Gov. Brown Walks the Budget Tightrope

jerry-brownGov. Jerry Brown has unveiled the highly-anticipated revision to his annual state budget, teeing up final spending negotiations in Sacramento — largely with his fellow Democrats.

Despite a resurgence in California’s fiscal fortunes, including tax receipts some $2 billion in excess of estimates, “analysts are warning that California could be headed for more fiscal headaches as soon as next year,” the Wall Street Journal observed. “The state is constitutionally required to spend more on public education as revenue increases. This year’s revenue will establish a spending base for next year, meaning it could be harder for the state to balance its budget if the state’s income declines.”

Brown has made his reputation as governor holding the line on spending against steady pressure from his left. But Brown’s own favorite projects, including California’s high-speed rail plan, received his unwavering support, even drawing money away from expenditures favored by activists.

A selective windfall

Now, Brown has chosen to walk the budget tightrope in a way that will encourage his more profligate allies. Beneficiaries of Brown’s revised budget were set to include poorer Californians, unlawful immigrants and college students, as the San Jose Mercury News reported:

“With billions in better-than-expected revenue, Brown unveiled a $115.3 billion general fund spending plan that creates the state’s first-ever ‘earned income tax credit’ and would pay for Medi-Cal for some immigrants living in the state illegally.”

Brown’s revision also slipped in the results of a long-belabored deal with UC President Janet Napolitano, “who had demanded tens of millions of dollars more for her system to stave off 5 percent tuition hikes in each of the next five years,” as the Mercury News recalled.

But the revised budget plan went well beyond those measures, touching policy areas that have bedeviled Brown throughout much of his time in office.

Prison reform

Brown, for instance, used the revision to forge ahead with reforms to California’s prison system, which has been a virtual albatross around his neck since the Supreme Court ordered the state to reduce its crowded incarcerated population.

As the Los Angeles Times reported, the new budget revision “calls for shrinking the number of inmates housed outside California in the next year by 4,000 — reducing related state spending by $73 million. As of this week, the state had a little more than 8,000 inmates in private prisons in Arizona, Mississippi and Oklahoma, and another 6,250 prisoners in contracted lockups within the state.”

According to the Times, the cuts became possible because of the impact of Proposition 47, which thinned prisons’ ranks largely by slashing penalties and jail time for drug-related offenses. As CalWatchdog previously reported, although relatively few donors fueled the measure, Prop. 47 won the support of a substantial majority of voters in November.

Mixed reactions

In what has become a hallmark of his tenure in office, reactions to Brown’s adjusted numbers mixed praise with criticism. “We applaud the governor for putting money back into the pockets of those who work hard every day and pay their taxes – it’s the right move,” remarked Assembly Republican Leader Kristin Olsen, R-Riverbank, according to the Sacramento Bee. But, she added, Brown’s tax credit “will not end widespread poverty. That’s why Assembly Republicans have offered straightforward solutions to reform education and support the modern economy so every Californian can boost their earnings and quality of life.”

From the other side of the aisle, some Democrats registered disappointment with the limitations of Brown’s agreement on school funding. “We are pleased UC students and their families will avoid paying higher tuition next year,” said Senate President Pro Tem Kevin de León, D-Los Angeles. “But CSU, the workhorse of our higher education system, has been shortchanged. We have to support both of our public institutions of higher learning to make sure college is accessible to as many Californians as possible.”

Originally published by CalWatchdog.com

Revised Estimate for K-12 Spending: $6 Billion More Next Year

Vidak_Andy_School_8x12_0164Spending for K-12 schools in the coming year will be $6 billion more than Gov. Jerry Brown proposed just five months ago, raising per-student spending $3,000 – 45 percent – from what it was four years ago, according to the revised state budget that the governor released on Thursday.

State revenues have surged this year, and K-12 schools and community colleges will haul in nearly every penny because of Proposition 98, the constitutional amendment that puts schools first in line for restoring funding when the economy rebounds after a recession.

The new level of Prop. 98 spending for K-12 schools and community colleges will be $68.4 billion in 2015-16. That is $7.5 billion more than the Legislature appropriated last June for the current year. Surging revenues, which are projected to continue into next year, will bring the total increase for schools next year to nearly $14 billion in Prop. 98 spending (see pages 13-22 of state budget summary).

But warning that “the reality is another recession is coming,” Brown is splitting the increase between ongoing spending, one-time expenditures and paying off debts.

Local Control Funding: The Local Control Funding Formula, which provides general spending to schools, will remain his top priority. It will get $6.1 billion more next year, or about $1,000 more per student on average, with districts with higher proportions of English language learners and low-income children receiving more.

Paying off mandates: About $3.5 billion ($2.4 billion more than in the January budget) will pay for unreimbursed mandated expenses. Districts and county offices of education can use this money however they want, although the governor is encouraging them to spend it on implementing the new Common Core and science standards.

“I think there’s an expectation and hope that it will be put into Common Core implementation,” said David Plank, executive director of Policy Analysis for California Education, or PACE, a research center based at Stanford University, “Common Core is hard work and the money, I think, will be greatly received and put to good use.”

