Protected?? Guv’s Proposals for Education

On Wednesday of last week, Governor Arnold Schwarzenegger assured listeners in his State-of-the State address that one of his priorities is to protect public education from further budget cuts, as he works with the Legislature to resolve a $20 billion two-year state budget deficit.

This past Friday, when he introduced his budget plan for 2010-11 we found out exactly how much protection that was.  If enacted by the Legislature, the Governor’s proposals for education will result in an additional cut of $250 in state funding for each California student, on top of the almost $1000/student cuts imposed since January 2009.

With 8,500 students in the Davis Joint Unified School District, these proposals would result in an additional reduction of more than $2 million in district revenue for the 2010-11 school year. It is important to note that this will be added to the $3.5 million in budget reductions for 2010-11 that have already been proposed by Superintendent James Hammond.

What follows are the nitty-gritty details of the Governor’s budget plan and its impact on California’s public schools.

Continuing Fiscal Emergency

The Governor acknowledged that despite the enactment of $60 billion in “budget solutions” in 2009 (including over $30 billion in one-time and ongoing spending reductions), he is again forced to declare a fiscal emergency and call on the Legislature to adopt $8.9 billion in budget solutions in yet another special session. The Legislature has until February 22 to act within the 45-day constitutional deadline.

The Governor’s Finance Director, Ana Matosantos, now reports that California’s two-year budget shortfall has grown from $6.9 billion to $19 billion since last July. She attributes the increased budget gap to three primary causes:

1. Erosion in the value of $7.2 billion in savings enacted this past year, including court decisions that have blocked solutions enacted by the Legislature in 2009.

2. $1.4 billion in additional program costs associated with population and caseload driven programs (e.g. prisons and MediCal.)

3. $3.4 billion in decreased General Fund revenues.

The Governor’s Latest Plan

Declaring that he intends to “protect education,” the Governor proposes to address the $19 billion shortfall with the following solutions:

• $8.5 billion in spending cuts – mostly to state employee compensation, social services, and prisons
• $4.5 billion in fund shifts and “alternative funding”
• $6.9 billion in expected (proposed) federal funds

The Governor also identifies $6.9 billion in additional solutions to be implemented in the event that the federal government fails to provide the funding proposed in his budget. The alternative solutions are:

• $4.6 billion in spending reductions that include the elimination of CalWORKS, In-Home Support Services (IHHS), Healthy Families, UC and CSU enrollment growth, Foster Youth Transitional Housing, non-court required inmate rehabilitation programs and significant further reductions to State Employee compensation, Cal Grants, trial courts and Medi-Cal benefits.
• $2.4 billion in temporary revenues that include tax increase extensions and delayed tax breaks.

Creative Interpretation of the Minimum Funding Guarantee

The basis of the Governor’s assertion that he is “protecting education” stems from a rather creative interpretation and/or manipulation of the Proposition 98 constitutional funding guarantee.

By using reduced General Fund estimates in the current year, the Governor proposes to revise the 2008-09 and 2009-10 budget agreement and reduce the K-14 constitutional funding guarantee for the current year and 2010-11. The result is that K-14 (Proposition 98) minimum funding levels are revised downward from the Legislative Analyst’s November estimates: $50.7 billion to $49.9 billion in 2009-10 and $51 billion to $50 billion in 2010-11.

So, while “protecting education,” the Governor has found a way to lower K-12 spending by $1.8 billion.

Mid-Year Cuts for 2009-10?

Technically (and providing a degree of cover to the Governor’s claim of protection), there are no actual mid-year spending cuts proposed in the budget. However, the imaginatively reduced Proposition 98 minimum spending level allows the Governor to propose reverting $252 million in reduced Average Daily Attendance (ADA) funding from lower K-12 enrollment and $340 million in unused K-3 class size reduction (CSR) funding to the state General Fund as savings. It is fair to say this is money school districts had not budgeted to receive.

Proposed K-12 Reductions for 2010-11

Consistent with the approach used in the current year to accrue “natural and seemingly painless savings” from a lowered Proposition 98 minimum spending level, the Governor proposes the following:

• K-12 Growth and COLA: The administration projects an additional savings of $252 million from declining K-12 enrollment. For the first time in Proposition 98 history, the national economic recession will result in a -0.38% Cost of Living Adjustment (COLA) calculation, thereby allowing the state to reduce K-12 funding by $206.6 million. In other words, the state will “fund” the negative COLA by imposing a cut.
• K-3 CSR Reversion: Using the lower Proposition 98 funding guarantee, the Governor proposes to revert $550 million of unclaimed CSR funding as General Fund savings.
• Economic Impact Aid (EIA) Reversion: Taking advantage of the lower Proposition 98 funding guarantee, the plan uses $64.3 million in prior year, unspent K-14 funds to reduce General Fund in 2010-11 for the Economic Impact Aid Program.

