Bill Text: CA ACA5 | 2011-2012 | Regular Session | Amended
Bill Title: State finance reform.
Spectrum: Moderate Partisan Bill (Democrat 5-1)
Status: (Introduced - Dead) 2011-05-10 - Re-referred to Com. on BUDGET. [ACA5 Detail]
Download: California-2011-ACA5-Amended.html
BILL NUMBER: ACA 5 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 9, 2011
INTRODUCED BY Assembly Member Portantino
( Coauthors: Assembly Members
Davis, Fletcher, Huffman, and
Solorio )
( Coauthor: Senator Wolk
)
DECEMBER 6, 2010
A resolution to propose to the people of the State of California
an amendment to the Constitution of the State, by adding and
repealing Section 8.5 of Article II thereof, by adding and repealing
Section 8.5 of Article IV thereof, and by adding and repealing
Section 1.2 of Article XVI thereof, relating to state finance.
LEGISLATIVE COUNSEL'S DIGEST
ACA 5, as amended, Portantino. State finance reform.
Existing provisions of the California Constitution provide that
the electors may propose statutes or amendments to the California
Constitution by initiative and approve or reject statutes by
referendum. The California Constitution also provides that the
Legislature may propose both amendments and revisions to the
California Constitution to the electors, and may enact statutes by
passing bills.
This measure would, until January 1, 2020, prohibit an initiative
measure from being submitted to the electors or from having any
effect if the initiative measure appropriates state funds for any
purpose in an amount exceeding the amount appropriated for that
purpose for the 2004-05 fiscal year by more than $250,000 unless the
measure provides for additional state revenue or offsetting savings
in a total amount that is not less than the amount of the
appropriation.
This measure would, until January 1, 2020, provide that a statute,
other than an urgency statute, is void if it appropriates state
funds for any purpose in an amount exceeding the amount appropriated
for that purpose for the 2004-05 fiscal year by more than $250,000
unless the statute provides for additional state revenue or
offsetting savings in a total amount that is not less than the amount
of the appropriation.
This measure would also, until January 1, 2020, prohibit the
Treasurer from offering for sale or issuing general obligation bonds
unless the measure that authorized the sale or issuance of the bond
provides for additional state revenue or offsetting savings in an
amount necessary to repay the bond, including principal and interest
payments. This prohibition would encompass bonds from bond
measures approved prior to the operative date of the prohibition.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
Resolved by the Assembly, the Senate concurring, That the
Legislature of the State of California at its 2011-12 Regular Session
commencing on the sixth day of December 2010, two-thirds of the
membership of each house concurring, hereby proposes to the people of
the State of California that the Constitution of the State be
amended as follows:
First-- The people of the State of California find and declare all
of the following:
(a) During the current economic recession, California has
experienced a dramatic decline in revenues that has forced and is
forcing severe cutbacks in spending by the state government on
services and programs. The state now faces an estimated shortage of
$25.4 billion for the 2011-12 fiscal year.
(b) The budget for the 2011-12 fiscal year is expected to include
a series of taxes and cuts triggered in part by the level of incoming
federal dollars and the performance of the state's economy.
(c) State services have been funded in past budgets through
gimmicks and borrowing that have served only to exacerbate our state
government fiscal crisis. In addition, state borrowing through bond
indebtedness has steadily increased over the past six years.
California bond borrowing has reached the point where the debt load
on the General Fund could, in the future, easily exceed 10 percent of
the annual state budget. These fiscal practices are not sustainable
and will lead only to further economic and fiscal crises.
(d) The Treasurer, in his State Debt Affordability Report issued
in 2009, made the following observations to illustrate how debt
payments will eat up increasingly larger chunks of the General Fund:
(1) The state in the 2010-11, 2011-12, and 2012-13 fiscal years
will issue an estimated $4.06 billion in additional bonds backed by
the General Fund. Over the same period, for these additional bonds
and bonds already sold by the state, the General Fund will have to
pay a combined $23.15 billion in debt service.
(2) As a percentage of General Fund revenues, the annual combined
debt service payments will grow from 7.7 percent in the 2010-11
fiscal year to 8.81 percent in the 2012-13 fiscal year. Meanwhile,
the General Fund over these three fiscal years will have a cumulative
structural deficit of $38 billion, according to estimates by the
Department of Finance.
(3) Over the long term, from the current fiscal year through the
2027-28 fiscal year, the state will issue $22.598 billion of General
Fund-backed bonds. The combined debt service on these bonds and
already sold bonds, over the same period, will total $254.96 billion.
