What the Budget Deal Means for Public Schools

A major component of the budget deal announced the evening of July 20 is a commitment by the state to pay back public schools $11.2 billion they have been shorted over the past two years.

Proposition 1B on the May ballot, which was defeated by voters, would have required the state to pay back $9.3 billion but the amount owed schools has grown. That growth is due, in part, to lawmakers and Gov. Arnold Schwarzenegger being able to reduce spending for schools in the fiscal year that ended June 30.

Previously, it was thought that because the fiscal year ended, the $1.3 billion reduction sought by the governor – and agreed to by lawmakers – could no longer be made.

However, State Controller John Chiang had yet to mail nearly $1.7 billion in payments to schools for the previous fiscal year and so $1.3 billion of those payments were halted.

When lawmakers vote on a budget, one of the measures they will consider would authorize Chiang to halt the payments.

Under the terms of Proposition 98, the school funding formula initiative approved by voters in 1988, repayment of the $11.2 billion begins when the state’s general fund grows at a higher percentage than the state’s personal income.

Because of the more than $12 billion in temporary taxes imposed by the budget signed in February, a partial repayment could begin as early as the fiscal year beginning July 1, 2010.

Earlier this year, the Schwarzenegger administration argued that the Proposition 98 test being used to determine the level of school funding did not require paying back past obligations.

Now, the administration says schools are on a different funding test that requires repayment. Lawmakers will also vote on a measure certifying that is the case.

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