Real Cuts

Unfortunately, the Governor doesn’t stop with the ”painless” cuts in the budget year; making his protection claim difficult to accept if you hope that schools might avoid even greater revenue losses in the next school year. Accordingly, the following very real cuts to K-12 spending are included in the Governor’s budget:

• $1.2 billion Administrative Cost Reduction to School District Revenue: This proposal will “protect classroom spending, including spending for teachers and principals” by prohibiting school districts from reducing teacher and site principal salary costs when implementing this budget reduction.  This proposal, if enacted, will result in loss of approximately $200 per student.
• $300 million reduction to County Office and School District Revenue Limits: The Governor is again proposing to “eliminate barriers to contracting out” to enable school districts to achieve cost savings.  Under this proposal, school districts will take a revenue cut of approximately $50 per student whether this reform is enacted or really produces savings.
• $45 million reduction to County Office Revenue Limits: This proposal will require county offices of education to consolidate services and functions, possibly into regional consortia.
• $122.7 million reduction to CalWORKS Stage 3 Child Care Funding: The Governor is proposing to achieve additional ongoing Proposition 98 General Fund savings by reducing eligibility to only California’s “neediest” families.
• $77.1 million reduction to Child Care Reimbursements: The Governor proposes to reduce reimbursement rates for licensed exempt providers from 90 percent of the ceiling for licensed family child care homes to 70 percent.

Impact of Race to the Top Initiatives

In addition to his reform proposals that are directly linked to budget reductions to schools, the Governor also has included some policy reforms that are designed to extend or provide “additional flexibilities to schools to allow them to protect classroom spending to the maximum extent possible, and to build on the reforms embodied in President Obama’s Race to the Top Initiative.”

These proposals include:

• Teacher Seniority: The Governor proposes to change state law and provide school districts the flexibility to layoff, assign, reassign, transfer and rehire teachers based on skill and subject matter needs without regard to seniority.
• Substitute Costs: The Governor proposes to eliminate the provisions in state law that require teachers who have been laid off to receive first priority for substitute assignments and that these substitutes be paid at the rate they received before they were laid off if they work more than 20 days within a 60 school day period.
• Staffing Notification Process: The Governor proposes to change the staffing notification window for teachers to 60 days after the state budget is adopted or amended. Current state law requires that school districts notify teachers by March 15 of the year before the layoff, well before the state typically adopts its budget and districts know how much funding they will receive.
• School Year: The Governor is proposing to extend current flexibility through 2012-13 to reduce instruction by up to five days, to accommodate the reductions made in 2009-10 without losing any incentive funding they receive to maintain a 180 day school year.

A Target for Even Greater Cuts

It is hard to imagine that any sector of the State Budget is pleased. We have reached a point where it seems that any cut will impact the lives of large numbers of Californians in negative ways. To that end, while this budget proposal is no doubt a major disappointment for K-12 educators expecting some real protection, it is important to understand that there is great pain everywhere.

Unfortunately, the Governor’s decision to characterize his proposals as an attempt to protect schools has served to make education a target for even greater cuts.  Assembly Speaker Karen Bass has been quoted in numerous news reports as saying she would not spare education at the expense of social service programs.  Her remarks were made before full knowledge of the Governor’s proposals and are based upon the presumption that the Governor was actually proposing no additional funding reductions to California schools – not a true assumption.

The hopeful news is that the Governor’s K-12 spending cuts will be uncovered and discussed in Legislative budget hearings in the coming weeks. We can only hope that these proposals will be considered in the context of over $5 billion in real, ongoing spending cuts to K-14 schools that were enacted by the Legislature in 2009.

It is a fact that spending cuts to schools made up 50% of all budget cuts in 2009; despite the fact that K-14 school spending makes up only 40% of California’s total budget.

It is an understatement to say this is going to be a very, very painful year for Californians who care about protecting the services provided by state and local jurisdictions. Despite the inability of the Governor and Legislature to achieve all of the savings enacted in 2009 and the continuing decline of state revenues, the Governor continues to resist revenue enhancement proposals—including a one-year extension of temporary tax increases approved last year and the elimination of tax breaks.

Without reconsideration of this position on revenue, or an injection of even more federal stimulus dollars, it appears almost certain that the cuts to our schools proposed by the Governor will be enacted for next year and that even greater cuts may be considered.