Legislative Analyst Weighs in on Proposition 76: “Live Within Our Means”

Last week the Legislative Analyst’s Office (LAO) issued its analysis of Proposition 76, the “Live Within Our Means” (LWOM) measure. The analysis will be included in the sample ballot for the November 8th special election. With respect to education funding, the LAO concludes that the net impact of the proposition “would be to lower the minimum guarantee for K14 education.” (Emphasis included in the LAO’s write-up.) The Office’s nonpartisan analysis is important since many voters and opinion makers will rely on this review to shape their understanding of this complicated measure.

A process for ensuring balanced state budgets was one of the Governor’s January 2005 proposals unveiled when he delivered his State of the State speech and outlined his 2005-06 budget proposals. In this speech, the Governor declared the upcoming year the “year of reform” and indicated his intent to pursue budget cutting provisions and Proposition 98 changes to eliminate budget shortfalls.

The LAO highlights three provisions of LWOM that would act to hold down the Proposition 98 guarantee:
� Because funding for K-14 education accounts for almost 45% of the state budget, lawmakers would likely subject education to funding cuts when the budget falls out of balance. Moreover, because Proposition 76 eliminates the Maintenance Factor (i.e., the long term Test 2 funding target), the state would no longer be constitutionally required to restore these funding cuts when additional revenues become available.

� LWOM also makes any appropriation over the minimum guarantee one-time in nature, rather than become part of the guarantee as is the case under current law. As a result, the minimum guarantee would be lower than it would under current law. The LAO illustrates this point by noting that if LWOM were in effect for the current year, the $741 million over appropriation in the 2005 Budget Act would be one-time spending and would lower the minimum guarantee in 2006-07 by a similar amount compared to current law.

� The proposition converts the $3.8 billion outstanding Maintenance Factor to a one-time obligation, thus eliminating this amount from the annual base funding requirement.

The LAO, however, is careful to distinguish between the effects of the proposition on the minimum funding guarantee and actual education spending. The LAO writes, �A lower guarantee, however, does not mean that actual spending for schools would necessarily be lower. Policymakers would still be free to spend more than required by the minimum guarantee in any given year.� (Emphasis included in the LAO�s write-up.)

Commentary
Notwithstanding LAO�s statement that policymakers will have the authority to provide more than the revised minimum guarantee, we believe that actual education funding will suffer greatly if LWOM is enacted�especially given the state�s current multi-billion dollar structural budget imbalance. The historical record shows that the Legislature and the Governor have provided more funding than what has been required by the minimum guarantee only in the boom years of the late 1990s. In fact, there have been numerous attempts to redefine the guarantee or to blur the distinction between fiscal years (note CTA vs. Gould) in order to skirt the funding requirements of Proposition 98 in bad fiscal years. We would point out that the reason California voters enacted Proposition 98 in 1988 was to ensure that state policymakers place education funding as its highest priority and to ensure that the funding levels keep pace with workload and inflationary increases. Budget decisions leading up to the 1988 vote reinforced the view that education funding needed constitutional protections, otherwise state support for the public schools would continue to erode.

Career Technical Education Legislation

When Governor Schwarzenegger signed the 2005-06 State Budget on July 11, 2005, he vetoed two items in the community college budget that had a significant funding impact on Career Technical Education. When the Governor introduced his proposed State Budget in January, it included $20 million for the Community College Economic Development program to create new articulated courses between K-12 and community colleges by building on the Economic Development program�s successful integration of business with emerging industries. The Administration sought to align career technical education curriculum between K-12 education and community colleges to more targeted industry-driven programs through the existing Tech Prep 2+2 model in order to expand career options for students.

When the Governor took action on the 2005-06 State Budget, he vetoed language and set aside the $20 million originally proposed for Career Technical Education. The Governor took this action because the Legislature added language to the Budget that linked funding for Career Technical Education to funding for supplemental instructional materials for English learners. The Governor obviously did not agree with this legislative proposal, resulting in the veto and set aside of the $20 million.

The other item that has a connection to the Career Technical Program is the reduction in community college property tax backfill funds. The Legislature had included $33 million to backfill projected shortfalls in the 2004-05 local property tax revenues for community colleges. The Governor reduced the $33 million to $15.6 million. In his veto message, the Governor indicated that the community colleges will experience a shortfall not greater than $21 million in the current year, so he set aside $17.4 million of the $33 million.

The Governor then took further action to combine the $20 million and $17.4 million he had set-aside, for a total of $37.4 million, to provide support for Career Technical Education pursuant to separate legislation. A number of bills are currently moving in the legislative process and will be acted upon when the Legislature returns to Sacramento on August 15. The $37.4 million could be amended into one of those bills.

Proposals by the Governor that will be acted upon after August 15 include:
 AB 226 (Bermudez, D-Norwalk) was amended to include an innovative approach to Career Technical Education funding by using funds from the Vehicle Inspection and Repair Fund to fund automotive technology programs

 AB 693 (Goldberg, D-Los Angeles) would require the Commission on Teacher Credentialing to study how components of skills identified by the Secretary of Labor may be integrated into existing teacher training programs to better prepare students for the work force

 AB 917 (Wyland, R-Del Mar) calls for the creation of the Career Technical Education Vision Council, to include both educators and industry representatives that would make recommendations regarding Career Technical Education, and to develop a workforce preparation and strategic plan by December 2007.

 AB 1609 (Liu, D-La Canada Flintridge) would require K-12 school districts to include assessment of career technical education information on the school accountability report card

 SB 102 (Ducheny, D-San Diego) would allow the Employment Training Panel to use its funds for up to five licensed nurse training programs to address the state�s need for nurses

 SB 665 (Migden, D-San Francisco) establishes the California Career Resource Network for the purpose of providing career development information and resources

 SB 794 (Scott, D-Altadena) requires the Board of Governors of the California Community Colleges to work with middle and high schools to improve linkages to career technical education pathways

Biggest Decline in Student Enrollment Occurred in Physical Education Courses
In April 2005, the Chancellor�s Office completed its report on �The Impact of Student Fee Increases and Budget Changes on Enrollment and Financial Aid in the California Community Colleges.� This report is an examination of the effects of fee increases and supply restrictions within the system during the 2003-04 fiscal year.

The ongoing fiscal crisis, beginning in 2001-02, within California state government that resulted in a reduction in available funding for community colleges in 2002-03 continued in 2003-04. As a result, the system�s ability to provide an adequate supply of courses to meet student demand remained diminished through 2003-04.

Although there were some increases in course offerings and thus student enrollments in 2003-04, physical education courses continued to decline. The decline in physical education courses (84.1%) is a direct result of legislation (SB 338) passed in 2003 that severely limited the number of K-12 students who could be concurrently enrolled in physical education courses. Concurrently enrolled students were restricted to no more than 10% of the total class enrollment. As a result, community colleges around the state have had to turn away hundreds of special admit students in physical education courses, to the dismay of many parents and students.