Fensterwald on the May Revise: K-12 SCHOOLS SPARED, FOR NOW …but automatic $5.5 billion cuts if tax initiative fails

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

14 May 2012  ::  The state budget for next year has deteriorated by $6 billion since January, but Gov. Jerry Brown is not proposing to cut money for K-12 schools – immediately. But if voters in November reject Brown’s proposed $8.5 billion tax increase, schools will be a $5.5 billion piece of what the governor has called “a day of reckoning.”

In his revised budget, Brown is proposing massive reductions in the budgets for courts, as well as state worker furloughs and punishing Medi-Cal cuts to hospitals and nursing homes. Because state revenues have fallen, Brown also could have cut Proposition 98 funding for this year by nearly $800 million. But that would have been impractical this far into the year, so instead he is proposing to redesignate the overappropriation as a prepayment toward settling up a debt to schools under an agreement that Gov. Schwarzenegger made with the California Teachers Assn.

One of the quirks of Proposition 98’s funding formula is that the spending commitment to schools can rise even as overall revenues fall. And that is what will happen in the 2012-13 budget. Having fallen substantially in 2011-12, the increase in revenues projected for next year creates a $1.2 billion extra for K-12. But districts shouldn’t count on any of that money coming their way. Brown wants to use $393 million to add to a $2.2 billion fund to pay down the current $9.6 billion in deferrals – late payments to school districts that are part of Brown’s wall of debt. And he wants to count a $450 million payment to low-performing schools under the Quality Education Investment Act as part of Proposition 98 (it had been paid outside of Prop 98 in other years). Add in a few more adjustments, and, poof!, the money is gone.

<< State revenues are projected to rise $17 billion by 2015-16. Source: state Department of Finance. Click to enlarge.

Total Prop 98 spending for K-12 and community colleges would rise from $47 billion in 2011-12 to $53.7 billion in 2012-13. About half ($2.9 billion) would come from passage of the tax initiative (see graph).

Brown is proposing to raise the sales tax by a quarter of a percentage and the income tax for those earning above $500,000. If it fails, Brown wants $5.5 billion in K-12 cuts, an extra $656 million more than $4.8 billion proposed in January. This is a higher figure because Brown increased the proposed tax by about $2 billion after coming together with the California Federation of Teachers.

A $2.8 billion repayment of a deferral would be canceled, continuing cash flow problems for many districts, and districts would face $2.7 billion in new cuts. That’s the equivalent of three weeks of school; the Legislature may be asked to reduce the school year from 175 days (already 5 days less than before) to 160 days.