Down The Rabbit Hole: Education Funding Meltdown

by on April 4, 2011 · 12 comments

in Economy, Education, Popular, The Chronicles of Edumacation

Governor Jerry Brown’s plan to put the future of California’s budget in the hands of the voters has failed; failed to persuade just any four Republicans in the legislature to let the voters have a say; failed to find a legal loophole that would get the measure on the ballot without a super-majority vote in either house of the legislature; and failed despite extensive negotiations. You can’t negotiate with the new American Taliban. Not on education funding. Not on healthcare. And not on any program that does not fit into their narrowly defined agenda, which, at its core, is more about destroying the mechanisms of governance that it is about adapting them to the changing realities of the 21st century economy.

The impact of this impasse on public education is the subject of much anguished debate in school districts around the State of California. Suffice it to say the picture is bleak. Just how bleak is something that won’t be known until the Governor makes his next move in releasing a revised budget for the coming year on May 10th.  The original Brown budget called for $12.5 billion in cuts and $12.5 billion in additional revenues to be raised by extending existing taxes that were due to be phased out. The cuts in spending are already signed, sealed, and delivered.  For San Diego’s Unified School District, they add up to a $120 million shortfall. They knew this was coming, and despite promises made by the legislature (contained in the language of the budget that was finally passed last October) that $60 million in funding would eventually be restored, SDUSD hedged their bets by drawing up budgets that didn’t count on this windfall.

On March 15th, the district issued “pink slips” (notices of pending layoffs) to over 1000 teachers and 800 other employees; the official description of a lower number of “FTE’s” (full time employees) being eliminated didn’t take into account that many of the people working in those positions are less-than-full time. Eighteen hundred plus human beings that have asked to put their lives on hold while the State sorts out its budget crisis. Every single school principal was also notified that their job was on the line, along with all the district superintendents. The district’s central office budget is now at $45 million, 50% of what it was two years ago.

Should the pending budget proposal follow the formula used with the original cuts proposed by the Governor, SDUSD’s shortfall will balloon to $200 million for the coming year. Even the optimists in the District administration are forced to admit that an additional $50 million in budget cuts are likely.  The political shorthand for how these cuts will impact students falls into two categories: cut the school year (some say it could end in March, April is more likely) or cut the payroll (district employees could be asked to take up to a 40% pay cut). Either option will guarantee gainful employment for a legion of lawyers and little else, as the courts will end up deciding the matter. If recent decisions (vis-a-vis state health care workers) are any indication, tax payers and students will end up on the losing end of either of these deals.

We’re All Mad, y’Know?

Adding to the drama and stress level in the local schools is a major falling out between the San Diego Education Association (aka the teachers union) and the trustees of the School Board.  The union maintains that the Board’s decision to issue pink slips to its members was unnecessary.  They point out that pink slips issued in past years have largely been rescinded based on openings created by retirements, resignations and transfers.  The union has challenged the District’s financial assumptions that led to their issuing layoff notices at school membership meetings throughout the area.  And, in a move that must have local wags –the conventional conservative analysis was that the union owned the school board– shaking their heads, the disagreements have gotten personal, with trustees Barrera and Evans in particular on the receiving end of some rather venomous attacks.

This fight, however, is not what it appears to be on the surface.  Yes, the SDEA is using the situation to build activism within their membership.  Pink slips are a very real concern for people receiving them. And any government employee union that isn’t ratcheting up their organizing in the face of the GOP’s ongoing national anti-labor activities is either suicidal or stupid.  This fight is about Armageddon, better known as what’s about to happen if the Democrats continue being outsmarted, out organized and uncreative about coming up with ways to balance the budget.

