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Tuesday, March 29, 2011

Greater transparency proposals for California budgeting - SB 14, SB 15 and SB 503

Two bills introduced in December 2010 to modify California budget processes will be the subject of a hearing in the Senate Governance and Finance Committee on March 30, 2011. SB 14 calls for performance-based budgeting. SB 15 calls for 2-year budgets, 5-year projections for revenues and expenditures and creation of an estimate of the long-term effect of the budget on the economy. In addition, the hearing will include SB 503 introduced in February that calls for analyses of personal and corporate tax credits in order to know if they are having the desired effect.

There are a few items in these bills that should bring about greater transparency in the budget process and tax system. I'll highlight two of them.

First, SB 14 would add Section 9147.8 to the Government Code to read as follows:

"9147.8.(a) Within one year of the effective date of the act that added this section, the Joint Sunset Review Committee shall adopt a process, schedule, and deadline for reviewing the performance of all programs at least once every 10 years. The schedule shall provide for reviewing programs with expenditures that total one-third or more of total expenditures by July 1, 2015, and that total two-thirds of total expenditures by January 1, 2018. For purposes of this section, "expenditures" include all funds as reflected in the Budget Bill submitted by the Governor, and statutory exemptions, deductions, credits, or exclusions from taxes or fees that would otherwise apply. For purposes of this act, "expenditures" also shall include the revenue and expenditures of state departments that are not reflected in the Budget Bill. The process established by the committee to review the performance of public programs shall reflect the principles of performance-based budgeting and shall include the participation of the Senate Committee on Budget and Fiscal Review and the Assembly Committee on Budget."

Second, SB 503 calls for data gathering and analysis for any new tax credit added after 2011. Specifically, such a new credit must "contain all of the following:
(a) Specific goals, purposes, and objectives that the tax credit will achieve.
(b) Detailed performance indicators for the Legislature to use when measuring whether the tax credit meets the goals, purposes, and objectives stated in the bill.
(c) Data collection requirements to enable the Legislature to determine whether the tax credit is meeting, failing to meet, or exceeding those specific goals, purposes, and objectives. The requirements shall include the specific data and baseline measurements to be collected and remitted in each year the credit is effective for the Legislature to measure the change in performance indicators, and the specific taxpayers, state agencies, or other entities required to collect and remit data.
(d) A requirement that the tax credit shall cease to be operative seven taxable years after its effective date, and as of January 1 of the year following the end of the operative period is repealed."

This all sounds good, but I don't expect it would apply too often as I don't see the state enacting new credits given the current budget problems.

It would be beneficial to the legislators and public if they had some of the information for existing tax credits.

What do you think?

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