As Gov. Jerry Brown prepares to release his revised state budget for the coming fiscal year next week, educators around the state are looking forward to hearing about the additional funds they will receive, a dramatic departure from the bleak years of the recession, when they braced themselves for further cuts.
Even for the state’s most experienced school finance experts, predicting how much California’s schools will get in new revenues is a next to impossible task.
This year the task is especially challenging because of the unanticipated interplay between two voter-approved initiatives – Proposition 98, approved by voters in 1988, and Proposition 2, championed by Brown and approved by voters just last November – on top of many unknowns about how much tax revenue the state will generate from a variety of sources.
One thing is clear: Schools and community colleges will be the big – and possibly only – winners when it comes to dividing up the extra revenues.
The Legislative Analyst’s Office and others estimate that California’s surging economy could generate between $4 and $8 billion more than the state had projected.
“Schools are the big winner,” Mac Taylor, the state’s legislative analyst, said at EdSource’s 2015 symposium, held last week in Sacramento in collaboration with the California State PTA.
The additional funds will arrive at a welcome time for schools, which are still digging out from the impact of deep cuts made during the recession. Schools are also implementing a range of reforms, including the Common Core State Standards and the Local Control Funding Formula, which prescribes eight priority areas in which school districts are expected to show improvement.
Complicating how the new revenues will be allocated is the unanticipated interplay of Prop. 98 and Prop. 2, which could result in all non-education social services and state government departments winding up with little additional money or none at all.
That’s because Prop. 98, setting the minimum levels of school funding, requires that the state’s first priority in revenue-rich years is to bring funding levels for schools and community colleges up to the level they would have enjoyed if there had not been a recession. That amount, called the “maintenance factor,” currently totals $2.6 billion.
Prop. 2, meanwhile, mandates that the state set aside the first 1.5 percent of state revenue, plus additional dollars when the state is flush with tax receipts from capital gains, to pay down state debt and build a rainy-day fund. Money for Prop. 2 would be diverted from funding for non-education programs and services.
“It is a very unusual situation for my bosses – the members of the Legislature and the governor – that they may have to deal with this very strange world,” Taylor said. “They will have to take some actions to balance all the competing demands.”
Under one possible scenario that Taylor and the LAO laid out, the non-Prop. 98 side of the budget could receive $1 billion less next year than they got this year, possibly even requiring spending cuts that would put the Legislature in a bind and pit school advocates against a range of other interest groups. Taylor said programs subject to cuts could range from health and social services to higher education and criminal justice programs.
“There are many scenarios where the bottom line will be worse, where the Legislature will have to act to bring the budget in balance,” Taylor said.
Mike Herald, legislative advocate for the Western Center on Law and Poverty in Sacramento, said he expected legislators would find it “unpalatable” to reduce funding for human services in a year where there is going to be a substantial surplus. “It’s hard to explain to disabled adults surviving at poverty levels on Supplemental Security Income that they can’t get any increases for food when there are billions of dollars more in state revenue,” Herald said.
Brown’s budget for next year, which he proposed in January, assumed $7.8 billion more from Prop. 98 through a combination of increased state and property tax revenues for 2014-15 and 2015-16. About $4 billion of that will go toward ongoing funding for the Local Control Funding Formula, which provides extra money to school districts with high numbers of low-income children, foster youth and English learners. “That is an enormous amount of new money in a relatively short period of time,” Taylor pointed out.
But school districts also face rising expenses, including increases in pension obligations for teachers and administrators that will be phased in, reaching $3.7 billion more per year by 2020-21.
Taylor noted that despite the massive inflow of funds to the schools in inflation-adjusted dollars, schools will only receive on average about $200 more per student than they did in the 2007-08 school year, when funding peaked.
“But if you think about what we went through, the worst recession in decades, the fact that we have bounced back and are above where we were at the beginning of the Great Recession, that is not bad,” he said.