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$2 Billion Cut, Steady Aid Guaranteed In Calif. Budget

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The year's most protracted and painful state-budget standoff came to an end last week as California lawmakers and Gov. Pete Wilson finally reached an agreement on education funding.

Through a series of fiscal maneuvers of awesome complexity, the pact reduces education aid by about $2 billion, while at the same time pledging to hold basic state per-pupil funding steady over the next two years.

For more than two months, the size of cuts for the largest state public school system was the missing piece in solving a $11 billion budget shortfall. After a few final days of high-profile feuding, the Republican Governor and Democratic legislative leaders ended their dispute early last week with a midnight phone call.

The conflict exacted a political toll on both sides, and each agreed that it was time for a resolution and to move on to other matters.

"I achieved what I set out to achieve: no new taxes, no deficit spending,'' said the Governor, who was taken to task by his supporters last year after closing a $14 billion deficit largely with new taxes. "I am content with the result. I am not content with the fact that it took 2 months.''

Top legislative officials, claiming to have saved $1 billion in education funds from the chopping block, argued that the extended confrontation had been worthwhile.

"The basic decision was made early this year that if we had to throw out the babies with the bathwater, we would at least try to save the education baby,'' noted Jim Lewis, the communications director for the leader of the Assembly, Speaker Willie Lewis Brown Jr.

Accounting Contortions

State educators, meanwhile, expressed relief that the debilitating deadlock was over. While the final agreement may cost them significantly in the long run, local school officials said they were at least glad to escape the pervasive sense of uncertainty and the necessity of paying for school operations with state-issued I.O.U.'s.

The budget deal came filled with accounting contortions designed to comply with Proposition 98, the state constitutional amendment that guarantees 40 percent of general-revenue funds to K-14 public education.

In the end, however, appropriations for the fiscal year that began July 1 will be $850 million below the adjusted base for the previous year. When the budget battle began, top Democrats had staked out a limit of $600 million in cuts, as compared to the Governor's $2 billion.

While the overall school budget decline neared Mr. Wilson's target--from about $24 billion appropriated last year to $22 billion this year--tradeoffs secured by legislative leaders made it harder to determine which side had fared better.

Beyond this year's cuts, school districts were saddled with $732 million in loans that must be repaid in fiscal 1994, budget officials said. Those loans became necessary after state leaders agreed to the novel tactic of reducing last year's appropriation, which had long since been spent by the schools.

To make the loan plan more palatable, officials put repayment off until next year to keep from busting the budgets already adopted by school districts.

But lawmakers also agreed to a "poison pill'' deal that protects the retroactive budget cut, agreeing that if anyone challenges the informal suspension of Proposition 98 in court, lawmakers would officially suspend it at its current lower level.

Democrats secured a pledge that per-pupil funding would not drop below its current level while the loan is outstanding.

In addition, legislative leaders pointed last week to a list of programs that were saved, including dropout prevention, gifted and talented education, and class-size reductions. The agreement also killed a plan by the Governor to move the age for kindergarten admission to Sept. 1 from Dec. 1, which would have created a one-time $350 million savings.

"We blocked more drastic backsliding proposed by the Governor,'' said Assemblywoman Delaine Eastin, the chairwoman of the Assembly education committee. "In the first round of our battle we were bloodied, but we did not let the administration wreak its full havoc on schools.''

Not a Smart Policy'

The agreement would hold total per-pupil spending to $4,660 over the next two school years, officials said.

The state education department predicted that the budget would leave California more than $1,130 behind the national average in per-pupil spending by the end of the 1993-94 school year. The state's current $4,686 per-student funding average now trails the national average by $766.

Superintendent of Public Instruction Bill Honig said that while some gains were made by holding out, public school students will suffer under a plan that, he charged, essentially nullifies Proposition 98.

"You've got pretty tough conditions everywhere that will only get worse,'' Mr. Honig said. "We were 34th in the country in per-pupil spending before this and in two years we're going to drop to 40th. That puts us with Louisiana and South Carolina, but we're a rich state that has always supported education.''

After the budget was signed, Mr. Honig's office circulated a graph showing the state's decline in per-pupil spending versus the national average. At its high point in 1964-65, California spent 20 percent more than the average. By 1993-94, Mr. Honig's office projects, the state will be nearly 20 percent below the national average.

"In 1964, education was important, but now it's indispensable,'' Mr. Honig argued. "This is not a smart policy.''

More Problems Ahead

District officials said last week that they would need to further inspect the budget before knowing its specific effects.

"It's sort of like someone who has been banging their head against a wall for three months and ends up bloody and bruised,'' explained Bob Wells, the director of governmental relations for the Association of California School Administrators. "It's nice to stop, but it doesn't mean you're healthy.''

Robert Booker, the chief business and financial officer of the Los Angeles schools, said he and his staff would examine the budget and its various trailer bills and amendments before issuing a verdict to the school board this week.

The district is already grappling with a $400 million deficit.

"We expect substantial budget problems again, but it's the magnitude that we don't know,'' said Mr. Booker, "It is a relief to have a state budget that we can analyze and determine our financial future, and the state can start paying its bills.''

Legislative leaders noted, however, that while the immediate concern of adopting a fiscal 1993 budget has passed, the fight over school funding is long from finished.

After receiving the legislature's budget plan, Mr. Wilson vetoed $520 million in general school aid until the legislature fixes a technical problem. But Mr. Honig predicts that the money may never be restored, and thus will amount to a further cut.

Beyond that, observers have warned that the state's meager budget reserve fund--left with just $28 million as a cushion for a budget of more than $57 billion--leaves little room for error if revenues once again fall below expectations.

"This is just the first round in a long fight for children,'' Ms. Eastin said.

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