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May Revise for 2008/09

Act II

In January, 2008 the Governor submitted his his budget to the Legislature. This was the first act in the a three part play. The 10% proposed cuts across all programs (including $4 billion from education) drew immediate reaction from local representatives. The second act occured in May with the May Revise. The Governor's Office provided these comments regarding K-12 funding while the Assembly Budget Chair issued this analysis of K-12 finding. Over the next couple weeks I will track additional detatils including implications for AUSD.

The initial news reports show a mixed bag for K-12 education. While the May Revise increases spending to meet Prop 98, the May Revise includes a proposal to borrow $15 billion against future lottery earnings. The net impact to schools is that future lottery earnings would be capped. The lottery proposal (placed on the ballot by the Legislature) would require voter approval. Failing voter approval, a sales tax of one cent for three years would be triggered (Note: Republcians can block the automatice provision for a sales tax increase). Ardella Dailey issued this statement in reaction to the May Revise. As of May 15, the too many variables for Sacramento to resolve and therefore passage of Measure H is the only sure way to guarantee Alameda maintains its current level of edcuational programs.

Finally the third act is the actual passage of the budget and it could take awhile.

Governor's budget plan would divert gas taxes to help close gap

Schwarzenegger unveils his spending plan. It would include deeper healthcare cuts to address California's $17.2-billion budget shortfall

By Jordan Rau, Los Angeles Times, May 14, 2008

SACRAMENTO -- More than $828 million in gas tax money that is supposed to go to public transportation projects would be diverted to help bail the state out of its financial problems under a new spending plan“Gov. Arnold Schwarzenegger”Gov. Arnold Schwarzenegger unveiled this afternoon.

To close a $17.2-billion budget shortfall, Schwarzenegger also will propose even deeper cuts to healthcare for the infirm and for legal immigrants, as well as for welfare recipients, than he did in his initial budget plan in January.

His revised budget would:

  • Restrict full in-home supportive services for seniors and people with disabilities, and cut the pay of the service workers to the minimum wage. Only the most severely impaired would get aides for household tasks, although in-home medical assistance would continue.
  • Eliminate California's $111-million program of healthcare for legal immigrants, and pare back the healthcare provided to impoverished people who have been in the country for five years or fewer. That would save $87 million.
  • Eliminate cost-of-living increases for disabled people in the supplemental security income program, part of the Social Security system, with the state keeping $109 million the federal government is providing to California.
  • Cut welfare grants under the Cal-Works program by 5% instead of providing a cost-of-living increase, saving $187 million.

The gas taxes Schwarzenegger wants to keep are a product of the higher oil prices Californians have been paying at the pump. The money is intended to improve public transportation, but the state in the past has rerouted the funds for such things as bond payments and school transportation for students.

In his new budget plan, which would need approval from the Legislature to be enacted, Schwarzenegger would ask voters for approval to borrow $15 billion over three years against future profits from the state lottery. The governor wants lawmakers to agree that if the electorate were to reject that idea in November, the state's sales tax would automatically rise by 1 percentage point. The sales tax could remain in effect for as long as three years unless the state's financial balance was restored.

Schwarzenegger backed away from his original proposal to close 48 state parks and let tens of thousands of low-risk prisoners out early. Park users pay fee increases of $1 or $2 instead.

And he is proposing to increase school funding by $1.8 billion, enough to meet the minimum required under law.

Healthcare advocates castigated Schwarzenegger for targeting medical care at the same time he was yielding to groups with more political clout such as teachers unions, park users and anti-crime activists. Some said it was particularly wrong given that Schwarzenegger has made expanding healthcare a priority of his second term.

"We had started the year working with the governor and we all had high hopes of passing healthcare reform and increasing access, and it's a surprise to us that this is the first item that would be on the chopping block," said Annelle Grajeda, president of the California state council of the Service Employees International Union, which helped Schwarzenegger get his healthcare plan through the state Assembly last year, only to see it defeated in the California Senate.

Michael Herald, legislative advocate for the Western Center on Law and Poverty, called the proposed cuts "callous and cynical."

"The governor has declared war on the poor today," Herald said

Governor's Comments on May Revise for K-12 Education

Investing In Students and Schools: The May Revision fully funds Proposition 98 and K-12 education for a $68.6 billion ($41.1 billion General Fund, $27.5 billion from other funds) total from all sources. The revision also maintains the Higher Education Compact with the University of California and California State University and adds millions in additional funding for our community colleges.

