Part 2: What Will The Upcoming Federal and State Budget Cuts Mean To Our Communities?
The Impact of State Cuts
The Governor has released his 2008-09 proposed budget and the Governor addressed a shortfall estimated at $14.5 billion. The gap would be closed by reducing spending in most state programs and departments by 10 percent.
The Governor also proposes to sell an additional $3.3 billion in Economic Recovery Bonds (ERBs) under the authority granted by Proposition 57 of 2004. This would exhaust the $15 billion authority granted by the voters. The Proposed Budget also uses a $2 billion accounting gimmick that would book receipts of income tax revenues in 2008-09 that would otherwise be recorded in 2009-10. This, of course, would reduce revenues available in 2009-10 by an equivalent amount.
The magnitude of the proposed reductions and the policy changes necessary to achieve them are significant, even as compared to the sizeable shortfalls of the early years of this decade and the early 1990s. In response to questions from the media, the Governor appeared to leave the door open to a larger tax increase as part of an eventual budget package.
The Proposed Budget does include a number of significant fee increases, including surcharges on property insurance policies to pay for fire and other disaster-related services and an increase in vehicle registration fees to help fund the California Highway Patrol. Finally, the Governor assumes the state will receive $430.4 million in revenues from tribal gaming activities in 2008-09 based on the passage of new compacts recently approved by voters. This amount includes $396.8 million attributable to compacts approved in 2007.
The Governor's Budget would cut 2008-09 spending levels by $10.7 billion and current year spending by $283.2 million. The 2008-09 amount includes $4.825 billion in reductions to programs covered by the Proposition 98 school funding guarantee, $4.307 billion in reductions to General Fund-supported programs outside of the Proposition 98 guarantee, and $1.535 billion in additional reductions to programs supported by federal and other funds.
On housing issues, the budget has relatively been a mixed bag, at the expense of significant and brutal cuts to K-12 education, the public universities, healthcare (especially for children, the disabled, and seniors), in home supportive services (IHSS) and the state's park systems. Significant housing items addressed by the Governor's budget include the following.
- Reduce, by 10 percent, payments to families and facilities that provide shelter and services primarily to abused and neglected children, including foster care group homes, placements for emotionally disturbed youth, and certain adoptive families, for state savings of $81.5 million in 2008-09.
- Spending $771 million in Proposition 1C bond proceeds in 2008-09. Proposition 1C of 2006 authorized $2.85 billion in general obligation (GO) bond proceeds for various housing-related programs.
- Spending the remaining $36.8 million in Proposition 46 bond proceeds in 2008-09. Proposition 46 of 2002 provided $2.1 billion in GO bond proceeds primarily to develop affordable housing and promote homeownership.
- Reduce state support for veterans homes by $18.7 million. This reduction would be accomplished in part by capping the number of veterans served by the skilled nursing care unit at the veterans home in Yountville and delaying staffing increases at veterans homes in Redding and Fresno.
- Reduce property tax assistance and renters tax assistance programs for senior citizens by decreasing the level of assistance available by 10 percent per applicant. In addition, the income limit for the Senior Citizens' Property Tax Deferral Tax Relief Program would be lowered from its current level of $35,500. The total state savings from these reductions would be $21.7 million.
A detailed view of the State Budget, with information provided county by county, is available by the California Budget Project at http://www.cbp.org/Impactbycounty.htm
While the cuts to housing may not be as deep or significant as those to public services, healthcare, and education, they will impact most of the communities non-profit housing developers serve, most notably low-income working families, seniors, and the disabled.
