Volume I, No. 8a

January 8, 2009

Over the Cliff – What’s at the Bottom?

By David Walrath -- dwalrath@m-w-h.com

With his veto of the Democrats’ budget balancing plan, Governor Schwarzenegger has started a whole new level of negotiation brinksmanship. For school districts, the situation has not changed. Expect at least $2 billion and probably $2.5 billion in real program cuts for this year and additional cuts for next year. Whether the cuts are from the revenue limit as proposed by the Governor, or from categorical aid programs as proposed by the Legislature, is not the direct issue.

The cuts will be made and flexibility will be provided to help balance budgets but probably not enough flexibility to completely balance budgets. Schools need to continue to hoard cash in order to protect from the cuts and cash flow changes that will be part of any resolution of the current year and budget year debacles.

This is my bottom line:

• Real program cuts of $2.0 billion to $2.5 billion in 2008-09
• Governor primarily in Revenue Limit
• Legislature primarily in Categorical Aid programs
• No Restoration in 2009-10
• No COLA in either 2008-09 or 2009-10
• Almost no mandate funding
• No separate lottery revenue (proposed to be included in Proposition 98)