Investment Fund (TIF). The funds in the TIF are distributed 40 percent to the State Transportation Improvement Program (STIP), 40 percent to local street and road repairs (including 20 percent to cities and 20 percent to counties), and 20 percent to the Public Transportation Account (PTA).

The Legislature approved the refinancing plan which defers the transfer of gasoline sales tax revenues from the General Fund to the TIF until 2003-04, instead of beginning in 2001-02. The two-year deferral totals $2.3 billion, $1.1 billion in 2001-02 and $1.2 billion in 2002-03. This loss of $2.3 billion in the short term is made up by extending the program for an additional two years, through 2007-08. The refinancing plan also includes a $238 million loan from the TCRF to the General Fund in 2001-02 to be repaid by June 30, 2006. Based on our review of the department's cash flow needs for TCRP projects, the refinancing plan will likely not have an adverse impact on the delivery of the projects.

Local Streets and Roads Held Harmless; PTA and STIP Take Short-Term Hit. For the first two years, the refinancing plan has the following impact on the various elements of the TCRP:

Maintains local street and road funding at amounts specified in current law, but uses funds from the State Highway Account (SHA) instead of TIF for 2001-02 and 2002-03.
Eliminates the TIF transfer to PTA in 2001-02 and 2002-03 (a cumulative total of $177 million).
Eliminates the TIF transfer to the STIP for 2001-02 and 2002-03
(a cumulative total of $354 million).
Eliminates the TIF transfer to the TCRF for 2001-02 and 2002-03
(a cumulative total of $1.4 billion).

Overall, however, the refinancing plan results in an additional $515 million to be transferred from the General Fund to the TIF, relative to current law. This is due to projected increases in the price of gasoline and the amount consumed in 2006-07 and 2007-08 relative to 2001-02 and 2002-03. Figure 12 shows how the refinancing plan affects each TCRP program element.

Figure 12
Traffic Congestion Relief Program Refinancing Proposal: Impact on Program Elements
(In Millions)
	Use of Funds
Year	Local Streets	Public TransportationAccount	State Transportation Improvement Program	TCRP Projects
2000-01	$400	—	—	$1,600
2001-02^a	154	($77)	($154)	(678)
2002-03^a	200	(100)	(200)	(678)
2003-04	222	111	222	678
2004-05	238	119	238	678
2005-06	254	127	254	678
2006-07	—	135	542	678
2007-08	—	160	638	602
Totals	$1,468	$652	$1,894	$4,914
Net Change^b	—	118	473	-76
^{aAmounts in parentheses indicate amounts that refinancing plan would defer to future years.}
^{b Net change is relative to current law. The net increase is due to projected growth in gasoline sales tax revenues over the 2006-07 and 2007-08 period relative to 2001-02 and 2002-03. The STIP receives the greatest increase due to the fact that it would be repaid for SHA funding of local streets and roads in 2001-02 and 2002-03 and would thus receive 80 percent (up from 40 percent) of TIF funding in 2006-07 and 2007-08. The $76 million reduction in the TCRP transfer is the amount by which the total transfers proposed in current law exceed the total funds allocated to the TCRP projects.}

Cash Flow Needs Will Be Met by Loans From Transportation Funds. In order to ensure that the cash flow needs of projects in the TCRP and the STIP are met, AB 438 (Committee on Budget), the trailer legislation to implement the refinancing proposal, authorizes the Department of Finance (DOF) to make short-term loans (to be repaid within the fiscal year) among various transportation funds. The legislation also authorizes DOF to make an interest-free loan of up to $100 million from the Motor Vehicle Account to the TCRF no sooner than July 1, 2004 to be repaid no later than July 1, 2007. Additionally, AB 438 authorizes long-term loans to the TCRF of up to $280 million and $180 million from the PTA and the SHA, respectively. The bill also specifies that the PTA and SHA loans will be repaid no later than June 30, 2008 and June 30, 2007, respectively. Figure 13 shows the specific time frames for when the loans are to be made and repaid.

