PROPOSITION 98 FIGHT AT CORE OF STATE BUDGET DEBATE

By Capitol Weekly Staff

3/04/10 12:00 AM PST | When California voters narrowly approved Proposition 98 nearly 22 years ago, their anger was clear: They wanted to protect education funding from the Legislature’s political infighting and assure a stable source of money from year to year. In good years, the intricate, three-tier, school-funding scheme draws little attention. A description of the Proposition 98 formula can be found here.

But in bad years – and right now, we’re in a bad year as the state confronts a $20 billion shortage  – the complex formula that rides herd over more than 40 percent of the state budget is drawing a close look.

Gov. Schwarzenegger, in his final budget as governor, has treated different areas of education differently. In his public pronouncements, he has said protecting school funding is a top priority. “Our state, our economy, our future is so dependent on education… we must protect education,” the governor said in January.

Some budget numbers back up his contention.

The impact on Proposition 98 is essentially flat during the 2010-11 fiscal year, in large measure because of proposed cuts to non-instructional areas, such as administration, and an easing on contracting-out restrictions.

One-time federal money that was available earlier will not be available for the 2010-11 year, but the governor has proposed making up the difference by back-filling money from the General Fund. That, in turn, likely will mean cuts to other areas, such as social services.

The governor also has offered a special message to higher education: His budget blueprint, to some extent, restores money to community colleges, which are covered by Proposition 98, and to four-year public colleges and universities.

Analyses by the Legislative Analyst’s Office and the California School Boards Association – among others -- paint a differing picture.

Different areas of education in the state budget are treated differently. And while media coverage of the budget has focused largely on college and university fees, the Kindergarten-through-12th-grade component of the spending plan is taking the largest hit.

“Under the governor’s plan, Proposition 98 support for K-12 education would be cut from current-year levels by $1.9 billion, and total funding for child care and development programs would be cut by slightly more than $300 million,” the LAO reported. Meanwhile, funding for community colleges, the University of California and the California State University would be partly restored, a total of about $1 billion.

The school boards association reached a similar conclusion.

“The governor proposes a number of complicated maneuvers to reduce the Proposition 98 guarantee. While the budget does not provide complete details on all of these machinations, it is specific on one point—the net result would be a reduction to the guarantee of $892.6 million in 2009-10 and $1.5 billion in 2010-11 from what it would otherwise be under current law,” the group said.

“Achieving these reductions relies partly on revising a major part of last year’s budget agreement relating to the certification of the minimum guarantee in 2008-09. The administration now estimates that the guarantee was $2.3 billion lower than certified for that year, resulting in a $2.3 billion “overappropriation.” The governor is proposing to apply some of that overappropriation to restoration of a Maintenance Factor. This would reduce the minimum guarantee in 2009-10 and subsequent years by $800 million per year, according to the Department of Finance.” The CSBA noted.

A detailed breakdown of the Proposition 98-related impacts for the 2009-2011 budget shows a $568 million reduction in 2009-10, which includes a savings of $340 million by allowing larger classes in K-3rd grades.

The 2010-11 budget blueprint shows a $103 million excess, but at least one Capitol observer says those numbers are misleading.

The $568 million cut in 2009-10 was not factored in 2010-11, but should have been, said Scott Lay, the chief executive of the California Community College League. The result is that the total cut is closer to $1 billion.

The earlier budget called for $11.2 billion to be paid back over time to education, a promise that the new budget didn’t begin to address, he added. The dwindling money combined with an enrollment surge makes for a difficult combination.

“It’s the worst possible confluence of events,” he said. “People 10 years ago were talking about Tidal Wave 2, an enrollment tidal wave, and now we’re at the crest of Tidal Wave 2. Demographically, there is no worse possible time for this: We have more people than ever needing higher education.”

Indeed, higher education captured the governor’s attention this week.

Schwarzenegger met with three UC students who complained about the university’s fees, while elsewhere in the Capitol, five UC students were arrested for protesting the fees.

The three students, who were not among those arrested, were invited to meet with Schwarzenegger in the governor’s office, where a handful of reporters looked on.

The governor, who was surrounded by top aides as well as UC President Mark Yudof, blamed lawmakers, the state’s tax system and the power of labor unions for California’s budget woes and subsequent cuts to higher education.

“I don’t have more money because they are refusing to fix the system,” Schwarzenegger said of state legislators, according to an L.A. Times report.  Telling the students, “We are so glad you are here,” Schwarzenegger insisted that “we are on your side of the fence.”