Child Development Policy Institute Information Bulletin
03/08/2010 -
DATE: March 5, 2010
FROM: Tim Fitzharris, Ph.D.
Legislative Advocate
CDPI INFORMATION BULLETIN
March 5, 2010
Legislature Passes Gas Tax Changes to Ease Budget Deficit
ED. NOTE: The following is an Associated Press news article, dateline March 4, 2010.
California lawmakers on Thursday passed a complicated change to the gasoline tax to address part of the state's $20 billion budget deficit and said it's enough to get the state through its financial problems for now.
The state Senate passed the Democratic package on a majority vote, largely along partisan lines. The Assembly also passed the bills, which now head to Gov. Arnold Schwarzenegger's desk.
The legislation is modeled after Schwarzenegger's proposal to replace the sales tax on gasoline with a larger excise tax. The swap allows some accounting maneuvers that would funnel more money into the state's general fund, where the deficit exists.
The tax exchange is estimated to generate $1.1 billion for the general fund while continuing to provide close to the current level of funding for public transit and repairs to highways and streets.
Californians would see no difference in prices at the pump.
The gas tax proposal passed Thursday was the centerpiece of a $4 billion Democratic package to deal with California's overall deficit projected through mid-2011. Essentially, the state is ending a 6 percent sales tax on gasoline and replacing it with a 17.3 cent per gallon excise tax on gas. The change allows the state to use the excise tax to pay off transit bond debt, which would free up more general fund money.
In January, Schwarzenegger had called the Legislature into a special session to whittle down the deficit by $8.9 billion, largely through cuts to public schools, higher education and social services.
But Democrats refused to make deeper cuts and handed the governor the current package with changes including the gas tax swap, cuts to state government payroll and a reduction in prison health care spending. The other measures already have been passed and sent to the governor's desk.
Republicans opposed the gas swap, characterizing it as a bait-and-switch for Californians that eventually would result in higher taxes at the pump.
The sales tax is a percentage, so it fluctuates with the price of gas, but because the excise tax is a flat amount per gallon, drivers might not see as much savings when the cost of gas declines.
Senate Minority Leader Dennis Hollingsworth of Murrieta said the original plan offered by the Schwarzenegger administration proposed lowering overall gasoline taxes by about 5 cents per gallon. The Democrats' legislation, however, keeps overall taxes the same while applying more of the revenue to the general fund.
Hollingsworth said the legislation circumvents California's two-thirds requirement for passing tax increases. He described the maneuver as a lowering of one tax while raising fees to cover the difference, then redirecting the revenue.
Senate President Pro Tem Darrell Steinberg said the exchange from a sales tax to an excise tax did not require a two-thirds vote because it replaces taxes "dollar for dollar." He said it also maintains funding for transportation projects, which he said could create 10,000 jobs.
Assemblyman Mike Eng, a Democrat from Monterey Park, said the gas tax proposal will provide a stable source of funding for transit agencies to keep buses running. "The one thing the bus riders want is certainty," Eng said. "If they're out there waiting in the rain for the bus to come, it will come."
The governor's office has indicated that Schwarzenegger is unlikely to call another special session even if he's dissatisfied with the Democrats' package. Unlike last year when Schwarzenegger and lawmakers were forced to make deep midyear cuts in the face of a cash crisis that delayed tax refunds, the current situation is far less dire.
Democrats, who hold a majority in both houses, said they are content to address the remaining deficit later in the year. They are hoping increased federal aid and an improved economy will help whittle the deficit by as much as $6 billion. That would leave lawmakers to address only a $10 billion shortfall.
"We know the work isn't done," Steinberg said.
(ED. NOTE #1: One of the not-so-hidden benefits of this "swap" is that the revenues flow into the State's General Fund, automatically impacting the Prop 98 Minimum Guarantee. The Governor's January solution would have lowered the education Guarantee by approximately $800 million; the Legislature's option does not.)
(ED. NOTE #2: According to the Sacramento Bee, Steinberg said after the vote that he expects legislators can whittle the deficit down to $10 billion or less by the time Budget negotiations begin in earnest later this year. "This is a down payment," he said.)
Jerry Brown Throws Hat into Governor's Contest
This week, State Attorney General and former Governor Jerry Brown finally joined this year's gubernatorial race. His candidacy has been long-anticipated, and is the reason why no other Democratic hopeful had stepped forward. This fall, he will face the winner of the Republican primary, either Meg Whitman, former eBay CEO, or State Insurance Commissioner Steve Poizner.
Brown, who was California governor for two terms from 1975-1983, is billing himself as the experienced veteran: one with "insider's experience" and "an outsider's mind." The next governor, he claims, must have the preparation, knowledge, and know-how to get the State working again. Both Republican candidates will try to tag him as a career politician with "a trail of failed experiments, undelivered promises, big government spending and higher taxes." (Whitman)
In the next issue of Capitol Plus (our premium account), we provide some of the comments Brown made at a press conference this week which may provide a clue to how he'd approach health and human services and education funding if he were elected. (Annual subscription is available at www.cdpi.net.)
Some Background on the LAO's Child Care Proposals
Earlier this week, several advocates and interested individuals met in the Legislative Analyst's office to be briefed on the thinking behind the LAO's Budget proposals. (For the LAO's child care recommendations, please see CDPI Bulletin, dated February 25, 2010.)
