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Capitol dance intensifies as flood of federal funds looms

Legislative leaders are expecting Gov. Arnold Schwarzenegger to call a special session of the Legislature to begin doling out billions in federal stimulus dollars expected to begin pouring into California within weeks.

State lawmakers and the governor are jockeying for position to take the lead role in making sure that California gets the maximum amount possible from $787 billion in federal stimulus money.

But experts inside and outside the Capitol agree that nobody is really sure who's getting what – at least, not yet – because of the sheer magnitude of the funding.

"It's unprecedented solely because the scope is unprecedented. If you go into areas where the programs have been operating for many years, you'll find that the numbers were up and out in 24 hours," said Marcia Howard, executive director of Federal Funds Information for the States, or FFIS, which tracks federal money to state and local programs.

Some numbers are beginning to take shape.

California's piece of the federal economic recovery package approved by Congress and signed into law by President Obama includes about $26.6 billion for government programs, the Washington, D.C.-based FFIS reported in a 28-page study provided to its subscribers.

But the figures do not include billions of dollars more for such things as food stamps, energy efficiency programs, broadband access, health information technology, rural justice programs, among many others. There is uncertainty about the total money package, in part because new programs are being created and others depend on competition between the recipients. Last year, for example, energy-related programs got about $50 million nationally; in the stimulus package, they get more than $3 billion.

Mystery often surrounds state and federal finances, and the stimulus package is no exception. "We can't possibly know yet how much California is going to get," Howard noted.

A preliminary, internal state review shows that an estimated $8 billion is destined for California's beleaguered General Fund, the state's main depository of tax revenue. Officials in state government familiar with the estimate cautioned that it is preliminary.

But the number is critical because if the General Fund impact comes in at less than $10 billion, the so-called "triggers" of the cuts and tax increases in the just-signed, two-year state budget will be "pulled" as planned.

If the impact is higher than $10 billion, about $1.3 billion in tax hikes and nearly a billion in cuts would be blocked, perhaps more. That means the equivalent of that money would be lost to the state.

State Treasurer Bill Lockyer's staff and the governor's Department of Finance are conferring on the numbers. They also plan a joint public hearing on March 17. The hearing is expected to be publicly announced by the end of the week.

"The plan is to let people know how the process is going to work, post notice of the March 17 hearing and post materials so the public gets as much information as possible," said Lockyer spokesman Tom Dresslar.

Estimates of California's share of the federal funds, such as one from California Sen. Barbara Boxer, range up to 10 percent, or even more, of the total package, or roughly $78 billion — a plausible estimate, because the stimulus money largely is pegged to population and California, the largest state, is home to about 12 percent of the nation's people.

But since much of the federal money is provided through competitive grants or flows through other channels, a final amount is not yet known. Even basic logistical issues — the federal fiscal year starts Oct. 1 and the state's begins July 1 — play into the confusion.

One thing is certain: Lawmakers in both parties and the governor have ramped up their efforts to assure that the state gets all the money it can. In the administration and in the Legislature, rounds of meetings are under way.

The staffs of the Big 5 – the governor and the leaders of both houses of the Legislature – already have met, trying to crunch the numbers. A legislative hearing is upcoming as early as next week, as is the release of a report by the Legislative Analyst's Office. Assembly Speaker Karen Bass has gone to the White House to advocate on behalf of the state. Gov. Arnold Schwarzenegger is taking an active role in the discussions. He received national attention when he said California wanted as much stimulus money as possible, including funds that a number of other GOP governors had rejected because it meant loosening eligibility requirements to get jobless benefits.

Another piece of the equation is purely political.

To get the money, the governor and Legislature are going to have to cooperate, something they were unable to do for months during the state budget impasse. Changes in state laws are necessary, which means bills will have to be approved by the Legislature and those bills will have to be signed by the governor.

The changes are needed in Medi-Cal eligibility requirements, for example, to get an estimated $10 billion, and statutory changes are needed in eligibility to obtain some $840 million, or more, for California's unemployment insurance fund. Other changes are expected for water and transportation projects, and in statutes to process the huge infusion of money.

Capitol sources say the governor is expected to call a special election to consider the stimulus bills, which could allow simple majority votes and the bills to take effect 90 days later. A spokesman for the governor governor said Schwarzenegger, who has the authority to call the Legislature in special session, is awaiting more information from the federal government to determine whether any changes in state laws are needed.

Fiscal experts believe the state's changes need to be in place by June, which means the special session – if any — needs to occur soon.

A key date in California is April Fool's Day.

