Budget: Signed, sealed and delivered

Analysis from CSBA’s Governmental Relations Department

After a false start the evening before, the state Legislature finally passed a budget for 2007-08 on Aug. 21—a mere 52 days after the start of the fiscal year—and the governor signed it three days later. The concessions made to Senate Republicans in order to garner the two votes needed for the required two-thirds majority included changes to the California Environmental Quality Act related to transportation and water bonds and a commitment from Gov. Arnold Schwarzenegger to veto an additional $700 million from the nearly $103 billion spending plan in order to reduce the operating deficit to zero. While other Republican senators voted for some of the trailer bills, Dick Ackerman, R-Tustin, and Abel Maldonado, R-Santa Maria, were the only two from their party to vote for the budget itself.

There had been some discussion that Senate Republicans were also holding out for $130 million for revenue limit equalization. Ultimately, this issue came off the table, and the final education budget approved by the Senate mirrors the one passed by the Assembly on July 20. This includes providing $50.8 billion for K-12 education and full funding for cost-of-living adjustments for revenue limits and categoricals. Due to tight revenues, the budget does not provide for program expansion and essentially will allow school districts only to maintain existing programs and services.

The final budget funds Proposition 98 at the minimum guarantee; however, that falls $427 million short of the amount needed to fund base programs, including the across-the-board COLA. The budget addresses this by using $350 million in one-time dollars to fund home-to-school transportation. Those one-time funds come from three sources: the Public Transportation Account ($99 million), the Williams Emergency Repair Account ($250 million) and the Proposition 98 reversion account ($78 million). The budget also provides funding for a 4.53 percent COLA for revenue limits, categorical programs and higher enrollments in growing districts. The $263 million CalWORKS child care shift to Proposition 98 was also approved.

What is not included in the budget

This is essentially a base-line budget; therefore, the new and expanded programs proposed by the governor in January and May have been cut, including funding for student data systems, career technical education equipment and counselors, and teacher quality programs. Unfortunately, the budget also does not include funding for declining enrollment, mandates and elimination of deficits in supplemental instruction programs, or for the increased funding for special education that CSBA had sought.

Governor vetoes $700 million

Gov. Schwarzenegger honored his commitment to Republicans to cut $700 million from the budget that had been approved by the Legislature. This achieved one of the Senate Republican conditions—a zero operating deficit. Funding for education and public safety remained untouched. During the signing ceremony, the governor lauded the budget for reducing the deficit, maintaining a reserve and not raising taxes.

Education trailer bill

The education budget trailer bill, Senate Bill 80, addresses three policy-related issues, including:

• STAR testing in second grade: Authorization for the Standardized Testing and Reporting program for second-graders expired July 1; an attempt to extend the sunset earlier this year stalled and never had a hearing. SB 80 allows the testing to continue until July 1, 2011.
• School District of Choice: This provision also expired July 1 and was the subject of legislation that was stalled in the Assembly Appropriations Committee. Under this option, districts can elect to become a School District of Choice, which allows students who don’t reside in their district to attend a district school without the consent of their district of residence. The two-year extension only applies to school districts that were already participating prior to the July 1 sunset and requires them to report certain information that had previously been voluntary.
• School meals: The meal reimbursement rate for free and reduced-price meals is increased from 15 cents to 21 cents per meal, effective this year. Districts will have to certify by June 30, 2008, that they are not frying food items and not serving foods with trans fats or unhealthy oils.

What's next

The latest budget stalemate has revived discussion regarding the process for adopting a state budget, including the two-thirds vote threshold (California is one of only three states to require one). During the budget delay a range of individuals, including Sen. Tom McClintock and Assembly Speaker Fabian Núñez, raised the issue of lowering the vote threshold to either a simple majority or 55 percent. Senate President Pro Tem Don Perata has also sent a letter to the governor calling for the establishment of a budget revision panel to make recommendations to change the current budget process and structure.

With this budget chapter closed, the Legislature has resumed hearings on the hundreds of bills that are still pending in both houses. With very little time left in the session for this year, the normal end-of-session flurry of action can begin in earnest. Whether this will bring healthcare reform or significant action on a multitude of other issues remains to be seen.