STATE LEGISLATURE PASSES 2017 - 2018 BUDGET  
 
Yesterday, the State Legislature passed the 2017 - 2018 Budget, advancing the legislation to the Governor's desk for approval. Last month, the Governor presented his May Revise, prompting the month-long negotiation over this final budget. The budget has changed based on the continued return of higher than expected tax revenues, concerns over California's Board of Equalization (BOE), and laws needing to be implemented related to recreational cannabis, and Medi-Cal spending.
 
This budget was particularly beholden to a flurry of State Propositions passed into law, this past November. Leading up to the final budget, one of the most contentious negotiations revolved around the spending of $1.3 billion in Proposition 56 tobacco tax revenues. This allocation was split between Medi-Cal reimbursements, and Medi-Cal expansion. Additionally, this was the first budget that was subject to Proposition 54, which requires bills to remain in print for 72-hours before a vote - expediting last minute negotiations. Prop 54 has also resulted in the introduction of several 'budget trailer bills', separate pieces of legislation directly tied to budget implementation. In total, this budget reflects a  $183.2 billion State spending plan. 
 
The most significant changes either affecting cities or restructuring the State government are found in several of the budget trailer bills including; cannabis regulation implementation, the reorganization of the BOE, public safety impacts, SB 1 transportation allocations, changes in the Community Based Transitional Housing incentives program, alterations to the State pension loan structure, and the streamlining of the Community Development Block Grant (CDBG) program.  These bills will implement directives that were passed by the Legislature in the formal budget bill, Assembly Bill 97. AB 97 was passed first, because it outlined the overall spending plan for the trailer bills and was subject to the June 15th budget adoption deadline. Highlighted below are the differences between the Governor's May Revise and the final 2017 - 2018 Budget, some of these trailer bills are still awaiting an official vote:
  • SB 94 & AB 110 - Cannabis Regulations: This legislation was spurred by the passage of Prop 64 the Cannabis Regulation & Safety Act, legalizing recreational marijuana use. These bills are the vehicles for the alignment between medical marijuana regulations and recreational cannabis regulations, including the dual selling of both medical and recreational marijuana in the same location. Also, created in this legislation is the authorization of agricultural co-ops for cannabis growers, and the creation of a 'one-stop shop' for tax and license collections located along the North Coast. Additionally, the ability for cities and counties to maintain local control over regulatory decisions within their own jurisdictions has been outlined in this legislation. The bills direct the Bureau of Cannabis Control to work with locals to collect all the ordinances that govern cannabis in the State, including those that have bans. Local jurisdictions will be responsible for providing the contact for their jurisdiction, so that state licensing entities know who to call when questions arise about an applicant at the state level. View the Bureau's Fact Sheet 
    here.
  • SB 86 & AB 102
    - The Taxpayer Transparency and Fairness Act of 2017
    This bill would establish, the California Department of Tax and Fee Administration and would place the department under the control of a director appointed by the Governor and subject to confirmation by the Senate. This would transfer the responsibilities of the State Board of Equalization (BOE), relating to the administration of various taxes and fees, to the new department. The District Offices responses and general support to cities would be unknown when compared to the current model under the BOE. 
  • SB 95AB 111 - Community Based Transitional Housing Incentives Program: 
    Provid es  cities  and counties with more  flexibility  on how program funds are spent. This includes providing a portion of their program funds to the facility operator without limitation, and the expending of funds on other purposes that their governing boards determine are in furtherance of the program's goals, related to specifications on their applications.
  • SB 87 & AB 103 - Public Safety Omnibus:
    Prohibits a city, county or local law enforcement agency from entering into a contract with the federal government or any federal agency to house or detain an adult non-citizen in a locked detention facility for purposes of civil immigration custody. 
  • SB 99 & AB 115- Transportation: Road Repair and Accountability Act (SB 1) provides $2.8 billion in new revenues in 2017-18. Of this amount, nearly $600 million is for capital outlay, $1.7 billion for local assistance such as local streets and roads and transit and intercity rail, and $565 million for support costs. View these transportation highlights here
  • SB 84  &  AB 100  - Pension Loan Structure:
    These bills will increase the May Revise pension investment and payment to the California Public Employees' Retirement System (CalPERS) by $6 billion, totaling to a $12 billion investment over the next year. This money is coming from the surplus budgets of several different government agencies as loans to be paid back over time.
  • SB 106 & AB 121 - Streamlining Community Development Block Grant (CDBG) Funding: This bill would give cities less flexibility on what projects they can use their County allocated CDBG funds, and may dictate a city's priorities based on new grant restrictions. The proposal would reduce what is currently, 30 percent of the annual CDBG allocations set aside for specified economic development projects and programs administered by the Department of Housing and Community Development (department), to a 15 percent annual allocation. This would severely hamper local economic development programs and job creation investments, and since the dissolution of redevelopment this is one of the only tools left for economic development funding within participating cities. Click here to view ACC-OC's Memo to Orange County Cities.
Some new additions and increases in spending to the final budget include, a $1.8 billion investment to the Rainy-Day fund, and an eligibility expansion for the Earned Income Tax Credit for low-income families. Education received a $3 billion spending boost at the K-14 level, and the Middle-Class Scholarship fund was recovered, which had been cut in the May Revise. In light of a recent audit, the budget also reflects a separation between the University of California's budget and the UC President's office. The budget also increases monetary support for raised UC and California State University enrollment targets. Excluded from the 2017 - 2018 Budget is the extension authorization of the cap-and-trade program. However, this remains a priority of the Governor - despite not being captured in this budget plan.
 
Like the May Revise, this budget is still grappling with the many federal funding unknowns surrounding a potential overhaul of the federal healthcare system, and the threat of reduced federal allocations to "sanctuary" cities and/or states. Since the May Revise, there has not been any new funding to alleviate the remaining costs to Counties in absorbing State spending on the In-Home Supportive Services (IHSS) Maintenance of Effort (MOE) programs. Lastly, fundamental plans to meet the challenges of affordable housing have, again, been left out of this budget. It appears that this issue will not be addressed until next year, when it's sure to be a focus of the Legislature.
 
As budget decisions come to fruition the ACC-OC will make regular updates, and analyze the effects of the Legislature's actions on local government. Should you have any questions please contact Legislative Affairs Director, Diana Corona do at dcoronado@accoc.org  or at (714) 953-1300.

Click here  to view the Governor's 2017-2018 May Revise & here for ACC-OC's Analysis.
Click here to view the Governor's 2017-2018 January Budget Summary & here for ACC-OC's Analysis.