*****Budget Update*****

Assembly Speaker John A. Pérez (D-Los Angeles) and Senate President pro Tem Darrell Steinberg (D-Sacramento) today announced an updated Jobs Budget proposal to close the state’s budget deficit. Now that the legislative Democrats have put forward a joint proposal, a framework for a final budget solution is now in place that will hopefully lead to a final agreement between Democrats and Republicans.

As expected, the proposal delays the start of the new business tax breaks saving the GF approximately $2 billion. They include an oil severance tax generating $600 million in the budget year and $1.2 billion ongoing and includes the Senate’s tax swap proposal; reducing state sales tax, which is not deductable on individual federal returns, and substitutes the personal income taxes and VLF, which are deductable. The theory is this will result in a combined federal-state tax reduction for personal income taxpayers across all income groups, while still raising $1.8 billion.

Employee Compensation. The proposal scores the savings from the 6 state bargaining units that reached agreement with the administration. It also scores an additional $822 million in employee compensation. The $822 million is an extrapolation of the estimated savings based on the six bargaining unit agreements reached to date. The money will not be saved out of employee compensation if agreements are not reached and will be taken out of budget reserves or other programs.

Local Government. The budget duplicates the local government Joint Powers Authority that mitigated the impact of the Prop 1A suspension in 2009-10, to enable cities and counties to receive $931 million of past state mandate funds that the state owes local governments. The Assembly is preparing a spreadsheet highlighting the amount each city and county will receive as a result.

We have attached the press release from the Speaker and the Pro Tem, a detailed handout of the proposal, a summary of the proposal and spreadsheet and the budget tax reform package. Also included is Assembly Minority Leader Martin Garrick’s response to the proposal put forward today by legislative democrats.

It seems the only remaining part of the Senate’s realignment program is the corrections piece (see attached). This proposal will likely be adopted by the Budget Conference Committee later this evening.

Interesting to note, the Governor declared the new Democratic plan to close the state budget deficit to be “dead-on-arrival” even before it was officially unveiled. Read Governor’s response by clicking here: http://blogs.sacbee.com/capitolalertlatest/2010/08/schwarzenegger-rejects-latest.html

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