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Democratic Leaders Pérez and Steinberg Announce Revised Budget – Suspension of Prop 98

By Jeff Hudson and Vernon Billy - August 5, 2010

Earlier this summer, there were three state budget proposals on the table – one from Governor Arnold Schwarzenegger, another from Assembly Speaker John Pérez, and a third from Senate President pro Tem Darrell Steinberg – something of an anomaly, given that Sacramento politics is generally a two-party game.

Having alternate proposals from the Democratic legislative leaders seems to have done little other than further complicate a situation that has long since turned into a stalemate.  So on Tuesday, Pérez and Steinberg tried a different tactic, and rolled out a new joint Democratic proposal, the updated “California Jobs Budget.”

As described by the two Democratic legislative leaders, “the plan closes the deficit, which has been fueled by both the collapse of our economy and by the pre-existing structural deficit which has contributed to California’s budget instability for decades. The (updated) Jobs Budget reflects a central commitment to saving and creating jobs while implementing responsible, targeted cuts totaling $8 billion that do not put California’s economic recovery in jeopardy. In contrast, the Republican Plan will unapologetically ruin California’s recovery by eliminating 430,000 jobs and stop five billion federal dollars from flowing into our economy.”

It is expected that this new Democratic budget plan will be quickly taken up by the budget conference committee – and given the Democratic majority on that body, it could pass. Once approved by the committee, the Assembly and Senate will put the proposal up for a vote in their respective houses.    The Governor and Republican leaders have already dismissed the proposal, which will make securing the needed two-thirds vote for approval extremely difficult.

Given the lack of agreement by either the Governor or Republican leaders, many in the capitol believe the Democratic proposal is nothing more than a budget “drill” intended to push negotiations along. 

What’s in this new proposal? The budget plan includes several items that were contained in either the Speaker’s Jobs Budget or the Pro Tempore’s earlier budget proposal (or both) relative to tax increases.  Overall, their new joint proposal makes $8 billion in cuts and raises various taxes including a slight increase to the Vehicle License Fee (something the Governor has long opposed), and a reduction in the state sales tax rate.  The joint Democratic plan also “increases” personal income tax brackets by one percent – except for the highest tax bracket which would see a smaller increase.

In terms of education, the proposal rejects the Governor’s cuts to education, provides $52 billion for education and calls for a “suspension” of Proposition 98.  Based on the initial details, the bottom line seems to be that the level of funding will be pretty similar to what many school districts have budgeted for the coming year.

It also appears that the suspension of Prop 98 is forward looking.  In other words, the suspension of Prop 98 is on the new taxes proposed by the Democratic leaders and not on existing funding. 

This approach has the effect of allowing the state to avoid having to provide schools with almost half of any new tax revenue.  In addition, under the Prop. 98, suspension requires the state to payback schools for the loss dollars as state revenue increases.  By disavowing prior year budget practices of manipulating Prop 98 in order to achieve savings and simultaneously avoiding suspension, the state would be acting in a more honest manner and in accordance with the state constitution.  A suspension, while not welcomed, would also help to mitigate any future efforts to avoid paying schools back for the loss of funding as the economy rebounds. 

Overall, the joint Democratic proposal provides a total of $52 billion in total funding for Prop. 98 for education, compared to $49 billion in the Governor’s May Revision. 

In addition, the Democratic budget proposal and conference committee actions include the following actions:

—Restores several of the Governor’s most serious proposed cuts.

—Restores $1.5 billion for Revenue Limits (the most basic, flexible, funding provided to school) that the Governor proposed to cut.

—Restores $1.4 billion for child care (including $286 million from one-time funds).  The Governor had proposed to eliminate funding for child care altogether. 

—Restores $300 million for Class Size Reduction.  The Governor had proposed to reduce funding by $550 million.

—Restores $230 million that the Governor proposed cut with a “negative COLA".

—Provides major increase in one-time funds for mandate relief:  

—Provides an additional $1.3 billion to $4 billion of one-time money to schools to pay off past mandate claims and court-ordered settlements.  The budget would establish a statewide local school district Joint Powers Authority (JPA) to enable school districts to accelerate the mandate funds.

The joint Democratic proposal faces a number of hurdles, but if approved by the Budget Conference Committee as expected, the proposal may help push the politics of the budget along just a little bit further.

Editor's Note:  Jeff Hudson is the editor of EdBrief and an award-winning education reporter and writer in print, radio and television media. Vernon M. Billy is president of Governmental Solutions Group, LLC (GSG) a Sacramento-based consulting and legislative advocacy firm. GSG serves public and private education organizations, non-profit organizations and private sector companies.