Budget Conference Committee approves $3.2 billion in education cuts 

Analysis from CSBA’s Governmental Relations Department

On Monday, the Budget Conference Committee began taking action on a revised state budget for 2008-09 and 2009-10, and wrapped up the next day.

For K-12 education, the hit would be similar to what was proposed by Governor Arnold Schwarzenegger in his May 14 budget revision. School districts and county offices of education would be faced with a loss of $1.3 billion to their revenue limits for 2008-09, representing a cut of approximately $220 per ADA (unit of Average Daily Attendance) in the final two weeks of the school year.

For the 2009-10 school year, a further cut to revenue limits of $1.9 billion, or about $320 per ADA was approved. A provision was also included that would apply a categorical program reduction to basic aid districts proportional to the reductions aimed at revenue limit districts.

As previously reported, the May Revision proposed to eliminate the funding for home-to-school transportation provided by the Public Transportation Account; this $402 million appropriation would have equated to 65 percent of the funding local educational agencies need for transportation. The Conference Committee approved the reduction June 16, but in a related action the following day it voted to backfill $282 million of the cut with Proposition 98 dollars. This would result in a cut to transportation funding proportional to other categorical programs; however, the committee also voted to increase the cut to revenue limits that was originally proposed by the governor by shifting $282 million from revenue limits to transportation, resulting in a larger cut to revenue limits.

Additionally, the committee approved actions that would continue to push the state’s cash flow problem onto LEAs by approving the $1.7 billion deferral of funding from 2009-10 into 2010-11, as proposed by the governor in his May Revision. The panel also approved the deferral of funding districts and county offices should receive in July and August to October.

The Conference Committee also voted to approve the following:

• Allow LEAs to reduce the number of instructional days for each of the next three years by five (the governor had proposed a reduction of 7½ days) without losing incentive grants for longer school years that are to be available from 2009-10 through 2012-13.
• Extend the authorization for school districts to access ending balances for categorical programs for 2008-09 and 2009-10 and shift the money to other uses. The committee also expanded the access to several programs that had been previously excluded, such as those for Targeted Instructional Improvement Grants, instructional materials, the California High School Exit Exam, adult education, Regional Occupational Program facilities and deferred maintenance.
• Allow LEAs that are in compliance with the facilities requirements pursuant to the Williams settlement to suspend the current 1 percent reserve requirement from the 2008-09 school year through 2012-13.
• Allow LEAs to sell surplus property and use the proceeds for general fund purposes for three years.
• Eliminate the requirement that students must pass the CAHSEE in order to graduate from high school beginning in 2009-10. Instead, the CAHSEE would be used to satisfy the NCLB high school assessment and would be limited to only one test administration.
• Suspend the requirement that LEAs purchase newly adopted instructional materials for an additional three years (through 2012-13) and prohibit the State Board of Education from initiating new adoptions during that time.
• Reduce the Reserve Requirements for Economic Uncertainty (the often-cited AB 1200 reserve) to one-third of the currently required level for 2009-10, provided that LEAs make annual progress in fully restoring the reserves by 2011-12.
• Prohibit county offices from assigning a qualified or negative certification to an LEA based substantially on a projected loss of federal Fiscal Stabilization Funds in 2011-12 and 2012-13.

CSBA staff is reviewing the specific action on these items in more detail and will provide additional information as it becomes available.

Finally, the committee took action to address the state’s maintenance-factor obligations by adding a provision that would entitle LEAs and community colleges to a maintenance factor in years when Test 1 is operative and lower than Test 2. This is related to the same issue raised in the lawsuit that CSBA recently joined the California Federation of Teachers and the Service Employees International Union in pursuing); however, we are reviewing the language to determine the impact on the pending lawsuit.

These actions by the Conference Committee complete its work on crafting a budget to close the budget deficit. Further negotiations will need take place among legislative leadership and the governor over the coming days as the governor has already indicated that he will not sign the committee’s budget. In particular he noted his objection to the elimination of the requirement to pass the CAHSEE for high school graduation.

A vote on a budget is still expected before June 30 – the end of the fiscal year.