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Budget: Lawsuits & Lagging Revenues - Sept. 27, 2011

 

 

September 27, 2011

Dear Colleagues:

"Check in with legislative analysts - the state is on track to run out of money by Thanksgiving...I'm telling you, [Jerry] Brown is on the brink - and legislators are becoming concerned because they don't think he knows it."

Willie Brown
Gov. Brown Unaware of State Budget Woes Coming
San Francisco Chronicle, 09/25/11

I frequently agree with the observations of Willie Brown, but I didn't agree with this article. While he is correct that the budget is rapidly falling apart (if it was ever truly bound together), I fully believe Governor Jerry Brown knows the magnitude of the problem. Further, we have been unable to confirm the assertion that the state will run out of money before Thanksgiving absent additional cuts.

That said, it is almost certain that all $2.4 billion in triggers will need to be pulled in January, including the $102 million cut to community colleges. Of the $102 million, $72 million would be a workload reduction and $30 million would be a one-time deficit.

And, if the situation couldn't get more uncertain, today two lawsuits were announced that call the spending plan into further doubt.

The larger of the two is a lawsuit by the California School Boards Association and the Association of California School Administrators, which asserts that the adopted budget underfunds Proposition 98 by $2.1 billion. The other lawsuit is from advocates for persons with disabilities, although the specific claims have not been unveiled.

On the Proposition 98 lawsuit, the Legislature absolutely manipulated the guarantee by redirecting $5.1 billion in sales tax money on a one-time basis to local agencies for realignment. This allowed the Legislature to ignore the expected increase in tax revenues (which may or may not fully materialize).

The California Teachers Association, usually the driver of the education lobby bus, signed off on the budget deal, albeit not happily. They also won a provision in the budget that blocks additional teacher layoffs, even if the triggers are pulled cutting $1.5 billion from K-12 schools. The provision was seen as insult to injury to school district leaders and has fractured the Education Coalition.

Obviously, the non-suspension suspension of Proposition 98--required since Republicans withheld their votes from most budget bills and a suspension requires two-thirds--affects community colleges. The additional revenue could have reduced cuts to community colleges to $59 million and largely would have taken this year's "workload reduction" off the table.

That said, to the extent state revenues don't meet targets, as Willie Brown and most observers now believe, that Proposition 98 increase is illusory or significantly reduced. For every $1 billion in revenues below projections, that alleged "$2.1 billion of underfunding" drops by about $400 million.

The lawsuit is more about principle than cash. Even if a court found the Legislature at fault, it's very unlikely the cash would (or could) be provided this year. Instead, it would likely be added to the $12.9 billion already owed to Proposition 98 in the out years.

A court can't mandate a tax increase nor can it practically force legislators to cut elsewhere or vote for tax increases. But, to CSBA and ACSA, who were left out of the closing day negotiations and were insulted by the CTA provision, the lawsuit is a strong message about their relevance.

We try to give you the most candid and accurate assessment of the budget. The most frequent question I receive is "Will there be more mid-year cuts beyond the triggers?"

I don't have that answer. While I disagree with Willie Brown and believe the governor fully understands the magnitude of the budgetary problem, I also think he is as perplexed as ever as to from where the next round of cuts will come.

Sincerely,

Scott Lay
President and Chief Executive Officer, The League
Orange Coast College '94




Community College League of California
2017 O Street, Sacramento, California 95811
916.444.8641 . www.ccleague.org



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Last Updated: 9/29/11