Executive director's note: Economics and adequacy—and governance and fiscal reform 

I’m sure that you were as happy as I was when those UCLA economic forecasters announced back in September that the national recession was over!

Yeah, right.

Like many Californians, I have members of my own family who are either unemployed or significantly underemployed as a result of this economic disaster, so I take very little comfort in the news that, as a technical matter, the recession is “over.” Considering that economists couldn’t agree until late 2008 that the recession had technically begun in December 2007, I don’t put much stock in their prognostications.

One economist I have grown to trust over the years, though, is Christopher Thornberg, who has been a regular presenter at CSBA’s Forecast Conference every January. Thornberg scared the wits out of us a couple of years ago when he predicted this economic downturn; he was one of the few to correctly predict its depth and breadth—and the resulting damage to our economy.

Thornberg said that this recession’s severity could be gauged by comparing the events then unfolding to those of the recession of the early 2000s—which now seems mild in comparison. After the dot-com implosion of that era, California’s economy had the wherewithal to recover relatively quickly because we could fall back on the strength of our state’s housing industry; with the assets that homeowners’ equity represented, there was plenty of financial power in reserve. But the new recession was triggered by a meltdown in housing itself, Thornberg pointed out, so recovery will be slow and painful.

Indeed, we are being told now that because of the nature of California’s economy, we will lag behind the national recovery by at least a year—maybe two. With more unemployed workers’ benefits running out and more businesses shutting down even as I write these words, it doesn’t take much imagination to realize that our public schools may face an even worse fiscal year in 2010–11 than we’re in now, and the budget the governor introduces in January will be very, very difficult for us. Early indications are that the state budget in the current year is already out of balance by over $8 billion, and that number could rise to $14 billion or so in the months to come.

That means, of course, that schools may be facing another round of midyear budget cuts after Jan. 1. This would follow on the very difficult cuts that we have already sustained in the last two years, cuts representing a funding deficit of 18 percent—the worst reductions in funding for California public schools since the Great Depression. As has already been widely reported, from 1929 to 1935—the six years of the Depression’s deepest depths—per-pupil funding in California’s public schools dropped by 25 percent.

It’s no wonder that we ranked 47th in the country in per-pupil funding (adjusted for the cost of living) in 2007—before those cuts! I don’t doubt that new national surveys will rank us at or near the bottom of the rest of the country.

The good news is that many school districts and county offices of education managed to set money aside early or gain significant concessions from their labor organizations; for them, the near-term effect of the cuts has been minimized to the extent possible—especially with the help of those federal stimulus dollars. It also helps if you’re one of the 100 or so basic aid districts that are less reliant on state funding—although they took a hit on categorical funding just like everyone else. Unfortunately, not everyone has had that kind of advantage, and it gets even worse when you recall that half of the children in this state go to school in a district with declining enrollment, and thus declining ADA revenues—a “double whammy” that makes the cuts deeper and more painful.

Are the governor and the Legislature doing anything about this beyond kicking the can down the road with a series of accounting gimmicks and deferrals that make the state’s cash flow problems our own? Well, that remains to be seen. They have so far resisted any coherent conversation about what really constitutes adequate funding for a public school system that has to meet the highest academic standards in the country.

That’s why, in partnership with the Association of California School Administrators, we’ll soon be suing the state. The objective is to find a way to get the right conversation going about our schools and their needs—and perhaps to stimulate a conversation about disengaging our school system from the dysfunction of the state.

Governance and fiscal reform

There is, by the way, one other economist I can count on: CSBA’s own Rick Pratt, our assistant executive director for governmental relations. An economist by training, Rick spent part of his career working for the Legislative Analyst’s Office. He has analyzed the proposals issued by the governor’s Commission on the 21st Century Economy (Rick’s write-up can be found on our Web site at www.csba.org). These proposals seem to have upset all of the special interests, which means that they’re either dead on arrival or they might actually get some traction. But, whatever your views on the state’s tax system, we’ve got to do something about this feast-or-famine consequence of our revenue and expenditure policies in order to create some measure of stability in our public operations.

That’s one of the reasons why we’ve partnered with the California League of Cities and the California State Association of Counties to develop a set of core principles that govern our efforts to reform the state’s budget and political processes, so that we can return as much control as possible to the local governmental entities—cities, counties and schools—that are closer to and trusted more by the people of this state.

All of these developments will be reaching some kind of climax in 2010—just in time for the next gubernatorial election. We are already seeing major-party candidates for governor saying really ridiculous things about the public schools; we will be there as the “truth tellers” to properly set the record straight.