League Budget Update - July 20, 2009July 20, 2009
The "Big 5"--made up of the governor and top four legislative leaders--has continued to work both in person and through staff members over the weekend, and a deal appears to be approaching. Speaker Karen Bass told the press last night that a vote on Thursday is likely, although many details remain open and this season has seen frequent promised votes come and go. The "Big 5" returns to its closed-door meetings at 11 a.m. today, and we'll post any significant developments on the League's Twitter stream.
For Proposition 98, the package would fund schools and community colleges at $680 million below the amounts agreed to by Conference Committee. In theory, this would accept http://www.ccleague.net/impact/ all of the cuts adopted by Conference Committee for community colleges, including the deferral and $85 million in reductions for 2008-09 that were expected to be acted on by June 30.
In practice, this will likely just add another $85 million in cuts onto 2009-10 and budgetary language will deem money distributed in 2008-09 as attributable for the 2009-10 fiscal year. While the move is legally suspect, it is unlikely anyone would sue the state over it.
It is not clear whether or not community colleges would "share" in the $680 million in additional cuts tentatively agreed to by the Big 5. When originally <http://www.dof.ca.gov/budget/historical/2009-10/may_revision/documents/HD%20MR%20Workbook%20(3).pdf> proposed by the governor on May 29, the cuts were expected to all come from K-12, which has the benefit of "deficit reduction" that essentially ensures that K-12 won't lose long-term purchasing power by the reductions.
The reductions to 2008-09 enable the Legislature to avoid "suspending" Proposition 98, which is more of a political than fiscal move. A suspension would also take the "floor" out of Proposition 98 spending for K-12 and community colleges, although this year's decisions are made equally with an eye to the federal maintenance of effort requirement under the American Recovery and Reinvestment Act ("ARRA").
The deal will likely indicate the governor and Legislature's intention to repay K-12 and community colleges $9.5 billion when the economy rebounds, likely beginning in 2012-13. This would likely provide community colleges with $1 billion paid over several years to restore many of the cuts, although the promise will require subsequent political leaders to uphold the deal.
There are many other pieces that are still being worked out, including the state's cash flow situation. It is possible that the Legislature will continue to add to the matrix of cash deferrals to many programs, including K-12 school and community college districts, to avoid the need for the state to borrow, as the state's credit rating is unlikely to be substantially improved by this budget package.
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