Rachael Ehlers, LAO child care analyst, led the briefing. Here are some of my notes:
There are no easy choices left. In this arena, and others, we have to prioritize the most essential services and the services for the neediest. Priorities have to be established by the Legislature. There will have to be cuts in all three areas of Proposition 98 (K-12, community colleges, and child care).
Child care is part of the big Proposition 98 picture. What impacts K-14 will impact child development, too. The Minimum Guarantee (see article above), the Maintenance Factor, the Deficit Factor, and Revenue Limits vs. categorical flexibility are all in play.
The LAO's Budget (reduction) target number is approximately $200 million, about $100 million less than the Governor's proposed cut. If these reductions do not occur, the Legislature will have to take additional reductions in some other area of Education or Health and Human Services.
Relative to the RMR, we think that it is disingenuous to use the (outdated) 2005 market survey. We need to be honest about the real costs of care. Our assessment is that at a statewide level the 75th percentile of 2005 is roughly equivalent to the 50th percentile in 2009. As we calculate it, the 85th percentile in 2005 is about equal to the 60th in 2009. We want to be both cost-neutral at the statewide level (keep rates where they are now) and honest about costs. Even if it is cost neutral at the state level, effects of updating the rates could certainly have differential effects at the individual county level based on local rate changes.
Relative to license-exempt care, this is a lesser among the evil choices. Family and neighbor providers do not have the burden of licensing and other provider expenses. We presume that, even at 70% of the (today's rate) RMR relatives will still continue to provide care.
Relative to Stage 3 reduction or income cap, we are concerned that the Governor's proposal would close the door for families coming from Stage 2. Our option is to lower the income ceiling instead. We included the loss of family fee (from the highest income-earners) into our estimates. We also looked at the possibility of changing the family fee structure and would be open to it but there not much money generated there.
Relative to COLA, we are against providing a negative COLA after years of not providing a positive COLA.
The LAO is also recommending a change in the age of Kindergarten entrance, beginning in the 2011-12 school year. Research suggests children who are older when they start kindergarten tend to perform better on standardized tests. Some research suggests this change also may lead to other positive student outcomes, including less chance of grade retention and higher earnings as an adult.
Changing kindergarten eligibility for roughly 100,000 children born between September and December would mean schools would be required to serve fewer students. We estimate that having 100,000 fewer kindergarteners in 2011-12 could free up roughly $700 million from revenue limits and categorical programs. These funds could be redirected for other K-12 purposes, including a portion for subsidized preschool for any affected low-income children. (Emphasis added)
Capitol Briefing on Early Learning and Play
Last week at the State Capitol, UC Berkeley experts, Dr. Alison Gopnik, Professor of Developmental Psychology, and Dr. Bruce Fuller, Professor of Education, discussed key scientific findings on quality - including play - on children's development. In the Monday issue of Capitol Plus (our premium account), we will summarize what they told Capitol staff and advocates. (Annual subscription is available at www.cdpi.net.)
State Unemployment Rate Rises
ED. NOTE: The following is an Associated Press news article, dateline March 5, 2010.
State officials say California's unemployment rate grew slightly to 12.5 percent in January. The latest employment figures were released Friday. The state's unemployment rate in December was 12.3 percent.
Despite the increase in unemployment in January, the state added 32,500 jobs. The construction industry saw the largest increase with an additional 16,200 jobs. The information, financial activities, and professional and business services industries were the only ones that lost jobs.
The national unemployment rate, meanwhile, is holding steady at 9.7 percent.
Senate Budget Hearings Announced
The Senate Budget and Fiscal Review committee has released its tentative Budget hearing schedule. The most critical day for child care will be April 22nd.
Senate Sub 1 (Education) will hear child care and Senate Sub 3 will hear Community Care Licensing. Both hearings will be in different rooms but at the same time (9:30 AM). The Assembly Committee on Budget has not set subcommittee hearings yet.
CDPI's Capitol Plus
For several months, we have been talking about CDPI's new, web-based publication, Capitol Plus. This is yet another way that CDPI will work to keep the Child Care and Development field informed.
Our 7,000 readers are familiar with the CDPI Bulletin, its format, content, and timeliness. It will continue - albeit with a somewhat briefer content - on a pro bono basis.
We are very excited to bring you Capitol Plus. In addition to timely political and policy information, the publication will have some new features. Each issue will have an "It should be noted" section with some important, bulleted facts and dates. Each will raise an important policy question under the heading, "Just Thought We'd Ask ..." And, each will highlight some interesting data, under "I'm Just Saying ..." As Capitol Plus evolves, we may add opinion pieces and a periodic federal update. But let's not get ahead of ourselves ...
Capitol Plus is available on CDPI's website on a subscription basis ($49 for the calendar year). Issues are published on a periodic basis as new-worthy information develops. We expect that a similar number of issues will be produced as with the CDPI Bulletin today. Unlike the CDPI Bulletin, where we encourage copying and sharing, we ask that subscribers not forward CapitolPlus, as it is a fund-raiser for CDPI.
Subscriptions are on an individual basis and each subscriber will be able to create their username and password on our website. When an issue is released, subscribers are notified via e-mail which provides the link to the "Premium Account" content on CDPI's website.
CDPI is now accepting payments on our website. If you would like to subscribe to CDPI's Capitol Plus, please visit www.cdpi,net. The first issue was released on March 4, 2010; the second will be released next Monday.
If you have any questions, please feel free to contact CDPI at 1-866-662-9597.
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