Finances

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:

The Senate relaxed Class Size Reduction caps. As drafted, districts will be allowed to increase the class size to some classrooms to 22:1 provided that the district average does not exceed 20:1.

The Senate acted to suspend the remaining $23.2 million for school library materials.

The Assembly adopted a $25 per ADA (including Adult Education and ROP) reduction for a savings of $157 million.

The Assembly reduced the AB 1200 reserves requirements. No fiscal savings for the State.

The Assembly permits districts to use categroical reserves. No fiscal savings for the State.

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.

February Developments

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?

March Developments

As of March 4, pending legislation on mid-year cuts were still pending. While the Governor convened a Special Session in January, the Legislature failed to send anything to the Governor's desk.
Republicans offer for a 2003-04 budget - no revenue increases, cuts an additional $5 billion beyond the Governor's $17 billion budget cut proposals, imposes a two year spending freeze and rolls $2.9 billion of the deficit into 2004-05.
Governor Davis goes on record stating he will not pass a budget unless there is structural changes to revenue generation (.i.e. changes to dependencies to cyclical taxes such income and sales tax).
At the March 11th BOE meeting, the Board of Education passed resolutions to send notices to all certificated employees. By law, each school district have to send out notices by March 15th.
On March 18, the Governor signs a bill for cuts for 2002/03. After applying the various provisions of the bill to the AUSD 2002-03 budget, there was an $500,000 increase to the General Fund. Some of you maybe wondering how that can be. If we are facing a budget crisis how is it that the Legislature passes legislation that increases our General Fund rather than decrease it. I will leave that question unanswered. With the Governor proposed 2003/04 containing no increases to base revenue limit, we can assume lowered reserves (due to increased expenditures). For the time being, Alameda Unified School District is moving forward to reduce its 2003/04 budget by $1,700,000.

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.

June Developments

The Board of Education passed the AUSD 2003/04 Adopted Budget at June 10, 2003 meeting.

July/August Developments

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:

ZERO Cost-of-Living Adjustment for 2003/04

$58 Reduction in Revenue Limit or approximately $580,000 loss of revenues

Suspension of Mandated Costs Recovery totaling $1.2 million for the last two years

Elimination of programs including Miller-Unruh Reading program and K-4 Intensive Reading

10% reduction in School Improvement Program

63% reduction in Deferred Maintenance

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.

October Developments

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.

2004 State Budget Crisis

2005 State Budget Crisis

2003 AUSD Budget Issues

2004 AUSD Budget Issues

2005 AUSD Budget Issues

Website Resources

California Budget - Just the Facts from Public Policy Institute

California Tax Burden from Public Policy Institute

Legislative Analyst Office Review of CA's 2003/04 Budget

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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Last modified: August 31, 2003

Disclaimer: This website is the sole responsibility of Mike McMahon. It does not represent any official opinions, statement of facts or positions of the Alameda Unified School District. Its sole purpose is to disseminate information to interested individuals in the Alameda community.