To understand this situation, it’s necessary to explain the School District’s annual pilgrimage, hat in hand, to Wall Street.  Part of the “blue smoke and mirrors” budgeting process in California involves budgeting money to school districts on a “we’ll pay ya’ later basis”. Each year, the San Diego Unified School district is forced to borrow hundreds of millions of dollars on the “open market” because, while the school’s fiscal year may start in July, the State of California doesn’t actually get around to sending any cash out until three to four months later.  Last year SDUSD paid $5 million in interest on these short term “bridge” loans to meet payroll and other obligations through October. (This funding lag, interestingly enough, is only tangentially related to when the legislature gets around to passing a budget.) And—here’s where it gets interesting—last year’s shopping spree for fast cash came up with a big cautionary warning that, despite the district’s stellar credit rating, future loans might be impossible due to the generally poor state of California’s finances.

So, from the District’s point of view, this year’s potential layoffs were a sop to the bankers; proof that San Diego was ready to post a balanced budget even if things got really tough.  Despite this, Gov. Brown’s failure to come up with a means of balancing the State budget via the initiative process might well mean that the District’s cash flow nightmare might be a reality, anyway.

Off With Their Heads!

If it isn’t obvious by now, things are seriously screwed up with the mechanisms that are used to fund education (and government in general).  Decades of dancing around the issues raised by the processes put in place back in 1978 when voters approved Proposition 13 are coming to a head. The State doesn’t have enough money to pay its bills and its options are limited by laws in place that dictate where money can be spent, how revenues can be raised and constituencies that are demanding (on multiple fronts) that things be done differently.  This is what dictated Gov. Brown’s strategy on calling for a special election.

Sooner rather than later, things are going to come to a head.  It’s become likely that public education will be the battleground on which this battle is fought. Which is why the kerfuffle between the SDEA and the District Trustees is significant. At some point in the near future schools are going to reach a point of no return; everybody involved agrees that cuts in funding can only go so deep before the point of “why bother?” is reached.  Educating students will no longer be possible. Teachers will be too demoralized to teach.  Schools districts won’t be able to keep schools open in many neighborhoods.

A confrontation with “the system”, observers with both the district and the union agree, is looming.  The teachers union is saying—in effect—let’s get this fight started now. The school district’s self preservation instincts are still in command, as they realize that any lone acts of defiance by a single school district will most likely end up with the State taking over via the process of receivership.  The Oakland and Compton school districts descent into receivership serve as an ongoing warning; many years after those districts went into receivership, their schools are effectively still controlled by the State government, even though the underlying financial problems within those districts have long since been resolved.  As one SDUSD trustee put it in a recent meeting, “Receivership is like a desegregation order, it never goes away.”

What may change the situation will be that most of the school districts in the State are facing the same short-term and long term financial difficulties.  Over 150 districts have already been identified by the State Department of Education as being in danger of not being able to meet their obligations—and this was BEFORE the Brown budget deal collapsed.  With an additional $5 billion in public education budget cuts on the table, the feeling is that many districts, acting in concert, could force a confrontation.  Think of it as a new inter-governmental form of civil disobedience.

Is this all too confusing? Does it seem like everybody’s gone mad? Welcome to the California “Tea Party”, education edition.

To be continued….

{ 12 comments… read them below or add one }

avatar tj April 4, 2011 at 9:16 am

State government MUST begin to live within it’s means.

They cannot print money like their counterpart over-spenders do in Washington.

No amount of $$$ will ever be enough for the fiscally irresponsible.

Live within our means!


avatar Frank Gormlie April 4, 2011 at 2:53 pm

Our “means” would expand if the corporations paid their fair share of taxes, but noooooooo.


avatar annagrace April 4, 2011 at 10:26 am

I am grateful for this piece of analysis Doug. I had not given any thought to the bridge funds that must be procured, and the interest on those funds that must be paid to our Wall Street overlords. What you didn’t mention is the potential for privatizing k-12. I have been watching closely the privatization of public libraries. The Santa Clarita Valley recently separated from the Los Angeles County library system, and LSSI, a private company recently got the contract for library operations there. I believe privatizing government functions and transferring public resources to the private sector is going on in our educational system too.


avatar Shane Finneran April 4, 2011 at 12:50 pm

Doug Porter (and millions of other rational Americans): “You can’t negotiate with the new American Taliban.”
Barack Obama: “Yes we can!”

