Governor’s budget could permanently alter Prop. 98

January budgets often are rife with creative accounting tricks. Because of the constitutional requirement that the governor introduce a balanced budget in January, the early year proposals are often about as balanced as a well-played Jenga tower.

This year, as part of his effort to present a balanced budget, the governor has proposed home-to-school transportation for K-12 students come out of the General Fund budget. Instead of using money set aside for education-related transportation, the governor wants to pay for the program by tapping a pot of money normally designed for rapid-transit projects.

The move has irked transit advocates, who fear the loss of funds.
But it also has spooked many in the education community, who worry about the precedent of moving programs out from under the Proposition 98 guarantee and paying for them instead out of more volatile revenue streams. The shift could mean less money for schools in future years, because the Proposition 98 guarantee is pegged, in part, to the previous year’s spending.

“It’s one thing if it means that they’re moving it out to make more money available under Prop. 98,” said Mary Bergan, president of the California Federation of Teachers. “But if they’re trying to lower the base, we’re not for that. This seems to me like a little Department of Finance shuffle.”

“The schools will want to resist this because they won’t have the same assurance for funding that they enjoy under Proposition 98,” said Sen. Jack Scott, D-Altadena, chairman of Senate Education. “Even though the schools aren’t going to be ending up with less money, they are going to be ending up with less assurance that the money will be there.”

But Jeannie Oropeza, who oversees education finance for the administration, says the schools will receive the same money as they would have under Proposition 98. But paying for the school transportation out of the transit account allows the
governor to save about $600 million in General Fund money while trying to bring other pieces of the budget into balance.

Oropeza said the transit account is brimming with money, due to higher than expected sales-tax revenues from gasoline. She says the governor’s financial prognosticators say the fund will continue to be flush, even though the legislative analyst has said she believes the governor has overestimated the money California will take in from gas taxes.

“We view it as a permanent adjustment. We think that the other funding source will continue to grow. We viewed it as a win for both sides,” she said.
But if gas tax revenues fall short, Oropeza said, school transportation still would be funded. “Then the responsibility would migrate back to the General Fund.”

Despite the more precarious nature of the transit money, some in the education world are watching this proposal closely. They say this could establish a real precedent of moving large programs, administered by local school districts, away from Proposition 98.

Brian Lewis, executive director of California Association of School Business Officers, said his group is closely tracking the proposal. Our goal is “to make sure that the integrity of Proposition 98 is protected,” he said.

“We will be watching this with great care, and we are going to be working very carefully with the governor’s office.”

There is some precedent for moving programs out of Proposition 98. As part of a settlement of a court case brought by the California Teachers Association against the Wilson administration (CTA v. Gould), a handful of smaller programs were moved out of the Proposition 98 guarantee.

“CTA identified programs that should not be funded with the guarantee. That allowed us to back those programs out and adjust the guarantee downward,” said Oropeza.

But Rick Simpson, who staffs education issues for Assembly Speaker Fabian N

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