If Education Were a Legislative Priority, Would Trigger Cuts Be Necessary?
A central feature of the Governor's budget is $5.5 billion in K-14 education trigger cuts and $500 million in higher education trigger cuts, which represents 99% of all of the trigger cuts. $2.7 billion of those K-14 cuts would be true programmatic cuts. The cuts would kick in mid-year, which is forcing many districts to cut budgets this summer to avoid a mid-year meltdown. Since the Governor's budget predicts that revenues will grow $4.9 billion next year without his proposed tax increase, the question remains, if the Legislature made education a priority, could trigger cuts be avoided?
The Governor increased the trigger cuts targeting education to $6 billion. Education would take 99% of the cuts even though schools only receive 50% of funding.
The Legislative Analyst offered an alternative to the Governor's trigger cut which would reduce the K-14 programmatic cut from $2.7 billion to $1 billion.1
The Republican "Budget Roadmap to Protect Classrooms and Taxpayers" identified more than $4.4 billion in alternative savings that could be used to avoid education trigger cuts. The Governor's May Revision used approximately $2 billion of those solutions to avoid cuts to health and welfare programs, while at the same time increasing the proposed trigger cut to education. The Legislature could reject the Governor's proposal to divert savings to non-education programs and redirect savings to schools to eliminate or dramatically reduce the Governor's proposed education trigger cuts.
Governor Increases Education Trigger Cut and Reduces Cuts To Social Welfare Programs:
The Governor's May Revision budget assumes the voters will approve a tax increase that could be as high as $8.5 billion.2 His budget proposes trigger cuts which would take effect, according to his proposal, if the voters reject those higher taxes. 99 percent of the trigger cuts target education, 90 percent of which impact the Proposition 98 minimum guarantee to education.3 This is even though education expenditures only account for about 50% of state General Fund costs. The Legislative Analyst estimates that the trigger cuts, which total $5.5 billion, will impose a $2.7 billion programmatic cut on schools. This is largely because $2.8 billion of the trigger reduction eliminates the proposal to buy down the education spending that was deferred as part of the Brown Administration's first budget4.
While this deferral buy down is good public policy, rescinding it does not impact programmatic funding. The Governor's May Revision also increased the higher education trigger cut from $400 million ($200 million to the UC system and $200 million to the CSU system) to $500 million, $250 million for each system.
In contrast, the Governor's May Revision reduces cuts to a number of health and welfare programs and increases funding for corrections.
$400 million of the reduced savings are the result of the failure of the Legislature to adopt many of the Governor's proposed January cuts by March.
$200 million of the reduced savings is a result of changes to the Governor's welfare proposal. In January, the Governor's proposal to alter CalWORKs, the state's welfare program, would have saved $1.1 billion5. The Governor's May Revision would save $200 million less.6 These reduced savings are partly a function of allowing more individuals to remain on welfare longer. Specifically, the Governor's new proposal will no longer retroactively count time when welfare recipients that are sanctioned for failing to meet work or participation requirements from counting towards their time limit.
The Governor's January Corrections 2012-13 budget was estimated to be $8.7 billion7. The May Revision increased Corrections funding by close to $200 million, to $8.9 billion8, despite the fact that 33,000 felons are expected to leave the state system by June 2013 and local agencies will take control of 52,000 parolees.
Legislative Analyst Proposes an Alternative to Governor's Trigger:
On May 18th, the Legislative Analyst offered an alternative funding proposal that would reduce the programmatic hit to education from $2.8 billion to $1 billion. The Analyst is able to achieve much of these savings by funding schools at the updated 2011-12 Proposition 98 estimate, but re-characterizing $1.7 billion of the current funding level as "settle up" payments instead of as an over-appropriation of Proposition 98.9 Moving into 2012-13, the Analyst would calculate the Proposition 98 minimum guarantee the way the Legislature has historically repaid the maintenance factor, which is an obligation created when revenues have dropped or Proposition 98 is suspended. By re-characterizing the 2011-12 funding level and paying maintenance factor the traditional way, the LAO proposal also reduces the programmatic hit by using the current-year method for rebenching (resetting the guarantee) and making other one-time spending reductions.10
If adopted, programmatic funding for K-14 education would only drop by $1 billion instead of $2.7 billion if the trigger cuts are enacted. The LAO does not have an alternative trigger proposal for higher education.
Republican Budget Saving Ideas Are Available to Avoid Education Trigger Cuts:
According to the Legislative Analyst's office, most schools are budgeting as if the taxes will fail in November because the tax initiative occurs so late in the school year. Eliminating the trigger using the alternative solutions in the Republican Roadmap would allow more school districts to rehire teachers who received layoff notices and retain the length of the current school year.
In March, Legislative Republicans offered a plan to avoid education trigger cuts. The "Budget Roadmap to Protect Classrooms and Taxpayers" assumed the voters rejected the taxes and offered $4.4 billion in alternative savings to avoid devastating education cuts. The Governor's May Revision used approximately $2.2 billion of the Republican alternatives to reduce cuts for programs other than education. The Legislature could reject the Governor's proposal and redirect the proposed savings to avoid education cuts. Examples include:
The Governor's budget ensures that low and moderate-income housing funds that were unallocated by redevelopment agencies shall be sent out to local school districts. The Governor's budget estimates that this will provide schools with $1.4 billion in additional funding. The Governor redirects General Fund dollars away from schools by $1.4 billion. The Governor's redirection can be rejected by the Legislature.
The Governor's May Revision assumes a 5% employee savings.11 This proposal is scored at a savings of $403 million. The Republican Roadmap assumed savings of 4.6% from reducing salaries equivalent to a 1-day furlough. The Republican proposal would have used the savings to avoid education trigger cuts. The Governor uses the savings to avoid other non-education cuts. The Governor's proposal can be rejected by the Legislature, and the savings can be used to pay for education programs.
Taking into account the savings from the Republican Roadmap used by the Governor to avoid non-education cuts, there is still about $2.2 billion remaining from the Republican Roadmap to reduce or eliminate the Governor's proposed trigger cuts. Other savings ideas are still available to eliminate the proposed trigger cuts if there is the political will to protect education.
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1LAO, The 2012-13 Budget: Overview of the May Revision, page 22
2Governor's Budget May Revision 2012-13, page 24
3LAO, The 2012-13 Budget: Overview of the May Revision, page 9
4LAO, The 2012-13 Budget: Overview of the May Revision, page 16
5Governor's 2012-13 Budget: page 119
6Governor's Budget May Revision 2012-13, page 55
7Governor's 2012-13 Budget, Page 17
8Governor's Budget May Revision 2012-13, page 14
9LAO, The 2012-13 Budget: Overview of the May Revision, page 19
10LAO, The 2012-13 Budget: Overview of the May Revision, page 21
11Governor's Budget May Revision 2012-13, page 85