To:      ACSA leadership and interested parties

From:  Adonai Mack, Legislative Advocate

Re:      Governor Calls for a Special Session

On Thursday, the Governor finally called for the Special Session that he promised late last week.  The governor defined the overall budget deficit for the current fiscal year and the 2009-10 fiscal year and introduced his plan to solve the budget deficit. The governor defined the budget deficit as a shortfall of $11.2 billion for the current year and another $13 billion for the 2009-10 fiscal year. As we expected, the revenue estimates and accounting gimmicks designed in the 2008 Budget Act were far below the expectations.  Combined with the ongoing mortgage crises and the fall of the country's financial institutions, California's economy has shown significant slow downs similar to those found nationwide.

Given these dire circumstances for the state's budget, the governor called a special session to address the budget deficit.  The governor's solutions include a balanced approach of increased revenues and targeted cuts to all sections of the budget including education. In an effort to respond to this special session, both houses of the Legislature had a floor session to set up an initial discussion regarding the governor's proposal.  

K- Adult Education

The governor has proposed $2.5 billion in reductions to the Proposition 98 guarantee.  These cuts are as follows:

• Elimination of the .68% COLA - $244.3 million
• Reduction to local revenue limits - $1.791 million
• Reduction child care programs, preschool and alternative payment programs by capping the allocation to these programs  - $55 million
• Reduction to Stage 2 and Stage 3 child care programs - $42 million
• Reappropriation of unused CalWORKs Stage 2 and 3 child care programs - $108 million
• $71.2 million in prior year Prop 98 reversions.  These savings include:

Ø      $28.6 million - K-3 Class Size Reduction

Ø      $2.6 million - Principal Training

Ø      $3.3 million - Alternative Credentialing

Ø      $1 million - Pupil Retention Block Grant

• Reduction in the appropriation for Targeted Instructional Improvement Grant on a one time basis and backfill it with the cuts from the above programs.

The cuts to the revenue limit are combined with flexibility to transfer categorical program funds to a school district general fund.  The intent of this proposal is to provide school districts the maximum flexibility in order to implement the cuts to the revenue limit.  Districts will be given the option to move any categorical program funding, as long as it does not conflict with federal law to the district's unrestricted general fund.  The administration has proposed that these flexibility options would be available for a minimum of two years.   Further, school districts would need to develop a plan on the use and transfer of the fund and have the plan be adopted by the local governing board. 

Revenue Increases

The governor also proposed several revenue increases to close the budget deficit that totals $4.7 billion.  These include:

Ø      Temporary Sales Tax Increase

The governor poses to raise the sales tax by 1.5% for three years.  After the three year sunset, the sales tax goes back to current levels.  This would generate $3.5 billion in 2008-09 and $7.3 billion in 2009-10.

Ø      Broaden Sales and Use Tax

The governor proposes to apply the sales and use tax rates to appliance and furniture repair, golf, veterinarian services, amusement parks and sporting events.  This would generate $357 million in 2008-09 and $1.15 billion in 2009-10.

Ø      Oil Severance Tax

This proposal imposes an oil severance tax upon any oil produced or extracted from California land or water.  The proposal is expected to generate $528 million in 2008-09 and $1.195 in 2009-10.

Ø      Increase Alcohol and Excise Taxes

This proposal would raise alcohol excise taxes by 5 cents per drink.  A drink is defined as 1.5 ounces of distilled spirits, 12 ounces of beer, or 5 ounces of wine.  This would generate $293 million in 2008-09 and $585 million in 2009-10.

Ø      Vehicle Registration Fee Increase

This proposal would increase the annual vehicle registration fee by $12.  This is different from the Vehicle License Fee, and could generate $150 million in 2008-09 and $359 million in 2009-10.  

What Does This Mean

This is again a proposal suggested by the Governor that still needs to be adopted by the Legislature and a 2/3rds vote is needed to pass any increase in taxes.  ACSA's intelligence on the tenor of the Legislature leads us to believe that the Democrats are not going to discuss any mid-year cuts until the governor establishes that he has the necessary votes to pass the tax increases.  Alternatively, the Republican Caucus does not believe that the two parties can come to any agreement after the hard fought battle over legislative seats this past election.  In addition, the Republicans have continued with their no taxes mantra.

It is apparent that the Legislature is not rushing to act on any proposal from the governor.  It is quite possible that the Legislature will not act on any legislation before the end of November.  By not acting by the end of November, the special session will continue with the new legislative members who were elected this past Tuesday and not those currently holding office.

ACSA Budget Talking Points

• In 2008-09 schools have already been cut more than $3 billion.
• Schools need ongoing, stable revenues now more than ever.
• Any further cuts to education in addition to recent $3 billion slashed from this year's budget would be a catastrophe for California's students.  Proposals to cut an additional $2 billion - a total of more than $5 billion is unacceptable and undermines the potential success of millions of students.  

·         These cuts directly impact students in the classroom, whether through increasing class sizes, laying off teachers, classified employees and other staff, eliminating music, art and sports programs, or cutting off access to basic supplies (like copy paper) for instruction. 

·         They also mean fewer bus routes to get students to and from school, significantly reduced custodial services, less adult supervision on campus, and even fewer school counselors and other support staff.

·         Cuts are already hurting our students in districts across the state.  Here are some examples:

Ø       At Rosedale Elementary School District in Bakersfield, they've already cut class size reduction programs for Kindergarten.

Ø       At Plumas Unified School District, they are being forced to cut back on library hours and services, as well as Special Education.

Ø      At Torrance Unified School District, they are being forced to cut their entire night custodial crew, as well as food and health services.

Ø      The PTA in Capistrano is being asked to fund basic school needs, including raising money to fund a school librarian, as well as art and music programs for grades K-3 and basic items like paper and markers.

Ø      Teachers in Sonoma County bring in their own copy paper and pay for field trips.

·         Our goal is to focus the public's attention on the need for ongoing, stable revenues for school.

·         Californians value our public schools and ensuring adequate levels of funding for our classrooms and students must be our state's highest priority.

If you have any questions, please contact me at amack@acsa.org.