The Fed's added $33.3 billion to California 2009-10 State spending

Elaine Howle is California's State Auditor. She's one of those generally unknown State officials whose role is more important than the Lieutenant Governor. Howle, a C.P.A., was appointed California's first female State Auditor in 2000 after working 17 years for the California State Auditor's Office (previously known as the Office of the Auditor General).

Tuesday her office issued one of the many legally required annual audit reports. Entitled State of California: Internal Control and State and Federal Compliance Audit Report for the Fiscal Year Ended June 30, 2010, this 307 page document is a typical, boring accounting document, generally not of much interest to the public. But Howle is kind enough to provide a one page fact sheet as she has for a number of years.

That fact sheet provides enlightenment for those of us who have wondered why, given the nearly $20 billion reduction in State General Fund disbursements between fiscal years 2007-08 and 2009-10, California's economy did not go into a free-fall in late 2009.

This year's fact sheet says: "From July 1, 2009 through June 30, 2010, California received $120.7 billion in federal funds to carry out more than 350 programs or program clusters—with $42.0 billion for education programs and $38.7 billion for health and human services programs. Funds received under the American Recovery and Reinvestment Act of 2009 accounted for $23.0 billion of the $120.7 billion received."

Last year's fact sheet said: "From July 1, 2008 through June 30, 2009, California received nearly $107.6 billion in federal funds to carry out 335 programs or program clusters—with $44.2 billion for education programs and $34.3 billion for health and human services programs."

The previous year's fact sheet said: "From July 1, 2007 through June 30, 2008, California received nearly $87.4 billion in federal funds to carry out 323 programs or program clusters—with $38.7 billion for education programs and $30.5 billion for health and human services programs."

In total, here is what California received in federal funds:

• 2007-08 $ 87.4 billion
• 2008-09 $107.6 billion
• 2009-10 $120.7 billion

Of course, there is nothing simple about how the money is spent. Federal priorities might not be the State's preference. But I couldn't help but compare these numbers to the State General Fund disbursements as reported by the State Controller:

• 2007-08 $107.3 billion
• 2008-09 $ 98.2 billion
• 2009-10 $ 86.6 billion

And, even though they may be apples and oranges, the total of these two sources of funds flowing through the State into the economy were as follows:

• 2007-08 $194.7 billion
• 2008-09 $205.8 billion
• 2009-10 $207.4 billion

So despite the fact that State disbursed $20.6 billion less from the General Fund, $12.6 billion or 6.5% more general government funding ran through the economy in 2009-10 than in 2007-08.

Specifically regarding the two areas of most concern to many, education and health & human services, the federal funds disbursed were as follows:

Education

• 2007-08 $38.7 billion
• 2009-10 $42.0 billion

Health & Human Services

• 2007-08 $30.5 billion
• 2009-10 $38.7 billion

Again, we need to understand that the federal funds were not at all disbursed in the manner General Fund disbursements are divided. But if we add to these numbers State General Fund disbursements for education and health & human services, we get the following results:

Education

• 2007-08 $90.9 billion
• 2009-10 $83.1 billion

Health & Human Services

• 2007-08 $59.2 billion
• 2009-10 $61.8 billion

Between these two sources, education disbursements dropped 8.6% instead of the 21.3% drop in General Fund disbursements alone. Health & human services increased 4.5% instead of the 19.4% drop in General Fund disbursements alone.

We need to note that these numbers do not include the one-time stimulus $23.0 billion spent in 2009-10 under the American Recovery and Reinvestment Act of 2009 (ARRA).  According to the report details, an additional $2.8 billion was allocated directly from the U.S. Department of Education for education purposes through this act. An additional $5.6 billion was allocated directly from the U.S. Department of Health and Human Services for health and human services purposes under this act.

It's difficult for those of us outside the halls of government to classify all the monies under ARRA. For instance about $33 million disbursed through the U.S. Department of Agriculture was for various nutrition programs, some of which may relate to school lunch programs and some to health and human services.

As another example, $251 million was disbursed for Workforce Investment Act programs. It is unknown how much of that money went to the Los Angeles Unified School District which offers WIA funded occupational training at locations like the Abram Friedman Occupational Center.

The point here, of course, is that economic decline from The Great California Slump was less steep than it would have been. It appears that actual reductions in government supported education and health and human services activities may have been far less drastic than one might have inferred from the General Fund disbursement reductions which were as follows:

Education

• 2007-08 $52.2 billion
• 2009-10 $41.1 billion, 21.3% less

Health & Human Services

• 2007-08 $59.2 billion
• 2009-10 $61.8 billion, 19.4% less

This adds to a credibility problem facing Governor Moonbeam and the Legislature. The impact of a 20% cut in the General Fund may appear to have been minimal. The tendency  is to minimize program cuts in the activities important to their constituency. They likely will hold the line through  fall 2011 until the voters can vote on a 5-year "extension" of the 2009 tax increases.

The problem is that all of the 2009 tax increases will have expired by June 30. So any way you try to spin it, the measure will be a tax increase measure and people will understand that.

If, despite all the hand-wringing and despair from the politicians and the press, the voters haven't lived with significant cuts for at least six months, the measure may fail.

Here's a comparison of what Brown proposed as a budget for 2011-12 to what he and Democrats should have adopted by now:

The "Balanced" column reflects the kinds of cuts needed. While modifications to distribution of the pain would be determined by the politicians and the actual total could increase depending on revenues, variations would probably be less than 10% of the total shown.

And whatever the federal government will do in 2011-12, it will be far less than in 2009-10.

But when your in-laws are living with you because they're unemployed and their house was foreclosed on, you may have a hard time believing that anything drastic is going to happen at your kid's school - because it hasn't. In fact, because of the Moonbeam and the Democrats, no significant cuts have been made since the adoption of Proposition 13 during Moonbeam's first term.

As I noted in my previous post, Brown's General Fund budget was still about 10% higher than if you applied population growth and cost-of-living increase factors to the 1990-91 budget. And in 2007-08 the Legislature spent 35% more than those factors would have indicated.

Why would you vote for a 5-year "temporary" tax increase? Why not 2-years? That's "temporary." At least Moonbeam will still be in office and will have to actually do something to solve the problem.