Budget details in brief

On July 29, the Legislature passed the 2003-04 Budget Act along with the usual trailer legislation to implement the bill. For education, the budget is very similar to that proposed in the May Revision and supported by CTA and the Education Coalition. There are some major differences, however, as well as some still-unanswered questions.

Revenue limit reductions Districts' revenue limits for both 2003-04 and 2004-05 were reduced a total of $350 million (1.198 percent). This percentage cut will apply to each district's base revenue limit. County offices of education will have a 1.195 percent reduction applied. This final determination of the revenue limit reduction is a far cry from the $250 per ADA loss that districts were building budgets around as late as last May.

COLA and growth The budget suspends the 1.86 percent cost-of-living adjustment (COLA) for 2003-04, but requires the state to build the lost COLAs back into the funding base starting in 2005-06. This suspension applies to county offices of education as well. The budget includes $504 million to accommodate a projected 1.34 percent growth in student attendance. There are no provisions for either growth or COLA for categorical programs with the exception of growth for special education. No deficit factor is created for the lost categorical growth or COLA.

Budget 'backfill' opportunities When the Education Coalition agreed to support the reduction in the revenue limit, it believed the language would require districts to use reserve funds to backfill and thus mitigate the impact of the revenue limit reduction. In the final budget deal, the language was changed from "shall" to "may." CTA is working with the legislative leadership to restore the language requiring districts to backfill the reduction. In signing the trailer legislation, Gov. Gray Davis admonished the Legislature and urged it to come back quickly with necessary corrective language.

Backfill flexibility for 2003-04 Districts may tap two sources for funds for any purpose in 2003-04 (provided federal maintenance-of-effort provisions are not mitigated). Districts may use up to 100 percent of a district's restricted general fund and Cafeteria Fund reserves [except for reserves for capital outlay, bond funds, sinking funds, Economic Impact Aid, Targeted Instructional Improvement Grants, instructional materials, special education, and the Public Schools Accountability Act (II/USP and HPS)]. The second source districts may use is the Routine Restricted Maintenance Fund. Ordinarily, districts receiving state facility bond money must dedicate 3 percent of unrestricted general fund expenditures to routine restricted maintenance; the trailer bill reduces this obligation to 2 percent. Districts not receiving post-1998 bond money are already at the 2 percent threshold.

Backfill flexibility for 2003-05 Statutory requirements for a district's Reserve for Economic Uncertainties have been reduced by half in both 2003-04 and 2004-05. The reserve requirements will be reinstated in the 2005-06 fiscal year unless future legislation continues the reduction.

The new requirement, based on average daily attendance (ADA), is:

Community colleges The budget appropriates $2.3 billion in general fund support for community colleges in 2003-04. Of that, $90.7 million is new fee revenue, resulting from an increase in student fees from $11 to $18 per unit. A major issue for the Legislature was the funding for "concurrently enrolled" students - high school students also enrolled in community colleges. Certain members of the Legislature had questions about the validity of enrollment by some students in some concurrent programs, and so cut the programs by $25 million.

UC and CSU programs Both the University of California and California State University programs were cut 7.9 percent ($216 million in UC and $160 million in CSU). However, most of this amount will be offset by increased student fees.

Teacher tax credit The tax credit for classroom teachers was restored. The credit ranges from $250 to $1,500, depending on length of service.

Legal challenges Two lawsuits that have been filed in the last few weeks could have a major impact on the budget. One lawsuit would block the vehicle license fee increase ($3.1 billion in 2003-04 and $4.3 billion in 2004-05) and another would block the issuance of $10.7 billion in bonds to cover the deficit. If either of these suits is successful, the likelihood is that the budget would be reopened for midyear cuts.

Midyear cuts are also likely if the economic forecasts on which the budget is based prove to be overly optimistic. And who knows what impact the recall election - whatever the outcome - will have on the budget .