Figure 13
Traffic Congestion Relief Program Proposed Loans to TCRF^a
(In Millions)
Year	General Fund	Motor Vehicle Account	Public Transportation Account	State Highway Account
^2000-01	^—	^—	^—	^$60
^2001-02	^-$238b	—	$180	60
2002-03	—	—	100	60
2003-04	—	—	—	—
2004-05	220	$100	—	—
2005-06	30	—	—	—
2006-07	-12	-100	—	-180
2007-08	—	—	-280	—
^{aTraffic Congestion Relief Fund.}
^{b Positive numbers indicate funds payable to the TCRF; negative numbers indicate funds payable from the TCRF.}

Legislature Modifies Spillover Cap; Reduces Potential Loss of Transit Funding. The Legislature modified the administration's proposal to cap the amount of gasoline sales tax revenues that would be transferred to the PTA under the "spillover" formula. The administration proposed capping the spillover amount at $81 million in 2001-02 and $37 million in 2002-03. The Legislature instead approved these caps but required that any revenues generated above the caps be split evenly between the PTA and the General Fund.

Constitutional Amendment to Permanently Dedicate Sales Tax on Gasoline to Transportation. In addition to approving AB 438, the Legislature also approved a constitutional amendment, ACA 4 (Dutra) to be voted on by the electorate in March 2002, to permanently dedicate the sales tax on gasoline to transportation beginning in 2003-04. The measure does not alter any provisions in the TCRP, which remains in effect for 2003-04 through 2007-08. Beginning in 2008-09, the sales tax on gasoline would be transferred from the General Fund to the TIF and distributed according to the 40:40:20 formula described above.

Budget Funds New Capital and Service Expansion for Intercity Rail. The budget provides $73.1 million for operating costs for intercity rail. This includes $9.4 million to support two extra daily round-trips on the Capitol Corridor line between San Jose, Oakland, Sacramento, and Roseville and one additional daily round-trip on the San Joaquin line between Bakersfield and Sacramento. In addition, the budget funds $91 million in capital outlay projects for the state's three intercity rail lines, $41 million is provided for double- and triple-tracking of the Pacific Surfliner route, $29.4 million for double-tracking of the San Joaquin route, and $20.6 million for double-tracking of the Capitol Corridor. The Legislature reduced by $7 million the Governor's request for improvements to the Pacific Surfliner route.

High-Speed Rail Authority

The budget includes $1 million for support of the High-Speed Rail Authority. This amount covers the salaries and overhead of the authority's staff, but funds only minimal environmental impact reviews of the proposed rail system alignments. The environmental assessment process began in 2000-01 with $5 million provided by the TCRP and is expected to cost a total of $25 million.

California Highway Patrol

The budget provides $1.04 billion for support of CHP activities, an increase of 2 percent over the 2000-01 level. In addition to funding ongoing patrol services, the budget includes:

$1 million in grants to local law enforcement agencies for collection of racial profiling data. Chapter 684, Statutes of 2000 (SB 1102, Murray), requires the Legislative Analyst to conduct a study of data collected by both the Highway Patrol and local agencies to determine, among other things, the incidence of racial profiling and whether data collection serves to reduce and prevent such practices.
$1.7 million to fund ten additional CHP officers for farm labor vehicle inspections. The Legislature augmented this by $1.7 million.

Department of Motor Vehicles

The budget provides $674 million for support of the Department of Motor Vehicles, virtually unchanged from 2000-01. This total includes:

More than $4.4 million for new programs to combat fraud in the issuance of driver licenses. The Legislature rejected the Governor's request for $7.7 million for biometric verification systems that would have electronically verified thumb prints and facial features for license applicants. Also rejected was a $1.2 million request that would have funded 12 investigators assigned to cases of fraud by license applicants and employees.
$5.7 million for electronic systems designed to decrease waiting times in DMV field offices and boost citizen access to DMV services via telephone and the Internet. This includes $2.5 million for queuing systems in field offices, $2.3 million for automated E-mail management and speech processing software, and $932,000 for creation of a Spanish-language Web site and software to enable citizens to purchase personalized license plates through the Internet.

