The CSAC Executive Committee met yesterday and engaged in lengthy discussion about the 2011 realignment. The Committee focused its discussion on the opportunity, path, and timing to secure a constitutional amendment to afford counties protections. In addition, the group discussed the fiscal structure for 2012-13 and beyond. Please recall that when the Legislature passed and the Governor signed the budget, there was recognition that additional work to refine the financing structure would take place over the remainder of the legislative session.

Constitutional Protection. While the Administration is still supportive of the constitutional amendment, the path to getting a measure on the November 2012 ballot is unclear. To place a constitutional amendment on the ballot by the Legislature requires a 2/3 vote. The Executive Committee sees securing the necessary votes as an uphill battle. They expressed interest in exploring the pros and cons of proceeding with a constitutional amendment via the signature-gathering route.

There are incentives for other stakeholders – namely education – to care about a constitutional amendment. AB 114, the education trailer bill, includes language that the 1.0625% of the state sales tax is not “General Fund Revenues” for purposes of calculating the Proposition 98 guarantee. Further, the bill indicates that this section is operative only if one or more ballot measures approved before November 17, 2012 that authorizes the dedication of state revenue to realignment and provides funding to school districts and community college districts in an amount equal to that which would have been provided if the revenues had been “General Fund Revenues”. If not, the state must provide funding to school districts and community college districts in an amount equal to what they would have received had realignment not occurred.

Statutory Protection. The Administration is interested in statutory protections until a constitutional amendment is secured. The Administration’s primary concern is to protect itself against mandate claims for any of the programs realigned in 2011. Likely, the Administration will be seeking provisions similar to the poison pills from the 1991 realignment.

Some of the provisions in the constitutional amendment favorable to counties related to the state sharing in future legislative costs, federal costs, court decisions and federal penalties could be put into state law.

Fiscal Structure. AB 118 creates a fiscal structure for 2011-12 only. Counties have been tasked with creating a fiscal structure for 2012-13 and beyond. The issues with creating a fiscal structure include balancing flexibility with certainty and predictability. AB 118 does not allow for the transfer of funds between programs. For example, if costs decreased in foster care (due to caseload declines), a county would be unable to spend those funds on other programs. Additionally, AB 118 does not contemplate how to allocate growth in revenues.

The Executive Committee reiterated support for a fiscal structure that allows for flexibility and some board authority to set priorities.

The Legislature returns on Monday. Counties will have four weeks to shepherd 2011 realignment clean up through the legislative process. CSAC will pushing hard to come to consensus about a fiscal structure – including transfer provisions and growth – before the Legislature adjourns. The CSAC Realignment Work Group will continue to meet weekly and be apprised of the latest developments on realignment.