Newsom promises to protect funding for K-12 schools and community colleges, but not for CSU and UC amid budget concerns

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Despite a further decline in state revenues, Governor Gavin Newsom reaffirmed his commitment on Friday to safeguard the ongoing funding and extensive initiatives for TK-12 schools that he has initiated.

“I just do not wish to witness educational budget reductions,” Newsom stated during a press conference discussing the revisions to the 2024-25 state budget proposed in January. “At this moment, I want us to preserve the advancements we have achieved in community schools, preschool programs, comprehensive after-school programs, summer school initiatives — all the collective efforts we have been engaged in.”

The revenue figures under discussion have necessitated delicate budgeting from Newsom, as he crafts annual fiscal plans that are highly dependent on volatile income patterns of the wealthiest 1% of earners. Capital gains tax revenues surged to $349 billion in 2021-22 only to plummet to $137 billion in 2023-24. The current fiscal year concludes on June 30.

Due to the anticipated revenue shortfall, there is a possibility of additional cuts impacting other state programs. While Newsom assured retention of current funding levels for schools, the same pledge was not given to higher education, leaving officials at the California State University system in a state of apprehension. Chancellor Mildred Garcia expressed deep concerns over the revised budget, which suggests no increase in the next year followed by a mere 2% increase in the subsequent year, rather than the initially promised 10% increase over two years.

“As the premier institution nurturing California’s evolving workforce, this budget position necessitates challenging decision-making processes,” Garcia remarked.

Although it remains uncertain whether the University of California will also experience budget cuts, Newsom traditionally treats both university systems equally. UC officials refrained from making comments on the issue, while UC President Michael Drake emphasized the importance of securing a budget that sustains the institution’s core missions of research, public service, and education.

The fiscal summary shared by Newsom, highlighting revenue reductions and spending reductions, lacks the customary detailed breakdown usually included in May budget revisions. More comprehensive information is expected to be disclosed by Tuesday, the deadline for statutory budget language.

Despite the significant fiscal challenges facing TK-12 education, there is an overarching sense of relief among advocates that Governor Newsom has managed to construct a budget that largely insulates the K-12 educational sector. Education consultant Kevin Gordon, president of Capitol Advisors, commended the Governor for navigating through the crisis proficiently.

Derick Lennox, senior director of governmental relations and legal affairs at the California County Superintendents Association, emphasized cautious optimism: “While we appreciate the Governor’s commitment to shielding schools from severe impacts, the final outcomes will heavily depend on the intricacies of Proposition 98 and the overall funding availability.”

Newsom disclosed projections that anticipate an additional $7 billion dip in general fund revenues spanning the three-year period from 2022-23 through 2024-25, bringing the total deficit to nearly $27.6 billion. To mitigate this, Newsom proposed leveraging the remaining $9 billion from the rainy day fund for schools and community colleges.

Newsom indicated that the per-student funding for TK-12 in 2024-25 is anticipated to be $17,502, a marginal reduction of $151 per student compared to the initial proposal in January. Notably, the budget includes a 1% cost of living increase, slightly higher than the prior offering.

The May revision outlines approximately $1 billion in reductions affecting early education through high school programs, primarily funded by the general fund instead of Proposition 98. Notable preserved initiatives include ongoing funding for the expanded transitional kindergarten initiative for 4-year-olds and overdue salary increases for childcare providers.

Cuts encompass:

• $425 million reduction from the Children and Youth Behavioral Health Initiative’s $4 billion investment, with a reallocation strategy towards wellness centers at educational sites. Carl Pinkston of the Black Parallel School Board expressed concerns over the impact on students experiencing post-pandemic trauma, highlighting the program’s vital role in promoting equitable behavioral health outcomes.

• Postponement of additional state-funded childcare slots, down from the planned 146,000 to the sustaining 119,000. Mary Ignatius, executive director of Parent Voices CA, deemed the delay concerning, particularly for children facing developmental challenges.

• Cancellation of $550 million in facilities funding earmarked for preschools, transitional kindergartens, and full-day kindergarten programs. Newsom hinted at integrating the funding within a state school facilities bond, with ongoing negotiations ongoing for a potential inclusion in a statewide ballot this November.

• A $60.2 million reduction in the Golden State Teacher Grant Program, which incentivizes teacher candidates in credential programs to serve in prioritized schools by offering grants up to $20,000.

• Trimming $48 million in 2025-26 and $98 million in 2026-27 from increased payments designated for state preschools catering to students with disabilities.

• Significant curtailment in ongoing funding for the Middle Class Scholarship Program, limiting the allocation to $100 million from the former $600 million annually. The program, benefitting over 300,000 students across UC and CSU systems, supports students from families earning up to $217,000 annually.

Criticisms of the Shortfall Remedy

Newsom’s proposed strategy to alleviate budget cuts for schools and community colleges hinges on a controversial approach. He aims to address the substantial gap — originating from an unexpected decline in Proposition 98 revenue of $8 billion in 2022-23 — by framing it as an overpayment of the state’s funding obligation. The intricate plan involves offsetting this shortfall by slicing from the general fund, albeit delayed till 2028-29 when the state’s financial landscape is anticipated to stabilize. The repayment necessity has since inflated to $8.8 billion since Newsom unveiled the concept earlier this year.

This unprecedented accounting maneuver has raised concerns, with both the Legislative Analyst Office (LAO) and the California School Boards Association questioning its feasibility. In a statement issued on Friday, the school boards association hinted at potential legal contestations against the approach.

The association’s opposition underscores the intricacies of the Proposition 98 formula, which underpins funding calculations. The mandated funding levels of 2022-23 are considered a constitutional commitment that dictates subsequent years’ financial allocations.

“This financial tactic could establish a lower baseline for estimating future education funding, resulting in prolonged revenue shortages for California schools,” cautioned Albert Gonzalez, President of the school boards association. “This sets a detrimental precedent that could perturb education funding stability and undermine the original voter intent behind Proposition 98’s passage over three decades ago.”

While the California Department of Finance asserts the legality of their proposed solution, Newsom acknowledged on Friday the complexity regarding Proposition 98.

“Comprehending its intricacies demands not merely a Ph.D. but also expertise in physics, engineering, and a myriad of other disciplines,” articulated Newsom.