Dems’ budget: Prop 98 with twistBig cuts for education if revenues don't come
Giving K-12 and community colleges more money with one hand and taking it away with the other, Democratic leaders are proposing a balanced budget that would fund K-12 schools at last year’s level while meeting the state obligation to education under Proposition 98. They are doing this without $10 billion in temporary taxes that Republicans refuse to extend. No easy feat, this is budgeting with a twist – of the arm of education groups, which could sue over budget maneuvers (but probably won’t).
Nine days ago, Democratic lawmakers passed a state budget by majority vote, which Gov. Jerry Brown vetoed. Today they will try again, only with Brown’s full support. After months of stubbornly trying, Brown over the weekend gave up hope of persuading four Republicans to temporarily extend taxes in exchange for pension and environmental law changes and a cap on state spending.
Brown said the proposed budget would require up to $1.9 billion in midyear education cuts, including seven fewer school days, if rosy revenue estimates come up short. The budget will be balanced but will not solve the state’s structural deficit. That will take higher taxes, and he promised to propose them in an initiative on the November 2012 ballot.
Details were sketchy Monday on how Brown, House Speaker John Perez, and Senate President pro Tem Darrell Steinberg balanced the budget. Brown promised budget briefings after the Legislature approves the budget. (He actually said that in a press webcast.) But this is basically how they plan to square the circle:
- Democrats are building in $5.2 billion more in revenue, including the optimistic projection of $4 billion in natural growth in taxes, mainly from high-income earners, beyond the $6.6 billion that Brown included in his May budget revision.
- Since K-12 schools and community colleges are entitled to about 40 cents of every new dollar under Prop 98, they would get about an extra $2.1 billion of the $5 billion. Instead, Democratic leaders will nullify that by diverting 1.06 percent of the state sales tax to local governments to pay for realignment that shifts more state functions to cities and towns. That 1 percent will no longer count toward Prop 98.
According to John Mockler, the architect of Prop 98 and occasional consultant for the California Teachers Association, who was in on negotiations on Sunday, this will be a one-year deal, and groups in the Education Coalition will not sue over it. The November 2012 ballot initiative will call for permanently reimbursing schools to replace the loss of state sales tax revenue. (Update: Next year’s budget would be written so that schools would be compensated even if a budget initiative failed). “We’re supportive [of Brown’s plan for realignment] but not chumps,” Mockler said. (Rick Pratt, vice president of the California School Boards Association, said Mockler must have been speaking for the CTA, because CSBA hadn’t been consulted.)
- About $1.5 billion in child care programs that have been included within Proposition 98 will be moved outside of it, further lowering the Proposition 98 guarantee. According to Mockler, a previous court ruling gives the Legislature authority to do this. But Pratt said it would be a “bad precedent” to move a program outside of the Prop 98 obligation just because the Legislature decides not to fund it.
- If the projected revenue increases come up short, then in January Director of Finance Ana Matosantos could order up to $2.6 billion in cuts, starting with $700 million to higher education and social services, and then the rest to K-12 schools and community colleges. Midyear cuts are especially tough on districts, which set budgets by July 1. So the Legislature will approve cutting another seven days off the end of the school year – likely giving California the shortest school year in the United States, if not the developed world, at 168 days. It’s not clear whether the Legislature would mandate or simply permit a shorter year. (Update: Economist Chris Thornberg of Beacon Economics, a Los Angeles consulting firm, was asked whether Democrats should rely on $4 billion more in tax revenue this year “They’re out of their minds,” he told the Sacramento Bee.)
- In his initial January budget, Brown had proposed delaying payment of an additional $2.1 billion owed to schools and community colleges in 2011-12 until the following year. In his May budget revision, which assumed Republicans would agree to extend taxes, Brown withdrew the deferral and even rescinded several hundred million dollars in past deferrals. But in the latest proposal, Democrats would reinstate Brown’s $2.1 billion deferral from January and add $700 million to it. This would bring the total of deferrals to more than $10 billion. In yesterday’s post, I pointed out potential dangers of doing this.
The bottom line is that K-14 schools will receive $48.3 billion in Prop 98 money next year, including $2.8 billion in new deferrals. Asked Monday how he could meet the Prop 98 obligation without tax extensions, Brown replied “very legally and creatively.”
“It is very creative,” Pratt said. “I don’t know about very legal.”**********
According to the Sacramento Bee, the latest budget will also include the following features in the Democrats’ budget that Brown vetoed last week:
- $1.7 billion from eliminating redevelopment agencies;
- $300 million from $12 per vehicle increase in DMV registration fee;
- $200 million in enforcing an online tax of Amazon;
- $150 million cut each to University of California, California State University;
- $150 million cut to state courts.