The Deal is OFF

The Governor has reneged on his “Deal” with the education community to limit the cut in the Proposition 98 guarantee to no more than $2 billion for 2004-05. His January proposal, rather than boosting current-year funding by $1.1 billion, as required under the “Deal,” appropriates no additional support. The Department of Finance projects that current-year revenues will exceed the 2004 Budget Act amount by almost $1 billion, which in turn would boost the minimum guarantee. Instead, the Administration proposes to disregard the “Deal” and leave current-year funding unchanged.This proposal has a compounding effect on the guarantee because it suppresses the Proposition 98 base for purposes of determining the minimum funding level for 2005-06. Thus, the two-year impact on this proposal is to deny schools and community colleges $2.2 billion.

This proposal is particularly troublesome because the state’s economic condition has improved since last July when the 2004 Budget Act was signed. Revenues are up almost $1 billion, according to the Governor’s Budget. Unfortunately, unrealized assumptions regarding punitive damage award collections and unidentified savings, coupled with higher caseload growth in some state programs, consumes the added revenues. Thus, the state’s current-year ending balance drops by $254 million, according to the revised current-year Budget.

The Administration bears responsibility for proposing the one-time solutions and the uncertain savings proposals that have unraveled since the 2004 Budget Act was signed. Factors beyond the Governor’s control cannot be blamed for his abandonment of the “Deal.” Read the rest of this entry »