Many aspects of the budget agreement signed by Governor Schwarzenegger last week have left many of our readers scratching their heads in astonishment. But judging by the volume of questions we’ve been getting, none is more perplexing than the “trigger” provision included in Assembly Bill X3 16. Under the trigger provision, some elements of the budget package – including half of the increase in personal income tax rates as well as certain cuts to Medi-Cal, IHSS, higher education, and other programs – will be prevented, or “triggered off,” only if a certain condition is met.
What is the condition? California must receive at least $10 billion from the federal economic recovery bill signed by President Obama on February 17. If we do, the cuts and the extra tax increase go away. So, what’s the problem? Aren’t we supposed to receive a mountain of cash from the feds? Well, yes, but the state can’t count just any federal dollars toward the $10 billion threshold. Instead, they must be federal dollars that can replace state General Fund dollars and thereby help further reduce state spending by June 30, 2010.
This is a relatively high bar to clear, but estimates from our friends at the Center on Budget and Policy Priorities suggest that California will receive much more than $10 billion in the kind of flexible federal funds needed to meet the threshold – if state officials seek opportunities to achieve that level. Unfortunately, the initial response from the Department of Finance is disappointing. The DOF estimates that California will receive only $7.9 billion – more than $2 billion shy of the threshold. DOF officials haven’t released their methodology yet, so it’s not clear how they got to their figure.
The DOF doesn’t have the final word, though. The DOF director, along with the state Treasurer, jointly must make a final determination by April 1. The CBP will release its own analysis in the coming days. Stay tuned.
— Scott Graves