Governor's Vetoes

With regard to Caltrans, the Governor vetoed $53 million worth of legislative augmentations. Among the major vetoes, the Governor:

Reduced from $18 million to $1.3 million, an augmentation to expand freeway service patrol, the roving tow truck service designed to reduce congestion by clearing accidents faster. The remaining $1.3 million augmentation would be available to meet unavoidable cost increases.
Deleted $20 million from the SHA augmented by the Legislature for the San Francisco Transbay Terminal, a project whose total cost is estimated to be $888 million over a multiyear period. Additionally, the Governor deleted $1 million worth of General Fund expenditures for various projects added by the Legislature.
Deleted $7.2 million augmented by the Legislature for equipment to support additional capital outlay support staff. The Governor also sustained budget language that allows the department to use unexpended personal services funds to contract out for engineering services.

With regard to the CHP, the Governor:

Reduced by $1,000 (from $1 million to $999,000) grants to local law enforcement agencies for collection of racial profiling data and deleted provisions that would have expanded the categories of information to be collected on racial profiling.
Deleted a $1.7 million legislative augmentation for ten additional CHP officers for farm labor vehicle inspections.

Resources

The budget provides a total of about $3.4 billion for resources programs, of which about $1.3 billion is from the General Fund, about $1.1 billion are special funds and federal funds, and about $1 billion is from bond funds. Of the bond funds, $523 million is from Proposition 12 (parks bond) and $206 million is from Proposition 13 (water bond). This total amount is a decrease of about $2.3 billion below estimated 2000-01 expenditures. This decrease largely results from large one-time expenditures in the prior year, including Propositions 12 and 13 bond expenditures, energy-related initiatives, and General Fund appropriations for habitat and park projects. Significant features of the Resources budgets are discussed below.

CALFED Bay-Delta Program

The CALFED Bay-Delta Program is a consortium of 18 state and federal agencies created to address a number of interrelated water problems in the state's Bay-Delta region. These problems include inadequate water quality, declining fish and wildlife populations, deteriorating levees, and uncertain water supplies.

The budget provides a total of about $584 million from various state and federal funds, including $81 million from the General Fund, for the CALFED Bay-Delta Program. Proposition 13 bond funds are the largest source of funding for the program, providing about $217 million of the program's funding in 2001-02. The CALFED expenditures are under nine state departments, including seven departments in the Resources Agency. Figure 14 shows the allocation of the $584 million for the program among the program's 11 components.

Figure 14
CALFED Bay-Delta Program 2001-02 Expenditures^aBy Program Element
(In Millions)
Program Element	Budgeted Expenditures
^{Ecosystem restoration}	^$161.1
^{Water storage}	^121.7
^{Water use efficiency}	^111.1
^{Water conveyance}	^41.9
^Science	^36.6
^{Environmental Water Account}	^35.5
^Levees	^21.8
^{Drinking water quality}	^21.5
^{Watershed management}	^20.0
^{CALFED program management}	^12.4
^{Water transfers}	^0.9
Total	$584.5
^{aIncludes state funds and federal reimbursements.}

Park Acquisition and Land Conservation

State and Local Parks. The budget provides $426 million from Proposition 12 bond funds to the Department of Parks and Recreation for state and local park acquisitions and projects, including $37.5 million for the Cornfields property acquisition in Los Angeles. The budget also includes a legislative augmentation of $26.6 million from the General Fund for local park projects.
Urban Parks. The budget includes $15 million from tidelands revenues for an urban parks program. Expenditure of the funds is dependent upon enactment of separate legislation to establish guidelines for the program. In addition, of the $426 million Proposition 12 bond funds discussed above, $47.2 million is for local assistance in the Murray-Hayden Urban Parks and Youth Services program.
Habitat Acquisition and Restoration. The budget provides a total of about $106 million to the State Coastal, Tahoe, and Santa Monica Mountains Conservancies ($72 million, $20 million, and $14 million, respectively) for state and local habitat acquisition, restoration, and enhancement, as well as public recreation improvement projects. Funding for these projects is provided primarily through Proposition 12 bond funds, as well as from the General Fund, and special and federal fund sources. The budget also includes $21 million for habitat acquisition by the Wildlife Conservation Board.
River Parkway Projects. The budget provides $18 million from the General Fund for eight river parkway projects.
Agricultural Land Conservation. The budget includes $6.5 million—$5 million from Proposition 12 and $1.5 million from the General Fund—for a farmland conservancy program. The program provides grants to purchase the development rights on agricultural lands through voluntary conservation easements.

