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February 22, 2006 - The Governor has proposed to consolidate several energy-related activities in a new Department of Energy, to be headed by a cabinet-level Secretary of Energy. The Governor’s proposal would also transfer the responsibility for permitting new electricity transmission projects from the California Public Utilities Commission to the new department. In his analysis, we describe the existing energy organizational structure in the state, consider concerns raised about the existing structure, examine key points of the Governor’s proposal, and raise issues and make recommendations for reorganizing energy-related activities in California.
February 22, 2006 - The Governor’s budget contains proposals for increased spending of $61 million ($54 million General Fund) in the budget year related to the state’s emergency preparedness and response—primarily for public health and agricultural emergencies. While some of the proposals are warranted, most of the proposals suffer from one or more deficiencies—such as the failure to maximize funds other than the General Fund, poorly designed solutions, and the failure to follow state information technology policy. Consequently, we recommend the Legislature reject many of the administration’s proposals. We also offer a number of key considerations for the Legislature as it evaluates the state’s emergency preparedness. Finally, we comment on recent federal funding changes, reducing risks through land use decisions, and the creation of separate homeland security and public health departments.
February 22, 2006 - California has benefited greatly from over $11 billion in unanticipated increases in state revenues. Yet, due to its allocation of these funds, the 2006-07 Governor’s Budget would still leave the state with large structural budget shortfalls and an enormous amount of outstanding financial obligations. In this regard, the budget proposal misses an important opportunity to take advantage of highly favorable revenues to get the state’s fiscal house in order. We thus recommend that the Legislature reduce the amount of ongoing spending increases proposed in this budget, and use the savings to either increase reserves or pre-pay additional budgetary debt.
February 22, 2006 - California has benefited greatly from an over $11 billion three-year revenue increase since the 2005‑06 budget was enacted; yet, the Governor’s budget plan would still leave the state with major structural budget shortfalls and a large amount of other financial obligations outstanding. In this regard, we believe the proposal misses a real opportunity to finally get the state’s fiscal house in order by meaningfully addressing what is still a formidable fiscal problem.
February 22, 2006 - Despite a slowdown in the final quarter of the year, the U.S. and California economies generally outperformed expectations in 2005, shrugging off soaring energy costs, rising interest rates, and the impacts of three major hurricanes on Gulf Coast states. Recent monthly data on spending, employment, and production suggest that the softness that occurred in late 2005 will be short-lived, and the economy will expand at a moderate pace in 2006 and 2007. This outlook is subject to significant downside risks, however, associated with the potential for further increases in energy prices and steeper-than-expected declines in the real estate market.
February 22, 2006 - The state budget continues to benefit from healthy revenue growth. After climbing by over 8 percent in 2004‑05, the 2006‑07 Governor’s Budget assumes that revenues from the state’s major taxes will increase further by 6.2 percent in 2005‑06 and 5.7 percent in 2006‑07. The administration’s current forecast is up substantially from the estimates included in the 2005‑06 Budget Act. It is also up significantly from our office’s prior forecast presented in November 2005. In addition, for the current year and budget year combined, our revised General Fund estimates are higher than the administration’s by roughly $2.3 billion.
February 22, 2006 - We discuss several of the most significant spending proposals in the budget. For more information on these spending proposals, and our findings and recommendations concerning them, please see our analysis of the appropriate department or program in the Analysis of the 2006-07 Budget Bill, available February 23rd, 2006.
February 22, 2006 - The Governor’s budget proposes total spending in 2006‑07 of $122.9 billion, including $97.9 billion from the state’s General Fund and $25 billion from its special funds. This total budget-year spending is $7.2 billion higher than current-year spending—an increase of 6.3 percent. Of total budget-year spending, General Fund spending accounts for about 80 percent. This proposed spending level translates into $3,268 for every man, woman, and child in California.
February 17, 2006 - The costs of providing health care to retired state employees and their dependents—now approaching $1 billion per year—are increasing significantly. Many other public employers (including the University of California, school districts, cities, and counties) face similar pressures. This report discusses health benefits provided to retired public employees, focusing on state retirees. We find that the current method of funding these benefits defers payment of these costs to future generations. Retiree health liabilities soon will be quantified under new accounting standards, but state government liabilities are likely in the range of $40 billion to $70 billion-and perhaps more. This report describes actions that the Legislature could take to address these costs.
February 16, 2006 - We review infrastructure proposals in the Governor's Strategic Growth Plan. Presented to the Conference Committee on Infrastructure Bonds.
February 16, 2006 - An overview of major state infrastructure in which we review infrastructure planning, recent infrastructure expenditures, and sources of infrastructure funding. Presented to the Conference Committee on Infrastructure Bonds.
February 15, 2006 - The Migrant Education Program is a federally funded program that provides supplemental education services to migrant children. This report reviews the state’s implementation of the program. We find that the state could better target resources and better serve migrant students by implementing a comprehensive package of reforms. Specifically, we recommend a number of modifications related to the program’s: (1) funding and service model, (2) data system, and (3) carryover funding process. We also identify funding available to help in implementing these changes. (The California Department of Education has translated this report into Spanish. El Departamento de Educación de California ha traducido este informe al español.)
February 14, 2006 - We review infrastructure proposals in the Strategic Growth Initiative related to public safety. Presented to the Senate Public Safety Committee.
February 8, 2006 - We review infrastructure proposals in the Strategic Growth Initiative related to higher education. Presented to the Senate Education Committee. This summary revises our January 25, 2006 handout on the same topic.