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February 21, 2007 - The budget contains two tax-change proposals. The first is to permanently repeal the existing teacher retention tax credit, which was adopted in 2000 but was temporarily suspended in four of the past six years. The second is to make permanent a temporary change made in 2004 to extend, from 90 days to one year, the time that vessels, vehicles, and aircraft recently purchased out of state must be kept outside of California in order to avoid the state’s use tax. We provide background on these two proposals, discuss their economic and fiscal impacts, and identify issues associated with them. Based on our review, we recommend that the Legislature adopt both proposals.
February 21, 2007 - The California Constitution requires the state to reimburse local governments for certain state mandates. The process for determining the existence of state mandates and providing local government reimbursements, however, has significant shortcomings. The administration’s proposal to reform this mandate process provides a good starting point for discussion. In this analysis, we review the administration’s proposal and offer the Legislature a similar, but more extensive, proposal that includes (1) simplifying the process for local governments to file reimbursement claims by placing greater emphasis on unit cost methodologies, (2) allowing mandate payment methodologies to be developed through negotiations between local government and the Department of Finance, and (3) establishing an alternate process to provide early settlement of mandate disputes and bypass the commission entirely.
February 21, 2007 - We focus on the process for setting compensation and recommend the Legislature improve the state’s employee compensation policies. Our recommendations are geared toward the Legislature focusing state employee compensation expenditures within the context of a balanced budget. Among our recommendations are for the Legislature to (1) limit the authority of arbitrators to order large payments under their interpretation of future labor agreements and (2) end the use of automatic pay raise formulas tied to actions by other governmental employers.
February 21, 2007 - The Governor proposes to extend health care coverage to California’s uninsured population and to implement specific reforms. The Governor’s proposal would impose an individual mandate requiring all Californians to maintain a minimum level of health insurance, attempt to contain health care costs so that individuals could afford to purchase coverage, and promote various measures meant to improve the overall health of Californians. We conclude that the Governor has presented a comprehensive framework to expand coverage for the uninsured. In addition, the administration has made a serious effort to estimate the programmatic and fiscal impacts of its proposal. We identify a number of legal obstacles and policy issues and conclude that the plan creates fiscal risks to the state potentially reaching several billions of dollars annually.
February 21, 2007 - The budget plan implements Chapter 241, Statutes of 2006 (SB 162, Ortiz) that creates a new Department of Public Health (DPH) and Department of Health Care Services (DHCS) from the existing Department of Health Services. We recommend the Legislature require the administration provide additional information to ensure cost neutrality as required under Chapter 241.
February 21, 2007 - We estimate a shift of veterans from Medi-Cal to the federal Veterans Administration (V.A.) health system could save the state up to $250 million annually, while providing those veterans with quality health care services. We recommend that California join 42 other states participating in a federal data matching process that would facilitate achieving these goals.
February 21, 2007 - We review the proposal for a net reduction of $25 million for Proposition 36 programs, discuss why this reduction might eventually result in increased prison costs, and recommend redirecting funds in order to support Proposition 36 programs at their current level.
February 21, 2007 - The Governor’s proposed budget bill language directs the California Postsecondary Education Commission (CPEC) to recommend a new methodology that compares total faculty compensation at the University of California and the California State University, as well as options for assessing the appropriateness of these compensation levels. We agree that CPEC’s current approach to faculty compensation is flawed. However, we recommend the Legislature rethink the basis for comparing faculty compensation and direct CPEC take an alternative approach to collecting and reporting specified faculty compensation information.
February 21, 2007 - Enrollment at the California Community Colleges (CCC) has been declining over the past several years. At the same time, CCC’s budget has been increased annually to accommodate enrollment growth. For the current fiscal year, we estimate that CCC will likely be unable to use more than $100 million in enrollment funding. We recommend that the Legislature delete this funding for CCC’s budget in order to improve the state’s overall fiscal health. For 2007-08, we recommend the Legislature fund modest anticipated growth. At the same time, however, we recommend the Legislature shift its budget and policy emphasis from increasing enrollment to increasing success rates for students that are enrolled.
February 21, 2007 - The Governor’s budget contains several augmentations for registered nursing programs at the University of California, California State University, and California Community College systems. We recognize the need to increase the number of registered nurses in the state, and find merit with some of the Governor’s proposals. Other proposals, however, lack adequate justification. We thus recommend approval of some proposals and reductions in others, as well as additional steps the Legislature could take to improve nursing programs.
February 21, 2007 - The Governor’s budget assumes that the University of California and the California State University will enact fee increases of 7 percent and 10 percent for resident students at their respective campuses. We recommend lower fee increases of 2.4 percent for both systems. The 2.4 percent fee increase would match the increase in overall costs experienced by the segments due to inflation, and would ensure that students continued to pay the same share of their educational cost as they are paying in the current year. We also recommend that the Legislature not “buy out” any portion of the Governor’s proposed fee increase because such an approach confuses the role of fees and undermines the Legislature’s role in budgeting. We do not recommend any change to the Governor’s proposed fee level for the community colleges, which would maintain the $20 per unit fee that went into effect in January 2007.
February 21, 2007 - The Governor’s budget proposes about $120 million to fund 2.6percent enrollment growth at the University of California (UC) and 2.5percent enrollment growth at the California State University (CSU). This amount would provide $10,876 in General Fund support for each additional student at UC and $7,837 for each additional student at CSU. The proposed budget also provides $109 million for a 2 percent enrollment increase at the California Community Colleges (CCC). In this write-up, we analyze the Governor’s proposed enrollment growth and funding rates for UC and CSU in 2007-08 and recommend alternatives to those rates.
February 21, 2007 - Currently, the state provides over $83 million in funding to the University of California (UC) and the California State University (CSU) to support over 20 different K-14 outreach programs that focus on preparing and encouraging students from disadvantaged backgrounds to attend college. For 2007-08, the Governor’s budget proposes a $26.3 million General Fund reduction to these programs. In this write-up, we (1) provide perspectives on UC and CSU’s outreach programs and efforts to evaluate their effectiveness and (2) present different approaches for the Legislature to consider in funding and evaluating these programs.
February 21, 2007 - Although the quality assurance (QA) initiative for In Home Supportive Services (IHSS) has improved the accuracy and standardization of service hour authorizations by social workers, there are limited controls assuring that recipients receive their service hours in accordance with their case plan. We review the department’s implementation of the QA initiative, and provide recommendations to enhance program integrity and increase the likelihood that recipients receive services in accordance with their case plans.