Governor proposes $2.5 billion in midyear education cuts 

Analysis from CSBA’s Governmental Relations Department

Just two days after last week’s elections, Gov. Arnold Schwarzenegger issued a proclamation to convene a special session of the state Legislature. He is asking the lawmakers to consider and act upon legislation to address:

• fiscal and budget-related matters
• the economy, including but not limited to efforts to stimulate California’s economy and create and retain jobs
• the housing crisis
• the solvency of the Unemployment Insurance Fund

This is a lame-duck special session that can last only until Nov. 30, because on Dec. 1 a new Legislature will be sworn in and take office. That means the current Legislature has less than three weeks to produce and send bills to the governor.

In announcing the special session, the governor said that the current-year budget shortfall now stands at $11.2 billion. The governor proposes the following steps to close the gap:

• reduce state spending by $4.5 billion
• increase state revenues by $4.7 billion
• eliminate the $1.7 billion reserve for economic uncertainties

That still leaves a $300 million hole that the governor does not address.

The revenue increases would come from the following sources (dollar amounts are for the remainder of the 2008-09 fiscal year):

• a temporary (three-year) 1.5 cent sales tax increase ($3.5 billion)
• oil severance tax ($530 million)
• expanding the sales tax to some services ($357 million)
• a “nickel-a-drink” alcohol tax ($293 million)

The revenue increases proposed by the governor will require the consent of some Republicans, because those proposals need a two-thirds vote to pass.

Of the $4.5 billion in cuts, $2.5 billion (55.5 percent) would come from K-14 education under Proposition 98, as follows:

• $244.3 million from eliminating the 0.68 percent cost-of-living adjustment for school districts and county offices of education
• $1.791 billion from further reducing revenue limit funding, resulting in a year-to-year reduction from 2007-08 of an average of nearly $300 per average daily attendance
• $55 million from capping child-care programs
• $42 million from Stage 2 and Stage 3 child-care programs
• $71.2 million from specific programs that the governor’s administration claims are underutilized, including K-3 class-size reduction ($28.6 million), principal training ($2.6 million), alternative credentialing ($3.3 million) and the Pupil Retention Block Grant ($1 million)

Also, $35.7 million for the Targeted Instructional Improvement Grant program would be unappropriated, with one-time money from prior-year savings used instead. An additional $332.2 million would be cut from the community colleges.

The governor intends to give districts and county offices the ability to use categorical program funds for general purposes. There appear to be two parts to this proposal. One is the authority to use unspent categorical reserves from prior years for general purposes. This could be helpful, depending on the size of available reserves districts have.

The other is the authority to use current-year categorical program funds for general purposes. The intent is to maximize resources for the classroom, but many categorical program funds—such as class-size reduction, instructional materials, and special education—are already spent in the classroom. Other funds may be tied up in contractual agreements. For these reasons, it is hard to determine how far this flexibility would go toward mitigating more than $2 billion in cuts, but CSBA is working with other organizations to answer this question.

“We hope that our elected leaders can come together during the special session, put partisan politics aside, and provide real solutions that don’t further harm education. We will move forward and continue to support policies that invest in our schools and provide the best possible resources for our children,” CSBA Executive Director Scott P. Plotkin said the day the governor announced he was calling legislators back to Sacramento.

Plotkin also joined CSBA President Paul H. Chatman in emphasizing that the association remains firmly opposed to any additional cuts to school funding.

“While we are pleased Governor Schwarzenegger acknowledged the need for additional revenues to address the budget deficit, our position remains the same—further cuts to education will be disastrous,” Chatman said.

“Schools have already been forced to cut beyond the basic, everyday necessities such as bus routes and school supplies, and have laid off teachers, counselors, librarians and other school employees. Art and music classes, sports teams, and after-school programs have been eliminated. There is nothing left to cut.”