BROWN’S BUDGET COMPROMISE SLOWS PACE OF SCHOOL DEFERRAL REPAYMENT

By Tom Chorneau, SI&A Cabinet Report | http://bit.ly/14wNCdt

Wednesday, June 12, 2013  ::  Gov. Jerry Brown and legislative leaders joined Tuesday to applaud agreement on next year’s budget at a Capitol news conference – a plan that would seem to include the lion’s share of what the governor wanted.

A close review, however, suggests the governor had to give up a cherished element of his fiscal agenda to make the deal work – a rollback in his efforts to reduce the state’s debt owed schools.

The tentative deal, which still needs to be translated into statute and pass out of the Legislature by Saturday’s deadline, appears to have strong support from Brown as well as Senate leader Darrell Steinberg and Assembly Speaker John Perez.

If so, Brown will end a two-year struggle to restructure school funding with adoption of his Local Control Funding Formula – which gives district officials more control over spending decisions and targets more money to educationally disadvantaged students.

But the Legislature’s majority Democrats were concerned that Brown’s plan, as proposed, focused too much money on a narrow group of districts and that many low-income students, English learners and foster youths could still fall through the cracks.

To find money to increase the base grant all districts would share, budget negotiators shifted $650 million from what the governor had earmarked for paying off some of the billions owed schools for deferred apportionments.

The deferrals had become the bane of district fiscal officers since the onset of the recession as money managers on the state level struggled to maintain cash flow. At first, the delays in paying K-12 apportionments got pushed back only a few days and then a few weeks, soon months passed between when the money was scheduled to arrive and when it did – forcing schools to borrow to make ends meet.

At its peak, deferrals represented more than $9.5 billion in money owed schools.

As part of his mission to reduce the state’s $33 billion “wall of debt,” Brown proposed in January to use $1.8 billion from growth in the Proposition 98 funding guarantee to buy deferrals in the 2013-14 fiscal year. His revised May budget included $1.6 billion to pay back deferrals in 2012-13, but reduced the amount to be paid back in 2013-14 by $909 million.

The tentative budget deal agreed to this week still includes about $4.3 billion in deferral repayments over two years – but it could have been more, as GOP Sen. Bill Emmerson of Redlands pointed out during the conference committee debate late Monday night.

But Michael Cohen, chief deputy director of the governor’s Department of Finance, pointed out that the amount proposed for deferral pay backs will end up being $91 million more than what the administration had proposed in January. He also said that under Brown’s multi-year plan for retiring debt, all the deferrals will be paid off in 2015-16 – the same date targeted in the revised May budget.

“It’s a win-win,” said Sen. Mark Leno, D-San Francisco. “Not only are we $91 million above what had been originally proposed but we’ve freed up $650 million in Prop. 98 dollars that we can invest in some of these other programs.”