Notwithstanding pledge to protect education, governor's proposed budget reduces Proposition 98 funding
Analysis from CSBA's Governmental Relations Department
Published: January 8, 2010
Gov. Arnold Schwarzenegger’s 2010-11 budget proposal, released today, 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 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.
Reduction to district and county office administration
The budget proposal includes a 10 percent reduction for school district and county office of education administration that is designed to reduce “overhead and other non-instruction related spending” to offset increases in workload. This reduction of $1.5 billion for districts and $45 million for county offices would be a cut to their revenue limits, which would be re-benched. Further, districts and counties would be limited in the areas in which they could make the reductions to central office expenses. Specifically, the governor proposes to achieve this reduction by:
Reducing school district administration funding: $1.2 billion reduction in funding for school district administration. Additionally, the proposal would establish limits on the portion of funding that can be spent on central administration “to prevent [districts] from using future funding increases to augment central administration at the expense of classroom funding.” Districts will also be “prevented from shifting central administration costs to school sites.” It is safe to say that this is an attack on school administration, which is essential for a school to provide the support and services students, teachers and classrooms need to meet the academic goals the state has set.
Increasing contracting out (amend SB 1419): $300 million reduction for districts and county offices and further proposes to “eliminate barriers to contracting out to enable school districts to achieve cost reductions.” There are no details on how such a level of reductions could be achieved by contracting out services, which have likely been significantly eliminated over the last few rounds of budget cuts.
Consolidating county office administration: $45 million reduction for county office administrative cost. County offices will be required to “consolidate services and functions, which may include county offices of education forming regional consortia to provide these services. This consolidation of county offices will achieve economies of scale and reduce administrative costs.” How this would be implemented and yet still maintain existing levels of support and services for students remains a serious question.
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.
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 budget reduces funding for the Class Size Reduction Program in 2010-11 by $550 million due to anticipated lower participation rates by school districts.
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.