In an unusual move to reach a consensus early, California Assembly and Senate leaders announced Wednesday they have agreed on a state budget that would rescind all cuts to K-12 and higher education that Gov. Gavin Newsom has proposed — on the assumption that Congress would soon pass, and President Donald Trump would sign, aid for states that would include $14 billion for California.
In a joint statement, Senate President pro Tempore Toni G. Atkins, D-San Diego; Assembly Speaker Anthony Rendon, D-Lakewood; and chairs of respective budget committees said there was a “strong likelihood” that Congress would deliver additional federal relief.
Newsom, too, hopes the Senate will approve the $3 trillion Health and Economic Recovery Omnibus Emergency Solutions – or HEROES – Act, which the U.S. House passed last month. However, instead of counting on it, he has proposed to tentatively cut programs now in the state budget that must be passed by June 30. Lawmakers would then return in late summer to deal with revised state revenue projections and decide what to do if Congress doesn’t come through with more money.
If it doesn’t, Newsom and the Legislature disagree on what would happen next.
Newsom would move ahead with an $8 billion cut to K-12 schools without more federal aid. It would include a $6.4 billion reduction – 8% – to the Local Control Funding Formula, which makes up 80% of districts’ state funding, as well as cuts to early education, after-school programs and career and technical education.
The Legislature would spare K-12 schools any cuts, primarily by issuing more IOUs, known as “deferrals.” Districts would have to borrow an additional $5.3 billion to cover their expenses, which the state would repay in subsequent years.
Legislators would restore funding for the additional $2.7 billion that Newsom would cut through revenue adjustments and savings from negotiating savings from furloughs and employee compensation, along with taking additional money from the state’s reserves – the rainy day fund.
The University of California and California State University would not go unscathed if there’s no federal relief by fall. Legislators would impose the same cuts that Newsom proposes: $370 million for UC and $400 million for CSU.
In a statement on behalf of a coalition of education groups, E. Toby Boyd, president of the California Teachers Association, said:
“We recognize the efforts of the Senate and Assembly in agreeing to a budget proposal that prevents immediate educator layoffs as well as their commitment to prioritizing our schools, colleges and preserving programs for the most vulnerable.”
“During the last week, we have again become painfully aware as a nation and a state of the inequity and racial inequality in our institutions and the impact it has on our students and communities of color.”
Newsom already had proposed $5.3 billion in deferrals for K-12 schools in his revised budget he released in May. That would bring deferrals to more than $10 billion – the same amount that the state had accumulated over several years during the Great Recession.
Deferrals don’t come without consequences. Small districts, charter schools and districts that rely on state funding more than property tax receipts would have to borrow larger sums to make their payrolls, potentially at higher interest rates.
The Legislature’s budget would treat community colleges similarly to K-12 schools. Both systems are funded through Proposition 98, a formula that determines how much of the state budget goes to both systems. Newsom proposed $662 million in deferrals for the system’s 115 community colleges followed by a 10 percent budget cut if federal aid didn’t materialize. The Legislature would double the amount of the deferrals that Newsom proposed in lieu of the cut.
Chancellor Eloy Ortiz Oakley expressed unhappiness in a statement Wednesday, saying:
“While I understand the difficulties that the state’s budget deficit presents for policymakers, I am disappointed in the message that the Legislature’s Budget Proposal sends to the 2.1 million students of the California Community Colleges.”
The chancellor continued:
“Furthermore, deferring more than $700 million in revenue in lieu of tangible and predictable budget adjustments sets up a very tenuous budget situation for our colleges.”
The Legislature is also rejecting the governor’s proposed 10 percent cut to monthly payments the state sends to preschool and child care providers who care for low-income children.
Mary Ignatius, statewide organizer for Parent Voices, a parent-led organization that advocates for more subsidized child care, said:
“It’s fantastic. For these providers who have been doing the unimaginable to figure out how to stay open, how to keep their staff, how to deal with new social-distancing ratios, how to get PPE equipment, the last thing they needed was to think that starting in a few weeks they would get a pay cut. So I think it’s an incredible validation to the work that they provide.”
However, there is no mention in the Legislature’s agreement of the other preschool and child care plans that were slashed under the governor’s proposed budget — for example, funding for 20,000 more low-income 4-year-olds to attend preschool and funding to train more child care providers and build more preschool classrooms.
By rescinding immediate cuts and restoring the 2.3 percent cost-of-living adjustment for 2020-21, the Legislature would eliminate districts’ authority to lay off teachers this summer. By statute, Newsom’s proposed budget cuts would have permitted it. The California Teachers Association said it would lobby the Legislature to override that option. It won’t have to, if the Legislature’s budget prevails.
The normal annual budget process entails the Assembly and Senate passing separate budgets, and then negotiating their differences before sending a compromise budget to the governor. Adopting a joint budget now could put the Legislature in a better bargaining position with Newsom. The statement didn’t say when both houses of the Legislature would vote on the agreement.
Bob Blattner, a Sacramento-based education consultant, said Newsom favors leaving more money in the state’s rainy day fund and not relying more on deferrals now, since the state could face a lengthy and punishing recession.
He said in statement:
“There is room for legitimate disagreement about how rapidly budget mitigation measures should be taken to minimize immediate fiscal distress, and how much should be held in reserve for rainy days to come.”
“The Legislature has come down on the side of sooner-is-better.”
In most other areas of the budget, legislative leaders adopted Newsom’s strategies to close a gaping revenue deficit.
Sen. Holly Mitchell, D-Los Angeles, said in a statement:
“The Administration had a tough job, working with a $54 billion shortfall; we used their proposal with a couple of key differences.”
“We still have a lot of work to do, but we are aware the June 15 budget deadline will not be our last action this year due to the ongoing devastating impacts of Covid-19.”