Democrats Offer Their Plan to Close the Budget Gap. Like the Governor, $4.9 Billion in School Cuts

Democratic lawmakers unveiled a plan June 17 of over $11 billion in cuts — $4.9 billion of them imposed on public schools — to close a nearly $24 billion hole in the budget for the fiscal year beginning July 1.

Even though it generates no savings, Democrats also would suspend the requirement students pass an exit exam to graduate from high school.

Public schools are already the subject of $2.4 billion in spending reductions as a result of the budget passed in February.

The Democratic proposal would reduce general-purpose funds for schools, known as “revenue limits,” by $1.3 billion this year and an additional $1.9 billion next year. Payments of $1.7 billion owed to school districts by the state in the next fiscal year would be postponed until the following year.

Gov. Arnold Schwarzenegger proposed comparable reductions in the revised budget he presented in May.

Democrats said they offered their alternative because they were unwilling to rip up the safety net of the state’s welfare program, health care for poor children, in-home care for the elderly and disabled, and college grants for lower income high school students who perform well academically.

Schwarzenegger proposes to eliminate or sharply reduce spending on all of those programs.

“We all want to get to as high of a solution as we can,” said Senate President Pro Tempore Darrell Steinberg, a Sacramento Democrat. “The way the governor proposes to do so, the price is too high.”

The GOP governor was tepid on the Democratic proposal which closes the budget gap by a combination of collecting some tax payments earlier and four new tax increases, two of them previously proposed by Schwarzenegger: a 9.9 percent oil severance tax and a $48 assessment on property taxes to pay for fire protection in areas served by the state. 

Taxes on cigarettes would be boosted to $1.50-a-pack to raise $1 billion and a $15 fee would be levied on vehicle registrations to support state parks.

“It’s about shared pain but it should also be fair,” said Assembly Speaker Karen bass, a Los Angeles Democrat, of the spending plan.

Despite his previous endorsement of two of the tax increases, the GOP governor said at a brief press conference:

“I cannot sign a budget that has tax increases in there. We just had the largest tax increase four months ago, the largest tax increase in the history of California, so to now, four months later, come out and do another tax increase is irresponsible.”

Democratic leaders say they plan to bring the proposal to a vote sometime after June 21.

In the press release touting their proposal, Democrats said of their cuts to schools that federal stimulus funds “will help mitigate some of the pain and increasing local flexibility will help districts cushion the blow of other cuts.”

School districts received $2.6 billion in federal stimulus money this year and are slated to receive an additional $1.1 billion in October.

Part of the flexibility districts are offered is not requiring them to purchase new textbooks until after July 1, 2013. Another is allowing districts to reduce their reserve funds, which are required by the state to protect districts from becoming insolvent.

Suspension of requiring students to pass a high school exit exam saves districts no money — although Democrats implied it does.

 “Cutting schools this much we can’t expect them to do everything they’re doing now,” said Steinberg, who then added that districts would still administer the test once a year even though passage wouldn’t be required for graduation.

The action was denounced by, among others, California Business for Educational Excellence.

“The (exit exam) ensures that high school graduates have the minimum skills necessary to become productive members of California’s workforce,” said Kirk Clark, the group’s executive director.

“What is worse, students who are currently receiving intensive remediation to ensure their passage of the (exam) will be left behind, as schools no longer held accountable for their students’ success turn their attention elsewhere.”

The chief reason the spending reductions to public schools are so large is because they can be.

Spending formulas created by Proposition 98, approved by voters in 1988, dictate state support for public schools. When revenue received by the state falls, the minimum amount that must be given to schools also drops.

The economic downturn has sharply reduced state revenue, allowing the state to reduce its payments to schools by, as Democrats and the governor propose, $4.9 billion.

The second bullet in the press release touting the Democrats’ proposal reads: “Protects education by rejecting the governor’s additional $700 million in cuts from schools.”
What the press release doesn’t say is that the governor proposed reducing school spending by $700 million because the Legislative Analyst believes revenues have fallen by $3 billion since the estimates used to create the February budget.

Using the Legislative Analyst’s prediction, Schwarzenegger revised his budget solution – the additional drop in state revenue reduced the minimum owed to schools by just under $700 million.

By rejecting the Legislative Analyst’s estimates, the Democrats don’t need to lower school spending the additional $700 million.

 Nearly one-third of the Democratic proposal is comprised of one-time savings, a strategy that, in the past, has exacerbated the state’s ongoing imbalance between revenues and spending commitments.

Among the one-time savings are accelerating collections of income tax withholdings and corporate estimated taxes, an idea embraced by the GOP governor, and imposing a 3 percent withholding requirement for independent contractors, which would generate $2 billion next year.

Democrats would also save $1.2 billion by delaying this month’s payday for state employees from June 30, the last day of the current fiscal year, until July 1, the beginning of the next one.

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