Finances

Governor hints school funding may be targeted

By John Hill, Sacramento Bee, December 10, 2003

2005 Prop 98 Update

Gov. Arnold Schwarzenegger sent a jolt through the state's education community Tuesday by suggesting he might propose suspending the constitutional guarantee of minimum school spending to cope with the fiscal crisis.

In an interview on CNN's "Inside Politics," Schwarzenegger said he was negotiating with school groups "to help us with this budget crisis ... to maybe have a suspension or to have some relief there so we can pull out of these next two years and pay it back, maybe."

Education groups regard as sacrosanct the landmark 1988 initiative that established a guarantee that a certain percentage of state revenue would go to schools and had taken solace in the new governor's statements as a candidate that he would not cut schools.

"The statement he made today certainly makes me uneasy," said Kevin Gordon, executive director of the California Association of School Business Officials. "When he starts to explore out loud the possibility of suspending Proposition 98, it is something we have to take very seriously and immediately go to work on."

The urgency of the state's budget situation was underscored again Tuesday as Moody's Investors Service downgraded the rating on California bonds.

It was the ninth downgrade by three credit-rating agencies since the start of the budget crisis in 2001, and the fourth this year.

Legislative leaders continued to negotiate with the governor on his initial budget plan, including a spending cap and a $15 billion bond.

"We have made significant progress and are continuing to work around the clock to get something reasonable and positive for the people of California," said Assemblyman Darrell Steinberg, D-Sacramento. But he added, "The details are very important."

Said Schwarzenegger's spokesman Rob Stutzman: "I think it's fair to say negotiations have progressed today." Legislative leaders are presenting the ideas to their caucuses, he said, and the governor remains optimistic.

On the school issue, Stutzman said, any proposal to suspend the guarantee would be part of the budget proposal Schwarzenegger will release on Jan. 10.

"I think it's safe to say that given the uncertainty that is facing the state, particularly with this deal not in place, that just about anything is on the table next year," he said, referring to the uncertainty over the spending cap and bond proposal.

Stutzman suggested that suspending the guarantee would merely limit the growth in school spending and would not mean that the governor was reneging on his promise not to cut school budgets. He compared it to bookkeeping maneuvers in the last three budgets that pushed school payments into the next fiscal year.

"It does not necessarily mean there's been a cut in education spending," he said. "It just may not grow as fast as it usually does."

Currently, public schools -- kindergarten through 12th grade and community colleges -- receive slightly under 40 percent of the state's revenues, or about $30 billion a year.

Barbara Kerr, president of the California Teachers Association, said the union has been talking to Schwarzenegger about the effect of his spending cap proposal on education spending, but not the possibility of suspending Proposition 98. "We're very concerned," Kerr said. "Suspension is a very serious thing."

The Legislature would have to approve such a move with a two-thirds vote in each house.

Proposition 98 has never been suspended. Once, the state struck a deal with education groups that allowed all the revenues from a temporary sales tax to be dedicated to repairing the damage from the Loma Prieta earthquake, without schools getting their normal share.

The initiative does automatically trigger lower payments by the state in bad budget years, as long as schools are repaid in the ensuing years. The

state currently owes K-14 schools about $3.5 billion for underpayments

that it made during the past few years as the state's finances tanked.

Some education groups speculated that the Republican governor may have been referring to trying to delay these repayments. The state owes $1.1 billion in the current fiscal year, $875 million more than was anticipated when the budget was signed last summer.

Delaying or restructuring the back payments would require a suspension of Proposition 98, said Robert Manwaring, director of K-12 education for the nonpartisan Legislative Analyst's Office.

Education groups said they would likely oppose any attempt to suspend the initiative because it would set a precedent that future legislatures might be tempted to follow.

When the guarantee is suspended, the state must eventually pay back schools. But if the debt got big enough, Gordon said, the state might try to rewrite the requirement.

"Proposition 98 will perhaps never look the same," he said. "That's a very dangerous route."

But Schwarzenegger finds himself in a budget bind. He has declared repeatedly that he does not want to raise taxes, at least not now. His $15 billion bond proposal, which could provide some wriggle room, has thus far been stymied by the Legislature. And he has declared that education is off the table for budget cuts.

That leaves reductions to the rest of the budget -- mostly health and social services, higher education and prisons. But cuts he has proposed so far in those areas have already set off protests.

"There just isn't enough room for cuts," said Patrick McCallum, who lobbies on behalf of community colleges. "He's in a bind."

For the governor to avoid a political firestorm, any attempt to suspend Proposition 98 would have to be part of a deal with education groups, McCallum said.

Lawmakers have in the recent past shown no appetite for such a move. But that could change, Gordon said, if the governor was willing to take the initiative.

"Whoever is willing to take the political hit for it would get headway," he said.

Moody's downgraded the state's credit rating for the third time this year. The rating is one notch above Standard & Poor's and two below Fitch. California has the worst rating among the states.