Informative article, and an enjoyable read, too. The Mad Hatter graphic is perfectly fitting for a nation that cuts education as it deludes itself about winning the future.

Pardon me, I’m going to spend the rest of the day in “all empires fall eventually and I guess we’re on our way” mode.


avatar Frank Gormlie April 4, 2011 at 2:56 pm

Well, shane, you have a great point. The British empire fell, but there’s still England, the French empire fell but there’s still France, the Soviet Union empire fell but there’s still Russia.

The only way American democracy will survive is for Americans to kick out the empire. $1 trillion on wars in Iraq and Afghanistan would go a long way to finance our needs, not to mention if the corporations were forced to pay taxes.

America is not broke! as Michale Moore likes to say, it’s just the money has been moved around – and we know where it has been moved to.


avatar RB April 4, 2011 at 1:27 pm

It’s too bad Governor Brown has chosen to cut education funding rather than balancing his budget from other unproductive places. It’s too bad the teachers union has decided to allow layoffs of low seniority members rather than have all their brothers and sisters share the pain with salary and benefit adjustments.


avatar Shane Finneran April 4, 2011 at 1:42 pm

RB, are you aware of how the Calif budget is spent? Here’s the basics:

K-12 edu: $36 bil
higher edu: $11 bil
health & human svcs: $27 bil
prisons: $9 bil

What would you cut?


avatar Frank Gormlie April 4, 2011 at 2:57 pm

What would Jesus cut?


avatar mr fresh April 4, 2011 at 3:13 pm

RB blames bad weather on unions. Please don’t feed the trolls.


avatar RB April 4, 2011 at 4:39 pm

First, everything not listed should be slashed. Every one of the 200-300 boards and commissions needs to go or have volunteer board members. Every new bond project should be frozen until the crisis ends and a state reserve is created, most especially the bullet train. $9B of the $26B projected deficit is carryover from last year and should be paid from salary and benefits, since the state spent money it did not have. Pensions should be frozen at the current salary of each employee. California spends $50K to warehouse prisoners while other states spend $18-20K. Cut prison spending by $4.5B or until cost per inmate is under $25K. Health and Human Services has programs that pay more then required by the Federal Government and programs with up to 30% fraud (Cal Works, In Home Healthcare,etc.) and should be cut by $7B. All increase in the cost of benefits for the state and school employees should be payed from salaries until the state has no deficit and has gotten a reserve.

K-12 education $36B
Higher Ed : $10B
H&H services : $ 20B (Brown is cutting $6B)
Prisons: $5B
Other state spending gets what is left.
Total of $71B with projected state revenues of $85B

The good news is California will have a much higher tax revenues this year from income taxes as capital gains from individuals will be way up with the last two years of large investment gains.


avatar Terrie Leigh Relf April 25, 2011 at 12:27 am

Maybe this is a stoopid question and I should know this. . .however, is there a place where we can see exactly where–and how–the money the district brings in is spent? Is anyone here a mathematical whiz, and can they find the fuzzy bookkeeping?

I remember calling the Lotto office several years ago and was told that California may receive millions from this pool; however, they replace it. According to the person I spoke with, that means if CA receives a million from the lotto, they then don’t have to spend the million they already had earmarked for education. One of the reasons I voted for the lotto was that it was supposed to be in addition to existing fundings. If those lotto dollars were actually “extra”, then perhaps we wouldn’t have as much of a problem?

Or, would they deny this now? The chap I spoke with was about to quit his job, hence why he told me, according to him.



avatar doug porter April 25, 2011 at 7:50 am

you can start here: understanding the state’s/school district’s budgeting process isn’t easy. all the gooblygook is mandated by the State of California’s bean counters


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