September 3, 2008
Update State Budget
The Senate Republican State Budget proposal includes a proposal for lottery securitization (slightly less than $2 billion) in an amount sufficient to keep education funding at the 2007-08 level. The proposal is not a specific dollar amount but is a floating amount that will be what is needed to maintain the 2007-08 level.
The upside is this proposal is better than the May Revision. The following are the downsides and my analysis:
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Lottery would be one-time non-Proposition 98 funds. Consequently, the first call on 2009-10 Proposition 98 funds would be to backfill the almost $2 billion just to stay at the 2008-09 level. This would leave little in new Proposition 98 funds for the 2009-10 COLA or to pay for the 2008-09 COLA deficits.
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The proposal would require using school district lottery allocations (or a part of the lottery administration funds) as a guarantee for the securitization.
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If the funds are to first go to the State General fund that would require voter approval and it is now too late to be on the November 2008 ballot. The proposal could result in a reduction of school lottery funds for 2009-10 and the next 20 years.
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The lottery funds are to be allocated on a per pupil basis. This is not the same as the May Revision categorical aid cuts. It would be very difficult to restructure the lottery allocations to match the categorical reductions in a manner that would keep each district held harmless from the categorical reductions.
- If the proposal were adopted it does not solve the long-term state budget structural deficit. It just lessens the number of tools available for future one-time purposes.
The Senate Republican proposal also includes a number of poison pills for Senate Democrats. This alternative moves the discussion forward, but do not expect it to be adopted.
~Dave Walrath
dwalrath@m-w-h.com
Dave Walrath
dwalrath@m-w-h.com
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