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Published in Print: May 21, 2008, as New California Budget Plan Aims Counld Blunt Impact on Schools

Revised California Budget Plan Could Blunt Impact on Schools

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The cuts to education proposed by Gov. Arnold Schwarzenegger to help plug a huge hole in California’s fiscal 2009 budget won’t be as deep as the $4.8 billion originally projected for K-12 schools, under a revised plan he announced May 14.

But it remained unclear how many of the 14,000 teachers who received “pink slips” in March notifying them of impending layoffs would actually lose their jobs as school districts prepared to absorb some cuts. Final layoff notices were due May 15. ("Thousands of California Teachers Await Layoff Fate," May 14, 2008.)

California faces a projected state deficit of $17 billion for the coming budget year, brought on by a slowing economy and the subprime-mortgage crisis. Mr. Schwarzenegger, a Republican, told legislators in January that education would be among the areas facing deep cuts.

But the education cuts would have required suspension of the state’s Proposition 98, a funding guarantee for K-12 schools and two-year colleges.

The governor’s revised, $101.8 billion budget proposal includes almost $200 million more for K-12 and community colleges above the fiscal 2008 amount of $49 billion. But while education funding would increase overall, many categories of K-12 spending still would be cut by up to 10 percent, state officials said.

To accomplish that, the governor now plans to place a measure on the ballot in November that would allow officials to ask Wall Street investors for a lump sum of $15 billion in return for future earnings in the state lottery. Michael C. Genest, the governor’s finance director, described it as “selling a future stream of revenue in exchange for a cash payment today.”

Mr. Schwarzenegger said that the lottery has been underperforming compared with those of other states in terms of annual proceeds, but that legislation has been introduced to modernize it and increase sales. All of California’s lottery earnings currently go to schools.

“We have to utilize the potential of the lottery 100 percent,” the governor said during the press conference he held to unveil his new budget plan.

‘Damage Already Done’

The ballot measure also would make changes to the lottery system that officials believe would result in higher proceeds. Education would still receive a share of the proceeds fixed at a minimum of $1.2 billion, the amount now being received.

A voter rejection of the plan would trigger a 1-cent temporary hike, until fiscal 2011, in the state sales tax, bringing it to 8.25 cents.

Although the number of teacher layoffs remained unclear last week as districts weighed how many notices could be rescinded in light of their budget situations, state Superintendent of Public Instruction Jack O’Connell said “the damage has already been done” because of efforts by districts in four other states to actively recruit California teachers who are being laid off.

He also took issue with the governor’s assertion that his budget “fully funds” education. Mr. O’Connell noted that some layoffs are still certain, and that cost-of-living increases are still being held back.

On Gov. Schwarzenegger’s plan to fix the budget, Mr. O’Connell expressed mixed feelings.

“I think it’s clear the governor has heard the outcry from the education community over his initial budget proposals,” the schools chief said in a press release. “I am concerned, however, about a proposal that relies so heavily on the lottery alone to fund schools.

“This scheme does not address the long-term funding needs of our schools,” he said. “Instead, it gambles on our students’ future by providing one-time funds for schools with a multiyear repayment plan.”

Vol. 27, Issue 38, Page 18

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