Moody's cited the loss of local government revenue from Schwarzenegger's rolling back an increase in the car tax, which it assumes the state will cover, as well as the state's "continuing inability to reach political consensus on solutions to its budget and financial problems."

Prop 98 Background

The Proposition 98 guarantee has not actually constrained the spending decisions of the Legislature. The proof is in the numbers. Proposition 98 was passed in 1988. Throughout the 1990s, spending per pupil essentially matched the levels required by Proposition 98. During that decade, however, spending per pupil in California actually declined relative to spending per pupil in other states. Would California have spent even less without Proposition 98? Not likely.

California's low public school spending is not the byproduct of generally low government spending in the state. In fact, state and local government spending in California exceeded the average of the other 49 states by 9 percent in 1999-2000. However, California spent a smaller share of those funds on K-12 public education: 22 percent compared to 25 percent in other states.

As a result, California's schools spent about 2 percent less per capita. Each dollar per capita had to stretch across more students because California had 8 percent more pupils per capita than did other states. Ultimately, California schools spent 9 percent less per pupil in 1999-2000.

Because California schools also faced higher resources costs, lower per-pupil spending translated into fewer tangible resources in California classrooms. In 1999-2000, California schools had 48 teachers per 1,000 students, compared to 64 teachers per 1,000 students in the rest of the country.

Similar shortfalls existed with other staff such as counselors and librarians.

Given the high priority that California voters place on education, it is hard to believe the Legislature would have allocated even less to schools. In this sense, the spending guarantee in Proposition 98 was largely irrelevant. The guarantee has simply diverted attention from a much more important and fundamental question: How much funding do schools need to ensure that students are able to meet or exceed the state's academic standards?

This raises a larger issue for ballot-box budgeting. Making hard and fast rules about a complex state budget in the presence of an ever changing set of external circumstances (the economy, resource costs and efficacy, voters' priorities) will lead to another set of complex rules that try, but often fail, to take account of all unforeseen events.

The history of Proposition 98 includes a series of additional propositions and contingencies for difficult economic times. In the presence of Proposition 98, legislators had to jump through hoops to spend what they likely would have spent absent Proposition 98.

Ultimately, Proposition 98 may not have constrained legislators, but it certainly seems to have distracted them from the fundamental question about what resources are really needed to get the job done. This is the aspect of ballot-box budgeting that may provide lessons for thinking about potential effects of Proposition 53.

New Education Secretary Jumps Into Proposition 98 Battle

KCRA News Report, July 12, 2005

SACRAMENTO, Calif. -- Gov. Arnold Schwarzenegger's new education secretary wasted little time Tuesday, leaping into the bitter political struggle over how to fund California's public schools and calling on lawmakers to change Proposition 98.

At a time when Schwarzenegger's rocky relationship with teachers is beset by protests, he has hired Alan Bersin (pictured, right) in an effort to help change the state school funding guarantee by using a special election.

"We do need fiscal accountability in ways that we have not managed to date," Bersin said.

During his time as San Diego's school superintendent, Bersin had his share of clashes with teacher unions. Speaking to the Sacramento Press Club Tuesday, he waded directly into the political fight over Proposition 98.

"We've got to make people accountable so that we can say to the taxpayer in good faith that your money is being well employed," Bersin said.

Bersin is talking about Schwarzenegger's desire for ballot box reform of California's budget. He has already qualified a measure called "Live within your means" and now wants to negotiate a deal with lawmakers. Either way, the governor wants to alter the formula under which school funding grows.

Schwarzenegger spokeswoman Margita Thompson suggested that voters didn't understand what Proposition 98 would do when they approved it 15 years ago.

"I would love to know anyone that understands Proposition 98," Thompson said.

"I've actually seen polls where voters understood very clearly what they did," said Assemblyman John Laird, D-Santa Cruz. "They were providing support for education, and they still support it."

Education groups show no inclination to declare a ceasefire in the monetary battle, which Bersin called for on Tuesday.

"We see this as something that is going to permanently relegate school funding to the basement, something that's not good for California's future," said California School Boards spokesman Rick Pratt.

Bersin said he believes the administration and the California Teachers Association can find common ground on the school funding issue.

Bersin Resigns

Oakland Tribune, November 16, 2006

State Secretary of Education Alan Bersin is leaving his Sacramento post to spend more time with his family, his spokeswoman said Thursday. His last day is Dec. 15. It is unclear what prompted Bersin to resign 16 months after his appointment by Gov. Arnold Schwarzenegger. He splits his time between his home in San Diego and Sacramento, and the travel is too much, spokeswoman Michelle Orrock said.

"It's kind of a combination of things. He's got two teenage daughters and he's been commuting. Not being able to see his family, that was kind of a big issue for him," Orrock said.

Bersin began as Secretary of Education on July 1, 2005, replacing former Los Angeles mayor Richard Riordan, who resigned after less than two years.

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Last modified: December 10, 2003