State budget leaves K-12 funding flat, with $9.4 billion deferred; midyear cuts possible
Analysis from CSBA's Governmental Relations Department
Published: June 29, 2011
The budget passed by the Legislature last night closes the $26.6 billion budget gap without the revenue extension requested by Gov. Jerry Brown and leaves a $513 million surplus, assuming all budget assumptions are realized. The solutions include:
- spending reductions: $14.6 billion (53 percent)
- revenues: $1.4 billion (5 percent)
- other: $2.9 billion (11 percent)
- natural/miscellaneous: $8.3 billion (31 percent)
Among the spending reductions, the hardest-hit programs are health and human services ($4.8 billion) and the University of California and California State University systems ($1.4 billion). The budget drops some of the key provisions of the June 15 majority-vote budget, including the sale of state buildings and the "sweep" of First 5 (Proposition 10) reserves. New provisions include a revenue estimate that is $4 billion higher than the May estimate (based on current tax receipts), a set of trigger reductions that would occur if revenues are below the budget estimates by specific amounts, and additional savings related to state-local realignment.
K-12 budget
For K-12, the dollar amount available to schools in 2011-12 will be essentially the same as it was in 2010-11. However, an additional $2.1 billion deferral that the governor proposed in January, legislators approved in March and the governor retracted in May, is back in. This will bring the total K-12 cross-year deferral to $9.4 billion.
In addition, schools and community colleges are vulnerable to midyear budget cuts of up to $1.9 billion, if revenues fall $2 billion or more short of projections. If that happens:
- school district revenue limits would be reduced 4 percent, or $1.5 billion (an average of $250 per ADA); and
- districts would be authorized to reduce the school year by an additional seven days, subject to collective bargaining; and
- the remaining half-year of funding for appropriation for home-to-school transportation ($248 million) would be eliminated; and
- community college apportionments would be reduced $72 million.
As part of the state-local realignment proposal, the budget redirects 1 cent of the state sales tax to local governments. Under Test 1 of Proposition 98—which is based on a percentage of the state general fund—this reduces the minimum guarantee. In addition, the budget takes child care out of Proposition 98 and further reduces the minimum guarantee by the amount of the child care shift. (Historical note: the Proposition 98 minimum guarantee was never increased to pay for the added cost of child care.) CSBA is reviewing both of these provisions for their legality.
The budget also makes a one-time change to the AB 1200 process by requiring districts to adopt a one-year budget for 2011-12 and not the standard current budget plus two subsequent years. It further specifies that county superintendents cannot force districts to adopt a three-year budget or a budget based on the worst-case scenario (that is, if the trigger for education cuts gets pulled). Districts would also essentially be prohibited from reducing staffing based on this scenario. The language will be reviewed very carefully on this issue and further guidance will be provided as necessary.
The budget also contains a one-year suspension of the Aug. 15 layoff window. This is the provision that allows school districts to terminate employees for the period following passage of the state budget through Aug. 15, if per pupil revenue limit funds do not increase by at least 2 percent. As funding did not increase, this would have been an option for districts to utilize; CSBA has been cautious about this provision, however, as it has not been widely used due to the rarity of a budget being passed much later.
Legislative comments
The debate over this budget didn't differ significantly from the debates over the past several budgets: Democrats lamented that without the revenue extensions, tough choices that will cause a lot of pain for the most vulnerable citizens have been made; Republicans chided the other side for not including them in the process and for not seriously considering GOP proposals for reform.
The governor noted that this was a balanced budget and puts us in the right direction to get back on sound fiscal footing. He is expected to sign the total budget package later today.