Budget deal provides flat funding for schools, uncertainty on horizon

Gov. Jerry Brown and Democrats have reached a deal for a no-tax budget that would fund schools at the same level as last year.

That is, about $2.6 billion lower than the governor's revised May budget.

The budget will impose the $2.7 billion in cross-year payment deferrals that Brown had proposed rescinding in May but were part of the January budget proposal.

Schools will also face an additional $1.5 billion in mid-year cuts but only if revenues drop more than $2 billion below the Brown administration's projections.

Local educational agencies will be able to take the cut any way they want, but the deal includes a change to state law that will allow districts to cut seven days off of the school year. LEAs will not be able to make the cuts now under the assumption that the revenues will fall short.

Failure to meet the revenue expectations will include an elimination of funding for home-to-school transportation in the second half of the school year.

The cuts arrive to schools despite the fact that revenues are about $1.2 billion above the governor's May projections. This is because the budget deal also includes the governor's realignment plan, which transfers money from the state level to counties and thus lowers the minimum funding guarantee.

Speaking before reporters Monday, Brown said the administration and Democratic legislative leaders approached Proposition 98 legally and creatively."

"We made tough decisions," said Brown. "It's a good budget, but it's not the budget that I started with in January and the Democratic leadership wanted."

School districts, facing a Friday deadline for finalizing their budgets, must base their budgets on the expectation that revenues will climb $4 billion between now and January 2012.

If revenues fall, schools would bear the largest piece of a $2.6 billion overall cut to services that include prisons and health services.

According to the Department of Finance, the school cuts are activated if revenues come in $2 billion or more below the $4 billion assumed windfall.

If revenues come in $1 billion to $2 billion short of estimates, there will be about $600 million in reductions but no school cuts. If they come in under a billion short, the problem is pushed over to next year.

Staff at the nonpartisan Legislative Analyst's Office said Monday they could not comment on the revenue projections being used by the Democrats.

In an e-mail, Jason Sisney, the LAO's director of state finance, said his office last provided revenue projections following release of the governor's revised May budget but noted that tax collections have been running well ahead of those estimates. He said the next revenue forecast will not come until November.

Brown has set aside plans for tax extensions and will instead seek gathering voter signatures to tackle the "wall of debt" in a 2012 ballot.

Legislative leaders said Monday this no-tax budget was unfortunate but also the best solution without extended taxes.

"We have reached an agreement on a budget that is balanced. It protects to the greatest extent possible education, the economy, jobs, and the California way of life," said Senate President Pro Tem Darrell Steinberg, D-Sacramento.

Republicans were quick to criticize the plan that was crafted without GOP input.

In a statement, four Republican Senators that had been negotiating a deal with Brown - Sen. Berryhill, Cannella, Emmerson, and Harman - lamented that a compromise was never made.

"We have remained consistent - we want to give the voters the opportunity to weigh in on the future of the state," said a representative for the Senators. "They deserve the right to vote on taxes as well as on meaningful reforms that will put the state back on track."

During the press meeting, Brown said that he succumbed to a no-tax budget on Sunday night after receiving a text message from one of the Republican legislators.

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