CSUN University News Clippings

Schwarzenegger, lawmakers working on school cuts

(July 16, 2009)

By Kevin Yamamura and Jim Sanders

Gov. Arnold Schwarzenegger and legislative leaders have agreed on a way to cut school funding while avoiding a politically unpopular suspension of the state’s constitutional guarantee for education, Democratic negotiators said Wednesday.

But they remain at odds over whether to make a permanent change in the way education spending is calculated that would make it easier for schools to get more money after lean budget years.

They ended negotiations Wednesday shortly after 10 p.m., saying discussions had stalled. Negotiators said they were close to reaching an overall deal to bridge California’s $26 billion deficit and allow the state to pay bills with cash rather than IOUs. But they had yet to reach agreement over permanent cuts to health and welfare programs, as well as education spending and borrowing from local governments.

“We are close, but there are still some difficult issues to be resolved,” said Schwarzenegger spokesman Aaron McLear. “The governor has consistently supported repaying education, but he does not support the Democrats’ efforts to slip in a constitutional amendment without going back to the people. The Democrats also are unwilling to make sufficient cuts to create a reserve that is desperately needed in this budget.”

Senate President Pro Tem Darrell Steinberg said Democrats simply want to guarantee that schools get the money “they are owed,” and that the change can be accomplished with “a simple statute.”

A key problem for budget negotiators has been finding a way to cut education funds this year without undermining Proposition 98, the voter-approved constitutional amendment that promises a minimum level of state spending on schools.

Education receives about 40 percent of the state’s general fund budget each year.

Schwarzenegger asked lawmakers on July 1 to suspend Proposition 98 and give schools about $3 billion less than his Department of Finance believed they were owed for the current 2009-10 fiscal year. That prompted a backlash from education groups, including the California Teachers Association, which launched a $1 million ad campaign against the governor.

But lawmakers, working with budget aides and the Department of Finance, found a maneuver to avoid suspending the guarantee in the past week. The move relies on an accounting change in which the state would reassign $1.6 billion in funds that were dedicated to last year’s school budget, sources said.

While it was once believed the state could not reclaim last fiscal year’s education money after June 30, the current plan suggests the state can reduce its school payment for last year because Controller John Chiang has not yet distributed that money, sources said.

To win school support for further education cuts this year, lawmakers and Schwarzenegger are also considering committing up to $9.5 billion more to schools in future years. Education groups assert they were owed that money anyway, and Schwarzenegger believed as much on July 1, when he said “the education community is smiling today.”

But the Department of Finance issued an analysis last week that determined the state did not automatically owe that payment to schools when taking lower June revenues into account.

School groups have sued to ensure that money would be paid, but they would prefer to have the Legislature settle the matter and avoid further litigation.

Lawmakers and Schwarzenegger did not set out to suspend Proposition 98, a politically perilous move that has occurred only with the blessing of education groups in the two decades since the initiative became law. But after leaders failed to agree on a stopgap education cut by June 30, Schwarzenegger believed the only way they could get the same savings in the fiscal year that began July 1 was by suspending the measure.

The California Teachers Association’s ad blitz launched last week attacked the governor for proposing that move.

CTA spokeswoman Becky Zoglman said that lawmakers’ focus away from such an action “is certainly encouraging, and they’re doing the responsible approach. … Voters strongly support minimum funding for schools, and we do hope they do come through with not suspending that law.”

Legislative leaders are discussing other parts of the budget framework, including about $14.5 billion in cuts during this fiscal year – more than the $12 billion proposed by lawmakers but less than the $16 billion sought by Schwarzenegger, sources said.

Schwarzenegger is pushing for permanent cuts in health and welfare programs that would save money in future years, though Democrats have questioned how much those cuts would actually save.

“This year we have to go and look at the budget, how do we fix it this year and also what effect will it have in the out-years … so that in the future we can cut that line of spending increase,” Schwarzenegger said Wednesday.

Beyond cuts, to bridge the rest of the $26 billion gap, leaders are revisiting a plan to borrow $2 billion in local government money, as well as targeting other revenue sources, such as local redevelopment agencies and highway users’ gas tax funds, sources said. They also are considering shifts such as an accelerated tax payment schedule.

State leaders hope the deal will be credible enough to obtain short-term cash loans from Wall Street and end California’s reliance on IOUs.

The state has issued $588 million in IOUs so far this month, according to Hallye Jordan, the controller’s spokeswoman. She said Chiang will stop issuing IOUs when he determines lawmakers and the governor have made enough cuts to ensure the state has enough cash to pay its bills.

Publication: Sacramento Bee