Federal

Fiscal Deadline, Thorny Deficits Bedevil States

By Lesli A. Maxwell — July 10, 2009 5 min read
BRIC ARCHIVE

A handful of recession-ravaged states have kicked off a new fiscal year without balanced budgets, leaving public school educators in limbo as they struggled to manage spending amid dwindling resources and political bickering over unprecedented budget gaps.

The crisis remains most severe in California, which, as of last week, faced a $26.3 billion deficit that Gov. Arnold Schwarzenegger, a Republican, and the Democratic-controlled legislature have been tussling over.

The standoff came to a head over education spending when the governor proposed that lawmakers suspend Proposition 98, the minimum-funding guarantee for public schools that has largely been sacrosanct since voters approved it in 1988.

But California is hardly alone in its fiscal woes. From North Carolina, which remained in budget deadlock last week, to Arizona, where leaders finally sweated out a compromise that preserved K-12 spending, the forecast remains grim, according to Todd Haggerty, a research analyst for the National Conference of State Legislatures, based in Denver.

California Gov. Arnold Schwarzenegger is in a stalemate with lawmakers over how to close that state’s massive budget gap, and school funding is a flash point.

“What’s truly unique about this year is the sheer size of deficits that states are grappling with,” Mr. Haggerty said. “The depth of the recession and the lower-than-expected performance of revenue sources has forced states to look at cuts across the board,” including K-12 education, which accounts for a significant portion of most states’ general-fund spending.

Based on revenue projections from April, the 50 states were facing a collective shortfall of $121 billion for the 2010 fiscal year, a number that will no doubt increase, Mr. Haggerty said.

And there’s little sign that these financial challenges will abate soon. Mr. Haggerty said that 31 states are already projecting budget deficits through fiscal 2011 and that more than half the states have reported that all their major sources of revenue have fallen below expectations.

That poses a big challenge for leaders in states that started the new fiscal year—many July 1—without a budget in place. They must finalize spending plans while seeking to close enormous gaps—and public school spending is at risk.

California Crisis Continues

In the Golden State, schools, including community colleges, have taken massive hits over the recent months, including a $7.3 billion reduction in aid under Proposition 98 for the fiscal year that ended June 30. School leaders were braced for an additional $1.4 billion reduction in spending before June 30, but lawmakers balked.

That prompted the governor to call for suspending Proposition 98 in order to carve nearly $3 billion in education spending out of the fiscal 2010 budget. School spending in the just-ended fiscal year made up 37 percent of the state’s overall $91.4 billion budget.

The mere suggestion of suspending the guarantee raised the ire of the powerful California Teachers Association, which has been an on-again, off-again ally of Mr. Schwarzenegger. The 340,000-member teachers’ union, an affiliate of the National Education Association, had a television advertisement criticizing the governor ready to hit the airwaves late last week, said David A. Sanchez, the union’s president.

“As far as we are concerned, there is no more meat to carve off of this bone,” Mr. Sanchez said in an interview. “Our schools have taken enough cuts.”

Lawmakers in California historically have been reluctant to suspend Proposition 98, which requires a two-thirds vote in both chambers, said Scott P. Plotkin, the executive director of the California School Boards Association. Suspending the guarantee would lower the base for setting spending levels for future years, a prospect that no one relishes, he said.

“All of this has created an unbelievably stressful environment for people who are trying to make decisions about what academic programs are going to look like and for people who work in districts who wonder whether they will have a job,” Mr. Plotkin said.

North Carolina Standoff

In North Carolina, lawmakers and Gov. Beverly Perdue, a Democrat, have been in a stalemate over how to bridge a $4.7 billion gap in a two-year budget proposal. Public schools face a cut of as much as $750 million in a K-12 budget of roughly $8 billion, said Leanne Winner, director of governmental relations for the North Carolina School Boards Association.

“These are large-scale cuts for education in this state,” Ms. Winner said.

At the school district level, teacher assistants in the 3rd grade will be eliminated. Class sizes will increase in grades 4 through 12. And a $38 million program to work with children who score poorly on the state’s end-of-course exams is being scrapped. Districts will lose $129 million in corporate tax revenue for school construction over the cycle of the two-year budget, Ms. Winner said.

The governor has been pushing to raise several taxes, including on cigarettes, in order to come up with $1.5 billion that would help spare education and other social-services programs from even deeper reductions. Lawmakers so far have refused and have extended their negotiations until July 15 as they seek to reach agreement on a budget that should have taken effect July 1.

Common Plight

In Ohio, where the overdue budget is short by $3.2 billion, lawmakers have been fighting over Democratic Gov. Ted Strickland’s proposal to place electronic slot machines at the state’s seven racetracks. The governor is pushing for the slots as a way to raise roughly $900 million over the course of Ohio’s two-year budget cycle that began July 1, but some Senate Republicans are insisting that voters must decide.

Until Gov. Jan Brewer signed three budget-related bills last week to restore K-12 spending, educators in Arizona were facing the prospect of not receiving a regular state aid payment due to them this month under a budget that was supposed to be done by July 1.

Gov. Brewer, a Republican, earlier had vetoed parts of the budget approved by state lawmakers to force them to reconsider placing her proposed sales-tax increase on the ballot in November. Her vetoes eliminated $3.2 billion in funding for K-12 education and—temporarily—put the state out of compliance for billions of dollars in federal economic-stimulus money.

But in Illinois, where lawmakers and Gov. Pat Quinn, a Democrat, remain at odds over finalizing a budget that includes a $9 billion shortfall, K-12 programs are likely to fare better than most other sectors of state government spending, said one education advocate.

“We had a huge budget deficit coming into this fiscal year that everyone realized needed to be filled, so everyone has been braced for bad news,” said Ben Schwarm, the director of governmental relations for the Illinois Association of School Boards. “But so far, despite all of the uncertainty, education spending is a priority, and we’re expecting to see a modest increase in general state aid for K-12.”

The Associated Press contributed to this report.
A version of this article appeared in the July 15, 2009 edition of Education Week as Fiscal Deadline, Thorny Deficits Bedevil States

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