Natural Resources Management

Local Flood Control. The budget includes $44 million from the General Fund to pay the state's share of costs of local flood control projects that have been authorized by the state. At this level of funding, it is estimated that about $74 million would still be owed to local agencies at the end of 2001-02.
Fire Suppression. The budget provides $55 million to the Department of Forestry and Fire Protection for emergency fire suppression. The budget also provides $10.2 million for a computer-aided dispatching system to be used by the department to respond to emergency incidents and $9.9 million to enhance the department's fire-fighting capabilities during the 2001 fire season.
Department of Fish and Game Information Technology. The budget provides $14.2 million for information technology projects in the Department of Fish and Game, including a project to automate the issuance of fishing and hunting licenses and the associated record keeping.
California Conservation Corps. The budget includes $8.2 million for the California Conservation Corps to improve corps member training and replace equipment.
Sudden Oak Death. The budget provides $3.7 million for research and tree removal related to Sudden Oak Death.
Natural Resource Maintenance at State Parks. The budget provides $2 million from the General Fund and $1.3 million from Proposition 12 for ongoing natural resource maintenance and stewardship projects at state parks.
Water Hazards Remediation. The budget includes $1.6 million for the State Lands Commission to remediate and remove physical hazards along the Sacramento River and the Santa Barbara/Ventura Counties' coastline. The hazards pose a risk to public safety and include old pier pilings and derelict oil wellheads on beaches.

California Energy Resources Scheduling

New Energy Division in Department of Water Resources. The budget includes $22.2 million (Electric Power Fund) for the Department of Water Resources to administer its new division that purchases energy for statewide use.

Environmental Protection

The budget provides about $1.6 billion for environmental protection programs, including about $1.1 billion for the support of various environmental protection agencies and $467 million for local assistance. This total amount is an increase of about $64 million, or 4 percent, over estimated 2000-01 expenditures. Significant features include:

Water Quality

Bond-funded Water Projects. The budget includes about $237 million from Proposition 13 bond funds for local water quality, water recycling, and watershed protection projects funded by the State Water Resources Control Board. Of these bond funds, (1) $32.3 million has been allocated to specific projects that would improve beach water quality as part of a $33.8 million Clean Beaches Initiative and (2) $45 million is for CALFED-related projects.
Water Quality Regulation. The budget includes an increase of $9.6 million from the General Fund to reduce permit backlogs and increase inspections in the board's core regulatory program. The budget also includes $8.1 million (General Fund) to reduce the impact of stormwater runoff in coastal Southern California and $3.2 million (General Fund) to improve water quality data management.

Toxics

Settlement of Hazardous Waste Litigation. The budget includes $114.5 million from the General Fund to settle litigation with the federal government for the state's liability at the Stringfellow and Casmalia hazardous waste sites.
Urban Cleanup. The budget includes $12.5 million (special funds) to assess and clean up urban contaminated sites ("brownfields") for redevelopment. The budget also includes up to $17 million (special funds) for low-cost environmental insurance for brownfield development, contingent on the enactment of legislation establishing this program.

Air Quality

Diesel Emission Reduction. The budget includes a total of $48 million ($23 million from the General Fund and $25 million from tidelands oil revenues) for a new program to reduce air emissions from diesel school buses, standby diesel generators, and other diesel sources.
Zero-Emission Vehicle Incentives. The budget also includes $20 million (Motor Vehicle Account) to subsidize the purchase or lease of zero-emission vehicles.

Solid Waste

Waste Tire Recycling Program. The budget includes $31.2 million (special funds) to clean up illegal waste tire piles and for research and market development to reduce landfill disposal of waste tires. This represents an increase of $26 million over estimated current-year expenditures to implement the requirements of Chapter 838, Statutes of 2000 (SB 876, Escutia).

Capital Outlay

The budget package includes $1.9 billion for capital outlay (excluding highways and transit), as shown in Figure 15. About 75 percent of total funding is from bonds—primarily for resources, higher education, and the Department of Mental Health (for a new 1,500-bed sexually violent predator facility). The majority of General Fund spending is in three areas—resources, corrections, and higher education.

