May 14, 2008
Governor Releases May Revision
Today Governor Schwarzenegger released his 2008 May Revision for both the 2007-08 current year State Budget and 2008-09 State Budget. The May Revision contains both good news and bad news for schools.
First the bad news, because of the anticipated reduction in General Fund revenues for 2008-09, the anticipated Proposition 98 guarantee is reduced significantly from the amount anticipated in the original budget presentation.
The good news is that the Governor proposes to fully fund the lower guarantee. The lower guarantee means school district revenue limits will be able to be level funded between 2007-08 and 2008-09 without an increase in the Cost-of-Living Adjustment (COLA). The Governor anticipates saving $4 billion from schools compared to full funding the COLA for all revenue limit and categorical programs. Specifically, the COLA has increased from 4.94% in the budget as introduced to 5.66%; however, the Governor is not proposing to fund the COLA.
One of the challenges posed by the Governor’s May Revision will be to specify where any new Proposition 98 guarantee funds would be allocated in 2008-09, if the state economy performs better than expected.
The education community will be looking at full funding COLA for both revenue limit and categoricals and restoring any categorical aid cuts as the first call on any new Proposition 98 revenues.
Once again Governor Schwarzenegger is proposing to use the State Lottery funds as a source for revenue bonds that the state would use to meet budget year obligations and create a $10 billion rainy day reserve. Any action allowing the use of lottery funds for the state General Fund would have to go before the voters and be approved by the voters to be part of the budget balancing proposal. The issue that will be facing the Legislature, the Governor and the education community is: How do you count the budget balancing money in 2008 -09 for a proposition that will be on the ballot in November? The Governor is proposing that if the lottery proposal fails, sales tax will increase by one percentage point from the current 7.75% general rate to an 8.75% general rate. However, this is contingent upon a November vote on changing the lottery, sales tax could not be levied until after November. In that case, it might not generate the dollar level anticipated by the Administration.
Summary to Significant May Revision Changes
- Full funds the Proposition 98 minimum guarantee – which does not fund COLAs
- No cut in revenue limits between 2007-08 and 2008-09
- Home-to-school and special education transportation ($592.9 million) funded from the Public Transportation Account
- Reduce state deferred maintenance funding by $222.6 million to $39.6 million reserved for deferred maintenance hardship. Suspend the district match requirement
- Additional Flexibility Options
- Reduce reserve requirements for purposes of determining "Negative" and "Qualified" budget status
- Authorize districts to increase apportionments sufficient to ensure a 2 percent increase from restricted categorical sources
- Reduce the required 3 percent annual contribution to the districts' restricted reserve for routine maintenance to 2 percent
- Increase current percentage caps on district transfer authority for AB 825 categorical block grants from 15/20 percent to 20/25 percent
- Eliminate the local match requirement under the Deferred Maintenance Program
- Allow districts to move state categorical program carryover or reserve funds from any prior year and from any program to the district's unrestricted general fund, excluding those funds prohibited under federal or state law
$234.1 million for special education
- $189.2 million to restore cut proposed in January Budget
- Backfill reduced property tax
- Fund increased estimated ADA
- No COLA
Increases STRS Purchasing Power Protection to 85 percent from the 80 percent proposed in January.
Click here for additional May Revision information.
~Dave Walrath
dwalrath@m-w-h.com
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