State budget update: Assembly passes budget, but Senate prospects are unknown

Analysis from CSBA's Governmental Relations Department

The state Assembly passed a $103 billion state budget this morning and adjourned for a month-long recess. The Senate took up the revenue and spending plan today, but as of late afternoon it hadn’t received enough votes to pass. Previous reports have indicated disagreements between the two houses. The budget needs a two-thirds vote, which means two Senate Republicans must vote in favor of it.

Legislators had given repeated assurances that education would get the level of funding approved by the Budget Conference Committee last month. This included providing approximately $350 million above the Proposition 98 guarantee to fully fund the cost-of-living adjustment—a figure that grew to $437 million when declining revenues led to a lower guarantee.

However, Republicans have been holding out for deeper cuts in the overall budget to reduce the operating deficit. In the end, the budget adopted by the Assembly reduced total general fund support for K-12 by $437 million and used money from the Williams Emergency Repair Account, the Public Transportation Account and other one-time dollars to make up the difference that is needed to fully fund the COLA.

The details of the arrangement must be reviewed to fully determine the implications for education funding, but it is clear that the action to reduce the funding level for Proposition 98 to the minimum will mean a lower funding base for next year.

Part of the Assembly budget deal includes tax breaks for corporations and “Hollywood movie moguls” (as Senate President Pro Tem Don Perata referred to them in a scathing letter to fellow Democrat and Assembly Speaker Fabian Núñez) amounting to some $500 million. Given this, the tax break faces an uncertain and unlikely future in the Senate. CSBA is opposed to the Assembly package, which would reduce school funding by hundreds of millions of dollars by reducing total revenue to the state general fund.

The omnibus bill for education in the budget package does preserve increased funding for the school meal program, and it prohibits trans fats and fried food in school meals. It also postpones the scheduled end of a school district-of-choice program and standardized testing of second-graders.

Next Steps

Following the initial votes, the Senate placed the measures on call and is expected to remain in session until an agreement is reached. As of early this morning, Senate Republicans were still holding out for a 2 percent across-the-board cut for all programs, and prospects for the Assembly tax break that aroused Sen. Perata’s wrath are unknown. It is also unclear what would happen if the Senate made changes to the spending plan. Such changes would have to be approved by the Assembly, which has adjourned for its summer recess and, according to Speaker Núñez’s spokesman is “not coming back under any circumstances.”

Once the Legislature comes to an agreement on the budget, the revenue and spending plan will go to Gov. Arnold Schwarzenegger’s desk, where he may wield his blue pencil and strike out funding for some programs in order to fund his priorities.