Recent revelations about the Department of Parks and Recreation hiding $54 million dollars while threatening to close 70 state parks in the 2011-12 budget raises questions about other budget assumptions.    These revelations come as California started a new fiscal year on July 1st and taxpayers can take a closer look at last year's actual spending now that the books have closed on the 2011-12 Budget. 

Looking back, California Budget Fact Check is examining whether budget cuts in last year's budget actually materialized.  Consider that:

• Spending was up $1.1 billion over the adopted budget.  An "apples to apples" comparison found that General Fund spending grew from $91.5 billion in 2010-11 to $92.6 billion in 2011-12. 
• Many of the permanent budget cuts in the 2011-12 Budget did not materialize, including $1.7 billion in proposed cuts to health and welfare programs. 
• Budget gimmicks, including loans and fund shifts, did materialize.  However, those maneuvers did not reduce overall spending and grew the deficit.

General Fund Spending Grows:

The adopted 2011-12 budget assumed $85.9 billion in General Fund expenditures.¹  But the Governor failed to limit spending, and expenditures grew to $87 billion by the end of 2011-12. 

"Apples to Apples" Comparison:
To compare spending levels in 2010-11 and 2011-12, it is critical to note that the 2011-12 budget shifted $5.6 billion in state General Fund program costs to counties as part of realignment.²  Therefore, to get a true "apples to apples" spending comparison, realignment has to be considered an expenditure.  Doing so shows that General Fund spending grew from $91.5 billion in 2010-11 to $92.6 billion in 2011-12. 

Many Real Budget Cuts Used To Close the 2011-12 Budget Gap Did Not Materialize... Except Those Targeting Education:

The 2011-12 budget included an effort to close a $26 billion gap with $11.1 billion in what the non-partisan Legislative Analyst referred to as "Revenue-related Actions."³  These include loans to the General Fund, fund shifts and budget cuts.⁴  While budget gimmicks did materialize, many permanent non-education budget cuts did not materialize.  Many education budget cuts remain in effect.

Cuts That Did Not Materialize:

Medi-Cal Spending: The budget assumes $2 billion was saved by reducing Medi-Cal Costs. 

· $511 million - Co-pays: The budget assumed co-pays, including a $5 co-pay to visit a doctor or dentist.  But since the federal government did not approve them, the savings never appeared.

· $623.4 million - 10% Provider Rate Reduction: The federal government approved the provider rate cuts, but a court halted them. 

IHSS Spending: The budget assumed $400 million in In-Home Supportive Services (IHSS) reductions.  Unfortunately, two major savings proposals failed to achieve any savings.

· $140 million -MDM Pilot: The Medical Dispensing Machine pilot program (MDM) would have utilized automated medication dispensing machines in IHSS recipients' homes to monitor and assist recipient's with taking prescribed medications.  It was estimated to save $140 million in 2011-12. After evaluating the pilot, it was determined that full implementation could actually end up costing the state General F und up to $57 million.  The pilot program was repealed as part of the 2012-13 budget.  (SB 1041)

· $121 million - IHSS tax: As part of the 2010-11 budget, the state sought permission from the federal government to begin collecting sales taxes on home care services in IHSS.  Revenue from this tax would be used to secure additional federal funds.   But the state is still awaiting a response from the federal government and it is no longer assumed this $121 million in savings will materialize in 2011-12.

· $35 million - Health Care Certificate: The budget assumed savings of $67.4 million by requiring IHSS recipients to obtain written certification from a licensed health care professional that personal care services are necessary to prevent out of home care. As implemented, 43 different kinds of health care professionals and practitioners may provide certification for IHSS services including veterinarians, massage therapists, and dental assistants.

Corrections Spending:  The adopted budget assumed that Corrections spending would be $8.6 billion with $400 million in Corrections funding reductions. 

· $300 million Increase:  By the end of the fiscal year, Corrections spending had risen to $8.9 billion in 2011-12.⁵ 

Savings from Operational Efficiencies:  The budget assumed $250 million savings in departmental costs through efficiencies.

· $250 million Increase:  The Legislative Analyst assumed those savings were never achieved.⁶

Education Cuts Did Materialize:

K-14 Cuts:

· Baseline Cuts: K-14 education took the biggest hit in the 2011-12 budget, when the Governor realigned $5.1 billion in state sales tax revenue to local agencies.  According to the Legislative Analyst's office, the fund shift reduced Proposition 98 funding by $2.1 billion.⁷  (The majority party added an additional $2.2 billion deferral to education to accommodate this Proposition 98 cut.)

· Trigger Cuts:  The 2011-12 budget included trigger cuts if revenues did not meet expectations, 85% of which targeted education.  K-14 schools were targeted with a $1.9 billion education trigger cut.  In January, most of the trigger cuts were avoided.  Ultimately, $328 million in trigger cuts were implemented.

Higher Education:

· Baseline Cuts: The budget included $1.4 billion in higher education cuts.

· Trigger Cuts: The final budget included $200 million in higher education trigger cuts, which were imposed in January.

Most Loans and Other Budget Gimmicks Did Materialize:

The 2011-12 budget gap was closed with numerous fund shifts, loans and offsets.  The vast majority of those gimmicks reduced the General Fund deficit.  However, it is important to remember that while these gimmicks reduce General Fund spending, the spending continues using other funds and they often only provide temporary relief. 

· Loans and Transfers from Special Funds: The budget included $2.5 billion in new loans, loan extensions and transfers from special funds.

· Weight Fees: The budget used $1.1 billion in weight fees paid by truckers to offset General Fund transportation debt service costs.

· Proposition 63 Funds: The budget used $900 million in funds from Proposition 63 to offset General Fund costs for mental health programs.

· Gas Surcharge: The budget used $200 million in funds from the Gas Consumption Surcharge to offset General Fund costs.

· VLF Fees from Cities: The state captured $200 million in Vehicle Licensing Fees previously dedicated to Orange County and to cities.

· Disability Fund Loan: The budget borrowed $300 million from the state Disability Insurance Fund to make Unemployment Insurance interest payments.

· Tribal Gaming: The budget transferred $100 million from tribal gaming funds to make transportation payments formerly paid by the General Fund.

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