Trigger pulled as expected, schools cut $328 million this year
Analysis from CSBA's Governmental Relations Department
Published: December 13, 2011
In an early release on revised revenue estimates, Gov. Jerry Brown’s Department of Finance announced that revenues were $2.2 billion less than anticipated when the budget was enacted in June. This represents a better estimate of the state’s fiscal health than the Legislative Analyst predicted in November and is based on more up-to-date revenues than was available at that time.
Because the estimates are still below what was approved in June, cuts of nearly $1 billion will be triggered effective January 1 – except for revenue limit cuts, which will take effect February 1. For K-12 it will result in a cut to home-to-school transportation of $248 million and a cut to revenue limits of $79.6 million. In terms of average daily attendance, the revenue limit cut equates to approximately $13.30 per ADA. The combined total of the transportation and revenue limit cut equates to about $55 per ADA on average.
As structured in the state’s spending plan for 2011-12, which estimated that revenues would increase $4 billion above the May Revision, the cuts would be implemented on a sliding scale depending on the revised estimate of revenues. As revenues were more than $1 billion below the budget, the following $600 million in cuts will occur:
• $100 million to the University of California
• $100 million to California State Universities
• $100 million to the Department of Developmental Services
• $110 million to the In-Home Supportive Services program, including $100 million in service hour cuts, and $10 million for local anti-fraud efforts
• $92 million to the Department of Corrections and Rehabilitation
• $72.1 million in increased county charges for youthful offenders sent to Corrections
• $30 million to the California Community Colleges backfilled with a $10 per unit fee increase
• $23 million to the Department of Education related to childcare funding
• $16 million to the California State Library related to library grants
• $15 million to the California Emergency Management Agency related to local vertical prosecution grants
• $15 million to Medi-Cal from extending the March 2011 cuts to all managed care plans
The budget stipulated that if revenues were $2 billion or more below estimates the following second tier cuts would be implemented:
• Up to $1.5 billion for school district revenue limits with corresponding authority for districts to reduce the school year by up to 7 days
• $248 million from dedicated funding for home-to-school transportation
• $72 million to the California Community Colleges related to an apportionment decrease
Because revenue estimates show that state revenues are down by $2.2 billion, the first tier of cuts will be fully implemented. The full cut to school district revenue limits in the second round will be mitigated and result in a nearly $80 million loss instead of the possible $1.5 billion. While this is a positive direction in terms of how much the cut could have been, it still represents cuts districts must make with only six months left in the year and is in addition to the $18 billion in cuts and deferrals made in the last three budget years.
Further, even with these cuts the state still faces multi-billion dollar deficits over the next few years. During the press conference announcing the revised revenue estimates and subsequent reductions, Brown stated his intent to address these head on and not rely on previous tactics of “gimmicks and delays.” The governor also noted that his January budget proposal for 2012-13 would include less funding than schools are expecting.
Brown also addressed the issue of his proposed revenue initiative, released earlier this month, during the unveiling of the revised revenue estimates. The initiatives he proposed for the November 2012 election would temporarily increase the state sales tax by one-half percent and increase the income tax on California's highest-earners by one percent, raising $7 billion annually for five years. Two billion of the new money would be used to offset the revenue shifted from Proposition 98 to local governments from the June budget, a plan that CSBA objected to and is challenging in court. The additional $5 billion would be directed towards the Education Protection Account and provide additional funding for schools – with 89 percent going toward K-12 and 11 percent for community colleges.
The governor said that the January proposed spending plan would include similar trigger language should new revenues not be approved by voters. While recent polling by the Public Policy Institute of California shows voters’ receptivity to temporary tax increases as proposed by the governor and their concern about the cuts to schools, there is still an uphill battle to win such revenues. This will likely leave schools with additional uncertainty as 2012-13 district and county office of education budgets are reviewed and adopted over the next six months.