  • Provides total per-pupil funding of $11,562, a 21 percent increase in per-pupil funding since the Governor took office.
  • Fully funds Proposition 98 at $57.6 billion, a 4 percent increase over the Governor’s budget estimate.
  • School Safety: $100 million one-time block grant to develop and improve safety plans.
  • Career Technical Education (CTE): $100 million in one-time funding split equally between public schools and community colleges for CTE equipment and minor facilities improvements; $50 million in Proposition 98 funds to support hiring 1,000 additional CTE teachers; and $25 million to increase the number of school counselors that specialize in CTE.
  • Teacher Shortage: More than $75 million to address the teacher shortage and improve teacher quality, including $50 million in Proposition 98 funds for grants to help hire more college preparatory course instructors.
  • Healthy School Meals: More than $48 million in Proposition 98 funds to increase students’ access to healthy foods in our school cafeterias.
  • Family Literacy: $50 million in Proposition 98 funding to promote literacy among the parents of pre-school students living in attendance areas of schools ranked in the lowest three deciles of the 2005 Academic Performance Index. California High School Exit Exam: $8.5 million to provide school districts with instructional assistance to help students pass the Exit Exam.

Demorat Budget Chair Comments on May Revise for K-12 Education

  • Withdraws proposal to suspend the Proposition 98 Minimum Guarantee in 2008-09 and instead provides $1.1 billion more in Proposition 98 spending in the budget year than was proposed in January for a total of $56.8 million. This results in a $4.3 billion cut but would fully fund the updated estimate for the budget-year minimum guarantee.
  • Holds ongoing Proposition 98 spending essentially flat from year to year (increase of $194 million).
  • Continues to not provide a cost-of-living adjustment (COLA) to any K-12 program and continues the proposal to amend statute regarding how the COLA index is calculated.
  • Continues the same level of across-the-board cuts for most K-12 programs that were proposed in January, however, restores base funding cuts for revenue limits ($841 million) and special education ($238 million). Neither program receives a COLA in 2008-09, but both are held essentially flat compared to current-year levels. The Administration believes this funding level meets the federal maintenance-of-effort requirement for special education.
  • Proposes to reauthorize the flexibility provisions that were adopted in 2003-04 to provide "flexibility for school districts to cope with a constrained budget environment". Specifically, the Administration proposes to allow districts to lower various reserve requirements; increase current percentage caps on district transfer authority for AB 825 categorical block grants from 15/20 percent to 20/25 percent; eliminate the local match requirement under the Deferred Maintenance Program; and allow school districts to use certain restricted fund accounts for general purposes.
  • Proposes to use $592 million of Public Transportation Account (PTA) funds to reimburse the General Fund for school transportation expenses (home-to-school transportation and state special schools transportation).
  • Proposes to reduce funding for deferred maintenance by $223 million leaving program funding at roughly $40 million. The Administration states this remaining amount would be used for districts displaying hardship/emergency facility conditions.
  • Proposes $3 million in Proposition 98 General Fund be re-appropriated to continue funding for the Personnel Management Assistance Teams authorized by Chapter 517, Statutes of 2006. These teams assist school districts establish and maintain effective personnel management, recruitment and hiring processes.
  • Proposes separate legislation that will appropriate $45 million in federal Title I Set Aside funds to assist local educational agencies in their efforts to improve the academic performance of their students and to meet their federal accountability measures.

Q&A: How the lottery proposal would work

By Dan Smith, Sacramento Bee, May 15, 2008

Gov. Arnold Schwarzenegger is proposing to borrow against lottery proceeds to help address the state's budget problems. Here's a quick look at the plan:

Q: How would the borrowing work?

A: The state would seek investors to lend $15 billion secured by future earnings from lottery games the state hopes would be improved and more lucrative. Investors would be repaid from lottery funds over 32 years.

Q: What would the state do with the money?

A: It would go into a rainy day fund the governor hopes to create in a separate ballot measure. About $5.1 billion could be used to help balance the budget for the fiscal year beginning July 1. The rest could be used over the next two years.

Q: How would the games change?

