Failed Budget Bills Give Schools Small Reprieve in Cuts

California’s 6.2 million public school students, 290,000 teachers and 1,050 school districts dodged a $1.3 billion budget bullet when the Legislature failed to pass three cost-savings bills by midnight June 30.

GOP Gov. Arnold Schwarzenegger said he would veto the bills anyway since they solved only a portion of what was estimated on June 30 to be a $24 billion gap in the budget for the fiscal year that began July 1.

While schools may rejoice, the state begins its new fiscal year with a mounting cash flow problem that requires the issuance of IOUs, known as registered warrants, for only the second time since the Great Depression.

The state controller says printing of the warrants begins the afternoon of July 2.

Failure to pass the three bills worsened the state’s budget problem by at least $2 billion, the GOP governor told reporters July 1. And, he said, while not passing the bills soured the state’s fiscal situation, the result was good for schools.

“The kids are going to get their money back. Kids deserve their money back. Kids and the education community are smiling today,” Schwarzenegger said. 

The relief of school districts of avoiding $1.3 billion in cuts is likely tempered by previous actions by the GOP governor and lawmakers in the budget signed in February. Those actions reduced state support of public schools by $8.6 billion over two years.

Both Democrats and the governor support an additional $4.5 billion reduction in the current fiscal year. Of that, $1.7 billion would be in the form of payments owed schools this year but pushed off until the next fiscal year.

The GOP governor also proposed on July 1 to reduce school spending by another $1.6 billion.

Schwarzenegger did say he favored paying back the money shorted schools – an action required by law through Proposition 98, the initiative approved by voters in 1988 that dictates the level of state support for public schools.

“When you take that much money from education I think its important you pay that back. We’ve taken the biggest amount of cuts from education.”

Given the state’s fiscal constraints, its unlikely any of that money will be repaid while Schwarzenegger is governor – his term ends in 2010.

Nor soon thereafter – double-digit budget deficits are forecast for the next three years.

The measures that lawmakers did not pass saved over $3.4 billion but Mike Genest, Schwarzenegger’s Department of Finance director said failure to pass them only worsened the problem by $2 billion because lawmakers and the governor can still reduce University of California and California State University funding by $1.4 billion if action is taken before July 31 when the two entities close their books.

The GOP governor also added a third furlough day for state workers who won’t be paid for the first three Fridays of each month.

State hospitals, prisons and other 24-hour care facilities will be open. California Highway Patrol officers and state firefighters will stay on the job as well.

The list of entities excluded from furloughs includes offices to apply for unemployment benefits and the Vista Del Lago Visitor’s Center at Pyramid Lake.

Lawmakers and the governor appeared no closer to a final budget deal although cities and counties fear borrowing $2 billion from them, an idea proposed by Schwarzenegger but rejected by the Legislature may be reconsidered.

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