THE POTENTIAL CURSE OF MONEY DEFERRED: Districts will feel pressure to spend what may soon vanish

By John Fensterwald - Educated Guess | http://bit.ly/dl13Z9

10/08/10 • Even in suspending Proposition 98, after hemming and hawing all night long, for only the second time, the Legislature approved Prop 98 spending of $1.2 billion more than Gov. Schwarzenegger proposed in May. And then lawmakers tacked on $3 billion on top of that.

That’s the good news. The bad news is how they did it, with $1.9 billion of the $3 billion ($1.7 billion for K-12, $200 million for community colleges) deferred until the next fiscal year. In the end, that may leave school districts worse off than before.

Here’s why: There’s a good chance that for many reasons the deferred money will be like vaporware – an undelivered promise. The state budget is built on optimistic assumptions of $5 billion extra funding from the federal government and higher state revenue than the governor projected. The state is facing a continued deficit made worse by the expiration of about $9 billion in temporary taxes, starting next year.

A new governor looking at this bleak picture may pursue midyear cuts, and this money would be a fat target. Because it’s not protected by Proposition 98, it would be easier to take back.

Meanwhile, districts will enter the extra $1.7 billion as revenue this year. It will make them look healthier than they are when they file their next financial report to the state, in December. Unions will argue that districts have no right not to start using the money now to hire back teachers and clerical workers who were laid off last summer and to keep them on the books for next year.

In a budget memo sent out yesterday, the Sacramento education consulting firm Capitol Impact issued this sober assessment:

“With all of these challenges ahead, school districts will need to be very cautious in their future spending. On January 10^th the new Governor will present his or her budget for 2011-12. That is a mere 74 days from now. We also expect the new Governor to immediately call for a special session in order to deal with the state’s fiscal condition for both 2010-11 and 2011-12.  It is possible that districts may be asked to take additional reductions in both years.”

K-12 and community college spending, at least as of today, would be about the same this year as last: $52 billion. But at least $1.9 billion of it may be an illusion.