Governor faces showdown over school funding

Thursday, December 16, 2004, Sacramento Bee

By Tom Chorneau, Associated Press Writer

Despite an aggressive campaign by the state's education lobby, Gov. Arnold Schwarzenegger still has not yet decided whether to share a $2 billion windfall in unanticipated tax income with schools. A coalition of teachers, school administrators and parent groups have held news conferences and issued statements for weeks staking claim to at least $1.4 billion of the money, by right of a 1988 voter-approved funding guarantee.

But the nonpartisan Legislative Analyst has pointed out the funding guarantee - Proposition 98 - was suspended this year by agreement between schools, the governor and the Legislature, and schools are not technically owed the money. By spending that money elsewhere, the analyst said, next year's budget deficit could be cut almost in half.

The issue has emerged as perhaps the key piece in Schwarzenegger's $105 billion budget puzzle that must be delivered to the Legislature by Jan. 10. But so far, the governor has made no final decision, said H.D. Palmer, spokesman for Schwarzenegger's Department of Finance.

While concerned about the uncertainty, many schools officials said they think the governor will side with them. They said Schwarzenegger promised that last December when he sought their support of the suspension to help close what was estimated to be a $17 billion shortfall.

The state still faces an estimated $6.7 billion deficit next year, despite the improving economy and higher-than-projected tax income.

Schwarzenegger has said often he will not raise taxes to solve the problem. To reach the current budget, Schwarzenegger and the Legislature borrowed billions and used a variety of one-time solutions and accounting gimmicks to paper over the shortfall - options that are less available this year.

The debate over giving the $1.4 billion to schools matters because it not only raises state expenses in the current budget year but increases the minimum level of support for schools every year. The complexity of the Proposition 98 formula means that withholding the money from schools this year will cut the 2005-2006 fiscal year deficit to $3.9 billion.

So far, the administration and the education coalition haven't talked about the issue. But Barbara Kerr, president of the California Teachers Association, said Wednesday she spoke to Schwarzenegger last week about meeting and expects to sit down with him in the coming days. She does not expect to hear bad news.

"We expect the governor and the Legislature to keep their word," she said.

Some point out, however, that if the governor remains opposed to new taxes, the school funding will come at the expense of other programs.

"It's absolutely true, honoring Prop. 98 will in effect reallocate resources from other programs," said Steven Levy, an economist with the Center for Continuing Study of the California Economy.

But withholding the money could bring political risks, Levy said, such as a huge political fight between Schwarzenegger, lawmakers and the education lobby.

Still, the effects of giving the money to education would hurt other programs, social service advocates said.

"Since the passage of Proposition 98, social services and health care have been much more vulnerable to cuts any time the state is running a deficit," said Jim Keddy, executive director of the Pacific Institute for Community Organization, a statewide network of faith-based community organizations. "There's just no where else to cut."

Education supporters said that schools have given up more than $9 billion in funding since 2000-2001.

Opinions in the Legislature also vary.

Assemblyman Joe Canciamilla, a Democrat from Pittsburg and leader on budget issues, said he does not believe schools are entitled to the extra money. "Unless the governor and the Republicans agree to accept some form of a tax increase, you cannot cut enough out of the rest of the budget to make it up."

Schools may be asked to give up even more that just the $1.4 billion, Canciamilla said.

Assemblyman John Laird, D-Santa Cruz, chair of the Assembly budget committee, said he wants to see what the governor decides. "I think you need to look at the overall package. But the Assembly wants to be as supportive as we can of schools, that's a big priority."

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Last modified: December 7, 2004

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