Budget deferrals today could force schools into a $23 billion hole next year

Photo: Alison Yin/EdSource

With only weeks left until Congress leaves for its August recess, time is running out for major federal action to provide additional pandemic relief funding to spare California schools from damaging future budget cuts. California education leaders, teachers, parents and concerned citizens should advocate for that federal funding.

To balance the budget this year and avoid cutting school funding, the governor and legislature relied on significant and unsustainable deferred spending with the hope that new federal monies would arrive before Oct. 15.

Deferred spending sounds like a harmless technical budgeting trick, and some have described this year’s budget as providing a no-cuts budget for our schools. If Congress takes no action however, then funding shortfalls next year could push California educational programs off a fiscal cliff.

The state education community did advocate for these large-scale deferrals to avoid immediate cuts because there are so few places to trim spending.

California already has fewer teachers, counselors, specialists, administrators, and other educational staff than almost any other state, and multi-billion dollar funding cuts so close to the start of this school year could be devastating — especially as we need more educators to meet the expanded needs of educating students during a pandemic.

To maintain schools’ spending at the same level as the school year that just ended, the state took out what is essentially a payday loan: It borrowed $12.5 billion ($11 billion for K-12 schools and $1.5 billion for community colleges) from education’s 2021-22 paycheck.

To understand how this works, one needs some background about deferrals as well as their interaction with California’s Proposition 98, the law passed by voters that guarantees a minimum level of funding and is the primary funding source for public schools and community colleges.

In 2019-20, Proposition 98 funding was $81 billion. In the 2020-21 school year, due to the economic challenges resulting from the pandemic, Proposition 98 minimum funding is $71 billion as the guarantee depends largely on how well the economy grows and generates tax revenues.

Deferrals mean schools will get paid retroactively in the summer and fall after the school year is over instead of getting paid monthly in the spring of 2021. These deferrals create cashflow problems and fall disproportionately upon districts that rely more heavily on the state for their funding and tend to serve lower income students. Those districts will need to borrow money in order to meet payroll and purchase needed materials and services.

The pandemic has made the state’s economic future and thus school funding highly uncertain. The Legislative Analyst’s Office, a state agency that provides policy and fiscal advice to the legislature, recently published multi-year forecasts. Its more pessimistic scenario is roughly in line with the economic assumptions used by the governor and Legislature in the newly adopted budget.

If legislators attempt next year to protect schools from program cuts, they will have a tougher time because they will have only $58.5 billion to cover an $81 billion education program. Schools would face around a $22.5 billion budget hole because, with funding deferrals, $12.5 billion of the 2021-22 amount (approximately 18%) already will be spent.

K-12’s share of that budget hole would be around $3,400 per pupil or just over $90,000 per classroom. To put $90,000 per classroom into perspective, that is more than the average teacher salary or more than an assistant teacher, a new computer for every student and all of the books and supplies students use during the year. Absorbing this level of cuts would be devastating for students and schools.

Additional pandemic relief funding from the federal government would leave more dollars available in future budgets to maintain the state’s educational program.

This federal funding, however, is highly uncertain. And the Proposition 98 minimum isn’t really adequate to meet student needs: California policymakers must look past automated funding formulas and instead ensure that education is consistently prioritized in the state budget and in new revenue sources.

The challenges to our schools are dire and require meaningful and immediate action. School leaders, parents and other advocates need to reach out now to their congressional representatives and our U.S. senators to ensure that schools are a big component of an additional stimulus package.

Do not be lulled into the mistaken idea that schools have been protected from cuts by the state budget solutions adopted last month. We must act now to protect our immediate future.

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Robert Manwaring is senior policy and fiscal adviser for Children Now, which advocates for children’s health and education.

The opinions in this commentary are those of the author. Commentaries published on EdSource represent diverse viewpoints about California’s public education systems. If you would like to submit a commentary, please review our guidelines and contact us.