Governor’s latest budget proposal continues to short education funding

This week, the governor presented his “May Revise” budget proposal and admitted that the state’s projected budget deficit has grown from $14.5 billion in January to $24.3 billion today. The mid-year budget cuts adopted by the Legislature in February lowered the deficit by about $7 billion, but the remaining budget gap is now more than $17 billion.

Assembly Budget Committee Chair John Laird characterized the governor’s latest budget proposal in this way: “While I salute him for proposing $7 billion more on the revenue side of the budget, his budget still leaves in place a $4 billion cut to schools, which is the heart of what is wrong with his budget: kids. The governor’s budget targets kids at school, and then at home in the form of his very deep cuts to health and human services.”

Why is there a new budget plan now?
Every year in mid-May the governor is required to update his January budget proposal based on the latest information on the state’s revenues and expenditures. The intent is to provide the Legislature with the latest information so lawmakers can finalize the budget for the next fiscal year, which begins each July 1.

What’s the headline? Big cuts for schools
The governor claims that he is now fully funding the Prop. 98 minimum guarantee for education. However, this is very misleading. This is achieved only because of the significant drop in the state’s General Fund revenues, which resulted in a lower Prop. 98 guarantee. In effect, K-14 education still faces a $4 billion cut similar to the cut that was in the governor’s January budget proposal.

Why is this year different than any other budget year?
To protect school funding, we are going to have to work even harder this year than we have in the past.

Many of the options that helped state lawmakers fund schools in past years are not available this year. For example, last year Prop. 98 fell short of providing enough funding to maintain current school programs. So, about $1 billion of one-time dollars were used to support ongoing programs. In other words, over the past academic year, education received Prop. 98 funding plus additional one-time funding to support current programs. This time, those one-time dollars will not be available.

With more than 20,000 layoff notices already sent to custodians, teachers, school bus drivers, principals and other school employees around the state, California's schools and students have paid a steep price for the governor’s proposed budget cuts. Attempting to balance this budget with a cuts-only approach hurts children and schools. The final budget agreement must include revenues as part of the solution. Otherwise, our students will be the ones to suffer.

Visit www.csea.com and www.protectourstudents.org to send an email to your state lawmakers and find out what else you can do to stop these budget cuts. Let’s pass a state budget that invests in the future of our students and our state!

Here are the highlights of the governor’s proposed May budget revision.
 
K-12 EDUCATION

Under the governor’s May revision, next year’s K-12 budget would still fall short of the “workload budget”—the amount needed just to maintain current programs—by $4 billion (it was $4.3 billion short in his January proposal). This amounts to nearly $700 per average daily attendance (ADA).

·                                 No COLA.  The governor’s revised budget fails to recognize the increased cost of health care, utilities and gasoline and provides no cost-of-living adjustment (COLA) to help schools address these rising costs.

·                                 Increased Funding for Special Education.  The May revision increases the funding for special education by $234 million, but this funding comes at the expense of the state Deferred Maintenance program.

·                                 Home-to-School Transportation Funding.  The HTS program is still being cut by 6.5 percent, and will be funded by the Public Transportation Account completely, instead of just partially as proposed in January (this puts these funds at greater risk of being cut in future years).

·                                 School Budget Reserve and Categorical Funding Shifts. Without any new funding, the May revision proposes to give districts the authority to take funding from various reserves and to transfer funds between categorical programs.

·                                 Categorical Funding Cuts. Because the governor is proposing to maintain funding for revenue limits and special education, the K-12 funding cuts would be applied to other (categorical) programs. This subjects some districts to bigger cuts than others. For example, districts that serve a larger population of economically disadvantaged students would experience a proportionally larger cut than other districts.

CALIFORNIA COMMUNITY COLLEGES

·                                 Property Tax Shortfall.  The May revision includes an increase of approximately $75 million to address the unexpected current-year property tax shortfall. There is also $138.7 million to provide funding to address the lower estimated property tax revenues for 2008-09.

·                                 No COLA.  Like K-12 education, the revised budget proposal contains no funding for a cost-of-living adjustment (COLA).

·                                 Increased Funding for Enrollment Growth. The May revision provides an increase of $35.5 million for enrollment growth, bringing the total growth funding in the budget year to $95.5 million (1.67 percent growth).

·                                 Categorical Programs.  The May revision contains a proposal to allow colleges to transfer funds between two categorical programs – faculty incentive programs and student services programs.  The governor continues to propose the 7 percent across-the-board cut for categorical programs.

OTHER IMPORTANT MAY REVISION PROPOSALS

The California Lottery
The governor proposes to place an initiative on the November ballot to allow voters to choose between leasing out the Lottery or raising the sales tax by one cent.  This proposal is intended to allow the governor to borrow $15 billion over 3 years to help close the budget gap. In return, investors would get future Lottery revenues. This means that Wall Street investors would have first call on these revenues before education. In the event that the voters fail to pass this proposal, a one-cent sales tax increase would be triggered.
 
Arnold recycles ballot initiative
Similar to the “power grab” that was rejected by the voters in the 2005 Special Election, the governor is proposing an initiative for November that would establish yet another budget reserve and give the governor unlimited powers to make cuts anytime state revenues drop, including in the middle of the academic year.

If that’s not bad enough, the proposition contains a spending cap that could lock in California’s school funding at a dismal 46th in the nation. Reportedly, the base year for determining the permanent spending cap would be this coming fiscal year (2008-09)—locking in the worst budget cuts in state history.  This would effectively cap school spending at a level that is $4 billion below the amount needed just to maintain current programs.  In other words, there would be no hope to increase school funding to a level that even approaches adequate.
 
Other Program Areas
Many schoolchildren would also be affected by additional cuts proposed for other program areas. For example, the May Revision calls for an additional $672 million cut to the Health and Human Services budget, which includes programs such as Healthy Families, foster care, Medi-Cal, and CalWorks.  These proposed cuts would be in addition to the cuts already proposed in the January budget.
 
WHAT’S NEXT?

As early as next week, the Senate and Assembly start reviewing the governor’s May revision and begin the process of passing their own budget.  The two houses will then convene a Conference Committee to hammer out any budget differences before sending a single budget to the governor. The budget is not final until it is signed by the governor.  The Constitution requires a budget to be adopted by June 30th and the new fiscal year begins on July 1.
 
Caution: This is a preliminary analysis of the budget.  Some proposals may change as additional details become available.

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