State Budget UpdateMay Revise

May 27, 2003

The Budget

• How the State landed in this position• What is the shortfall• Governor's Budget Plan• Community College Funding• Budget Outlook• Impact to NOCCCD• Tentative Budget• Next Steps

General Fund:Decline Almost Entirely Caused by

Personal Income Decline $44,614 $33,456

$-$10,000$20,000$30,000$40,000$50,000$60,000$70,000$80,000

Tota

l (in

milli

ons)

Cigarette Tax

Alcoholic BeverageExcise Tax

Inheritance, Gift andEstate Taxes

Insurance Tax

Bank and CorporationTax

Retail Sales and UseTax

Personal Income Tax

Assumes May Revise Tax Proposals

Understanding the MountainStock options/capital gains “pushed” tax revenue to historic levels.

$0

$50,000

$100,000

$150,000

$200,000

$250,000

1994 1999 2000 2001 2002 2003

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

Stock options/Capitalgains (left axis)

Personal income taxes(right axis)

6.7

2.2

1.3

2.7

2.5

1.9

2002-03 Budget Fixes, 12.6

18.9

Understanding the Gap$38.2 billion – a bigger “gap”

Tax Shortfall,

“Scheduled Spending Increases,”

Tobacco Securitization

One-time reductions/deferral

Loans

Fund shifts

Miscellaneous

Increases from $34 billion in January:•$2 billion lost tobacco securitization•$1.7 billion spending increases (workload programs)

Governor’s Budget Plan

• $10.7 billion “deficit financing bond”– Borrows money securitized by ½ cent sales tax

(using special fund exempt from Prop 98)

• $18.9 billion in cuts and savings• $6.8 billion in fund shifts, transfers & loans• $1.7 billion in program realignments to

local governments• Tax increases

Tax Proposals

$7.2 billion$8.3 billionTOTAL

Increase by 0.23 per pack in 2003-04 and 0.40 per pack in 2004-05 to fund realignment ($0.4 billion in 2003-04; $0.7 billion in 2004-05)

Increase by $1.10 per pack to fund realignment ($1.2 billion)

Tobacco tax

Create a 10.3% (taxpayers over 150k/300k) to fund realignment ($1.3 billion)

Create 10% and 11% tax brackets to fund realignment ($2.6 billion)

Personal income tax

0.5 cent “temporary” increase to pay deficit bond, beginning 10/1/03 ($1.7 billion)

1 cent proposed for realignment ($4.6 billion)

Sales Tax

Full restoration to 2%

(Revenue/decreased backfill): $3.8 billion

No increase (although eliminated backfill to local government)

Vehicle License Fee

May ReviseJanuaryTax

Governor’s CommunityCollege Proposal

• Cuts of $285 million (5.6%) from the enacted 2002-03 budget

• Enrollment: Provides a net decline of 6,500 FTES (-0.60%):– Cuts $125 million from the general apportionment for

attrition/downsizing. (~32,500 FTES)– Cuts $25 million from the general apportionment for concurrent

enrollment. (~6,500 FTES)– Funds 3% enrollment growth (32,500 FTES)

• Cuts Partnership for Excellence by 50% (to $150 million).• Increases fees to $18/unit.

2003-04 Budget Outlook

• Arguments for on-time:– Governor’s May Revise “requires” on-time approval.– Without cash infusion (through borrowing), state will be out of

cash in mid-July.– White v. Davis – no payments will be made to many programs

(incl. community colleges) without either a budget or emergency spending authority. State employees would receive minimum wage.

• Signs of possible delay:– Republican caucus: “not a single vote for the Davis tax increases”– Liberal Democrats still uneasy about the deep level of health,

human services cuts.

Impact to NOCCCD

• Reduction for $11.6 to $10.2 million

• Categorical Programs

• Full-time faculty obligation moves to 542.79 for fall 2004 a reduction of 32.81

• FTES would increase by 400 from January estimates

Revenue Decline

• Apportionment @ 3.88% - $4.4 million

• Partnership Funds @ 50% - $4.5 million

• Part-time Faculty Funds - $.2 million

• Total for these is $9.2 million

Expenditure Increases

• Medical @ 17% - $1.5 million

• PERS @ 10.42% - $1.9 million

• Step Increases - $.7 million

• Total Increase $4.1 million

Expenditure Decreases

• Extended Day reductions – ($.5 million)

• Schedule Maintenance Match – ($1.0)

• Cash Allocation – ($.2)

• Salary Holding Accounts – ($.2)

• Full-time faculty savings – ($1.0)

• Other reductions – ($.2)

• Total decreases - $3.1 million

Tentative Budget

• District model that reduces expenditures by $11.6 million

• Presented at the June 24th Board meeting

• Development in Banner– Position Control– Non Position Control

• Simple format

Next Step

• Follow budget development at the State Level– Assembly Subcommittee – 3.36% increase– Senate Subcommittee – 4.15% increase

• State Budget

• Year End Closing – Carryovers

• Proposed Budget on September 9th