With state revenues plummeting from a COVID-19-precipitated economic recession, Gov. Gavin Newsom released a revised California budget proposal Thursday that would lessen the impact of a potential two-year drop of $19 billion in state funding for schools and community colleges.
Newsom listed public education first among four budget areas that he said he was prioritizing in the proposed state budget, along with public health, safety and help for people hit hardest by the coronavirus. Proposals cobbling together additional state and federal funding would offset more than half of the $15 billion reduction next year in revenue for schools from Proposition 98, the formula that determines the portion of the general fund going to K-12 schools and community colleges.
Schools would not go without significant pain, however; the biggest cut would be a 10 percent reduction — $6.5 billion — to the Local Control Funding Formula, which comprises about 80 percent of state funding for K-12 schools. All districts would receive a 10 percent cut to their base grant and supplemental and concentration grants, the additional funding for English learners, low-income, foster and homeless students.
Other dedicated funds, known as categorical funds, could be cut $462 million, with one exception: special education. Total cuts would be about $7.2 billion — about 8.5 percent — from what Newsom had proposed in January to give to schools and community colleges.
The state’s after-school programs would face the biggest hit among the dedicated funds, $100 million. This would be “a huge setback for children and families in California who are already disproportionately affected by the current crisis. These families depend on after school programs to provide critical care and support for their children, which will be even more vital as parents go back to work and students are likely on adjusted school schedules,” responded the California After School Alliance, which called for the Legislature to reverse the proposed cut.
Newsom would keep a 15 percent increase in per-pupil spending for students enrolled in special education, and left most other funding streams for those students unchanged, at least temporarily. In addition, the budget includes $15 million in federal funds to pay for scholarships for those pursuing special education teaching credentials.
“I could not in good conscience be part of dismantling a commitment we had made well over a year ago to substantially improve special education in the state of California,” Newsom said during an hourlong budget presentation.
A projected 25 percent drop next year in the three primary sources of revenue — sales, personal income and corporate taxes — would hollow out the state’s general fund. The $42 billon decrease over two years would be far larger than the Great Recession a decade ago. This amount could increase if revenues fall more than projected. The deadline for filing date for personal income and corporate tax has been pushed back to July 15. As a result, the Legislature will likely revise the budget later this summer.
Newsom emphasized that a quarter of the total deficit would “disappear” if Congress passed the next stimulus bill to include aid for all states, cities and counties. Newsom had proposed $1 trillion, including several hundred billion for K-12 schools. He implored President Donald Trump to work with U.S. House Speaker Nancy Pelosi to pass the bill.
“The president of the United States, with a stroke of a pen, could provide support for Pelosi’s new HEROES Act and these cuts (to California’s budget) would be eliminated,” Newsom said. Unlike the federal government, California and other states must balance their budgets every year, he said.
“Remember no printing press here,” he said. “We are constitutionally obliged to pass a balanced budget. You don’t get to obfuscate, you don’t get to mediate. You don’t get to deviate from that foundational principle.”
Actions Newsom would take to offset the $15 billion drop in Proposition 98 next year would include:
- Directing $4.4 billion in federal CARES Act funding to local educational agencies to address learning loss related to COVID-19 school closures, especially for students most heavily impacted by those closures, according to the budget. School districts would have flexibility to use the money for summer school, extending the school year, providing tutoring and other supports. The funding would go toward special education and school districts with concentrations of low-income students. Congress separately is providing an additional $1.6 billion directly to districts through the CARES Act.
- Eliminating several billion dollars in one-time funding he had proposed in his January budget. That proposed funding included substantial investment in teacher professional development and programs to address the teacher shortage in critical areas, including STEM and bilingual education. Child care would also bear the brunt of these cuts. Under the new budget proposal, the 10,000 state-subsized preschool slots that were scheduled to open in April of this year would be eliminated, along with 10,000 additional slots proposed for April 2021. He is also proposing to cut the $300 million invested last year to help districts build or renovate full-day kindergarten classrooms, and funding for training more child care providers and building more child care centers. In addition, he’s proposing to cut the subsidies the state sends to preschool and child care providers who care for low-income children by 10%.
- Supplementing Prop. 98 with $1.8 billion — schools’ and community colleges’ share of new revenue that Newsom is proposing.
- Using all of the $500 million in a separate rainy day fund created exclusively for K-12 schools and community colleges.
- Reducing school districts’ payments for employee pensions to CalSTRS, for teachers and administrators, and CalPERS, for other school employees, by $1 billion next year and $2.3 billion over two years — an idea that school districts had recommended.
- Delaying payments to schools and community colleges by $1.9 billion next month and an additional $3.4 billion in 2020-21 for a total of $5.3 billion pushed off until at least 2021-22. This tactic, known as deferrals, essentially is an IOU, in lieu of further budget cuts, that requires school districts to use their own reserves or to borrow money until the state repays them.
Deferrals totaled $10 billion during the Great Recession — about a fifth of funding for school districts. Deferrals were a big piece of the “wall of debt” that former Gov. Jerry Brown made a priority to pay down, and Newsom paid off the last piece in the current budget.
Newsom noted the irony of eliminating that debt, only to be laying the stones for a new wall. “I never imagined to be back a year later under these extraordinary circumstances,” he said.
Separate from actions to stave off immediate harsher cuts, Newsom is also proposing to raise Prop. 98’s funding guarantee beyond the minimum required, which few of his predecessors have done. The supplemental appropriations, amounting to 1.5 percent of the general fund, would begin in 2021-22, and continue until cumulatively $13 billion has been contributed.
Education leaders were ambivalent toward Newsom’s proposal — appreciative of steps Newsom took to mitigate damaging cuts, while expressing worry about facing additional expenses with the reopening of school.
“We strongly appreciate the governor’s commitment to supporting public education in the current budget by allocating $4.4 billion in federal funding to support schools and colleges and address any learning loss for students,” said California Teachers Association President E. Toby Boyd in a statement. “But the proposed education cuts for the 2020-21 budget will be devastating at a time when students need more support. More than $10 billion in proposed cuts will lead to cuts to vital student programs, educator layoffs, furlough days and pay cuts just like it did during the last recession when we lost 33,000 educators. Our students, our schools, our colleges and our families cannot afford to go back.”
“While the cuts to schools are less than the Prop. 98 minimum, they still constitute the largest cuts going into a new year we have ever seen,” said Kevin Gordon, president of Capitol Advisors Group, an education consulting company base in Sacramento. “Our school districts cannot bring kids back to school and be slashing the budget at the same time. We either have to decide education and our local schools are crucial to reopen the economy or not.”
California School Boards Association President Xilonin Cruz-Gonzalez also credited Newsom with directing more CARES Act money to schools and defraying increased pension costs for districts.
“This is a welcome development that affirms the importance of public schools, but coupled with a 10 percent cut to LCFF (the funding formula), the May Revision impairs the ability of schools to serve all students and to resume on-campus instruction safely,” she said in a statement. “This budget would be insufficient in ordinary times, and is less than what is required for most schools to reopen safely during a pandemic — and if schools don’t reopen, our economy can’t fully reopen.”
* EdSource reporters Carolyn Jones and Zaidee Stavely contributed to this article.