COUNTY OF SAN MATEO

Inter-Departmental Correspondence

COUNTY MANAGER

DATE:

June 5, 2003

BOARD MEETING DATE:

June 10, 2003

TO:

Honorable Board of Supervisors

FROM:

County Manager

SUBJECT:

County Manager's Report #10 - State Budget Update

State Budget Update - Informational Only

Budget Conference Convened

The California Constitution requires the Legislature approve and send a budget to the Governor by June 15. The Governor is required to sign the budget into law by July 1. In the past 25 years the state budget has been enacted on time 8 times. Last year the budget was signed into law on September 5, more than two months past the Constitutional deadline.

The Assembly and State Senate have appointed Budget Conference Committee conferees: Oropeza, Campbell, and Steinberg from the Assembly and Chesbro, Alpert and Ackerman from the Senate. Senate Bill 53 (Chesbro) amended and approved on party-line vote is the budget bill that Conference Committee began work on Wednesday, June 4, 2003. The Budget Conference Committee announced it would meet everyday through the weekend in order to complete its work by Sunday.

The Senate version of the Budget is about $100 billion. Senate Bill (SB 53):

· Assumes deficit financing bonds of $10.7 billion;

· Assumes no vehicle license fee (VLF) backfill for realignment or general local government and assumes the VLF "trigger" is pulled -- restoring the VLF rate to 2 percent;

· Shifts $250 million from redevelopment agencies to ERAF for just one year;

· Defers funding and suspension of mandates, but rejected the Governor's proposal to repeal the Open Meetings Act;

· Funds the $40.1 million Williamson Act Subvention

· Eliminates the $38 million backfill for booking fees;

· Provides $41.2 billion Prop 98 funding;

· Restores $200 million to Community Colleges;

· Adopts the Governor's revised $1.7 billion realignment plan;

· Increased health program spending by $800 million above the Revision level;

· Assumes $250 million in federal funds to increase federal cost-sharing ratio for the Medi-Cal Program;

· Adopts new and increases $118 million in court fees;

· Transfers the full $1.145 billion to the Transportation Improvement Fund (TIF) and loans $938 million to the State General Fund; and

· Agrees with the Governor's proposed General Fund savings of $470 million in reduced state employee compensation costs.

It is an "open" conference committee, which means all items can be acted on, including those previously agreed to both houses. The final budget bill requires 2/3 approval of both houses.

Mandates

As in the current year, $850,000 million in state mandated costs may be deferred, suspended or possibly repealed as part of the 2003-04 budget solution. Last month, Speaker Herb Wesson convened the Special Committee on State Mandates to more thoroughly examine these proposals. Attached is a list of mandates that may be repealed or suspended.

One of the most costly mandates is "Assembly Bill 3632" which requires counties to provide mental health services under the federal "Individuals with Disabilities Education Act" or IDEA. IDEA ensures children with special needs receive special education instruction and related services. Related services include occupational and physical therapy, mental health and residential placement. In 1984, Assembly Bill 3632 was enacted to shift the responsibility for mental health services to special education students from local education agencies to county mental health departments. When Assembly Bill 3632 was enacted $8 million was appropriated to fund the program. In Fiscal Year 2000-01 the counties 'total SB 90 claims to serve 27,000 special education students in this program exceeded $100 million. Estimates now put the annual cost of the program over $120 million. The May Revision included just $69 million in additional federal funds for this purpose.

San Mateo County is currently owed $3 million for this unfunded mandate.

Workers Compensation

In May, the California Chamber of Commerce issued an "economic stimulus plan" to provide a framework to break the impending state budget impasse. A key feature of the plan is workers' compensation reform. According to the Chamber, California's businesses pay among the highest premiums in the nation: $20 billion in 2003 -- an increase of 45 percent from the $5.7 million paid in 1995. What's more, the Chamber asserts California's workers' benefits are among the lowest in the nation. California's business community argues that the state's system is cumbersome and litigious, and without systematic reforms, the state's business economy will continue to falter.

No fewer than 16 bills have introduced to improve the workers' compensation system during this session, the preponderance would provide relief to small business and not benefit self-insured local governments like San Mateo County. Workers' compensation reform is anticipated to be included as part of the final budget solution.

I have requested the Board's Legislative Committee to review the package of workers' compensation reform measures and I will continue to keep you apprised of the state budget as it wens its way through the process.