Figure 15
2001-02 Capital Outlay Programs Budget Act
(In Thousands)
Department	Bonds	General	Special	Federal	Total
Legislative, Executive and Judicial
Judicial Council	—	$772	—	—	$772
Office of Emergency Services	—	—	—	—	—
Justice	—	2,616	$317	—	2,933
State and Consumer Affairs
California Science Center	—	$5,263	—	—	$5,263
Franchise Tax Board	—	447	—	—	447
General Services (seismic retrofit)	$16,338	1,836	—	—	18,174
General Services (other)	2,891	—	—	—	2,891
Business, Transportation and Housing
Transportation	—	—	$188,558	—	$188,558
Highway Patrol	—	—	2,789	—	2,789
Motor Vehicles	—	—	5,554	—	5,554

Resources
Conservation Corps	$10,865	$2,530	—	—	$13,395
Tahoe Conservancy	5,157	8,243	$1,196	—	14,596
Forestry and Fire Protection	22,516	13,701	—	—	36,217
Fish and Game	451	1,665	2,126	—	4,242
Wildlife Conservation Board	—	—	20,391	—	20,391
Boating and Waterways	—	—	12,100	—	12,100
Coastal Conservancy	60,814	—	4,900	$2,000	67,714
Parks and Recreation	127,900	245	7,348	1,500	136,993
Santa Monica Mountains Conservancy	14,250	—	—	—	14,250
Water Resources	1,000	25,602	—	—	26,602
Environmental Protection
Air Resources Board	—	—	$2,199	—	$2,199
Toxic Substances Control	—	—	—	—	—
Health and Human Services
Health Services	$2,183	—	—	—	$2,183
Developmental Services	—	$5,367	—	—	5,367
Mental Health	349,287	3,102	—	—	352,389
Employment Development	—	—	—	—	—
Rehabilitation	—	—	—	—	—
Youth and Adult Corrections
Corrections	$25,627	$29,418	—	—	$55,045
Youth Authority	—	7,907	—	—	7,907
Education
K-12 Education	—	$2,568	—	—	$2,568
State Library	—	—	—	—	—
University of California	$373,112	112,851	—	—	485,963
California State University	225,000	—	—	—	225,000
Community Colleges	141,033	—	—	—	141,033
General Government
Food and Agriculture	$19,992	$1,633	$672	—	$22,297
Military	—	728	600	$36	1,364
Veterans Home of California	—	2,339	—	—	2,339
Unallocated	—	—	—	—	—
Totals	$1,398,416	$228,833	$248,750	$3,536	$1,879,535

State Capital Outlay. Some of the major state capital outlay projects and programs funded in the budget package include:

Department of General Services—$16 million from bond funds and $1.8 million from the General Fund to seismically retrofit existing state buildings.
Department of Parks and Recreation—$128 million from the Proposition 12 (March 2000) bond measure and $7 million from special funds for 12 capital outlay programs.
Coastal Conservancy—$61 million from the Proposition 12 bond measure for coastal conservation, restoration, and park enhancement projects.
Department of Health Services—$2.2 million from bond funds for a new 200,000 square foot lab in Richmond.
Department of Mental Health—$349 million from bond funds for construction of a new 1,500-bed sexually violent predator facility located adjacent to Pleasant Valley State Prison in Coalinga.
Department of Corrections—$25.6 million from bond funds for a wastewater collection and treatment project at the California Men's Colony at San Luis Obispo, and $29.4 million from the General Fund (including $19.8 million for construction of 16 major projects at 12 institutions across the state).
California Community Colleges—$141 million from bond funds for 76 projects at 50 campuses and six off-campus centers.
California State University—$225 million from bond funds for 28 projects at 20 campuses.
University of California—$113 million General Fund and $373 million from bond funds for 36 projects at ten campuses and the Desert Research and Extension Center Laboratory.
Department of Veterans Affairs—$2.5 million General Fund for projects at the Yountville veterans home.

Governor's Vetoes. The Governor vetoed a total of $100 million from the state's capital outlay program passed by the Legislature. The vetoes con sisted primarily of general obligation bond proposals under Resources ($73 million), Community Colleges ($15 million), and the proposed new veterans home in Lancaster ($12 million).