(4) The General Fund's annual bond payments will grow from $6.01
billion in the 2009-10 fiscal year to $19.64 billion in the 2027-28
fiscal year. As a percentage of General Fund revenues, the annual
debt burden will increase from 6.71 percent in the current year to
9.18 percent in the 2027-28 fiscal year. In between, from the 2014-15
fiscal year through the 2020-21 fiscal year, the debt service ratio
will exceed 10 percent of General Fund revenues.
(e) The recession continues to take a terrible toll on California'
s communities and families. High unemployment plagues most sectors
and the housing market remains depressed. Family income has shrunk
and consumer spending has dropped. All these factors, in turn,
continue to erode the revenues of the state and local government. And
that erosion compounds the economic stresses by fueling further
reductions in jobs and public services at the very time when both are
needed most.
(f) Because debt service is considered a fixed part of a state's
budget, credit analysts compare a state's General Fund-supported debt
service to its General Fund revenues as a measure of the state's
fiscal flexibility. The Treasurer's Debt Affordability Report issued
in October 2010 indicates that California's ratio of debt service to
General Fund revenues was 6.69 percent in the 2009-10 fiscal year,
based on $5.790 billion in general obligation, lease revenue, and
Proposition 1A Receivables debt service payments versus $86.521
billion in General Fund revenues for that fiscal year. This ratio is
projected to be 7.17 percent in the 2010-11 fiscal year, based on
$6.558 billion in debt service payments versus $91.451 billion in
General Fund revenues as projected by the Department of Finance.
(g) California's level of debt to the total personal income of its
residents measures a borrower's ability to repay its obligations
because it provides one indicator of a state's ability to generate
revenues. This has been estimated to be at 5.6 percent. The debt per
capita measures residents' average share of a state's total
outstanding debt. The state's debt per capita amounts to $2,362.
(h) It is the intent of the people of the State of California to
adopt a process to require that, from 2010 until 2020, no statute or
initiative passed or bond issued in this state shall take effect
unless it is revenue neutral. The intent of this constitutional
amendment is to adopt a "pay as you go" or "PayGo" system, in which
any new statute or initiative passed that requires the expenditure of
moneys also include specified savings or revenue sources that
identify how the expenditures are to be made. If these offsetting
savings or revenue sources are not specified in the statute or
initiative it shall not become operative. The designated source of
revenue shall not include any moneys from the General Fund or any
other state fund unless the statute or initiative provides a new and
specified funding source from which new moneys will be deposited into
the General Fund or other state fund.
(i) The savings or revenue to fund any statute or initiative must
be clearly and specifically identified, and sufficient to cover the
expenditures and costs of the proposal.
(j) It is also the intent of the people of the State of California
that, during the time that this requirement applies, state
government shall be prohibited from issuing or selling any
general obligation bond indebtedness unless
a specified repayment source, other than the General Fund, has been
identified to repay the proceeds of the issued bond.
Second-- That this act shall be known and may be cited as the
"PayGo" or "Pay as You Go" Fiscal Responsibility Act of 2011.
Third-- That Section 8.5 is added to Article II thereof, to read:
SEC. 8.5. (a) Notwithstanding any other provision of this
article, an initiative measure that would appropriate state funds for
any purpose in an amount exceeding the amount appropriated for that
purpose for the 2004-05 fiscal year by more than two hundred fifty
thousand dollars ($250,000) shall not be submitted to the electors or
have any effect unless the initiative measure provides for
additional state revenue or offsetting savings in a total amount that
is not less than the amount of the appropriation.
(b) An initiative measure that would authorize the issuance of any
general obligation bond shall not be submitted to the electors or
have any effect unless the measure provides for additional state
revenue or offsetting savings in a total amount that is not less than
the total state expense for the principal, interest, and related
costs that would result from the issuance of the bond.
(c) This section shall remain in effect until January 1, 2020, and
as of that date is repealed.
Fourth-- That Section 8.5 is added to Article IV thereof, to read:
SEC. 8.5. (a) A statute, other than an urgency statute, that
appropriates state funds for any purpose in an amount exceeding the
amount appropriated for that purpose in the 2004-05 fiscal year by
more than two hundred fifty thousand dollars ($250,000) is void
unless the statute provides for additional state revenue or
offsetting savings in a total amount that is not less than the amount
of the appropriation.
(b) This section shall remain in effect until January 1, 2020, and
as of that date is repealed.
Fifth-- That Section 1.2 is added to Article XVI thereof, to read:
SEC. 1.2. (a) The Treasurer shall not offer for sale or issue
any general obligation bond , including any bond that was
authorized, but not sold or issued, prior to that is
authorized after the operative date of this subdivision, unless
the measure authorizing the sale or issuance of the bond provides
for additional state revenue or offsetting savings in an amount
necessary to repay the bond, including principal and interest
payments.
(b) This section shall remain in effect until January 1, 2020, and
as of that date is repealed.
