January 10, 2011
Governor's Budget Proposals 2012-13
Overview of the 2012-13 Governor’s Budget
The 2012-13 Governor's Budget paints a picture of a strained but improving state fiscal situation.
According to the Governor's 2012-13 State Budget proposal, the projected gap for 2012-13 is $9.2 billion, absent any corrective action.
The Governor's Budget proposes to bridge this $9.2 billion gap through a combination of increased taxes and further spending cuts. The key revenue proposal, subject to voter approval in November 2012, is to raise the income tax rate on high income earners and increase the sales tax by one-half cent through 2016.
PUBLIC EDUCATION
This will be the fifth straight year that education cuts will be maintained. That cut remains the baseline as we enter yet another difficult year.
The Governor's Budget Proposal is dependent on voters taking action to adopt a new round of temporary taxes—a ½ percentage point increase in the sales tax and higher tax rates for the state's wealthiest taxpayers.
Trigger Reductions
Governor Brown is again proposing midyear trigger reductions if the voters reject his proposal to increase state taxes. These cuts would be effective January 1, 2013. For Proposition 98, the trigger reduction would result spending cuts of $200 million will result in a real loss of $2.6 billion in funds for education, or about 15 instructional days, according to the Governor's Budget.
Education Proposals
The Governor's Budget nevertheless proposes several bold changes, both in policy and funding levels, for K-12 education. Among the major changes, the Budget proposes:
- Weighted Student Funding—Categorical programs that are not mandated by the federal government
- Cost of Living (COLA)—No COLA adjustment is proposed for 2012-13.
- Elimination of Home-to-School Transportation
- Deferrals—to reduce interyear apportionment deferrals for K-12 education and community colleges.
While the Governor has proposed increases to education funding by way of an elimination of the cash payment deferrals, they are contingent on the passage of a major tax initiative in November. This means it will be difficult to plan and budget again this year.
The big question is what constitutes a prudent reserve. Districts will need to assess the risk of a midyear cut in 2012-13, make an informed estimate of the potential exposure, and plan accordingly.
The LAO has reviewed the Dept of Finance’s revenue projection related to the tax measure and forecasts that the tax measure would generate $4.8 billion of additional revenues compared to the DOF forecast of $6.9 billion of additional revenues. Using the LAO forecast, the tax hike would raise $2.1 billion less than the Governor is banking on to balance the 2012-13 Budget.
The next update of the effect of the Governor’s Budget proposals on the district’s budget for the 2012-13 and 2013-14 school years will be presented at the Board Workshop on Friday Jan 20th. |
