Photo by Zach Klein

Photo by Zach Klein

California schools in recent years have been coping with uncertain revenue projections and shifting state budgets, with each new budget benchmark lasting only a few months.

These increasingly rapid budget cycles are administering an unprecedented dose of insecurity that makes even short term planning difficult and is having an impact on staff morale, said David Gordon, Sacramento County superintendent of schools, and formerly superintendent of the Elk Grove Unified School District, the fifth largest in the state.

“We now essentially have three-month budgets in the state,” said Gordon. The budget uncertainties that school districts face, he said, is “not year-to-year, it is almost month-to-month.”

Noting that human nature “is averse to uncertainty,” Gordon said, “school personnel have been given dose after dose of uncertainty.”

To make matters worse, California school officials now face not only the prospect of further reductions in state funds, but in federal funds as well due to  the failure of the bipartisan “supercommittee” to reach agreement on reducing the federal budget by $1.2 trillion. By January 2013, $3.5 billion in federal education funding, or about  7.8 percent, could be automatically cut, according to an Education Week analysis.

That would result in the loss of hundreds of millions of dollars  to California, including funds for Headstart pre-school programs and School Improvement Grants for the state’s most underperforming schools.

The frequency of budgeting cycles has accelerated in recent years, along with the state’s deteriorating fiscal situation. Jean Ross, executive director of the California Budget Project, said California’s rapidly changing budget situation is intimately tied to changes in the global economy. “The budget is a reflection of the underlying economy, and because the external economic environment changes so quickly, your budget has to change as well.”

One of Gov. Jerry Brown’s first acts upon taking office in 2011 was to issue his January budget and a promise to fix the state’s dysfunctional budgeting process. His promise and the budget were predicated on being able to convince Republicans in the Legislature to place a tax measure on a June special election ballot by March. School districts were left with the task of trying to figure out not only whether Brown would succeed in getting the measure on the ballot, but also to guess whether voters would support it.

But the plan collapsed within months of Gov. Brown taking office because Republicans refused to cast the handful of votes needed to provide the two-third majority required to put the measure on the ballot.

As a result, school districts had to wait to see what Gov. Brown would recommend in his May revision of the budget (issued on May 15).

But a “final” budget depended on what the Legislature actually approved and the governor signed into law, offering up another waiting period for schools.

Last year, the Legislature only got around to passing a state budget by October 7, 2010, the latest in California’s history.  Remarkably, this year, it approved a budget in mid-June, far earlier than usual. However, it included a gigantic contingency, the so-called “trigger cuts” that would go into effect if the state fell short of projected revenues, which were themselves based on uncertain and optimistic assumptions.

Now as December 15 approaches, school districts may have to make cuts in the current year’s budget while still meeting the mostly fixed costs of serving the state’s 6.2 million students. And an additional level of uncertainty has been introduced by a plethora of initiatives that may or may not be on the Nov. 6 ballot next year—and the uncertainty of whether voters will approve them.

The trigger cuts could also affect the credit ratings of some school districts, as the credit ratings agency Fitch Ratings pointed out last month. “The state’s weak and uncertain budget situation has long been a factor in Fitch’s school district analysis,” a Fitch statement declared. The agency has already downgraded ratings for one in seven districts that it rates in California, a number that could rise in the months ahead.

That could raise a district’s costs of borrowing funds, something many have been forced to do as a result of the state’s “deferral” of billions of dollars in payments to school districts as a key strategy employed by Sacramento to balance its budget over the last several years. “Given the state’s ongoing budget difficulties and education funding’s large share of the state budget, districts will continue to be under pressure to manage depressed revenues, reduced reserves and limited remaining expenditure flexibility,” the agency noted. 

These uncertainties are compounded by a $10 billion shortfall projected by the Legislative Analyst’s Office for the 2012-13 school year.

Changes in Washington D.C. following the 2012 elections could have a further impact on the federal dollars that flow to states and trickle down to districts.

In this atmosphere of uncertainty, Sacramento County’s Gordon said that schools are filled with optimists who are “soldiering on and getting the job done.”

At the same time, he said, “it is clear that this is taking a real toll on morale,” with an uncertain impact on children themselves. “The high expectations that our kids deserve are going to take a hit,” he said. “You are reaching the point where people get worn down because there is nothing to elevate your mood.”

As a result, he said, “maybe when we open our doors next year, the school staff won’t be as resilient as they have been.”

The California Budget Project’s Ross says that actually things have been better this year than in the previous several years under then Gov. Arnold Schwarzenegger from a budget planning perspective. The Legislature approved a budget in June, and schools knew months ahead of time of the possibility of a “trigger cut” awaiting them on Dec. 15. “If anything, people knew what the confines of the debate were going to be far in advance,” she said.

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