California Capitol Report, August 2003

CAPITOL REPORT August 2003 NATIONAL COUNCIL OF LA RAZA

CALIFORNIA BUDGET UPDATE Governor Davis Signs the Budget On Saturday, August 2, 2003, the Governor signed the 2003­2004 State Budget. The budget bill closes a $38 billion shortfall through a combination of borrowing, tax shifts, increased fees, and spending cuts, which will still leave California with an $8 billion shortfall for next year. The budget bill also contains a provision that gives the Governor the authority to make midyear cuts without the approval of the Legislature. (You can view the State Budget in its entirety at the California Department of Finance website http://www.dof.ca.gov) Though some of the critical health and education programs that serve the Latino community have been preserved, there were still some programs that were not spared from deep cuts. NCLR will continue to work with the Legislature and the Governor next fiscal year to ensure that any future budget proposals do not disproportionately harm the Latino community.

I. K­12 Education – The 2003­2004 State Budget makes targeted reductions to K­12 education programs, abandoning certain proposals that would have been potentially harmful to the Latino community. This plan does maintain funding for English language learner (ELL) students and leverages the federal No Child Left Behind Act (NCLB) to increase learning for ELLs by earmarking certain funds for bilingual programs.  On a per pupil basis, K­12 funding is reduced from $7,067 per pupil in the 2002­2003 Budget Act to $6,887 per pupil in 2003­2004, a decline of $180 per pupil.  The 2003­2004 Budget Act includes the following targeted reductions in order to fund $50 million for revenue limit equalization: Math and Reading Professional Development Program ($14 million), Deferred Maintenance ($18 million), Education Technology ($15 million, which eliminates funding for the program in the budget year), and Principal Training Program ($2.5 million).  The budget now includes a $13 million set­aside of the increase in federal Reading First funds under NCLB to be received by the state for bilingual programs that were ineligible as a result of the emergency regulations adopted by the State Board of Education. This funding is pursuant to the implementation of companion legislation, Assembly Bill 1485 (Firebaugh).  The budget achieves $384 million in savings from child care programs by reducing funding for after­school programs ($7 million), reducing provider regional market rates ($82 million), assuming lower enrollment in CalWORKs’ Stage 3 ($57 million), using federal TANF dollars for Stage 2 ($119 million), reducing the age limit so that subsidies are only available to children under the age of 13 ($16 million), reducing the Alternative Payment Provider administrative rate by 1% ($12 million), and eliminating Quality Improvement Technical Assistance spending ($5 million), among other changes.

NCLR SACRAMENTO OFFICE ♦ 926 J STREET, SUITE 701 SACRAMENTO, CA 95814 PHONE (916) 448­9852 ♦ FAX (916) 448­9823

II. Higher Education – Outreach and affordability are critical to the participation of Latino students in postsecondary education, yet the 2003­2004 State Budget makes significant changes to each:  Unallocated reductions are made to the University of California (UC) and California State University (CSU) totaling $497 million, most of which would be backfilled by increased student fees of about 30%. Fees for UC will increase from $3,429 in the fall of 2003 to $4,484 by the fall of 2004. Fees for CSU will increase from $1,428 in the fall of 2003 to $2,046 in the fall of 2004.

Both segments are to devote one­third of new fee revenues toward additional student financial aid.  K­12 Outreach, critical to Latino students in the aftermath of Proposition 209, is reduced for UC by $37.8 million (51%) and for CSU by $12.6 million (19%).  The 2003­2004 State Budget includes increases in student fees for California Community Colleges (CCC) from $11/unit to $18/unit (the Governor had proposed an increase to $24 per unit in January).  The budget also makes a reduction of $25 million to “concurrent enrollment” programs, which enroll high school students in CCC courses.

III. Health and Social Services – California will receive $2.4 billion as a result of the federal Temporary State Fiscal Relief legislation enacted on May 29, 2003. Of this amount, the federal law requires that approximately $218 million be provided to local agencies that receive federal matching funds under Medi­Cal. Due to this additional federal funding, many of the proposed cuts and administrative changes to Medi­Cal were not approved. Whereas this is an improvement, there still exist some cuts to health and social services programs which will present more obstacles for Latino families’ access to care. The final budget reflects:  Rejection of the Elimination of Optional Benefits under Medi­Cal – The Legislature did not adopt the Governor’s May Revision proposal to eliminate dental services, medical supplies, psychiatric, chiropractic, acupuncture, podiatric services, rehabilitation therapy, occupational therapy, optician and optical lab services, optometry, hearing aids, physical therapy, and speech and audiology services. While the dental and hearing aid benefits were not eliminated, these benefits received a reduction in funding.  A 5% Rate Reduction to Medi­Cal Providers, including doctors, nursing homes, and HMOs. This will result in Medi­Cal patients receiving less culturally and linguistically appropriate services since less health care providers will take part in the system due to low Medi­Cal reimbursement rates. Currently, California ranks 42nd in the nation for Medi­Cal’s fee­for­ service payments to physicians.  Funding Approved for the Statewide Fingerprint Imaging System (SFIS) – SFIS was designed to prevent people from obtaining benefits in more than one county or under more than one name.

Although California already uses an extensive computer matching system that checks applicants’ information against a number of statewide databases, and a recent study by the State Auditor found that the state has no additional justification for maintaining SFIS – at a cost of at least $10 million each year – the budget approved funding for the system. SFIS is an additional barrier for California’s immigrant population to access the services their taxes help support, as NCLR SACRAMENTO OFFICE ♦ 926 J STREET, SUITE 701 SACRAMENTO, CA 95814 PHONE (916) 448­9852 ♦ FAX (916) 448­9823

misinformation about immigration law often deters eligible immigrants from accessing services for which they qualify.  Suspension of Funding for the Naturalization Services Program (NSP) – NSP was not approved for funding. This program provided funding to local government and community­based organizations to assist immigrants obtain U.S. citizenship, at no charge. Since its inception, it had assisted over 77,000 immigrants.

IV. Taxes and Revenues – The budget bill does not contain any tax increases. The budget was partially balanced through borrowing and funding shifts, which include some of the following:  Deficit Financing – Assumes the state will issue $10.7 billion in deficit retirement bonds to be repaid out of existing resources. It will shift: o ½ cent of local governments’ sales tax rate to the state o Property taxes from K­14 education to cities and counties to replace lost sales tax revenues; Schools will be reimbursed for lost property tax moneys out of the state’s General Fund.

Cities and counties will be reimbursed with property tax dollars based on the amount of sales tax they would have received under current law.  Vehicle License Fee (VLF) – The budget eliminates the Vehicle License Fee backfill payments to counties and cities. The payment will be made up with revenues from the increased VLF rates paid by car owners, which takes effect October 2003. The increase in the state’s vehicle license fee is expected to raise $4 billion.

If you would like additional information about the 2003­2004 State Budget, please contact the NCLR Sacramento Office at (916) 448­9852. You may also contact the California Policy Analysts via e­mail: Cristina Huezo (chuezo@nclr.org) or Patricia Diaz (pdiaz@nclr.org).

NCLR SACRAMENTO OFFICE ♦ 926 J STREET, SUITE 701 SACRAMENTO, CA 95814 PHONE (916) 448­9852 ♦ FAX (916) 448­9823