Budget woes worsen as new year begins 

Analysis from CSBA’s Governmental Relations Department

The widespread economic downturn and the state budget crisis are already beginning to squeeze local schools and other public services. Still, the state Legislature remains in partisan gridlock, with the current fiscal year’s shortfall mounting and Gov. Arnold Schwarzenegger’s 2009-10 budget proposal due by Jan. 10.

A freeze on infrastructure spending, ordered Dec. 17 by the Pooled Money Investment Board that controls the purse strings for many capital projects, has halted work on more than 2,000 projects around the state—nearly half of which are K-12 education facility improvements or construction.

For schools, the choice could be between paying contractors for facilities projects and paying school employees. Board members, administrators and community members should contact their legislators immediately to let them know of the real-world impact of their lack of action and urge them to recognize that revenues must be part of any solution to the budget crisis.

Democrats: Try. Try try again

Legislative Democrats have tried three times since Thanksgiving to break the deadlock over the state’s mounting funding shortfall. The latest—at least as this issue of California School News went to press—was an attempted end run around the required two-thirds vote for tax increases. By lowering some taxes and raising others, Democrats contended their plan needed just a majority vote because it was revenue-neutral.

The $18 billion package passed both houses of the Legislature on party-line votes only to be faced with a vetoed by the governor, who contended it didn’t do enough to relax workplace and environmental laws or expedite public works projects. Legislative Republicans had threatened a legal challenge if it had been enacted—and it would have still fallen some $20 billion short of balancing the state’s books, despite its inclusion of $7.3 billion in spending cuts—including $2.5 billion for K-14 education.

Republican ‘revenue measures’:

Legislative Republicans sought to counter heavy criticism of their intransigence over revenue hikes and injection of unrelated issues into the budget debate by introducing their own budget plan just days before the Democrats. Relying primarily on two-year savings totaling $15.6 billion—of which $10.6 billion would be taken from education—prospects for that plan are tenuous at best. It does include $6.5 billion in “revenue measures” for a total of $22 billion in potential fiscal solutions over two years. However, those revenue proposals are equally hazardous to children and education; they depend primarily on taking $2.1 billion in unspent funds from the First 5 commissions, created by Proposition 10, and $3.9 billion from county mental health funding under Proposition 63.

Because they would tinker with voter-approved initiatives, those proposals would need to be ratified in a statewide election—a dubious assumption. Even then, they would amount to just one-time revenues that would not address the state’s structural deficit.

Devastating cuts to education

The Republicans’ one-time revenue solutions also would not count toward Proposition 98’s minimum education funding guarantee. Worse, they would be accompanied by $10.6 billion in “spending savings” to education. This includes devastating cuts primarily from school district and county office revenue limits; this year’s funding level would be cut by $2.5 billion, and as much as $6.15 billion—or more—would be cut from 2009-10 (the exact amount would be adjusted up or down to provide the minimum funding required under Proposition 98). A $280 million cut from deferred maintenance is also included.

The plan also relies on redirecting the $550 million provided for after-school programs under Proposition 49—another proposal that would need to be approved by voters. Additionally, the plan reclassifies $1 billion in current-year education appropriations that exceeded the Proposition 98 minimum as a settle-up of amounts previously owed to schools.

In promoting the devastating education cuts, the Republicans offer increased flexibility to local education agencies in a proposal similar to one Gov. Arnold Schwarzenegger put forth in November. Included would be the ability to transfer prior-year unexpended categorical balances and the ability to transfer categorical funding, in amounts equal to the revenue limit cuts, to those general funds.

The Republicans also propose to eliminate restrictions on contracting out for goods and services and changing the minimum advance notification period for layoffs of certificated employees to 45 days. While increased flexibility is certainly desirable, in good economic times as well as bad, flexibility is not a substitute for increased revenues and will not make up for this magnitude cuts.

Impacts of cuts on the economy

Many economists assert that cuts of the proposed magnitude would be more harmful to the economy than tax increases, because the cuts would lead to job losses and reduced purchases of goods and services from the private sector. More than 11,000 classified employees in local education have already been laid off, potentially contributing to both the foreclosure crisis and the sharply reduced consumer spending that are at the heart of the current recession.

That’s why CSBA continues to support a balanced approach that includes revenue increases. Let your lawmakers know that the cuts being proposed would be devastating to your schools and that cuts of this magnitude would be felt by students in the classroom.

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Additional information on the budget and how to contact your legislators can be found on the CSBA’s Web site @ http://www.csba.org/LegislationAndLegal.aspx.