News

Friday, November 7, 2008

Update on the State Budget

In announcing a special session of the Legislature to address the state’s out of control budget crisis, the governor stated that the current estimate of the budget shortfall is now projected to be $11.2 billion. His plan to cover the shortfall would include $4.7 billion in new revenue and $4.5 billion in cuts, including $2.5 billion in Proposition 98 (K-14) reductions.

Revenue

The governor called for an immediate increase in the sales tax of 1.5 cents for a period of three years. Due to a mid-year implementation, this increase would raise $3.5 billion in the current year. He also proposed an oil severance tax worth $530 million, expanding the scope of the sales tax worth $357 million, and increasing the alcohol tax by a nickel a drink which would raise an estimated $293 million.

K-14 Education Cuts

The governor proposed Proposition 98 cuts of $2.5 billion as follows:

• Eliminating the K-12 revenue limit COLA for a savings of $244.3 million.
• Reduce K-12 revenue limits by roughly 4.5 percent to 5.0 percent for another $1.791 billion, which is worth about $300 per ADA, coupled with flexibility to transfer categorical funds to the general fund. Specifically the proposal is to authorize local educational agencies (LEAs) to transfer any categorical allocations received to their general fund for any purpose up to the amount of their share of the reduction. Districts utilizing the flexibility must adopt a transfer plan at a regularly scheduled meeting of their governing board and must report the amounts and programs from which transfer were made and the purposes for which they were used.
• Reduce $55 million from current year unallocated capped child care programs.
• $42 million from reduced workload expectations in Stage 2 and Stage 3 child care programs. Stage 2 reductions would total $27 million and Stage 3 reductions would total $15 million.
• $108 million in prior year savings from CalWORKS Stage 2 and Stage 3 would be reallocated in the current year for a savings to the general fund.
• Reductions in specific programs totaling $71.2 million from prior year and other savings, including $28.6 million from K-3 class size reduction, $2.6 million in principal training, and $3.3 million from alternative credentialing. The savings from these programs would be used to backfill a current year reduction of $71.2 million in Targeted Instructional Improvement Grants (TIIG).
• $39.8 million by eliminating the community college COLA.
• $292.4 million from community college general purpose apportionments.

The governor is expected to convene a special session of the legislature by November 30 to focus on the state’s budget crisis.