In the latest Field Poll, two-thirds of voters said it was a bad idea for the Legislature to impose automatic midyear cuts in K-12 and higher education if revenues come up short. Based on the latest economic data, a lot of Californians could be angry come January.

The state’s cash receipts in August, combined with the latest ominous UCLA Anderson Forecast, make it increasingly unlikely that the state will take in enough revenue to avoid as much as $4 billion in layered,  automatic cuts. And that should make districts, which are facing a possible midyear 4 percent cut or as many as seven fewer school days, increasingly nervous.

After the first two months of the fiscal year, the state is running about 5 percent, or $596 million, behind the revenue forecast of $12.1 billion at this point. Sales and corporate taxes were in the red after two months, and the personal income tax – the biggest source of revenue – was slightly ahead. In total, July was a disaster, and August was only 1 percent off.

But there is a lot of ground to make up if the state is to avoid cuts, and little time to do it. In November, the Legislative Analyst’s Office must recommend whether to make cuts, using projections based on only the first four months of revenues. The Department of Finance must recommend in December, based on the first five months, without having the benefit of knowing data from the big revenue months of December, January, April, and June, tracking Christmas sales and quarterly income tax receipts. So the LAO and Finance will have to do  guesswork.

The UCLA Anderson Forecast won’t make it easy for them to err on the side of optimism. While predicting that there will not be another recession, economists at the school of management at UCLA cut the growth rate in both the national and state economies and forecast continuing high unemployment, particularly in California, where the jobless rate will “hover around 12 percent” for the rest of this year and remain above 11 percent for the next two years.

Three months ago, UCLA had forecast job growth increasing 2.4 percent in 2012; now it’s saying it will be 0.6 percent. Personal income was to grow 5.3 percent in 2012; that has dropped to 3.6 percent, according to the September forecast.

How the trigger would work

In order to balance the budget without raising taxes, legislators in June built in an extra $4 billion in revenue. They did so after more revenues than they expected rolled in; May was especially healthy. Since then, however, there have been three straight months below projections.

If state revenues are projected to come in between $1 billion and $2 billion below budget, then the state will lop off $600 million to the university systems, child care, and health programs. If revenues fall short between $2 billion and $4 billion, then as much as $1.9 billion for K-12 schools, including $248 million in home-to-school bus transportation funding, will be cut. The latter is particularly alarming rural school districts, where transportation is a proportionately larger portion of their budget. They fear that without transportation, attendance will fall, followed by cuts in state funding tied to student attendance – a dangerous spiral. But in terms of dollars, more than half of the transportation cuts will affect urban districts with low-income children. Stephen Rhoads, a lobbyist with Strategic Education Services in Sacramento,  estimates the loss at $49 per student in districts where low-income children comprise greater than 75 percent of the district.

The Legislature has directed that if there are midyear K-12 cuts, they should be in the form of furlough days, up to seven, depending on how much revenue falls short. But furloughs must be negotiated with local unions, and so far not many have signed on. One reason is that the Legislature hasn’t amended the law stating that teachers must work at least 175 days to get credit for a full year toward their pensions. If teachers end up working 168 or 170 days, they want that defined as a full year for pension purposes.

School Services of California, finance and advocacy consultants for many districts, is already calling on Gov. Jerry Brown not to pull the trigger on K-12 cuts in January and to deal with the potential shortfall in next year’s budget. School Services has advised districts to prepare for a 4 percent midyear cut averaging $260 per student for a unified school district.

But so far, Brown has not been so inclined. Last week, he vetoed SB X1-6, which would have delayed a $10 per unit increase in community college fees, to $46 per unit, by six months under the trigger, and would have required Brown to present alternatives to the automatic cuts.

In his veto message, he wrote, “This year – for the first year in a long time – we passed a no-gimmicks, on time budget. Why would we undermine the plan that has earned widespread respect and helped stabilize California’s finances?”