Hope is not a strategy

Schools brace for trigger cuts

School districts are preparing to take cost-saving actions on the heels of a recent announcement by the state that pulling the triggers on the budget’s built-in cuts is pretty much a given.

Last week, California Assembly Speaker John Perez said it’s unlikely there will be “any significant changes, or attempts to change, the allocation of the budget cuts required,” should the Department of Finance’s Dec. 15 revenue projections fall below the $4 billion in anticipated revenues needed to avert the triggers.

The non-partisan Legislative Analysts Office, along with Governor Jerry Brown’s own team, both stand by their assessments that revenues will miss the mark by $3.7 billion, thus triggering cuts, including an additional $100 million in cuts to both university systems, health and human services and a whopping $1.4 billion in cuts to K-12 schools and community colleges.

“The only way to avoid those triggers is to get revenue,” Perez told KQED Radio. “And that’s not going to happen, because none of the members of the minority party [Republicans] have shown a willingness to engage in that kind of conversation.”

School districts statewide began taking chatter of new taxes seriously after the Oct./Nov. revenue results were announced. Given the almost $4 billion in shortfalls this fiscal year, and a projected $9.8 billion budget deficit in fiscal year 2012-2013, earlier this week Governor Jerry Brown laid out a revenue-generating plan including about $7 billion in new taxes.

According to a Dec. 5 open letter from Brown to the public, the plan calls for millionaires and high-income earners to pay up to 2% higher income taxes for five years. “No family making less than $500,000 a year will see their income taxes rise,” the letter said. “In fact, fewer than 2% of California taxpayers will be affected by this increase.” In addition, Brown wants a “temporary” 1/2-cent increase in the sales tax, though he insists that, “Even with this temporary increase, sales taxes will still be lower than what they were less than six months ago.”

This funding, however, would be “dedicated” to education and public safety, and not spent on other programs. “My proposal is straightforward and fair. It proposes a temporary tax increase on the wealthy, a modest and temporary increase in the sales tax, and guarantees that the new revenues be spent only on education,” Brown said in the letter. He also made his case for his plan, recounting his take on how the state ended up staring down the barrel of the triggers.

“When I became Governor again — 28 years after my last term ended in 1983 — California was facing a $26.6 billion budget deficit. It was the result of years of failing to match spending with tax revenues, as budget gimmicks instead of honest budgeting became the norm. In January, I proposed a budget that combined deep cuts with a temporary extension of some existing taxes. It was a balanced approach that would have finally closed our budget gap.

I asked the legislature to enact this plan and to allow you, the people of California, to vote on it. I believed that you had the right to weigh in on this important choice: should we decently fund our schools or lower our taxes?

The Republicans refused to give ground, and [withheld] the four votes needed to put the measure on this year’s ballot. Forced to act alone, Democrats went ahead and enacted massive cuts and the first honest on-time budget in a decade. But without the tax extensions, it was simply not possible to eliminate the state’s structural deficit.”

Mammoth Unified School District Superintendent Rich Boccia said it’s important for parents and the public to remember the facts. “California has reduced funding for public education by $18 billion over the past three years,” he pointed out via email. “We also need to remind ourselves that if the [$660,000] parcel tax was not renewed that we might have to reduce our operating budget by as much as $1.2 million for the 2012-13 school year, after just reducing the operating budget by $921,000 for the 2011-12 school year.” Most Basic Aid school districts have a midyear budget projection reduction estimate of about 4%, which means about $480,000 for MUSD – about 16% of the present 25% reserves, leaving about 9% remaining. The MUSD Board Policy requires a reserve of 17%.

“I would prefer to be criticized for having a large reserve … rather than not being prepared for any uncertainty,” Boccia said. “And it would appear, that in this economic environment, no reserve is going to be large enough to weather this storm. At the end of the day we need to plan for the worst and hope for the best. Hope is not a strategy.”

Brown closed his letter with a call for support from the public, pitching that, “This initiative will not solve all of our fiscal problems, but it will stop further cuts to education and public safety.”

In a memo to its directors and membership, the Riverside County School Superintendents’ Association opined, “It is our understanding that the governor believes that the only way out of this fiscal crisis is by increasing revenue. And recent polls indicate that the public might consider tax increases – if they are for public education. Accordingly, it is generally agreed that sparing K-12 education from trigger cuts would probably not help Brown’s credibility with the public, or the public’s inclination to vote for more taxes in November [2012].”

Wall Street will also be watching the state’s next moves very closely. State Treasurer Bill Lockyer told the California Chamber of Commerce that the budget triggers are essential for the current state budget to be deemed “financeable.” According to Lockyer, any weakening of the trigger mechanism will cost the state (and the governor) credibility in the bond markets at a very inopportune time. And earlier this month, State Controller John Chiang told NBC4LA that absent a budgetary turnaround, California “will face increasing cash pressure in the months ahead.”

In response to the governor’s tax proposal, the California Taxpayers Association, Howard Jarvis Taxpayers Association and Small Business Action Committee this week filed a joint initiative that would cap state spending. According to a report in the Sacramento Bee, “The proposal would reconfigure the Gann Limit, a 1979 spending restriction established on the heels of tax-limiting Proposition 13. In years where tax revenues are greater than the limit, the state would first have to pay down debt and then divide up to $2 billion between schools and a rainy-day fund.” Ideally the state would return any money leftover to taxpayers.

While most analysts believe the triggers will in fact be pulled, the depth of the K-12 cuts won’t be truly known until the State Dept. of Finance releases updated revenue numbers in about two weeks.