Analysis of the 2007-08 Budget Bill: General Government

Governor’s Office (0500)

This item provides the Governor with funds for his personal staff to coordinate the administration’s operations. The Governor’s budget proposes expenditures of $19.7 million from the General Fund, an increase of 5.6 percent from estimated current-year expenditures. More than 83 percent of the Governor’s Office budget is for personnel costs. The proposed budget would support 185 positions.

Autopilot Spending Unnecessary

We recommend that the Legislature reject the administration’s proposal to automatically increase the Governor’s Office budget annually. The administration has offered no policy rationale as to why the current process is not working, and it would result in overbudgeting of the office in 2007-08. (Reduce Item 0500-001-0001 by $356,000.)

Recent Budgeting for the Office. Traditionally, the Governor’s Office has been budgeted like other state departments. If the Governor’s Office identifies a staffing problem, it can submit a budget change proposal to the Legislature seeking an augmentation. In addition, until 2004-05 the Governor “borrowed” many staff from other state departments to assist the office with its work. These positions often were borrowed for long periods of time. To better reflect the number of staff actually working in the Governor’s Office and increase transparency, the Governor proposed and the Legislature approved in the 2004-05 Budget Act a permanent transfer of borrowed staff to the Governor’s Office. Consequently, the Governor’s Office budget grew from $6.1 million to $18.4 million between 2003-04 and 2004-05. Likewise, the official staff count grew from 86 to 188 over the same time period.

Proposed Automatic Adjustment. The administration proposes to switch the Governor’s Office budget from traditional budgeting to an automatic annual adjustment. Specifically, the office’s budget would be increased annually by the percentage growth in the state appropriations limit (SAL). The SAL grows annually by a population and cost-of-living factor. (The administration made a similar proposal last year but eventually withdrew the request.) In the budget year, applying the SAL to the Governor’s Office raises costs by $986,000. As its rationale for the budgeting change, the administration points to similar growth factors for the legislative and trial court budgets.

Legislature’s Adjustment Was Accompanied by a Cap and Major Budget Reduction. In passing Proposition 140 in November 1990, the voters reduced the Legislature’s budget by more than one-third. The measure also instituted a cap on the Legislature’s appropriation amount. This cap grows annually by the SAL factor so that legislative expenses can increase with the economy over time—from the reduced base. (Proposition 140 also implemented other changes related to the Legislature, such as term limits and ending legislators’ retirement benefits.) The administration does not propose either a cap or a reduction.

Trial Court Funding Program Has Unique Issues. As part of the 2004-05 budget, a portion of the judicial branch budget—the Trial Court Funding Program—was placed under the SAL funding methodology similar to what is proposed for the Governor’s Office. However, this was largely intended to provide trial courts with a rough idea of future resources during their local employee compensation negotiations.

Proposal Overbudgets Office. The administration reports that it intends to have the same number of staff in the Governor’s Office in 2007-08 as in the current year. For the proposed 2007-08 budget, the administration first built into the Governor’s Office’s budget the costs associated with increased benefits (such as the state’s share of health premiums). The administration, however, did not provide two baseline adjustment to the Governor’s Office that were generally provided to other departments: (1) the 3.5 percent cost-of-living pay raise provided in 2006-07 for employees (about $555,000 for the employees in the Governor’s Office) and (2) the inflationary costs of operating expenses (about $75,000). The requested SAL adjustment of $986,000 would therefore provides $356,000 more than the amount necessary to keep the Governor’s Office fully funded. (Any increased compensation costs for 2007-08 could be funded from Item 9800—Augmentation for Employee Compensation.)

Reject Automatic Spending Increases. Like other state departments, the Governor’s Office should propose spending increases based on staff workload. The administration has offered no policy reason why the current process is not working. We therefore recommend that the Legislature reject the SAL proposal. In addition, the provision of a SAL adjustment for 2007-08 resulted in overbudgeting the office’s expenses. Accounting for increased salary and operating costs, we recommend a reduction of $356,000 to the Governor’s Office budget.