California Budget Crisis for 2003
December 2002 Developments
Governor Davis in two separate announcements announced California faced significant budget deficits. The first announcement indicated a budget deficit of approximately $20 billion and called for a Special Session in January. The proposed mid-year cuts(2002-03) to education that would have cost Alameda's schools approximately $1.5 million. In his release of proposed budget for 2003/04, the deficit estimate had grown to $34 billion. The Governor proposed a 0% Cost of Living Adjustment as well as additional edcuational cuts. At the time of Governor's second proposal, AUSD was looking at reductions close to $3.0 million. The Board of Education took no immediate pending action on proposals by the Legislature.
The Senate and Assembly took completely different approach to mid-year cuts.
The Senate and Assembly agreed in a number of education reductions. The major agreements include the following:
Deferral of current 2002-2003 ADA apportionment funding into 2003-2004 fiscal year. Rather than make across-the-boards cuts as proposed by the Governor, the Senate and Assembly opted to delay $1.087 billion of the P2 revenue limit apportionment payments to districts.
No across-the-boards cuts. The Senate and Assembly rejected the Governor's proposed across-the-boards cuts to revenue limits (2.15%) and categoricals (10.82%). Instead, both houses opted for a set of limited program specific cuts which included reducing the instructional materials program from $400 million to $297 million (-$103 million) and the Peer Assistance Review Program from $87 million for $65.2 million (-$21.8 million).
Major Areas Where the Senate and Assembly Differ:
In total, the required current year reductions would be minimal. The deferral of over $1 billion in apportionment funding to next year's budget places greater pressure for deeper cuts or additional deferrals in 2003-04. At the end of January, District staff continued to monitor the developments in Sacramento. Implications on the AUSD budget were unclear at this time.
The Assembly attempted to increase revenues by reinstating the vehicle license fees. The Governor threatened to veto the measure. No further action from the Legislature. With no action by the Legislature, it appears all reductions will occur in 2003-04. The only question remains how big will the reductions be?
What does this all mean to Alameda schools? The Board of Education is required to pass a budget by June 30. They will have to "guess" what cuts will be eventually passed by the Legislature and signed by the Governor sometime during the summer. The District is using the Alameda County of Education requirement to submit a budget with assumptions aligned with the Governor's January budget proposal.
The Board of Education passed the AUSD 2003/04 Adopted Budget at June 10, 2003 meeting.
On July 29th, 2003 the Legislature passed a budget. On August 2nd, Governor Davis signed the 2003/04 budget.
Staff presented a recap of the AUSD implications of the passed State budget. They are:
The good news (if you consider it good) was the final State budget did not make further cuts beyond those proposed in May. As a result, the Board approved $1.7 Million Budget Cuts in April were enough to maintain a budget that was approved by the Alameda County of Education.
Now, the next test of the 2003/04 budget comes in December/January when a projected $8-10 BILLION 2004-05 deficit gets updated. Hopefully whoever is the Governor will not need to propose mid-year cuts.
Governor Davis is recalled and replaced by Arnold Schwarznegger. He promises no new taxes, repeal of the vehicle license fees and to keep education funding intact.
FYI: The chart below illustrates the dramatic effect of stock market on State revenues. In 1997-98, the Education budget received approximately $1 billion from Capital Gains and Stock Options. At its peak in 2000-01, the Education budget received $5 billion. For 2002-03, Education will receive $1 billion.
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