The Constitutional deadline to pass a 2008-09 state budget came and went June 16, but the Legislature continued to wrangle over specifics at press time. ACSA has stepped up its efforts to inform lawmakers that any cuts will hurt schools.
ACSA’s legislative advocacy team has urged school leaders to tell personal stories to legislators and the governor, letting them know just how the proposal to cut $4.3 billion from education undermines critical programs that help student achievement.
California already has some of the most overcrowded classrooms and the greatest shortages of librarians, counselors and other critical support staff in the nation. According to Education Week, California ranks 46th out of 50 states in per-pupil funding. The governor’s budget proposal keeps California at the bottom of those rankings.
Adding pressure to an already difficult budget year is the state’s projected cash flow crunch. The state controller and state treasurer’s offices report that the state will likely develop serious cash flow difficulties in the first part of August. This will jeopardize the state’s ability to pay continuous appropriations, including Proposition 98 programs.
To address this problem, the governor’s administration has proposed a plan to shift payment of many K-adult programs from their monthly apportionments that begin in August and September, over to one lump sum payment in April.
This essentially would pass the state’s cash flow problems on to school districts and county offices and leave LEAs responsible for their own cash flow difficulties.
ACSA and the other association members of the Education Coalition are firmly opposed to this proposal. Programs proposed for this funding shift would include: Community Based English Tutoring; Supplemental School Counseling; foster youth programs; English language acquisition; CAHSEE supplemental instruction; ninth grade class size reduction; K-3 CSR; Pupil Retention Block Grant; Teacher Credentialing BG; Professional Development BG; Targeted Instructional Improvement BG; School and Library Improvement BG; and after-school programs.
The Legislative Analyst’s Office has proposed a compromise that affects the February payment to K-12, with only about $3 billion of that payment being deferred. The delay in payment would be from February to April. Meanwhile, ACSA’s Governmental Relations Department team has analyzed the most recent budget proposals from the state Senate and Assembly Democratic caucuses, each of which differs significantly from Gov. Schwarzenegger’s May Revision.
Speaker’s general plan
Assembly Speaker Karen Bass unveiled the Assembly Democratic budget plan, which includes funding education as a top priority and protecting the needs of children by eliminating the proposed cuts to foster care, CalWorks, and Medi-Cal.
In addition, the Assembly Democratic proposal provides a plan to increase revenues to the state. The revenue plan includes a modification to the governor’s idea of publicly selling future lottery earnings and uses the funding from that “lottery securitization” to pay down the state debt, but protect funds that go to education. Bass mentioned the need to define the values for the state and in turn develop a blueprint based on those values to fund the state’s priorities.
The specifics of the Assembly Democrat proposal, according to a press release, are as follows:
– Education
Increases school funding by nearly $2.3 billion above the governor’s budget. While this is a major increase from the governor’s proposal, it still results in about $2 billion in cuts below the workload budget level.
Repays schools $1.1 billion in education settlement funds over two years ($550 million in 2008-09 and $550 million in 2009-10), rather than the $150 million per year for seven years as proposed by the governor.
– Revenues
Rejects the governor’s $1.85 billion accounting proposal and instead raises about $6.4 billion in new revenues. The funds can be raised through closing loopholes and tax breaks, short-term solutions that have been used in the past, or other options.
Does not assume the lottery securitization funds as a new revenue as the governor does; instead the funds would be deposited into a debt retirement fund.
Adopts many of the governor’s revenue proposals, including closing a yacht tax loophole, most of the special fund loans and sweeps, and the proposed LLC acceleration.
Lottery securitization
The Assembly proposal assumes the same level of lottery securitization revenues as the governor, but would make the following key changes:
Deposits all securitization proceeds into a debt retirement fund to be used entirely for debt payments. This would save the General Fund approximately $3.6 billion in the budget year and prepays another $1.5 billion in education, transportation and local government debts.
Backs out of the governor’s proposal for a subordinate $1.2 billion annual payment for schools. The schools will instead receive their normal lottery allocation in the budget year and be guaranteed the $1.2 billion with a Prop. 98 adjustment beginning in 2009-10.
Uses extra lottery funds to make extra payments to the Economic Recovery Bonds until they are paid off and then will be used to pay general obligation bond debt service.
Senate Democrats’ plan
The Senate Budget Subcommittee 1 on Education Finance finalized its actions on the 2008-09 budget. Consistent with the action taken by the Assembly, the Senate subcommittee voted to increase K-adult Prop. 98 funding by $3 billion above the level proposed by the governor in his May Revision, and $700 million above the Assembly proposal.
As in the case of the Assembly, this increase for education would be made possible by additional taxes/revenue above the additional revenue proposed in the May Revision.
The Senate’s proposal is essentially the same proposal as adopted by the Assembly with one major difference: an increase in the cost-of-living adjustment to 3.68 percent over the Assembly’s 1.6 percent. Similar to the Assembly, the Senate based its proposal on unspecified increases to revenues and closure of tax loopholes.
Education perspective
What does this mean for LEA budget development? The Assembly and Senate Democratic plans are significantly better for K-adult programs compared to the governor’s May Revision proposal. But LEAs and education leaders are strongly advised against including these proposals as part of any local budget assumptions at this time.
The Senate and Assembly proposals rely heavily on new, yet to be identified, revenues. In addition, all of the plans assume $5 billion in new revenues from some form of a lottery securitization plan. Given these assumptions, ACSA continues to advise education agencies to remain on course and use the May Revision as a benchmark for June budgets. The situation is subject to change, but ACSA projects that the May Revision is likely the worst-case scenario.
LEAs should also be poised to make significant changes to their June budgets when the final state budget is enacted. LEAs are required to adopt their final budgets no later than 45 days after enactment of the final state budget, which might be some time in coming.
The final outcome of the K-adult budget debate will rely on matters and events taking place outside of the K-adult policy arena. Lawmakers and the governor will have to come to agreement on new revenues, program reductions, short- and long-term financing, and addressing the state’s cash flow situation. This would be a challenging task even in the most functional policy-making environment.
June 30 ends the fiscal year, and the Legislature is scheduled to take a summer recess beginning July 3 if a budget is passed. Aug. 15 is the last day for fiscal bills to be sent to the Senate and Assembly floors. The 2007-08 budget was not passed until Aug. 21.