On June 15th, the Legislature adopted the 2012-13 budget (AB 1464).  Amendments to the budget bill (AB 1497) and the education budget trailer bill (SB 1016), the bill that implements the education policy changes needed to make the budget work, were adopted on June 27th. 

As the Legislature prepares to cast votes on a high speed rail plan that could cost taxpayers as much as $68 billion, there are serious questions about whether high speed rail is more of a priority in the majority vote budget than education.

While there was plenty of rhetoric about how education was a priority for the majority party, the California Budget Fact Check found:

• Despite an $8.5 billion tax increase proposal, Proposition 98 would benefit by only $2.9 billion of the new money in 2012-13.  Because the new money is, for the most part, used to buy down ongoing K-14 budgetary deferrals and backfill prior-year one-time savings actions, no new programmatic funding will be available for schools.  California's CSU and UC higher education systems will also see no programmatic funding increase in 2012-13 despite the proposed tax increase.
• The budget targets education for 99% of the education trigger cuts despite the fact that education only represents 50% of General Fund spending.  Under the trigger cut proposal, schools will still take a $2.7 billion programmatic hit and a $300 million cut for community colleges.  UC and CSU will take a $500 million cut.
• The majority vote budget rejected both a Legislative Analyst's proposal and a Republican proposal to reduce or eliminate the Governor's proposed education trigger cuts.
• The budget ignores the vast majority of the Education Coalition concerns outlined in their May position paper.
• Health and welfare is virtually untouched in the Governor's 2012-13 trigger cuts, even though health and welfare costs will continue to grow by 18 percent over the next 3 years and represent about 30 percent of General Fund spending.

2012-13 Budget

In January of 2012, Governor Brown's budget proposal predicted that state revenues would increase by $4.9 billion even if the voters reject his proposed tax increase¹.  In addition, the Governor budget assumes an $8.5 billion tax increase (over the 2011-12 and 2012-13 fiscal years) in his budget projections.² 

65 Percent of Governor's Tax Increase Won't Be Used to Fund Schools:
While the Initiative directs the new tax revenue to schools, according to the Legislative Analyst's Office, schools would receive a net benefit of just $2.9 billion of the $8.5 billion increase under the adopted budget.  This is because the measure allows the state to lower existing state support for schools.  Exact figures aren't available, but the nonpartisan Legislative Analyst estimated that about 65% of the $8.5 billion immediately generated would be applied to non-education expenditures, with the remaining 35%, or $2.9 billion, going to schools and community colleges. 

Furthermore, the budget fails to acknowledge a provision in AB 114 that would require the state to restore the $2.1 billion if the tax initiative fails.

Trigger Cuts Target Education Even If There Is an Increase In Revenue:
 The final 2012-13 budget (AB 1464 and SB 1016) included trigger cuts to education if the voters reject the Governor's tax initiative.  Unlike last year's trigger cut, which was tied to state revenues, this trigger cut is tied solely to the passage of the Governor's tax initiative.  If revenues increase or a competing tax initiative passes that sends increased funding directly to schools, the education trigger cuts would still happen. 

Trigger Cut Targets Schools With 99% of the Cuts:
Under the trigger cut adopted in SB 1016 and AB 1464, education would absorb $5.9 billion of the $6 billion in trigger cuts.  K-14 schools would be cut by $5.4 billion and California's state universities would sustain a $500 million trigger cut.  Health and welfare programs are not targets of the cut, except for a $50 million cut to Department of Developmental Services programs, which is less than 1 percent of the proposed trigger cuts.  Of the $5.4 billion in K-14 trigger cuts, a portion of the cut reduces the proposed deferral buy down.  The loss of the deferral buy down does not directly affect spending on education programs.  The remainder of the trigger cut, however, does impact programmatic spending and will result in $2.7 billion less being spent in the classroom than in 2011-12.  This cut is achieved by manipulating the Proposition 98 guarantee (see discussion below).

Budget Does Not Include LAO or Republican Proposal to Avoid Trigger Cuts: 
Both the non-partisan Legislative Analyst and the Legislative Republicans offered proposals to spare education from part or all of the proposed trigger cuts.  The majority vote budget did not adopt these alternative solutions even though they were viable alternatives. 

Intra-year Cut to Schools: 
$7 billion is cut from schools in the first part of the school year in anticipation of receiving the Governor's tax initiative revenue, which schools would not receive until June 2013.  This is done to free up General Fund dollars for other budgetary spending, forcing schools to borrow throughout the year to fill the gap.

Manipulation of Proposition 98: 
Finally, the budget includes provisions which further erode the integrity of the Proposition 98 minimum funding guarantee.  Specifically, the budget counts $2.5 billion in debt service costs toward the Proposition 98 guarantee. The Education Coalition, which is comprised of teachers, school administrators and other education advocates, called this action both "inappropriate and unconstitutional."  It has the effect of reducing available programmatic funding schools by $2.7 billion.  This manipulation and other adjustments to the Proposition 98 guarantee were opposed by the Education Coalition. 

Click here to read the full comparison of the Education Coalition's budget position and what was enacted in the majority vote budget.

Click here to read the Education Coalition's letter to the Legislature.

2011-12 Health and Welfare Spending:
Health and welfare spending continued to grow at a rapid pace.  In the 2010-11 budget, health and welfare spending hit $26.8 billion. Under the final budget package, adjusted health and welfare spending in 2011-12 has grown by $2.7 billion, to $29.5 billion.  Under the Governor's plan, $2.9 billion of those expenditures were realigned to local agencies as part of the Governor's realignment proposal in October.  These programs continued to be funded by a portion of the state sales tax that was previously used to fund these very same General Fund programs.  No programs were reduced as part of the realignments.

2012-13 Health and Welfare Spending:
Health and welfare programs, which grew $2.7 billion in General Fund and realigned funds last year, will grow by 18 percent over the next three years.  This is primarily the result of California's voluntary policy choice to be the fastest state to implement federal healthcare reform, as well as auto-pilot annual spending increases associated with health and welfare programs.  

Click here to read past issues of "Budget Fact Check"

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