Budget +97: Now, Some Details

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On the eve of the first public vetting of the long-awaited agreement over a new state budget, we're getting a look at some of the details in a deal which seems to have offered something for everyone to cheer... and jeer.

Tomorrow afternoon's meeting of the Legislature's budget conference committee will make good on a pledge from Democrats to offer some transparency to the public before quickly voting on a budget that was crafted partially in private. The plan is then for a vote in each house on Thursday, though there's still some noticeable chatter about whether all of the votes are there on this very late, very complicated plan.

What follows are a few of the more notable elements, provided today by a source close to the negotiations who was not authorized to speak on the record. The outline provides a sense of just how tough it was to find consensus without touching the various political live wires of both Democrats and Republicans.

Spending Reductions: $7.5 billion. While we've been hearing that number for a while, a few of the details seem to show that the savings are less in reducing programs and more in ways that essentially find the money in places outside of the deficit-plagued general fund. Perhaps the best example coming to light, so far, is a reduction of $300 million in funding for in-home supportive services (IHSS). While at first blush that will appear to advocates to be a big hit, the savings is reportedly achieved by $190 million in new provider fees; those fees will make the state eligible for more matching money from the feds... which, in turn, will go back to offset some of the provider costs. Of the $300 million cut in IHSS, only about $35 million is reportedly an actual program reduction... which, according to the information provided today, translates into a caregiver's eight hour workday being trimmed by 15 minutes.

Other spending reductions include $200 million less for Medi-Cal (again, we're told, not a program cut but a savings through using more managed care options); and a $50 million reduction in child care services (compared to Governor Schwarzenegger's proposed elimination).

The big kahuna in the spending reductions is school funding; about $3 billion of the $7.5 billion is reportedly from schools. But here again, it seems as though it could have been worse. The deal defers more mandated spending into the 2011-12 fiscal year, and will proclaim to leave per pupil funding at its current levels once deferrals, repayment of money owed, and actual current year spending is all accounted for. That's a lot of twists and turns, and that's achieved through a formal suspension of the Proposition 98 funding guarantee. One education expert said while it could have been worse, school officials may be nervous that the formal suspension lasts for this entire fiscal year -- meaning that the next governor and Legislature could come back in and tweak the numbers with nothing to legally restrain them.

Federal Help: $5.3 billion: This summer's legislative proposal pegged help from D.C. at $4.1 billion, so expect a lot of scrutiny of this number. It would be hard to imagine outright 'aid' to California, which likely means we're talking about temporary relief in things like health and human services.

State Workers: $1.4 billion: This may be the most politically touchy of the solutions in the budget deal, as $896 million of the state employee savings reportedly hinges on the ongoing bargaining between Schwarzenegger and unions. Those talks have been supposedly up and down, and it's unclear what happens if the budget comes up for a vote... and there's still no deal.

Business Tax Credit Suspension: $1.2 billion: This is the suspension of a tax break for businesses regarding tax liabilities and net operating losses (NOLs) that was put into law during the contentious 2008 budget pact. There have reportedly been some concessions for some small businesses on this, but the delay of this NOL provision is the only part of the 'additional revenues' on which Republicans and Schwarzenegger conceded to Democratic demands. Is this a tax increase? You're going to hear that question debated a lot over the next few days.

Add to these solutions many of the creative fixes agreed to long ago -- fund shifts and transfers, new and improved revenue projections that allow everyone to whittle down the projected problem -- and the deal will reportedly end with both a fix to the deficit and a reserve of about $300 million.

Tomorrow's conference committee hearing is scheduled to begin at 1:30 p.m.

Note: It's been pointed out, by those more in the know than I, that the original reference above to the NOL tax incentive was either spotty in its accuracy... or downright off the mark. As such, I've broadened out the reference above, as well as fixed an error that referred to it as being agreed to in 2009. It was 2008.

Here's the description of changing the NOL tax break as it appeared in the budget conference committee report from August: "NOLs are being suspended in 2008 and 2009. Under the Conference Committee's proposal, corporations would be allowed to use NOLs to offset tax liability starting in 2012 and would be allowed to carry these losses forward for 20 years. Previously, corporations could only carry forward NOLs for ten years."

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About John Myers

John Myers is senior editor of KQED's new California Politics & Government Desk. He has covered California politics for most of the past two decades, serving previously as Sacramento bureau chief for KQED News and most recently as political editor for KXTV News10 (ABC) in Sacramento. In 2014, he was named one of the nation's top statehouse reporters by The Washington Post. Follow him on Twitter @johnmyers.

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