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Program Enhancements and Other Budget Adjustments
Economic Recovery Bond Pre-Payment
On March 2, 2004, voters approved Proposition 57 (the Economic Recovery Bond Act) and Proposition 58 (the California Balanced Budget Act). Prop 57 authorized the issuance of the Economic Recovery Bonds (ERBs) of up to $15 billion in net bond proceeds to retire the accumulated budget deficit. To date, a total of $10.9 billion in ERBs have been issued ($11.3 billion in net proceeds), with $3.7 billion remaining un-issued. To ensure the repayment of the ERBs, Prop 57 also authorized the "Triple Flip," which consists of three major provisions regarding the distribution of sales and use taxes and other revenues to schools and local governments as follows:
- The 1/4 percent local sales tax rate was replaced with a new 1/4 percent statewide sales tax rate to fund ERB repayment.
- Property tax previously allocated to local schools was shifted to cities and counties to backfill revenues now used to repay ERBs.
- The General Fund now repays the local schools to backfill the previously allocated property tax
Prop 58, requires a special reserve, the Budget Stabilization Account (BSA), to be established in the state's General Fund, part of which would repay the ERBs authorized by Prop 57. The amount of BSA funds used to repay ERBs is capped at $5 billion.
As a result of aggressive repayment efforts and the fact that the remaining ERBs have not been issued, the originally scheduled ERB retirement date (July 2023) has been significantly reduced to January 2010, as of the enactment of the 2006 Budget Act. The Governor's Budget proposes an additional $595 million General Fund to further accelerate the payment of the ERBs, and will result in nearly half of the original amount being retired by June 2008. Combined with modest changes to other revenues dedicated to the repayment of the ERBs, it is now estimated that this additional pre-payment will enable the ERBs to be effectively paid off by August 1, 2009, five months ahead of the previous projection. In addition, it is estimated that the pre-payment of the ERBs will result in almost $90.9 million in simple interest savings and make available an additional $701 million General Fund in 2009-10 that would have otherwise been used to reimburse local governments for the Triple Flip.
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CHAPTER HIGHLIGHTS for
General Government Back to Top
PRINTABLE BUDGET DOCUMENTS Back to Top
Budget Summary - General Government (pdf * - 59K)
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Provides this entire General Government Chapter in pdf format.
ADDITIONAL INFORMATION Back to Top
Proposed Budget Detail - General Government
Displays Proposed Budget Detail information for General Government.
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