But Education Trust-West, an advocacy group for low-income and minority students, criticized Brown for not requiring districts to use the money for Common Core. “Districts will be pressured to use these funds for many other competing priorities,” it said in a statement. “We missed an opportunity to ensure our state standards will truly make a difference for all of our students.”

Special education: The Statewide Special Education Task Force, a group convened in 2013 to propose improvements to special education in California, received recognition in the revised budget – and $60 million for some of the actions it recommended. This includes  $50 million in ongoing funding and $10 million in one-time funding to expand interventions for special-needs children under two years old, add 2,500 additional preschool slots prioritized for special-needs children and expand data-driven schoolwide behavioral supports.

End of deferrals: About $1 billion will pay off the final late payments to districts, known as deferrals, which forced districts to borrow money, sometimes at high interest rates, while waiting for state funding.

Advocates for young children and the Legislative Women’s Caucus had called on Brown to provide $600 million more for child care for low-income families by shifting that expense into Prop. 98. The Legislative Analyst’s Office had suggested freeing up money for non-Prop. 98 spending by adjusting property taxes that go toward education funding.

But Michael Cohen, director of the Department of Finance, said he was “not interested in manipulating the Prop. 98 guarantee” and “plopping things into 98” to spend additional money. The department, he said, distinguished programs that qualify for education funding.

Assemblywoman Shirley Weber, D-San Diego, who chairs the Assembly Budget Committee’s education subcommittee, said that she shares the “strong sentiment” to include more money for child care in Prop. 98, where that funding was included until it was shifted in 2010-11. The issue will be negotiated with the administration, she said.

PRAISE FROM EDUCATION GROUPS

Education groups generally had high praise for the revised budget. Plank called it a “spectacularly good budget for K-12.” Kevin Gordon, president of Capitol Advisors, a lobbying firm representing school districts and county offices of education, said it was “one of the best budgets for K-12 I have ever seen. It has fully discretionary money with no strings attached. That normally doesn’t happen.”

The Legislative Analyst’s Office estimates that extra revenue in the May budget revision will raise K-12 Proposition 98 funding to $9,978 per student –$656 per student higher than the inflation-adjusted, pre-recession spending level  in 2007-08. The LAO’s  estimate for 2014-15 includes one-time spending of $700 per student more than districts anticipated when they built their 2014-15 budgets; that money, totaling $4.3 billion, will be spent in 2015-16 and subsequent years. (click to enlarge.)

SOURCE: LEGISLATIVE ANALYST’S OFFICE

The Legislative Analyst’s Office estimates that extra revenue in the May budget revision will raise K-12 Proposition 98 funding to $9,978 per student –$656 per student higher than the inflation-adjusted, pre-recession spending level in 2007-08. The LAO’s estimate for 2014-15 includes one-time spending of $700 per student more than districts anticipated when they built their 2014-15 budgets; that money, totaling $4.3 billion, will be spent in 2015-16 and subsequent years. (click to enlarge.)

Adonai Mack, legislative advocate for the Association of California School Administrators, said his organization agrees with Brown’s priorities and appreciates that the governor didn’t permit other programs to encroach on Prop. 98 spending. “It’s a very good budget for public education,” he said.

Joshua Pechthalt, president of the California Federation of Teachers, said the budget reflected the right priorities in funding education and creating a new tax credit for low-income workers. But he added, “we have a long way to go before we restore the programs in education and social services we lost to a decade of budget cuts,” and called for making temporary taxes under Proposition 30 permanent.

Double-digit spending increases for schools is not expected to continue past next year. State revenues are expected to flatten with the expiration of temporary increases in the state sales tax and the income tax on the wealthiest 1 percent. And the portion of the revenue going to K-12 schools and community colleges will decline after next year to about the standard 40 percent of the general budget after past obligations to Prop. 98 are fully paid off. Called the maintenance factor, it was as high as $11 billion as a result of cuts made during the recession, but will be under $800 million after next year.

The new Prop. 98 numbers will ease anxiety in Los Angeles Unified, whose board approved a 10 percent pay increase for teachers without knowing how the district would cover the expense. District officials said Thursday that the $300 million to $400 million in additional state money next year – half for ongoing costs and half in one-time funds – would cover the costs of teacher raises. But they said they were unsure if they can avoid teacher layoffs next school year or how they will pay for promised future raises.

The Legislative Analyst’s Office estimates that extra revenue in the May budget revision will raise K-12 Prop. 98 funding to $9,978 per student –$656 per student higher than the inflation-adjusted, pre-recession spending level in 2007-08. However, under the new funding formula, some districts with fewer English learners and low-income students are still well below that figure. And all districts will face substantial increases in pension costs for teachers, which will rise an additional $3.7 billion collectively over the next four years.

Reporters Jane Meredith Adams, Susan Frey, Michelle Maitre and Sarah Tully contributed to the coverage of the state budget.