January 6, 2009
To close the $41.6 billion deficit that California is facing for both 2008-09 and 2009-10, the Governor proposes to implement a combination of cuts, taxes and borrowing (lottery, internal borrowing, and Revenue Anticipation Warrants -- RAWs).
While the Governor has yet to sign the Legislature’s proposed mid-year cuts and tax package, this report includes the Governor’s second mid-year proposal, since he bases the 2009-10 proposed budget on this proposal for 2008-09 mid-year cuts.
The following is a summary of the major components of the 2009-10 Governor’s K-14 Proposed Budget and the proposed mid-year cuts from the 2008-09 current budget year. Further details will be forthcoming as the budget discussions and deliberations begin.
For the 2008-09 mid-year adjustments and cuts, the Governor proposed the following:
Proposition 98
In September 2008, the 2008-09 enacted budget assumed an amount of $58.1 billion K-14 for Proposition 98. Due to the economic downturn, revenues in the state decreased dramatically. This, in effect, will lower the base for Prop. 98 by way of cuts and deferrals. The minimum guarantee for 2008-09 will be adjusted to its minimum required guarantee of $51.5 billion, which is a decrease of $6.6 billion or 11.4%.
For the budget year 2009-10, the Governor proposes to fund the minimum guarantee of $55.9 billion, which is an increase of $4.4 billion or 8.5%.
- Eliminates the .68% COLA for K-14. (This totals $247.1 million).
- Includes an additional cut of $1.6 billion to the revenue limits (approximately 4.5%).
- Shifts $619 million directly to home-to-school transportation from the Public Transportation Account.
- $55.5 million in savings from unappropriated funds from various programs (such as $48.5 million from Economic Impact Aid, $2 million from High Speed Network, and $2 million from National Board Certification, etc.)
- An additional deferral in order to help the state’s continuing cash flow problems. This proposed deferral includes a $2.6 billion K-12 apportionment and K-3 class size reduction payments from April 2009 to July 2009. (One such deferral has occurred from February as part of the enacted of 2008-09 budget).
Flexibility Proposal:
- Includes a flexibility proposal to allow all categorical program funding to be used for any purpose.
- Also included is the ability to reduce from 3% to 1% of General Fund expenditures the K-12 local routine maintenance account set aside requirement.
- In addition, it allows school districts to use up to 1.5% of the state required level of K-12 unrestricted reserves. (3% to 1.5% for most districts).
Community Colleges mid-year proposal:
- Elimination of the .68% COLA.
- $230 million deferral from January and February 2009 to July 2009.
- Includes a flexibility proposal similar to K-12.
Governor’s Proposed 2009-10 Education Budget
- No funding for statutory COLA (estimated to be approximately 5.02%). This is a cost savings of $2.5 billion.
- A reduction of $152.7 million due to a decrease in K-12 enrollment.
- Reduces the revenue limit funding by $1.1 billion. This would allow districts to eliminate 5 days of instruction. This must be negotiated with the unions at the local level. Further details will be given as information comes forth.
- A decrease of $1.5 billion to school districts and county offices revenue limits to bring Prop. 98 funding to the minimum guarantee for 2009-10.
Revenues and savings:
- Via legislation, a shortfall of $268.2 million in property taxes will be backfilled.
- $83.2 million in growth in the following programs: Adult education ($19.3 million), child nutrition ($8.4 million), Charter School Categorical Block Grant ($42.6 million), Teacher Credentialing Block Grant ($3.8 million), and Class Size Reduction ($9.1 million).
- $35.5 million increase for deferred maintenance.
- $398.5 million shifted from Public Transportation Account and Mass Transportation Fund to K-12 home-to-school transportation. This will maintain the level of funding for this program.
- Defers the $150 million in mandate settle-up funds scheduled for 2009-10.
- Eliminates $114 million from the High Priority School Grant Program. This, in effect, eliminates the program.
- A shift of $1.06 billion from the General Fund to K-14 education to replace Lottery revenues. This shift implements the securitization proposal bringing this funding under the Proposition 98 Guarantee.
- $65 million increase to pay for the Special Education behavioral intervention settlement lawsuit.
- $13.4 million for state mandated programs. This suspends all but two K-12 mandates. The exceptions are: Interdistrict and Intradistrict transfers ($6.3 million), and the California High School Exam ($7.1 million).
- The flexibility proposal for the mid-year 2008-09 budget cuts is also proposed to be continued for the 2009-10 budget. However, the categorical flexibility proposal is proposed to be a permanent change.
Community Colleges budget proposal for 2009-10:
- $185.4 in growth for Community Colleges (3%).
- Backfill for property taxes for Community Colleges, also via legislation. (No specific number is available at this time.)
- No funding for statutory COLA of $322.9 million, or 5.02%.
- A decrease of $4 million by suspending all community college reimbursable state mandates.
- Continues the categorical flexibility described for 2008-09.