LAO: Prop. 98 would take $2.4 billion hit in budget
Published: March 1, 2010
A report from the nonpartisan Legislative Analyst’s Office reinforces the education community’s assertion that, despite Gov. Arnold Schwarzenegger’s vow to “protect education funding,” complicated accounting maneuvers in the governor’s proposed budget for 2010–11 would reduce the minimum funding guarantee under Proposition 98 by a total of $2.4 billion.
Depending on how the Legislature responds to the governor’s new revenue proposals, the minimum Proposition 98 guarantee could rise or fall, according to the LAO report, “The 2010–11 Budget: Overview of the Governor’s Budget.”
Although the minimum funding level under Proposition 98 may technically be met by the governor’s budget proposal under some interpretations of the state constitution, the LAO analysis said others would interpret the constitutional requirement at a “significantly higher” level. Regardless, “the administration acknowledges that it is veering away from the July 2009 budget agreement” that had addressed the state’s obligations under Proposition 98, the LAO said.
According to CSBA’s own analysis, various budget manipulations in recent years have created 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.
‘Maintenance of effort’
The proposed reductions would require U.S. Education Secretary Arne Duncan to approve the state’s request for a waiver from “maintenance of effort” funding requirements included in the federal American Recovery and Reinvestment Act.
The Education Coalition, consisting of CSBA and other groups representing public school administrators, employees and parents, have corresponded with Duncan more than once to object to the “shell game” the governor is staging to meet the federal MOE requirement.
“No amount of manipulation can mask the fact that the Governor is proposing new, additional cuts to K–12 education of $2.4 billion,” said one coalition letter. “These cuts simply do not meet any test of the reasonable meaning of the term ‘maintenance of effort.’ If the investments made in public education through ARRA are to have meaning, it is critical that you enforce the commitment to a maintenance of effort that was signed by the Governor last year and that the proposed devastating cuts to public education be rejected.”
General fund: ‘Very difficult choices’
The LAO pegs much of the state’s projected $20.7 billion shortfall through June 2011 on the failure of several proposals for balancing the budget in recent years. In addition, settlements in several adverse court rulings and the expiration of various one-time and temporary budget solutions approved during the last budget cycle have caused the deficit to grow.
To help close the projected gap, the governor has proposed asking the federal government for $6.9 billion in additional funding related to health, social services, education and prison programs. While the LAO said that’s probably a good idea, the likelihood that the Obama administration will agree to that level of extra support is “almost nonexistent.”
Should the state fail to receive all the extra federal support requested, the governor proposes dollar-for-dollar cuts to a number of health and human services that would negatively impact public school students and their families. Programs on the “trigger” list include CalWORKS, Healthy Families, Medi-Cal, In-Home Supportive Services, Supplemental Security Income and food programs.
“The Legislature must make very difficult choices affecting both state revenues and spending. The Governor’s trigger cuts—to take effect if federal funding is less than the Governor hopes for—are painful and in some cases draconian,” according to the report.
Meanwhile, time is of the essence, and the LAO recommends that legislators assume federal relief will be far less than the governor requests.
Anticipating the state’s dire financial picture will persist into the foreseeable future, the analysis advises lawmakers to take a comprehensive look at the state’s priorities and suggests working toward creating a “new, sustainable budget framework” that would need to encompass both revenues and spending. “Such progress is imperative to restore the state’s fiscal health and enhance public trust in state government,” the report said.
The “bottom line,” according to the LAO, is that legislators need to act immediately—by March, well before June’s constitutional deadline for a budget—if any savings are to be realized this year. And it’s going to hurt, said the analysis.
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