State Senate ups the ante on education funding

Analysis from CSBA's Governmental Relations Department

The Senate Subcommittee on Education Finance approved $59.8 billion for Proposition 98 education funding Wednesday, compared with $59.05 billion that was previously approved in the Assembly Budget Subcommittee on Education and $56.8 billion in Gov. Arnold Schwarzenegger’s May Revision of his January budget proposal. As in the Assembly, the Senate panel’s anticipated increase in funding over the May Revision is based on an increase in revenues to the state general fund from unspecified sources.

The Senate subcommittee passed the education funding plan on a party-line vote with very little discussion, with chair Denise Moreno Ducheny, D-San Diego, and Sen. Gloria Romero, D-Los Angeles, voting in favor and Sen. Bob Margett, R-Glendora, voting in opposition.

According to Ducheny, the Senate budget plan is to restrain growth but maintain existing programs and services. The Senate plan is markedly similar to the Assembly’s and strives to make funding for education whole by:

• fully funding revenue limits and providing for growth
• rejecting the $1 billion cut to categorical programs proposed by the governor
• providing ongoing funding for programs funded with one-time dollars in 2007-08 
• providing $150 million for mandated programs
• including funding for a 3.68 percent cost-of-living adjustment across all programs

This COLA represents about a 2 percent greater increase over the Assembly version, but both plans would use the adjustment as a “balancer,” meaning it would likely be further adjusted based on changes in how revenues are allocated.

The Senate rejects the governor’s plan to change the index for the COLA and would establish a revenue limit deficit factor for the unfunded portion of the 5.66 percent COLA that districts should receive under the current calculation. The Senate plan also rejects the governor’s flexibility proposals, which include increased transfer authority between block grants and a reduction in local reserve requirements for economic uncertainties.

Assembly provides more details on budget plan

Assembly Speaker Karen Bass revealed more details of her plan for the state’s budget, emphasizing that Democrats were not willing to balance the budget with cuts alone. Thus, the budget plan would restore cuts proposed by the governor, including the $1 billion in cuts to K-12 categorical programs.

As approved by the Assembly education budget subcommittee last week, that panel’s plan would provide a $2.3 billion increase for Proposition 98 above the governor’s May Revision. In addition to restoring cuts, the Assembly Democrats propose to backfill one-time funding used this year with ongoing funding and to provide education with an across-the-board COLA of 1.6 percent.

Bass, D-Los Angeles, provided few specifics on how she would raise the needed revenue. Her plan does include a variation of the governor’s lottery securitization proposal, but she would use the revenue generated to pay back some of the state’s debt. Another $6.5 billion would come from closing tax loopholes and eliminating tax breaks. Not surprisingly, she rejects the governor’s proposed Budget Stabilization Act.

The Assembly Democrats would make additional changes to the funding school districts receive from the lottery. While we don’t have the specifics, it appears that the school districts would no longer receive lottery funding. Instead, the $1.2 billion that they currently receive from the lottery would come from the general fund.

The ball is in the hands of the Conference Committee … for now

 The Senate and Assembly panels have now wrapped up their reviews of the budget and put forward their proposals. The differences will be addressed in the Conference Committee, which includes equal representation from both houses. However, there is a fundamental disagreement between Democrats and Republicans on how to balance the budget, with the debate over increased revenues versus program cuts at the heart of the matter.

It is unlikely that this matter will be resolved in conference; the committee can meet and pass out a report, but it would likely be a partisan effort that lacks the needed support from Republicans to attract the two-thirds majority required in the full Senate and Assembly. The time will come for the two party leaders from each house to come together and work out a compromise. In the past, these negotiations have included the governor (the fifth element in the “Big Five”); however, the role he will play in the initial negotiations is unknown. He will have to be brought in at some point, since he has the final say.

The Conference Committee is expected to meet sometime next week.

Related links:

Find more CSBA state budget resources @ http://www.csba.org/EducationIssues/EducationIssues/SchoolsInvestment.aspx.

Read more CSBA legislative news @ http://www.csba.org/LegislationAndLegal/Legislation/LegislativeNews/2008.aspx