Budget would cut schools by $2.4 billion
Analysis from CSBA’s Governmental Relations Department
Published: January 25, 2010
Gov. Arnold Schwarzenegger’s 2010–11 budget proposal addresses an estimated $19.9 billion gap between revenues and expenditures. Of the total, $6.6 billion is attributed to the current year (2009–10) and $12.3 billion is attributed to the budget year (2010–11). The total also includes funding to restore a $1 billion reserve. The gap resulted from the following factors:
- revenue decline ($3.4 billion)
- federal and state court litigation ($4.9 billion)
- erosion of other, previously enacted solutions ($2.3 billion)
- population and caseload growth ($1.4 billion)
The governor’s proposed solutions to the projected gap include:
- expenditure reductions ($8.5 billion)
- increased federal funds ($6.9 billion)
- alternative funding ($3.9 billion)
- fund shifts and other revenues ($0.6 billion)
If increased federal funding is not realized, the governor proposes triggers that would result in one dollar of additional cuts or revenue for every one-dollar shortfall in budgeted federal funding. The trigger list includes eliminating CalWORKS ($1 billion); eliminating Healthy Families ($126 million); reducing Medi-Cal eligibility to the federal minimum and eliminating optional benefits ($532 million); and eliminating the In-Home Supportive Services Program ($495 million). These would be in addition to other health and human services cuts proposed by the governor, including:
- eliminating Medi-Cal benefits for certain immigrants
- eliminating Adult Day Health Care benefits
- reducing Healthy Families eligibility and benefits
- reducing CalWORKS grant payments
- reducing Supplemental Security Income/State Supplementary Payment grants
- eliminating the California Food Assistance Program
Many of these cuts would negatively affect public school students and their families.
Proposition 98
The governor proposes a number of complicated maneuvers to reduce the Proposition 98 guarantee. While the budget does not provide complete details on all of these machinations, it is specific on one point—the net result would be a reduction to the guarantee of $892.6 million in 2009–10 and $1.5 billion in 2010–11 from what it would otherwise be under current law.
Achieving these reductions relies partly on revising a major part of last year’s budget agreement relating to the certification of the minimum guarantee in 2008–09. The administration now estimates that the guarantee was $2.3 billion lower than certified for that year, resulting in a $2.3 billion “overappropriation.” The governor is proposing to apply some of that overappropriation to restoration of a Proposition 98 “maintenance factor.” This would reduce the minimum guarantee in 2009–10 and subsequent years by $800 million per year, according to the Department of Finance.
Another proposal with implications for Proposition 98 relates to transportation funding. Here the governor proposes to eliminate the sales tax on gasoline and increase the fuel excise tax from 18 cents per gallon to 28.8 cents per gallon. This is at least partly in reaction to recent court decisions that restrict the use of revenue from the fuel sales tax. Shifting to the excise tax gives the state more flexibility over the use of revenues.
However, it also reduces the proceeds of taxes into the state general fund. According to the administration, this shift will reduce general fund revenue by $836 million in 2010–11, which contributes to the $1.5 billion total reduction to the Proposition 98 guarantee.
In the past, the governor and Legislature have manipulated the minimum funding guarantee to ever lower levels and then claimed to have “protected” schools by funding them at the new, artificially reduced level. This year, the governor promised to “protect” school funding in the State of the State speech, but his proposed budget is consistent with past manipulations.
Proposition 98 spending vs. school revenue
Due to various budget manipulations in recent years, there is now a significant difference between the amount that the state records as Proposition 98 spending and the amount of revenue that K–14 entities actually receive. As a result, while the governor proposes to reduce state Proposition 98 spending in 2010–11 by $1.5 billion, the actual year-to-year decline in revenues for school districts and county offices of education would be more than $2.4 billion under his proposal.
Half of this reduction ($1.2 billion) would come from school district revenue limits with the requirement that the cuts be applied to central district administration. This would represent about a 10 percent cut to administration. Funding to county offices also would be reduced $45 million, with a similar requirement to reduce administrative costs.
In addition, another $300 million cut would be applied to district revenue limits. This cut is tied to the governor’s proposal to relax restrictions on contracting out and assumes that every district would be able to do more contracting out in 2010–11, with a statewide savings of $300 million. The governor does not provide any documentation to back up this assumption.
School district and county office revenue limits would be reduced a third time, by $202 million, in recognition of a negative cost-of-living adjustment.
The budget also proposes a reduction of $550 million for K–3 class size reduction. When combined with other smaller reductions, the grand total exceeds $2.4 billion.
Teachers
The governor also proposes significant changes to the current teacher seniority and lay-off process which, in his view, would “build on the reforms embodied” in the federal Race to the Top initiative.
Teacher seniority: Changes would be made to state law that would give local school districts “the flexibility to lay off, assign, transfer and rehire teachers based on skill and subject matter needs without regard to seniority.”
Substitute costs: Eliminates the provisions in state law that relate to the requirement that teachers who have been laid off have first priority for substitute assignments and that their rate of pay be the same as they received before they were laid off if they work more than 20 days in a 60-day period.
Certificated lay-off notice: Establishes a 60-day clock for districts to notify teachers that they may be laid off, which begins when the state budget is adopted. It appears that this would replace the Aug. 15 lay-off option and be in addition to the March 15 process.
Even if the governor succeeds in achieving these statutory changes, districts would still be bound by locally negotiated collective bargaining contracts, which cannot be abrogated.
Mandates
The governor once again proposes to suspend all but a couple of mandates, citing CSBA’s Education Legal Alliance lawsuit regarding the constitutionality of deferring mandates. He also notes that there is no funding provided for the mandate for the additional science course requirement for high school graduation, as his administration is challenging the reimbursement rate methodology adopted by the Commission on State Mandates.
On a positive note, there is $65 million for the annual ongoing costs related to mandated Behavioral Intervention Plans that CSBA negotiated with the Department of Finance. It is uncertain if the budget includes the amount owed districts for prior years.
Additional provisions
The proposal also transfers the following amounts from the Proposition 98 reversion account, which is money unspent within Proposition 98:
- Emergency Repair Program (established in the Williams lawsuit): $51 million
- Charter School Facilities Grant Program: $18.4 million
- new school categorical funding: $20 million
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