By April 1, the Schwarzenegger administration and Lockyer must decide the level of the stimulus package's impact on the General Fund, the finding that determines whether the triggers get pulled. Lockyer also intends to perform his own independent assessment of the financial implications of the stimulus package, Dresslar said.

Two other factors, separate from the federal funds but related to the budget, also are pending.

One is the May 19 special election in which voters will decide whether to cap spending, protect school funding, privatize the lottery and raise assorted taxes.

The other is a detailed examination of the state budget by the Legislative Analyst's Office, scheduled for June 8. The LAO review is likely to reevaluate projections for revenue growth as well as demands for basic state services, such as welfare and health care. As yet, there are no official projections, but some insiders say revenue growth may be less than expected and demand on services may be higher – a combination that could drive the state deeper into a fiscal hole.

For state officials and lawmakers, lobbyists for the state and Legislature in Washington, and representatives of the cities and counties, the same question remains: Just how much is California going to get?

FFIS estimates that California will receive $26,583,217,000 for 42 separate programs, part of about $223 billion nationwide – roughly a third of the total stimulus package – destined for the 50 states.

The money targets government programs, and does not include funding resulting from competitive grants, or money that flows directly to individuals, such as food stamps. If California's $26.58 billion figure represents a third of its total stimulus allocation, then a state estimate of $75 billion to $80 billion is not out of line.

A listing of the
dollar totals for the 50 states is at http://inside.ffis.org//ff/ARRA_National_Totals.pdf.

"The governor has a staff on Capitol Hill watching this, they are working closely with the (California) Congressional delegation and have been working with the relevant agencies in the state," said H.D. Palmer, a spokesman for the state Department of Finance, which writes the governor's budgets and advises him on all things fiscal.

In apportioning the money, the federal government is using a formula based in part on demographics. Some 61 percent of the allocation is based on the state's share of population of 5- to 24-year-olds. The remaining 39 percent is based on the state's share of the national population. California, the largest state by population with about 37.5 million people, is due to receive the largest share of federal stimulus money of any of the 50 states.

Most of the money must be used by 2011, although the federal education secretary can disburse funds after that date.

The U.S. Senate Policy Committee, controlled by Democrats, has released its own assessment of a variety of programs in California that will receive federal stimulus money.

The committee estimates that 396,000 jobs will be added in California. The figures include estimates from the Congressional Research Service and the Senate Appropriations Committee.

The estimates include the following for the state in new federal money:

–$160.2 million through the Drinking Water State Revolving Fund to address the backlog of drinking water infrastructure projects.

-$284.6 million through the Clean Water State Revolving Fund to address the backlog of clean water infrastructure needs.

–$2.6 billion in Highway Funding to be used on activities eligible under the Federal aid Highway Program's Surface Transportation Program and could also include rail and port infrastructure activities at the discretion of the states.

–$1.1 billion in Transit Formula Funding for investments in mass transit.

–$118.6 million through the Public Housing Capital Fund to enable local public housing agencies to address a national $32 billion backlog in capital needs – especially those improving energy efficiency in aging developments – in this critical element of the nation's affordable housing infrastructure.

–$324.2 million in HOME Funding to enable state and local government, in partnership with community-based organizations, to acquire, construct, and rehabilitate affordable housing and provide rental assistance to poor families.

–$190 million through the Homelessness Prevention Fund to be used forprevention activities, which include: short or medium-term rental assistance, first and last month's rental payment, or utility payments. As such, most of this funding will go directly into the economy of local communities, as the funds will be used to pay housing and other associated costs in the private market.

–$6 billion through the State Fiscal Stabilization Funds to local school districts and public colleges and universities in California and additional funding for other high-priority needs such as public safety and other critical services, which may include education.

–$1.2 billion for Special Education Part B State Grants to help improve educational outcomes for individuals with disabilities, raising the federal contribution to nearly 40 percent, the level established when the law was authorized more than 30 years ago.

–$1.6 billion for Title I Education for the Disadvantaged to help close the achievement gap and support disadvantaged students.

–$225 million in Dislocated Workers State Grants, particularly for grants that support immediate strategies for regions and communities to meet their need for skilled workers, as well as longer-term plans to build targeted industry clusters with better training and a more productive workforce.

–$224.5 million through the State Energy Program.

–$192.1 million through the Weatherization Assistance Program –$1.7 billion in Supplemental Nutrition Assistance Program benefits (formerly Food Stamps).

–$220.2 million in Child Care and Development Block Grants to provide quality child care services for in low-income families who increasingly are unable to afford the high cost of day care.

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