After months of negotiations, the Legislature passed a budget, which was signed by Gov. Arnold Schwarzenegger Feb. 20. There’s no good news in the budget for education, but educators can now finalize district budgets with the knowledge of how much education faces in mid-year and 2009-10 cuts. However, more cuts are possible for mid-year 2009-10, unless there is a dramatic turnaround in the economy.

The final budget package contained a balanced approach of revenues and reductions, which ACSA and the Education Coalition had been calling for ever since the state’s huge structural deficit became apparent. But Republican intransigence on new revenues stalled negotiations.

Eventually, with the national economy mired in recession, it became patently obvious California would need at least some new revenues along with any cuts just to get the state back to anything approaching functional.

Background

The California economy weakened significantly in 2008, consistent with declines in the national economy. Several factors contributed to California's weak economy: a sharp drop in taxable sales, the loss of jobs, the credit market meltdown and the continued slowing of the housing market. The Department of Finance noted that the state's monthly job losses grew considerably throughout 2008. During the first five months of the year, the average monthly loss was 5,200 jobs.  However, the last six months of 2008 witnessed an average job loss of over 20,000 jobs per month. Further, the state's unemployment rate rose from 5.9 percent in January of 2008 to 8.4 percent in November. The state's housing sector was hit especially hard because of the compounding nature of the housing industry.  The later part of 2008 saw the housing market make some recovery, but not enough to overcome the huge downturn that began in late 2007 and continued throughout most of 2008.
 
Substantial declines in national and state economic activity have resulted in unprecedented reductions to state General Fund revenues.  With state revenues coming in much lower than the 2008-09 and 2009-10 forecasts, the Department of Finance is estimating that the state is facing a budget deficit of $41.6 billion by June 30, 2010 if no corrective action is taken.  This figure is subject to change based on pending mid-year adjustments enacted by the Legislature, as well as future revenues receipts in 2009.

It is evident that we have reached a point where every budget proposal is intent on cutting education funding by unprecedented amounts.  The specifics are only on which programs will be cut.  Although the governor's proposal is the first take of an ongoing budget battle, it serves as a harbinger of what could come. The early release of the governor's budget proposal also left many unanswered questions because, unlike past years, it is missing specific language that is necessary for an adequate analysis.   For example, the 2009-10 proposal would cut $1.1 billion from school district budgets, but says that districts could reduce their school year by 5 days.  It is unclear if the administration contemplated the impact on local bargaining contracts or whether a proposal such as that can truly be implemented.  We seek additional clarification on these matters during the budget deliberation process.  Finally, it is possible that the governor's proposed budget is the best case scenario and things could get worse as the year progresses. 
 
While ACSA will continue to fight for reduced cuts to education, we support the governor's approach to solving this budget crisis with the inclusion of tax revenues to balance out his cuts.  ACSA is especially supportive of the permanent nature of the proposed categorical flexibility.  ACSA believes that without providing maximum program and fiscal flexibility, school districts will be unable to absorb these massive reductions.  The association will continue to advocate for increased program flexibility in a manner that maximizes the ability of education agencies to weather this storm and protect core instructional programs.