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9A Page 2 'Budget' Continued from Page 1... The budget produced by the Budget Conference Committee includes $10.4 billion in cuts and savings, $5 billion in revenue accelerations and fee increases, $2.6 billion in fund shifts, $2 billion in tax increases including an oil severance tax, a $1.50 per pack increase in cigarette tax, and the repeal of certain business net operating loss tax deductions, and $2.2 billion in other proposals that include partial sale of the State Compensation Insurance Fund. Other proposals include measures to increase collection of "use tax" which is owed to state and local governments from internet and other out-of state sales. Instead of approving the 5 percent pay cut for state employees as proposed by the Governor. the Committee approved accounting maneuver allows the state to move $800 million of costs from the June 30, 2010 state payroll into FY 2010-11. The committee closed out its work with many partisan votes: Democrats "aye", and Republicans "no.. The Governor told reporters that he would veto a budget that includes tax increases. This statement is an indication that there will be additional positioning and changes prior to a final budget deal that requires a two-thirds vote of both houses and Governor's signature. Floor votes on the budget are expected to happen next week. If the proposed budget fails to pass, discussions will likely begin involving the Budget Conference Committee, legislative leadership and the Governor. State Controller John Chiang warned the Legislature that it needed to act quickly to adopt a credible budget plan that will allow the state to borrow to meet its cash flow needs, and the state will not have sufficient cash to pay its obligations after July 29. Hands off the HUT A The Budget Conference Committee approved a Department of Finance (DOF) proposal to seize $986.3 million of city and county shares of the Highway User's Tax Account (HUTA), or gas tax, for FY 2009-10. and an additional $750 million per year ongoing to pay for transportation debt services. This provision would devastate local street and road maintenance programs, cost thousands of local jobs, create public safety hazards, and expose communities to fines for not sufficiently sweeping streets and maintaining storm drains. The League is strongly convinced this proposal is unconstitutional. The League's legal opinion on this matter was prepared by Nielsen, Merksamer. Parrinello, Mueller & Naylor, LLP and released on Friday, June 12. The opinion is available on the League's Web site at www.cacities.ora/HUTAooinion. City-by-City estimated impacts are also available online. www.californiacitvfinance.com/HUT Aproi FY 1 O.pdf. Background on HUTA has been posted online. http://www.callfomiacitvfinance.com/HUT Afacts .pdf Earlier in the budget process, the Legislative Analyst Office (LAO) had a counter-proposal to "borrow" 100 percent of these funds ($1.03 billion) from cities and counties, and repay them with interest within three years. Borrowing is permitted under Section 6, Article XIX of the California Constitution and League attorneys are reviewing potential legalities. This "borrowing" option is not currently on the table. but could re-emerge as legislators become informed on the effects of this proposal. Cities are taking action to protest the proposed HUT A grab. As of Thursday, June 18, more than 65 cities had passed a resolution agreeing that the proposal is unconstitutional and authorizing their city attorney to cooperate with the League and other cities that may engage in litigation on the matter. Redevelopment Funds atRisk for Three-Year Hit Even though the Sacramento Superior Court declared unconstitutional the seizure of $350 million in redevelopment funds for the FY 2008-09 budget, the Conference Committee adopted trailer bill language from DOF that attempts to work around the decision. The committee also approved 2