Flexibility Proposal At Risk

By Bob Blattner, this article was originally written in June 2008

Following the bleakest Governor’s Budget in memory this past January, the May Revision that followed – while still severe – was a big improvement. This improvement was largely a result of increased revenue – most significantly, an increase of more than $800 million to provide a “zero” COLA instead of a “negative” COLA on the Revenue Limits. But the Revise also proposed a menu of flexibility options that districts could utilize in mitigating what is still a tough budget.

To be sure, flexibility measures such as those proposed in the May Revision can never take the place of adequate funding levels. But in a year virtually certain to be of the “Bad Budget” variety, the ability to free up restricted ending balances and increase transfer caps between programs can give local education agencies the ability to plug holes and protect priority services.

Unfortunately, two different – but interrelated factors – have put the May Revision’s flexibility proposals at risk.

First of all, political influence by categorical program interests appears to be at an all-time high in Sacramento. These interests advocate only for their specific, parochial point of view; they ignore the broader interests of school agencies as a whole, and they jealously guard their narrow self interest. Many legislators have commented to us that when they visit their local school districts, superintendents and board members invariably plead for increased local flexibility, but when that flexibility is debated in Sacramento, there is a flood of intense opposition from the categorical program advocates who don’t want a dime of “their” money put at risk of liberation or redirection.

These advocates have only one issue, and they defend their issue fiercely. As an example, in the several years since the last brutal school budget of 2003-04, the categorical defenders have been busy retelling stories about how school districts used the flexibility provisions provided at that time to raid their budgets and slash their programs. But they paint an incomplete picture. They don’t explain the consequences that would have occurred absent the flexibility. They don’t mention how many classroom teachers, and how many essential programs, were spared because of access to restricted ending balances. They don’t answer why the ending balances in categorical programs were so large to begin with.

This pre-existing resistance to categorical flexibility was recently strengthened through the actions of the Assembly, and then the Senate, Budget Committees, when they proposed – on straight party lines – to increase school funding levels by billions of dollars. These funding increases would be possible only through massive, unspecified tax increases, and to date there has been absolutely no Republican support taxes – which would eventually require Republican support for passage. But although these new revenue levels are tenuous at best, the Budget Committees decided that they made the May Revision’s flexibility provisions unnecessary.

Our concern is that the anti-tax commitment of the Republican legislators will force the final Budget into looking far more similar to the May Revision than it will to the “Christmas-comes-early” versions floated by the Senate and Assembly Democrats last month.

Given the pressing cash-flow crisis facing the state, and the difficulty California faces in accessing bridge financing to make it past August without a budget, we may see a hectic resolution to the current Budget impasse in which Democrats are forced to accept far deeper cuts than they wanted in order to corral the Republican votes needed for adoption. This hectic endgame, analogous to “the fog of war,” will generate many casualties, some intentional, some not.

We fear that as it now stands, categorical flexibility may be among these casualties, because many who would otherwise be supportive are staying quiet in fear that supporting flexibility is a tacit acknowledgement that the final budget picture will be bleak. If, however, the provisions proposed in the May Revision are important to you, make sure that you make yourself heard – to your lobbyist if you have one, to your associations, to your legislators – as soon as possible during this lull in the budget battle, because we know from experience that once the screaming starts, the listening stops.

If you have any questions or comments regarding this article, please contact Bob at 916.606.7129 or Bob.Blattner@BlattnerandAssociates.com.