A: The games themselves probably wouldn't change much, but the lottery's current rules would be changed to allow broader promotion, bigger and more frequent prize payouts and other incentives to create more player interest.

Q: What would happen to the money for schools?

A: Under the proposal, the amount schools get would be capped at what they have received in recent years – about $1.2 billion a year of the $3.3 billion in total lottery revenues. The $1.2 billion is not guaranteed, however, as the investors must be paid first from lottery proceeds under the deal. Finance Director Mike Genest acknowledged the schools would have "some risk, but we don't think it's a practical problem."

As for the $1.2 billion-a-year cap, Genest said, "Lottery revenues aren't growing much anyway so (schools) aren't giving up much there. The lottery has never been a boon to schools."

Q: Do I have to vote on it?

A: Yes. Voters will have to approve a November ballot measure to change the state constitution, which currently says 34 percent of lottery revenues – the amount left after paying prizes and overhead – must go to schools.

Q: What would happen if the ballot measure didn't pass?

A: A temporary 1-cent sales tax increase would be triggered in 2009 for up to three years to raise the $15 billion for the rainy day fund.

Q: What would happen after three years?

A: The tax would end. The proposal assumes the economy will have improved enough by then to feed the rainy day fund in good years, as Schwarzenegger has proposed in his budget reform measure. After the tax ends, taxpayers would get a full rebate using a formula yet to be determined.

Q: What if the state couldn't sell the bonds?

A: The administration says it's confident there will be a market on Wall Street for them. Similar bonds have been sold by the state and counties since 2000 that allow governments to raise money now and pay it back with future revenues it collects from the huge settlement between states and the tobacco industry.

Q: How would the "rainy day" fund be used?

A: The administration is still negotiating and may have specifics by next week. But the basic idea is twofold: The governor would have more power to make midyear cuts, and the rainy day fund would accumulate money in good years for use in bad years to even out the ups and downs of the economy. Because the state is experiencing a down period now, the fund would be jump-started with the $15 billion from the lottery transaction.

Q: Who will oppose this on the ballot?

A: It's too early to say for sure, but Indian tribes with casinos may not be thrilled with increased competition from the lottery, and teachers unions fear the budget reform measure would put future school funding at risk. Both groups have a history of spending whatever it takes to have their way on the ballot.

K-12 education funding cut by 8.8%

By Nanette Asimov, San Francisco Chronicle, May 15, 2008

(05-14) 19:18 PDT -- PROPOSAL: Funding would drop by 8.8 percent. The Proposition 98 funding guarantee for schools would remain intact but would be insufficient to make up a $4 billion shortfall. So the governor would cut programs and withhold a cost-of-living increase. Per-pupil funding would rise from $8,521 to $8,610. He is also proposing a ballot measure to end public education's guaranteed 35 percent share of state lottery revenue and freeze its future share at the dollar amount it received this year - $1.2 billion.

WHAT IT MEANS TO YOU: Although fewer teachers would lose their jobs, schools and programs would not escape deep cuts. Elementary class sizes would swell, and many other programs - including class-size reduction, classes for academically gifted students, adult education and professional development for teachers - would be cut. Special education would not be cut, as had been proposed in January. Districts would receive new flexibility in managing their budgets. This would give them access to funds previously locked up in mandated reserves, or capped at certain levels. Educators have not yet analyzed the impact of a lottery ballot measure.

REACTION: Exhausted after months of rallies and protests, educators expressed relief that schools might be shielded from the worst. But they aren't happy. "The failure to fund a cost-of-living adjustment amounts to a serious budget cut," said state schools chief Jack O'Connell. Scott Plotkin, executive director of the California School Boards Association, said: "The bottom line is that schools statewide will still be woefully underfunded."

AUSD Reaction to May Revise

May 15, 2008

"The budget battle is far from over and we should not be fooled by the 'sound bites' coming from Sacramento. The Governor's latest proposals are risky and controversial at best. The only responsible thing that AUSD can do at this point is to continue with our own budget development process and the spending reductions we have put in place. We don't believe that the Governor has fixed anything with his May budget revision."

Ardella Dailey, AUSD Superintedent


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Last modified: May, 2008

Disclaimer: This website is the sole responsibility of Mike McMahon. It does not represent any official opinions, statement of facts or positions of the Alameda Unified School District. Its sole purpose is to disseminate information to interested individuals in the Alameda community.