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2011 -12 Proposed Budget Submitted by Governor Brown to Legislature. On January 3, 2011, Edmund G. Brown Jr. was sworn in as Governor and warned that his budget plan would include severe cuts to State spending. On January 10, 2011, Governor Brown submitted his 2011 -12 Proposed Budget to the Legislature. The 2011 -12 Proposed Budget acknowledged a $26.4 billion budget deficit, consisting of an $8.2 billion deficit that would remain at the end of Fiscal Year 2010 -11 (absent budgetary action), and an estimated $17.2 billion shortfall between current -law revenues and expenditures in 2011 -12, with a proposed reserve of $1 billion. The 2011 -12 Proposed Budget relied on a plan to submit to the voters at a special election in June 2011 a 5 -year extension of the temporary sales tax, income tax, and vehicle license fee increases and maintaining a lower dependent exemption credit that was set to expire on June 30, 2011. The 2011 -12 Proposed Budget also included $8.2 billion in one -time savings and borrowing. Those savings and borrowings included $1.8 billion in borrowing from special funds, $1.7 billion in property tax shifts, shifting $1.0 billion in Proposition 10 reserves to fund children's programs, and $0.9 million from Proposition 63 moneys to fund community mental health services. The Governor proposed to restructure the state -local relationship by shifting funding and responsibility to local government for certain services, resulting in a shift of an aggregate amount of $5.9 billion in State program costs to counties. The Governor also proposed eliminating redevelopment agencies. The 2011 -12 Proposed Budget included expenditure reductions that touched nearly every area of the State budget. Proposed reductions included cuts of $1.7 billion to Medi -Cal, $1.5 billion to California's welfare -to -work program, $1 billion to the University of California and California State University, $750 million to the Department of Developmental Services, and $580 million to state operations and employee compensation. Although the Governor's revenue proposals resulted in a $2 billion increase in the Proposition 98 minimum funding guarantee for schools above the current -law level, the 2011 -12 Proposed Budget would have resulted in a small funding decline for K- 12 and more significant reductions for community colleges and child care programs. The Governor called the Legislature to refer the proposed re- instatement of temporary tax increases described above to a statewide special election in June 2011, in an attempt to gain voter approval for the Governor's proposed increases. However, on March 31, 2011, the deadline for initiating such a special election passed without an agreement in the Legislature about whether to put such a re- instatement measure on the ballot. The measure may yet be presented to California voters at a later date. A 2011 ballot proposition voted on after the July 1 expiration could still re- instate the approved extensions for an additional five years. January 12, 2011 LAO Report. An LAO report dated January 12, 2011 stated that the 2011 -12 Proposed Budget estimates were reasonable, and the proposed multiyear and ongoing solutions showed great promise of making substantial improvements to the State's overall budget health. However, the LAO report recognized that the Governor's realignment and redevelopment proposals were extremely ambitious, implicating many legal, financial and policy issues, and that $12 billion of the Governor's proposed solutions were dependent upon voter approval in June 2011. March 2011 Legislative Action. The Governor's proposed June 2011 special election was not approved. However, the Legislature passed a package of bills resulting in $11 billion in cuts and other solutions, including $5.5 billion in cuts to health and human services, $1.2 billion in cuts to the University of California and California State University systems, $2.2 billion in transportation debt service and other reductions, $531 million in revenue proposals and $2.8 billion in loans and transfers and other solutions. 23