The Arc of California
(916) 552-6619
Overview of Proposition 57
The Economic Recovery Bond Act
Position
The Arc of California supports passage of the Economic Recovery Bond Act, Proposition 57.
Background
Proposition 57, the Economic Recovery Bond Act, on the March ballot was initiated due to chronic shortfalls between revenues and expenditures since 2001-02. In addressing the shortfalls, the Legislature, Governor and other policy-makers have reduced expenditures, increased revenues and implemented other measures including borrowing from special funds, local governments and private lenders.
A key action in dealing with the projected current-year (2003-04) budget shortfall was the authorization, by the Legislature, of a $10.7 billion deficit-financing bond. The intent of this bond was to eliminate the cumulative budget deficit that would have existed at the end of 2002-03. This would also have allowed the State to avoid more severe budget cuts. The repayment of the current bond was to be based on a multiple-step financing process, resulting in annual General Fund costs equivalent to one-half cent of the California sales tax or approximately $2.4 billion in 2004-05 and increasing moderately each year thereafter until the bond was paid in full (about 5 years).
This deficit bond that was approved last year by the Legislature is currently being challenged in court and therefore has not yet been issued. Due to this, the 2002-2003 deficit is being financed through short-term borrowing which becomes due in June 2004.
For budget year 2004-05, the state is facing a deficit estimated at close to $15 billion. This based on the assumption that the currently authorized deficit bond is sold and the 2002-03 carryover deficit is cleared from the books. Without this bond ($10.5 billion), the budget shortfall would be much larger.
Current Proposal – Prop. 57
Proposition 57 puts before voters authorization for the State to issue a bond of up to $15 billion to deal with the budget deficits. This new bond measure would be used in place of last year’s bond authorization. The repayment of the bond would cost the General Fund one-quarter cent of the State’s sales tax revenues. This is less than the currently authorized bond of $10.5 billion. Additionally, targeted funds from the Prop. 57 bond would be transferred to the State’s Budget Stabilization Account as outlined in Proposition 58 and would accelerate the repayment of the Prop. 57 bond. Both Proposition 57 and 58 must pass to be implemented.
If approved, Proposition 57 would re-finance California’s debt and hopefully prevent even deeper cuts in important services to the citizens of California which include health and human services, higher education, and local governments.
Impact to People with Developmental Disabilities
Included in the health and human services cuts are services that are critical to people with developmental disabilities. The services impacted by proposed cuts include Purchase of Services, Regional Center Operations, Medi-Cal, In-Home Support Services and SSI/SSP. Additionally, to achieve a $100 million reduction to purchase of services, the Governor is proposing parental enrollment fees and copayments for children between 3 and 17 years of age, statewide purchase of service standards and standardized rates for community-based services and supports. Without Proposition 57, the cuts to services for people with developmental disabilities could far exceed the proposed $100 million and cause irreversible harm to consumers, families and the entire service system.
For more information, contact The Arc of California.
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