Other Major Provisions

Consumer Power and
Conservation Financing Authority

The budget includes a $10 million General Fund loan for the California Consumer Power and Conservation Financing Authority created by Chapter 10x, Statutes of 2001 (SB 6x, Burton). Chapter 10x authorizes the authority to issue up to $5 billion in revenue bonds to finance the construction of power plants and conservation-related activities such as energy efficiency and demand reduction programs. Budget language makes expenditure of these funds contingent upon Department of Finance approval of an operating and staffing plan for the authority with 30-day notification to the Legislature.

Related items in the budget include: $7.7 million from the General Fund for Energy Commission power plant siting workload; $3.7 million ($2.7 million General Fund) for Public Utilities Commission work regarding power plant siting and operation, generation, transmission, and conservation issues; and $1.8 million for the Electricity Oversight Board for issues related to market monitoring and power plant outage and maintenance standards.

Infrastructure Bank

The budget transfers $277 million in uncommitted funds from the Infrastructure Bank to the General Fund. This leaves approximately $130 million for additional loans to support infrastructure projects. (The bank has already committed approximately $90 million to approved projects.) After committing the $220 million, the bank will issue revenue bonds to continue loaning funds, pledging loan repayments on the initial $220 million as security for the bonds.

Employee Compensation and Retirement

Employee Compensation. The budget does not allocate any funds to increase state employee salaries or benefits. The administration is in negotiations with employee bargaining units for new agreements to replace the memoranda of understanding (MOUs) that expired June 30, 2001.

The administration has offered a compensation package that would (1) increase take-home pay by reducing employee retirement contributions and (2) pay for a portion of health insurance premium increases. At the time of this publication, 4 of the 21 bargaining units had agreed to this package. However, the Legislature had not yet ratified these MOUs, as required for the fiscal provisions to take effect.

The take-home pay provision would reduce employee retirement contributions from the 5 percent paid by most employees to 2.5 percent effective the first full pay period after legislative approval. Effective July 1, 2002, employee retirement contributions would be further reduced to zero. On July 1, 2003, the current employee retirement contribution would be reinstated and employees would receive a 5 percent increase built into their base salary. Because of the way the Public Employees' Retirement System sets state reitrement contribution rates, this provision would not impact the state budget until 2003-04.

Under the health insurance premium provision, the state would continue to pay half of the premium increases that went into effect January 2001 and pay two-thirds of premium increases effective January 2002 and January 2003. If all bargaining units agree to this provision and the Legislature approves the MOUs, the 2001-02 cost of this provision would be about
$50 million from all fund sources.

Employee Retirement. The budget also includes a $455 million ($195 million General Fund) increase in the state's contributions toward state employees' retirement. This higher cost is the result of the increased retirement benefits that became effective January 1, 2000.

The budget includes $486 million for the state share of retirees' health and dental insurance premiums. This is a $55 million increase over the Governor's January budget because of premium increases for health insurance and continued high enrollment growth. The contribution for health insurance is determined by the premium cost of the four state plans with the greatest enrollment of state employees and retirees.

Local Government and Housing

The Governor's budget in January included $250 million in general purpose fiscal relief for cities, counties, and special districts, and $200 million to expand a program which provides payments to local governments to reward them for the construction of new housing units. The enacted budget accepts the May Revision proposal to eliminate these one-time spending programs. The enacted budget also reverts to the General Fund an additional $40 million from the past-year housing payment program—leaving $60 million for allocation to local governments.

The enacted budget transfers back to the General Fund unused funds from a number of housing programs—providing one-time benefits to the General Fund. The budget accelerates by 12 months the scheduled sunset of four programs which reimburse home buyers and developers for school facility fees paid. This action provides savings of an estimated $128 million in 2001-02 and 2002-03. The budget also reverts funds from a downpayment assistance program ($18 million), a child care facilities financing program ($11 million), and the Housing Trust Fund ($4 million).

The budget provides $15 million in one-time spending for a new program to provide Central Valley governments with grants for infrastructure spending. In addition, the Governor vetoed $15 million in proposed spending for farmworker and multifamily housing and homeless services—leaving a $35 million increase in base spending from the past year.

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