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Published in Print: November 12, 2008, as State Budget Chills Send Shivers Through K-12 Circles

State Budget Chills Send Shivers Through K-12 Circles

Governors Sounding Alarm Over Deficits, Need for Cuts; California Lawmakers to Act

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With California’s fiscal outlook worsening, Gov. Arnold Schwarzenegger last week called state lawmakers into a special session to balance the current budget, while governors in Mississippi, New York, and several other states sounded alarms about their own revenue problems.

Gov. Schwarzenegger is proposing about $4.5 billion in budget cuts—including $2.5 billion in education cuts—along with tax increases, to help plug a deficit that has ballooned to more than $11 billion.

“We have drastic problems that require drastic and immediate action—we must stop the bleeding right now,” he said during a Nov. 6 press conference on his latest efforts to plug holes in the state’s $103.4 billion budget.

But Superintendent of Public Instruction Jack O’Connell has warned that the latest cuts would cause “catastrophic disruption in our schools and harm to our students in the middle of the school year.” They would come in addition to about $500 million struck from the $49 billion education budget.

The situation is mirrored elsewhere in the country.

In New York, Democratic Gov. David A. Paterson is calling legislators into a special session later this month to address a $1.5 billion deficit in the current fiscal year budget of $120 billion.

Looking ahead to next fiscal year, which begins April 1 in New York, the governor, like those in many states, isn’t expecting any relief. By then, the shortfall is expected to grow to more than $15 billion.

In Mississippi, Gov. Haley Barbour, a Republican, said last month that revenue projections could be off by as much as $100 million. He told state agency administrators to calculate cuts worth 2 percent of their budgets for fiscal 2009 and 4 percent for the following year.

Schools are already looking for ways to trim spending in a fiscal 2008 K-12 budget of $2.2 billion.

Twenty of Mississippi’s 152 school districts would dip into the red if forced to reduce funds. So far, some superintendents have indicated that they would have to cut extracurricular activities.

State schools chief Hank Bounds told district superintendents during a budget meeting late last month that he would argue that state reserves be used to help cover the shortfall.

In Arkansas, where Gov. Mike Beebe, a Democrat, is expected to announce his budget proposal this week, lawmakers have been holding budget hearings in advance of next year’s legislative session.

While the Arkansas economy hasn’t fared as badly as those of other states, the governor has indicated that he might not be able to restore the $107 million taken last spring out of the state’s overall fiscal 2008 budget of $20 billion. None of those affected schools.

As lawmakers plan for the fiscal 2010-11 biennial budget, “our agency could face some cuts,” said Julie Thompson, a spokeswoman for the Arkansas education department. “But the schools, the students, they’re fine.”

Because of a budget shortfall, Alabama school districts received only 75 percent of the funds they normally get from the state in October. The temporary reduction has forced some districts to dip into their savings accounts to cover their payrolls.

Alabama Superintendent Joseph B. Morton told local superintendents in a letter that he hoped the funding would be provided quickly. Alabama is facing a $458 million shortfall in its $11.6 billion state budget in fiscal 2009.

Federal Help Eyed

Govs. Edward G. Rendell of Pennsylvania and James H. Douglas of Vermont asked congressional leaders last month to consider providing aid to states as part of any economic stimulus legislation.

“Congress also should consider changes to the federal tax code that can spur economic growth and avoid policies that pre-empt state authority, shift costs to states, or impose new unfunded mandates,” their letter said.

California officials already are looking to explore changes in tax policy intended to create a more dependable tax structure, under the auspices of a new commission established by the governor.

“Our state is one of the most advanced economies of the 21st century, but it relies upon an outdated and volatile tax model that no longer makes sense,” state Senate President Don Perata, a Democrat, said in the waning days of October at a press conference announcing the 12-member commission.

As he did during a three-month budget impasse earlier this year, Gov. Schwarzenegger is now calling for a temporary sales­-tax increase, to 6.5 percent from 5 percent, which would generate $3.2 billion in the current fiscal year. It would revert to 5 percent after three years.

During the budget standoff, Republicans in the legislature wouldn’t agree to additional taxes. With Democrats having gained seats in legislature in last week’s election, that may ease the job of passing a tax increase somewhat.

The new commission, however, may not be able to work fast enough to improve the state’s current economic troubles.

Even though California has sold $5 billion in short-term revenue-anticipation notes to keep the state from running out of cash, state Controller John Chiang has warned that the forecast remains bleak.

“Revenues are deteriorating faster than expected, and September’s cash flows send strong signals that the recently enacted budget is more out of balance than we feared,” he said in a statement last month.

Vol. 28, Issue 12, Page 19

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