A couple of weeks ago EdCal reported that the state budget for education was looking fairly decent. No big infusion of funding to at least get us to the national average, but also no funding cuts, as had been the case in recent years.

However, as ACSA also noted, the budget situation can be very fluid and dynamic. And recently there was some bad news on the state revenue front that has made prognostications on the education budget somewhat less stable.

First, there was the miscalculation by the administration on Proposition 98 funding that left a $364 million hole to fill. But it looks like that will largely be addressed by scuttling a majority of the governor’s new K-12 proposals and one-time allocations included in his May Revision.

And now comes some more bad news. Late last week, the Department of Finance announced in a letter to legislative leaders that state tax revenues fell below their projected forecast by approximately $764 million for the current year of 2006-07. This has made the work of the Budget Conference Committee more difficult. As a result, the committee’s work pace has slowed considerably; although staff workgroups continue to meet behind the scenes.

The constitutional deadline for the Legislature to send the annual budget bill to the governor is June 15. It is unlikely lawmakers will meet that deadline, but they seldom do. The real deadline, at least from a public and political standpoint, is July 1.

Indications from the Capitol are that the Legislature will work hard to meet the July 1 date. The possibility of having an initiative reforming legislative term limits on the February 2008 ballot is putting political pressure on legislative leaders to complete the budget on time or risk political fallout in the election.

With the recent news of the revenue downturn, it is still too early to predict the impact on the state’s General Fund and Prop. 98. This could be a fiscal hiccup, with revenues going up in the near future, or it could be a harbinger of a sustained drop in revenues.

For now, ACSA continues to adhere to the budget predictions issued most of this year. The 2007-08 education budget will likely include prior-year Prop. 98 base funding plus statutory COLA – 4.53 percent – and ADA growth. It is possible the final budget will include some small changes – the governor and legislative leaders always want, and usually get, some things as part of the final deal.

On the policy side, ACSA notes that the administration and legislative Republicans have made a stronger push to retain second-grade testing as part of the STAR test. Democrats in both houses eliminated funding for the second-grade test in both their budget proposals.

However, the governor and Republicans want the funding restored and the grade-level test to remain. Both the administration and Republicans have weighed in that this is one of their top priorities for the final budget agreement.

Finally, keep in mind that the budget situation can change in a matter of hours. ACSA will update the field when additional information becomes available. For additional information on this or other K-12 policy matters, please contact ACSA Governmental Relations or visit ACSA Online.