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Governor’s May Revise reveals huge deficit increase

5/15/12

Governor Jerry Brown released his May Budget Revision this week. It revealed that the state's deficit has increased to $15.7 billion as a result of a reduced revenues, higher costs, and rejection by the federal government of cuts in social services programs and decisions by the courts to block budget cuts. The Governor's January budget estimated that the state faced a $9.2 billion budget deficit. The Governor is proposing additional cuts to the courts, social service programs and reductions to state employee compensation to make up the balance of the budget deficit.

The Governor placed a high priority on protecting education and public safety. There are no cuts proposed to education funding at this time. However, if the Governor’s tax initiative, the Protect Schools and Public Safety Act, is not passed by the voters in November, K-12 programs will be subject to additional trigger cuts in the 2012-13 fiscal year.

The Governor reemphasized the importance of passing his tax initiative in November. The initiative, supported by CSEA, temporarily increases the personal income tax on the wealthiest tax payers and the state's sales tax by one-quarter percent and will guarantee new revenues to schools and community colleges.

Major Education Proposals Include:

  • No COLA - Like the January budget proposal, no COLA was provided in the May Revise.

  • Home-to-School Transportation - The May Revise proposes to give school districts the same amount of funding that they are currently receiving for school transportation. However, these funds would become flexible and could be used for any educational purpose. CSEA is opposed to this proposal.

  • Deferrals - The May Revise proposes to direct $2.6 billion in Proposition 98 funding to reduce deferrals for K-12 and Community Colleges and buy down the debt to schools. This represents an increase of $393 million over the January proposal.

  • Weighted Student Funding - The Governor continues to propose combining revenue limit funding and categorical funding, except those programs mandated by the federal government (i.e. special education), and allocate these funds based on a new formula. The new formula would be based on the number of students with extra "weight" allotted for students who are English learners or eligible for free or reduced price meals. As part of his May revise proposal the administration makes adjustments to the formula that includes increases in the base grant and grade span adjustments. CSEA is opposed to the Weighted Student Funding formula proposal because it would essentially "rob Peter to pay Paul" shifting money from one program to another.

  • Mandates - The May revises continues to propose reforming K-14 state mandates by eliminating half of the mandates and instead providing $200 million for a new K-12 and community college "block grant" to cover state mandates. CSEA is opposed to the mandates proposal.

  • Community Colleges - The May Revision proposes an increase in state funding of $30.8 million to backfill a portion of the current-year property tax shortfall. For 2012-13, the Revision includes the following offsets to state aid: $140.3 million in property tax revenues to be received from redevelopment agencies; a proposed redirection of $191.2 million of redevelopment agency cash reserves to community colleges; an assumption that the initiative would provide $125.4 million to community colleges, and student fee revenues and oil and mineral revenues increases of $17.4 million. CSEA also continues to oppose Categorical consolidation.

  • Ballot Trigger Reductions - If new revenues are not received, the potential reduction for K-14 programs is $5.5 billion, an increase of $657 billion over the $4.8 billion trigger reduction proposed in the Governor's January budget.

What's Next?
 This is the initial proposal on changes to the Governor's budget proposal based on updated revenue and expenditure data. The Senate and Assembly will now review the Governor's May revision proposal and each house will adopt their own budgets. The two houses will then convene a Conference Committee to address any differences in their respective budgets before sending a single budget to the Governor. The Constitution requires a budget to be adopted by June 30th.

Caution: This report is based on a preliminary analysis of the budget. Some proposals may change as additional details become available. We will provide you with additional reports on any new and significant findings.