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Governor's May Revise Cuts School Funding, Plan "B" Budget Offered if Ballot Measures Fail

By Vernon Billy and Jeff Hudson - May 15, 2009

In an effort to spark voter interest in next Tuesday’s special election – and stem the tide of apathy among voters that many observers believe is carrying five budget-related ballot propositions toward likely defeat – Gov. Arnold Schwarzenegger stirred things up on Thursday by releasing not one, but two versions of what the state’s 2009-10 budget could look like.

The two versions of the so-called “May Revise” will also serve to frame the budget debate that will occur in the aftermath of the May 19 special election. Regardless of how that election turns out, all observers are anticipating that there will be further cuts in state funding, in multiple areas.

In terms of K-12 education, neither version of the Governor’s “May Revise” was attractive.  State Superintendent of Public Instruction Jack O’Connell’s response was typical: “The two budget proposals . . . offer a choice between ‘devastating’ and ‘horrific’ cuts to public schools.  I am heartsick at the prospect that public schools in California are being asked to absorb between $800 million and $1.4 million in the final month of the traditional school year, and then an additional $1.6 billion to $4.2 billion in the next school year. If approved, these proposed cuts would be added to the $11.6 billion in cuts to schools approved last February” in the hard-fought compromise reached between the Governor, legislative Democrats, and a few Republican lawmakers.

Some public education analysts described the Governor’s two budget alternatives as “worse” and “worser.”

The Governor’s budget proposals took some observers by surprise, in that the plan appears to be predicated on using federal stimulus money to supplant state funding for education that will be slashed.  State Superintendent O’Connell said he’s “worried that cuts this deep . . . will jeopardize our maintenance-of-effort commitment to the U.S. Department of Education and put our federal stimulus money at risk.”

But at Thursday’s press conference with the Governor, state Director of Finance chief Michael Genest flatly denied that the Governor’s proposals would require that the state seek waivers from federal authorities for the use of federal stimulus funds.

As part of Thursday’s May Revise announcement, the Governor also announced that he would lay off 5,000 state employees, seek to consolidate a number of state boards and commissions, and seek to sell a number of state-owned properties in urban areas, including the CalExpo Fairgrounds in Sacramento, the Los Angeles Coliseum, and San Quentin State Penitentiary in Marin County.

The Governor described the proposed cuts as “very painful” but added “we are now in such a terrible situation, there is really no other way out.”  He also suggested – in jest – that Department of Finance chief Michael Genest “is on suicide watch.”  Genest, for his part, said that the state’s revenues are coming in at levels substantially below the level predicted at the time of the February budget compromise, and described the state’s current fiscal situation as the worst since the Great Depression.

Here is a rundown of the Governor’s proposals in regards to K-12 education:

  1. Proposition 98. Reduces Prop. 98 by $1 billion in 2008-09 (to $49.7 billion from $50.7 billion) and $2 billion in 2009-10 (to $53.7 billion from $55.9 billion), on the assumption that most of these reductions would be largely offset by the $3.3 billion in federal State Fiscal Stabilization Fund money, and $2.8 billion in other federal funding increases through the federal American Recovery and Reinvestment Act.
  2. Reductions. For 2008-09, the Governor proposes a $114 million reduction by eliminating the High Priority Schools Program, and a $694.3 million one-time reduction in Average Daily Attendance funding. For 2009-10, the Governor proposes a further $950 million in Average Daily Attendance funding.
  3. Shorter school year. The Governor seeks to provide school districts the option of cutting up to one week (five days) of instructional time.
  4. Deferrals of $640.3 million in school apportionment payments from 2009-10 to 2010-11, deferral of other K-12 program payments from early July to late July, and other payments from July and August to October.
  5. Borrowing $6 billion or more through Revenue Anticipation Warrants (RAWs).

In the event that some of the ballot propositions backed by the Governor (Propositions 1A-1E) fail in the May 19 special election, the Governor proposes the following contingency actions:

  1. Proposition 98 funding would be reduced further.
  2. Additional reductions in Average Daily Attendance funding.
  3. A reduction of two more days of instructional time at local discretion, for a period of up to three years.
  4. Some $1.982 billion in additional borrowing from local governments.

The Governor’s “May Revise” is, of course, a starting point in the budget negotiations between the Governor and the Legislature.  More details will come into focus during the weeks ahead, and typically, some compromises are reached.  But in the current economic climate, school districts will almost certainly be facing further rollbacks in funding, along with more decisions about staff reductions and program cuts – and these decisions will likely be coming sooner, rather than later.

Editor's Note: Vernon Billy is the Co-publisher of EdBrief and President of legislation advocacy firm Governmental Solutions Group, LLC. Jeff Hudson is the editor of EdBrief and an award-winning education reporter and writer in print, radio and television media.