Chatman: State budget ‘robs public education’
Analysis from CSBA’s Governmental Relations Department
Published: October 9, 2008
Gov. Arnold Schwarzenegger signed the state budget for 2008-09 without much fanfare Sept. 23, 85 days after the start of the fiscal year. His approval of the spending plan came after a week of unprecedented and highly unusual negotiations by legislative leaders and the governor.
Those talks grew out of the Legislature’s approval of an earlier form of the budget Sept. 16—which was followed within hours by a vow from the governor to veto the long-overdue spending plan. The “Big 5” (the state Senate and Assembly’s party leaders, along with the governor) cobbled together an agreement that not only fails to address the problem of the Legislature’s use of one-time revenues and gimmicks to balance the budget but adds further limits to use of an increased rainy day fund reserve.
The final budget exchanged one very uncertain revenue source for another, relying on an increased penalty for corporations that file erroneous tax returns instead of on accelerated personal income tax payments. This is very uncertain revenue; if less money is realized than is projected, that could help set the stage for yet another state fiscal crisis in 2009.
The package also includes legislation that would give the governor statutory authority to make certain midyear budget cuts, including the temporary suspension of cost-of-living adjustments (except revenue limit COLAs) and cuts of up to 7 percent for state operations. This statutory authority would only become operative if the voters approve a rainy day fund ballot measure as described below.
“The budget passed by California’s elected leaders represents an enormous setback for our schools and students,” said CSBA President Paul H. Chatman. “Instead of providing a reasonable balance of cuts and revenues, it robs public education of the funding it needs to succeed. School governance leaders will continue to make public education a priority in California’s communities; it’s a shame our Legislature could not do the same.”
School funding essentially flat
Overall, the budget closes a $15.2 billion gap with nearly $6.5 billion in revenues and $8.7 billion in spending cuts. Only $20 million of the new money is a permanent revenue increase. The rest represents one-time funding that simply speeds up the receipt of revenue that is already owed under current law.
For education, this budget means essentially flat funding this school year. The budget will provide $58.1 billion for Proposition 98; this represents $800 million less than was provided by the Conference Committee report that CSBA supported and is $3 billion below the governor’s projected workload budget, which represents the cost of 2007-08 programs and operations adjusted for inflation and enrollment.
The plan does include a 0.68 percent COLA—but for revenue limits only. This is well below the 5.66 percent COLA required by law, creating a revenue limit deficit of over 4 percent. While it appears that the $58.1 billion is ongoing revenue, it is important to note that this level of funding is based on nearly $6.5 billion in one-time funds and accounting gimmicks. Therefore, funding for Proposition 98 will once again be in jeopardy in next year’s budget.
Lessons from ‘debacle’
Closing the gap in the state budget with one-time revenues, acceleration of payments and gimmicks has been the modus operandi of the Legislature for the last several years, and it has contributed significantly to the fiscal crisis the state is facing. Continuing further down this path is fiscally irresponsible.
With the enactment of this deeply flawed budget, leaders of school districts and county offices of education will need to brace themselves for the fact that next year is already starting off with a deficit—which will likely mean more cuts for schools. Given the state of the financial markets, the fiscal picture for next year is especially grim, and with this budget the Legislature and the governor added to the deepening fiscal crisis.
“It is a dark day for California, its schools and, most importantly, its students," CSBA Executive Director Scott P. Plotkin said of the budget’s adoption. “We hope that our elected leaders learn from this debacle and provide real solutions next year that don’t 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.”
Voters to weigh in
The last-minute agreement by the Big 5 restricts the amount of money that can be withdrawn from the Budget Stabilization Fund— the rainy day reserve the governor demanded—in low-revenue years. This restriction means that, in some years, the amount that could be used from the fund would not be sufficient to maintain the current level of spending. This would force deeper spending cuts even while money sits idle in the fund. This is a constitutional change that must be approved by the voters in a statewide election.
Another element of the budget agreement requiring voter approval is the proposal to securitize the state lottery. Under this plan, shares in the lottery would be sold to private investors. Lottery revenue would be used to pay the private shareholders. The share of lottery revenue that currently goes to education would be replaced by general fund revenue. For schools and community colleges, this means that the Proposition 98 guarantee would be increased to compensate for the loss of lottery revenue.
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