Budget Update – Big 5 Agree to a Budget Plan

July 21, 2009

Late Monday night, legislative leaders and the Governor announced that they had agreement on a plan to solve the state’s $26.3 billion budget deficit. The plan would impose approximately $15 billion in draconian cuts to state funded programs, including $5.2 billion in cuts to education. These cuts were so deep due to the refusal of conservatives to increase new revenues or eliminate corporate giveaways. The budget borrows billions of dollars from local governments and relies on accounting tricks and one time solutions to bridge the shortfall.

Highlights of the Impact on Education

* No Suspension – the plan avoids suspending Proposition 98; CSEA and the Education Coalition actively opposed suspension. Under the budget agreement, approximately $1.5 billion in unallocated categorical funding from the 08-09 fiscal year would be withheld to bring Proposition 98 down to the minimum guarantee. The funding would be restored in the 09-10 fiscal year to backfill and maintain the level of categorical funding.

* Maintenance Factor – the plan would also statutorily certify the reduced level of funding for the 08-09 fiscal year, thereby creating a maintenance factor and future obligation to restore $11.2 billion in education funding in future years.

* Home-to-School Transportation – the program is reduced by 20% equal to other categorical programs with language that protects the base funding for transportation. Funds may transferred from specified categorical programs into transportation, but funds may not be transferred out of transportation. CSEA’s active opposition successfully prevented the disproportionate 65% cut in home-to-school transportation that was proposed by the Governor.

* No contracting out, pension reductions or retiree health care reductions – Governor Schwarzenegger proposed to repeal SB 1419 and allow school districts to outsource classified jobs and he proposed to roll back retirement benefits and create a two-tier pension system. CSEA strongly opposed these proposals and worked closely with Senate Pro Tem Steinberg and Speaker Bass to prevent these proposals from becoming part of the budget deal.

What’s Next?

Legislative leaders have indicated that the plan will be put before the full Senate and Assembly for vote on July 23rd. If the measure passes both houses and the Governor signs it, a revised 2009-10 budget could be in place by early next week. GR staff will continue to monitor the budget process and will provide a new update when additional information is available.

Caution: This report is based on the latest budget information. The information may change as budget negotiations continue. We will provide you with additional reports on any new and significant findings.