There’s good news for counties awaiting the mandate repayment
provided in the 2018-19 State Budget. According to the State
Controllers’ Office, program payments were mailed on Friday, July
27. This does not
include interest, which will be mailed separately. No specific
time frame was given for the interest payments, just before the
statutory deadline of November 1, 2018.
The 2018 Budget Act included mandate repayment for counties
associated with the cost of providing “AB 3632” services for
seriously emotionally disturbed children. The approximate $280
million for counties statewide includes actual program costs and
interest owed for the mandated programs that used to be provided
by counties, but has been provided by schools since 2012.
Department of Finance (DOF)
reports a total of $136 billion in general fund cash for
2017-18. That’s $1.5 billion higher than the 2018 Budget Act
forecast. June alone brought in $1.6 billion of unanticipated
revenue, mainly in personal income and corporation taxes
representative of second quarter returns. These results offset
disappointing sales tax revenues, which fell behind fiscal year
budget estimates by $380 million, or 1.5%.
CalPERS needs some feedback from county stakeholders as the
healthcare region map is being redrawn. These regional boundaries
are critical because they dictate health insurance premiums from
one contracting agency to the next.
Just how did Governor Brown use the unprecedented
economic growth period to carry his final state budget to the
finish line? The Legislative Analyst’s Office (LAO) illustrates
the key points in their
summary of the 2018-19 State Budget and how the governor was
able to meet his rainy day savings goals and provide critical
one-time funding to pay down debts and meet urgent needs.
After a flurry of second house policy committee hearings, the Government Finance and Administration (GF&A) policy unit is pleased to report successful negotiations on a number of key bills impacting county personnel management and liability.
The ballot measure that would drain local resources
through a Prop 13 property tax program expansion has officially
qualified for the November ballot and will appear as Proposition
5. The initiative, sponsored by the California Association of
Realtors, represents a significant threat to property tax
revenues as well as an erosion of local control, causing the CSAC
Board of Directors to adopt an “oppose” position earlier this
year.
As the November General Election nears, dozens of initiatives are
vying for a spot on the ballot and the Legislature is ramping up
its initiative hearings. As background, state law requires that
the Legislature hold informational public hearings on any
initiative that receives 25 percent of the required signatures,
of which currently there are 14. The hearing docket this past
week included two tax-related initiatives which CSAC opposes and
which fueled very passionate debate.
The Government Finance and Administration (GFA) policy unit
reports the following “hot” bills which remain alive in the 2018
calendar year and are headed to the second house. As CSAC works
to stop these measures, counties are encouraged to get involved
and engage their legislators.
AB 1912 (Rodriguez) – Expanded Pension Liability for JPA
Members
• Scheduled for Hearing Monday, June 11 (Senate PERS
Committee)•
CalPERS will host a webinar, providing public agency employers
with various strategies on how to manage their unfunded accrued
liability balance. The webinar will take place Thursday, May 31
from 9:00-10:00 am. Register here to
reserve your spot.
Several decisions pending in the proposed 2018-19 state budget,
the Commission on State Mandates, and the California Supreme
Court could provide funding to repay local agencies for providing
state-mandated services. See below for more details on each
development.
The CSAC Government Finance and Administration (GF&A) Policy
Committee met this week in Sacramento County and discussed a wide
range of important topics. The
agenda included presentations from both the CEO of CalPERS
and the Director of the newly formed Department of Tax and Fee
Administration (CDTFA), in addition to updates on state
legislation, congressional activity, and collective bargaining
for IHSS providers. Key highlights are provided below.
The CalPERS Finance and Administration Committee tabled action on
CSAC-opposed
AB 1912, until their next meeting in June after lengthy
discussion and extensive public comment at this week’s hearing.
The action followed requests to do so from CSAC, the League of
California Cities, and the California Special Districts
Association.
The Government Finance and Administration (GFA) policy unit is pleased to report early successes on several bills before the critical “fiscal deadline” for any legislation needing to move past the first round of policy committees if it creates additional costs. There are also ongoing challenges in the “house of origin” that should be noted for counties to engage on in the coming weeks.
Counties have a vested interest in the upcoming census count, as
it dictates over $675 billion in federal grant money for
everything from safety net programs to infrastructure. Therefore,
as the U.S. Census Bureau enters into peak operations for the
2020 Census, CSAC has offered a helping hand. Earlier this week,
in a
letter to the U.S. Secretary of Commerce, CSAC pledged to
provide assistance that will ensure an accurate count.
As policy committees meet in earnest over the course of the next
month, the CSAC Government Finance and Administration (GFA)
policy unit would appreciate feedback on the following bills,
related to business licenses, hiring preferences, and
redistricting commissions.
