Budget Update – Legislature Passes Budget Revision: July 24,1009

July 24, 2009

Budget Update – Legislature Passes Budget Revision

The Senate passed the budget just after 6 a.m. Friday morning with the Assembly following suit later in the afternoon. The budget deal includes approximately $15 billion in draconian cuts to state funded programs, including $5.7 billion in cuts to education. These cuts are devastating due to the refusal of anti-education, anti-labor legislators 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 $26 billion 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 $1.6 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 amounts of the Proposition 98 minimum guarantees and outstanding balances for the 2005-06 through 2008-09 fiscal years, including that the maintenance factor owed in 2008-09 is $11.2 billion and provides that this amount will be restored to the Proposition 98 base as otherwise provided in the Constitution.

* 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.

Additional impacts on education include:

* Reduces school district and county office of education revenue limits by $2.4 billion in 2009-10, including a commensurate categorical reduction for Basic Aid Districts.

* Defers of $1.7 billion in revenue limit payments from 2009-10 to 2010-11.

* Provides several additional program and funding flexibility options, beyond what was provided in February, such as:

o Suspending the High School Exit Exam as a requirement for graduation for students with disabilities beginning in 2009-10;

o Authorizing local education agencies (LEAs), to reduce the number of instructional days to 175 per year through 2012-13, subject to collective bargaining;

o Allowing school districts to sell surplus property not purchased with state funds and use proceeds for general fund purposes for nearly three years;

o Suspending the remaining routine maintenance reserve requirement of one percent through 2012-13 for school districts that meet the facility requirements of the Williams settlement;

o Lowering the minimum reserves for economic uncertainty to one-third of the currently required level for 2009-10 provided that LEAs make annual progress in fully restoring these reserves by 2011-12.

* Community Colleges are cut by approximately $700 million, but will receive an additional $130 million in federal funds and $80 million from a fee increase of $26 per unit.

* The deal also provides the Community Colleges Categorical Program some “flexibility” by allowing funding from selected programs to be moved to better meet the needs of the districts.

Additional details of the budget revision include:

· $2.8 billion in cuts to state colleges and universities;

· $2 billion in cuts to health programs and $1.2 billion in cuts to social services;

· $1.2 billion from the prison system;

· State workers will continue to be furloughed three days a month through the end of the fiscal year, representing a 15 percent annual pay cut;

· Accelerating the collection of income and corporation taxes;

· Suspension of automatic cost-of-living increases for state colleges and universities, courts, the prison system and other state programs;

· Tightening eligibility rules for CalWorks, and increasing scrutiny of the In-Home Supportive Services program;

· The mergers and consolidations of some state agencies.

Again, this budget is the most unjust budget in the history of California. This is due largely to the actions of a minority faction of anti-labor, anti-education legislators who have used the 2/3rds budget vote requirement to hold California’s budget hostage to protect unfair corporate oil and tobacco tax loopholes at the expense of the most vulnerable – the young, the elderly, the sick, and the poor, along with public employees, and our state’s students in public schools, community colleges and universities.

What’s Next?

We expect the Governor to sign the budget agreement within the next few days.

CSEA, the Education Coalition and the Fair Budget Coalition are exploring several strategies to hold the Governor and legislature accountable for this terrible budget. As these plans develop, you will receive further information and we will look to CSEA leaders, members and staff to continue the fight for justice for education and the other communities of people who have been made to unfairly pay the highest price in this immoral budget.

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

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