GAAS:10:08
For Immediate Release: Contact: Aaron McLear
Tuesday, January 8, 2008 Rachel Cameron
916-445-4571
Governor Schwarzenegger Tackles California’s Challenges, Proposes Budget Reforms in State of the State Address
Delivering his annual State of the State address before a joint session of the California State Legislature today, Governor Arnold Schwarzenegger asked legislators to work with him to tackle some of California’s most pressing challenges including reforming the state budget system that has failed the people of the Golden State too many times.
“This coming year will test us in very hard ways. In any number of areas, we’ve tackled politically risky things that no one in the past wanted to touch. To me, this is progress. And now, we must make progress on another problem that’s been put off for many years,” said Governor Schwarzenegger. “We cannot continue to put people through the binge and purge of our budget process. It is not fair. It is not reasonable. It is not in the best interests of anyone. So I am again proposing a constitutional amendment so that our spending has some relationship to our revenues.”
During the speech, the Governor discussed his bold proposals to reform the state budget system that will ensure greater financial stability in the future and addressed why health care reform is critical to fixing our failing budget. He also discussed why the current budget challenge does not change California’s critical need for infrastructure investment and how the most needed education reforms are still possible.
“Government can work, it can be efficient and it can lead. California has proven this in so many areas including climate change, low carbon fuels, energy efficiency and on clean, green technology,” the Governor added. “But, our work has only just begun. I cannot fix the budget, build the roads and bridges or improve education alone. We have to work together if we are going to fix these problems and give the people of California what they deserve.”
Specifically, the Governor’s proposals include:
Budget Reform
California’s economy continues to grow, in spite of the current housing downturn, and the state continues to enjoy overall job growth. Yet while Governor Schwarzenegger prudently increased our rainy day reserve to historic highs in 2006 and 2007, California still faces a projected $14 billion budget gap in the 2008-09 fiscal year that requires across-the-board-cuts. In December, the Governor announced that he will declare a fiscal emergency to address the current year budget shortfall. Today, Governor Schwarzenegger proposes the Budget Stabilization Act, a Constitutional amendment to fundamentally reform the state budget process. This reform requires a vote of the people.
The Budget Stabilization Act:
- Establishes a Revenue Stabilization Fund (RSF), which is simply a savings account for excess revenues taken in by California during a prosperous year. This will allow the state to transfer the difference from the RSF into the General Fund in years when tax revenues are below average and California cannot meet its spending obligations.
- Allows California to reduce spending when necessary. Right now, California doesn’t have this flexibility. Once the Governor signs the budget, spending is locked in unless he declares a fiscal state of emergency and calls a special session. Under this act, state agencies must reduce their spending if a year-end deficit is projected by the Department of Finance.
- Requires the legislature to enact a statute specifying how the state will reduce spending to meet Budget Stabilization Act requirements as soon as a deficit is projected. If the legislature does not specify the reductions—or if their reductions are insufficient—the amendment allows the Governor to waive state law and regulations in order to achieve the savings needed to bring California's budget into balance.
If the Budget Stabilization Act had been in effect since 1998, the state would not have developed a structural budget deficit. In years where a deficit emerged, the Budget Stabilization Act would have triggered moderate cuts automatically to avoid draconian cuts later.
Strategic Growth Plan
California’s economic growth and environmental leadership are still closely tied to improving how infrastructure is built, operated and maintained. The Department of Finance estimates that California needs $500 billion worth of infrastructure over the next two decades. Governor Schwarzenegger is committed to further boosting economic growth, preserving our environment, enhancing services for citizens and getting taxpayers the most for their money by strengthening how California plans, finances and delivers infrastructure projects.
Governor Schwarzenegger proposes a set of new policies to leverage partnerships with the private sector, increase synergy between public agencies and educate thousands of new engineers to build the California of tomorrow. To achieve this, the Governor proposes:
- Establishing a Strategic Growth Council to coordinate SGP projects and spending. The five-member Council will help state agencies allocate SGP money in ways that best promote efficiency, sustainability and support the Governor’s economic and environmental goals.
- Expanding the types of projects, services and government entities that can enter into Performance Based Infrastructure (PBI) arrangements.
- Establishing “PBI California,” a center for excellence to help determine which state projects can benefit from PBI – also known as public-private partnerships – to represent the state in negotiations with PBI participants, ensure transparency and monitor performance. This will empower California to build, operate and maintain infrastructure better, faster and for less.
- Bringing approximately 20,000 new engineers into California's workforce over the next decade by expanding existing educational programs and building new partnerships between our schools, the military and the private sector.
Education
While school funding in California has reached historic new highs under his administration, Governor Schwarzenegger has always maintained that our education system needs more than money to succeed. Our system must ensure that students have the skills and knowledge needed for success; that parents, teachers and policymakers have access to accurate educational data; and that classrooms have highly qualified teachers to educate the next generation of Californians.
To achieve these goals, the Governor has announced:
- California will be the first state to use the powers given under the federal No Child Left Behind (NCLB) Act to turn challenged districts around. The Governor’s proposal includes allocating a higher percentage of NCLB funds in districts that need the greatest assistance and intervention.
- Reforms that value local control and assist school districts based on their needs. The problems driving underachievement in each school district are different, so a one-size-fits-all approach will not work. In determining the state’s response, the administration has used a “differentiated assistance” model to analyze each district individually and assign it the most appropriate intervention to improve student achievement and progress. (in other words; let's go ahead and give em a certificate even though they can't read nor write. We'll have more poor uneducated people out there, selling drugs and doing other criminal acts)
- High-performing schools and districts have the opportunity to apply to the State Board of Education for waivers from provisions of the Education Code. Waivers granted by the State Board of Education will give these schools and districts flexibility to budget and operate in ways that continue to improve student achievement.
- Immediate actions to improve the quality and accessibility of information available to parents, educators and policymakers and address critical shortages of teachers in California’s classrooms.
The Governor’s administration is working with teachers, administrators, parents, elected officials and the State Superintendent of Public Instruction to create a sustainable architecture for accountability that helps school districts meet federal standards and improve student achievement.
Health Care Reform
The Health Care Security and Cost Reduction Act, introduced by the Governor and approved by the California Assembly, is a landmark reform that strengthens our health care system when we need it most. It will take pressure off of the state budget to finance the Medi-Cal rate hikes that drive some of our most significant budgetary spending growth. The Act is fully funded, budget neutral and includes mechanisms to ensure strong oversight, evaluation and flexibility to prevent auto-pilot spending.
The Health Care Security and Cost Reduction Act:
- Increase the role of the federal government in paying for medical costs of our population. It secures $4 billion in new federal funds that California is eligible for under current law and right now is leaving on the table.
- Reduces pressure on the state General Fund and addresses the structural budget problems that drive deficits. The Act finances higher reimbursements with new hospital revenues and federal funds and funds programs to improve the health of current Medi-Cal beneficiaries. It also includes built-in mechanisms to ensure that health care reforms are financially self-sustaining.
- Contains costs and lowers health care spending by addressing chronic illnesses and providing broad access to preventive care.
- Will create a positive impact on the economy by increasing productivity, wages and tax revenues.