On Tuesday, Los Angeles County conducted the first of several
scheduled special elections this year to fill legislative
vacancies, shining a spotlight on the financial burden special
elections place on counties. LA County alone is estimating a $6.5
million price tag associated with elections administration. The
good news is that there is currently a bill working its way
through the Legislature that would provide state reimbursement to
counties for these elections.
April is a pivotal month for the state’s overall budget picture
as a large number of tax returns are added to the books. As the
May Revision nears, the Brown Administration will be watching the
numbers closely and now because of the State Controller’s Office
(SCO), the public can too. Daily personal income tax receipt
totals are available on the SCO’s
revenue tracking website.
Two Assembly Committees held a joint hearing earlier this week
on community development tools, sometimes dubbed
“Redevelopment 2.0.” At the hearing, CSAC urged legislators to
seek full consent from any local agency providing property tax
increment for development projects. CSAC also shared that the
over-reliance on property tax increment can thwart development as
local agencies must turn to developer fees for revenue needs.
The latest
California Department of Finance (DOF) cash flow report shows
February receipts falling short of 2018-19 proposed budget
projections by $297 million, or 5.7 percent. The underperformance
was driven by personal income tax receipts which were $357
million, or 11.5 percent below forecast – a dip that DOF
attributes to federal tax reform. Despite this setback, state
revenues are still surpassing estimates for the fiscal year
overall.
Following the
Board’s recent decision to shorten the amortization schedule
and thereby adding further stress on employer agencies, the
California Public Employees’ Retirement System (CalPERS) is now
reexamining the eligibility requirements under the hardship
exemption which would allow public agencies to maintain a 30-year
amortization, instead of changing to a 20-year schedule.
With policy committee hearings beginning to fill the calendar,
the CSAC Government Finance and Administration (GFA) policy unit
would appreciate feedback on the following bills, related to
sidewalk vendors, mandatory sexual harassment training, and city
incorporations.
California’s total revenues of $16.53 billion in January beat the
2018-19 proposed budget assumptions by $2.58 billion, or 18.5
percent, according to the latest
Department of Finance (DOF) cash flow report. DOF attributes
the recent surge in revenue partly to the passage of federal tax
reform late last year, which was not taken into account during
the development of the Governor’s proposed budget.
After months of review and public hearings, the California Public
Employees’ Retirement System (CalPERS) Board of Administration
(Board) unanimously acted to adopt
changes to the amortization policy which directly impact
employer contribution rates. Provided in further detail below,
the policy change will be reflected in counties’ June 2019
actuarial reports and take affect Fiscal Year 2021-22 for those
that contract with CalPERS.
The statewide initiative process for 2018 is fully underway with
a total of 40 proposals currently being circulated for voter
signatures. From local taxes to criminal justice reform to
transportation revenues, the proposals cover a wide range of
topics critically important to counties. CSAC has produced a
summary chart of the initiative landscape as it directly
pertains to counties and will continue to monitor initiative
activity closely as the year progresses.
State legislators are churning out a multitude of bill proposals
and informational hearings on the issue of sexual harassment and
misconduct following numerous complaints and reports from Capitol
staff and third-house lobbyists. Some of the proposals narrowly
target the Legislature’s internal claims processes, while others
apply on a statewide basis to all employers. CSAC will be working
closely with stakeholders in review of these and other measures
that impact county employer responsibilities and best practices.
Changes that could impact employer contribution rates to the
California Public Employees’ Retirement System (CalPERS) will be
heard next week at the CalPERS Committee and Board hearings.
Specifically, the actuarial staff is putting forth a
recommendation to change the way member agencies pay down their
pension debt, also known as amortization. The proposal is
critically important for counties that contract with CalPERS as
they impact annual payment installments and may consequently
require budget adjustments.
Counties that contract with CalPERS for retirement or health care
benefits are strongly encouraged to participate in their annual
survey and
share feedback across a wide variety of metrics, such as
customer service, fund sustainability, and communication. The
survey is 30 questions long and takes less than 5 minutes to
complete.
What do youth offender parole hearings, processing “U
visas,” and providing multilingual election materials have
in common? They are all state-imposed mandates that may be
eligible for reimbursement should a test claimant come forward
and file with the Commission on State Mandates before the 365-day
statute of limitations is up. The Local Government Mandated
Services Working Group recently met and had a lively discussion
about these and other potential test claim opportunities, all
detailed below.
The Legislative Analyst’s Office (LAO) published an overview of
the Governor’s 2018-19 budget proposal, offering insights and
suggestions for the Legislature to potentially pursue in upcoming
budget negotiations. Additionally, the report includes a
preliminary analysis of the new federal tax law and its effect on
California state revenues, ending with a hopeful prediction that
the May Revision could reflect higher revenues than currently
anticipated. Read the full report
here.
Several important updates come from the California Public Employees’ Retirement System (CalPERS) with a member-wide webinar on the proposed amortization policy (reported earlier) and a legislative hearing on divestment mandates. More details are provided below in addition to a preview of the monthly Board Meeting taking place off-site next week.
