PECG Hotline
January 9, 2004

Governor Schwarzenegger's proposal for a 2004-05 state budget includes, as promised, substantial cuts and no tax increases.

Regarding transportation, he would again suspend the Prop 42 requirement that the sales tax on gasoline be used for transportation, shifting $1.1 billion from Transportation to the General Fund. However, his budget would only reduce Caltrans staffing by 338 Person Years out of more than 20,000 employees. PECG is analyzing the impact of the Governor's budget proposal on other departments.

He is also proposing that all of the negotiated improvements to the retirement plan, including the 2% at age 55 benefit, be rescinded for new hires, returning to the 2% at age 60 formula. He would increase the employee contribution to PERS by 1% of salary.

Regarding contracting out, his budget notes that the voters approved Proposition 35 to eliminate some of the restrictions for contracting out for engineering and related services. The Governor stated his intention to pursue another constitutional amendment to expand that contracting out authority to other state services.

The Governor has instructed departments and agencies to immediately provide information regarding the functions and outcomes of their highest priority programs and their performance "metrics" or measurements in recent years, along with a comparison of their performance with other state governments and private organizations. The material will be analyzed by expert review panels of private sector business CEOs and others to evaluate agency and department performance. The initial report on this process is due in March.