They finally passed a budget

As expected, the Governor signed the state budget yesterday at a small ceremony in his office, after a record 85 days into the new fiscal year. The Governor also exercised his line-item veto power to slash another $510 million from various programs, beyond the $10 billion in cuts already in this budget to education and other vital health and social programs.

Impact to K-12 Education
Overall, K-12 schools and community colleges will receive a total of $58.1 billion under the Prop. 98 minimum funding requirement, compared to $61.1 billion that we are entitled to receive under the law. This is a cut of $3 billion to K-14 education when increased workload costs are considered. This funding will only provide a COLA of 0.68% for K-12 schools, county offices of education, and our community colleges (instead of the statutory COLA of 5.66%). This budget also restores the Governor's cuts to categorical programs.

The Governor vetoed another $25 million from K-12 education, including: $6 million from low-performing schools that are still subject to state sanctions, $600,000 from the federal Title I funds for an evaluation of the Migrant Education program, $1.2 million of Title III funds for English learner activities, $16.4 million for Stage 2 child care to align expenditures with updated estimates, and $862,000 for Child Nutrition.

Impact to Community Colleges
The colleges secured some growth funds (albeit not enough), a small COLA of 0.68% like K-12 education, and avoided deep cuts to student services programs. Enrollment growth is funded at 2 percent. Categorical programs are funded at the 2007-08 levels, and student fees remain level at $20 per unit. There is also $75 million to partially backfill a property tax shortfall for the 2007-08 fiscal year.

The Governor vetoed $531,000 from to the Chancellor's Office budget.

Other Budget Highlights
This budget contains major tax breaks for corporations at the expense of schools, seniors and children, including:

• Corporate Tax Giveaways: The Legislature passed two tax breaks to corporations by allowing them to transfer tax credits from one corporation to another even if they did not qualify for those credits. In addition, corporations can adjust prior year's income tax returns to get a refund. These tax giveaways will cost about $1.5 billion annually.


• Budget Power Grab and Mid-year Cut Authority: This budget will increase the existing budget reserve from 5% to 12.5%. This is another attempt by the governor to secure more budget power to make mid-year cuts, and cap future spending regardless of growth in the population for schools or seniors. This budget power grab will need to get voters' approval at the next statewide election.
  
  The budget also gave new mid-year authority to the Governor to cut up to 7% from state operations (not to local schools and colleges), and it also gives the Governor the power to suspend COLA by 120 days. These changes represent an unprecedented power grab by the Governor and upset the balance of power between the three branches of government. It also will lock spending in at the current inadequate levels for most programs.


• Weakening Overtime Protection. This budget expanded the overtime exemption to take away overtime pay from workers in the high-tech industry earning $75,000 or more.. Although the overtime takeaway affects only "technology" workers, it is the fist step in a series additional overtime and meal break takeaways sought by big business.


• Lottery Securitization. This budget relies on a proposal to "securitize" the State Lottery to provide $5 billion in each of the 2009-10 and 2010-11 state budgets. Essentially, this proposal amounts to borrowing against future lottery receipts as collateral. The $1.2 billion Lottery funds that education currently receives will come instead from the State General fund. This proposal requires voter approval at the next statewide election.

What's Next?
Even before the 'ink' is even dried, this budget is expected to be short by about $1.5 billion. Failure to pass the two components that require voter approval (the budget power grab, and the Lottery Securitization) could enlarge the deficit by another $5 billion. The Governor has hinted that he could call for a special election as early as March. However a date for the election is not yet known. or place them on the 2009 June Primary Election.

Given the severity of the budget shortfall, the final budget clearly is not what anyone wanted. Because of a few ideologues who were willing to hold up the budget further, a majority of the Legislature could not overcome the 2/3 vote requirement to pass a budget with new revenues. CSEA and our Education Coalition partners supported the Conference Committee Budget, which would have raised sufficient new revenues to prevent such deep cuts.

Despite of the outcome, things could have been worse if not for the hard work of our staff and members who spoke out on an all-cuts budget. We want to take this moment to thank you for your hard work and efforts in this budget fight.

While it is too soon to know if that will occur, CSEA and our Coalition partners are already planning for a bigger fight next year, and we will keep you informed of our plans and effort in the coming months.