CalPERS will host a webinar about the
proposed changes to the amortization period and is requesting
feedback from local government agencies. The webinar, on
Thursday, January 11 from 9:00-10:00 am, will also be posted
online following the initial viewing with a survey for employers
to share their input. CalPERS-member counties are strongly
encouraged to participate. The webinar will lay out the proposed
amortization policy changes, with examples of how specific
scenarios would impact employer contributions.
A new investment portfolio and corresponding discount rate was
adopted by the California Public Employees Retirement System
(CalPERS) Board of Administration (Board) that will dictate asset
allocation over the next four years. Of the four options under
consideration, the Board selected portfolio Candidate C which is
most similar to the current portfolio and is expected to earn a
30-year blended rate of return of 7 percent.
Assembly Budget Chair Phil Ting (D-San Francisco) outlined key
priorities for the 2018-19 State budget in his “Blueprint for a
Responsible Budget” earlier this week. It provides a high-level
overview of how to further bolster reserves, pay down debt, and
enhance program funding in light of the LAO’s estimated $7.5
billion in unanticipated revenue for 2018-19.
Budget season is in full swing on the state level with less than
a month before the Governor is due to release his proposed
2018-19 Budget. According to the
State Controller’s Office most recent cash report, within the
first five months of the current fiscal year, total revenues of
$40.96 billion are outpacing budget projections by 2.5 percent,
driven largely by unexpected gains in retail sales.
The CalPERS Board is scheduled to take action next week on
an investment portfolio that will guide asset allocation,
establish a discount rate, and define employer contributions over
the next four years. The decision comes on the heels of a
workshop held last month where CalPERS staff presented the
Board with four investment options and member agencies had a
chance to voice their preferences. Information on additional
public comment opportunities are provided below.
The Commission of State Mandates recently voted to approve
regulatory amendments, six months in the making, that
substantially impact test claim filing procedures and
documentation requirements. CSAC concerns were partially
addressed in the final
version of the regulations; however, core problems centered
on the test claim filing period remain.
The CSAC Government Finance and Administration Policy Committee
met on November 30 at the 123rd Annual Meeting with
Supervisor Erin Hannigan, Solano County, presiding as chair and
Supervisor Judy Morris, Trinity County, presiding as vice-chair.
The meeting agenda and speaker presentations are available
here with summaries provided below.
Federal tax reform proposals, CalPERS activity, a state budget
update with fiscal forecast and cannabis banking developments
will all be presented to the CSAC Government Finance and
Administration Policy Committee on November 30 from 9:00-11:00
a.m., taking place during the CSAC
Annual Meeting in Sacramento.
The California Public Employees’ Retirement System (CalPERS)
Board is in the midst of reviewing their investment strategy that
could lead to further changes in the discount rate, which has
major ramifications for employer contributions. County feedback
is needed as CSAC continues to engage with CalPERS over the
coming weeks to help inform their decision.
Following on the heels of big state revenue months, October
revenues came in just shy of 2017-18 budget projections. Despite
slumps in two of the biggest revenue sources (personal income tax
and corporation tax), according to the Department of Finance’s
October cash flow report, overall revenues in the month of
October experienced only a $1 million dollar shortfall, explained
by an unexpectedly strong month in retail sales.
The California Public Employees’ Retirement System (CalPERS) will
host the highly anticipated Asset Liability Management (ALM)
Workshop on November 13. Once every four years, CalPERS
staff unveils different investment strategies for the Board of
Administration (Board) to consider as a path forward for the next
four years. Workshop materials are available
here.
The House voted today on a budget proposal that sets in motion
the first comprehensive changes to the tax code in 30 years and
most troubling, the loss of the SALT (State and Local Tax)
deduction. Counties are urged to contact their Congressional
representatives and oppose the SALT elimination proposal, which
has allowed taxpayers to deduct their state and local taxes from
their federal taxes since 1862 and avoid a double-taxation while
ensuring local government and state control of the tax system.
Losing SALT would create new burdens on California’s counties
specifically and their ability to raise adequate revenue to
provide services for their communities and on behalf of the
state. County-by-county SALT profiles are available
here.
The new, online Annual Debt Transparency Report (ADTR) went live
on October 23, pursuant to
Senate Bill 1029 (Hertzberg, 2016). To help train filers on
the reporting process, the California Debt and Investment
Advisory Commission (CDIAC) will be hosting two upcoming webinars
free of charge and listed below. Registration and additional
information are available here.
The California Department of Finance (DOF) published its report
for
September cash flows and for the second month in a row,
California’s three major taxes have exceeded 2017-18 budget
expectations. Overall revenues in the month of September totaled
$10.8 billion, beating budget projections by $190 million (or 1.8
percent) and generating $454 million (or 4.4 percent) more in
revenues than September 2016.
