When California lawmakers patched together a budget this summer, they did something extraordinary. They wanted to save schools from more cuts. Economic forecasts said the money wasn’t there.
They wrote up a budget as if it was there anyways. The state budget banked on $4 billion extra, and it urged school districts to use that money to stop teacher layoffs.
The move came with a catch: if that $4 billion never appeared, the state would have to deliver big cuts to schools in the middle of the year. Lawmakers dubbed them “trigger cuts” because they would be triggered by not-so-hot revenues. It said school districts could shorten the school year even more if that happened.
San Diego Unified went ahead and rehired teachers using the promised money. Other school districts decided not to, fearing that if trigger cuts happened, they’d be stuck with a bigger budget and little room to cope. Now it looks like their fears could come true.
The state legislative analyst has already predicted schools will be slashed. The trigger cuts now hinge on an economic forecast from the California Department of Finance. That could have huge consequences for San Diego Unified, where the superintendent says trigger cuts could nudge schools to insolvency.
Monica Henestroza is the person who decodes all this grim news for San Diego Unified. And she’s also the one who fights back. As its government relations director and lobbyist, Henestroza meets with state lawmakers and tells the school board how goings-on in Sacramento will impact schools here.
She helped San Diego Unified sort through a tangle of confusion about whether schools would benefit from ending redevelopment. She argued against education cuts. And she also takes on smaller battles, like helping former board member Katherine Nakamura try to get gym credit for marching band.
We talked with Henestroza about the risks facing San Diego schools.
When the budget deal came together, there was a lot of conflicting information about what school districts should do, especially when it came to rehiring. What advice did you give San Diego Unified?
I wouldn’t say to the school board, “I think you should do this.” What I do is explain the risks. So I explained that there’s a potential for midyear cuts, that some of these revenue numbers are optimistic. But as you know in the school district, ultimately it’s not my decision.
San Diego Unified is now looking at, as its own leaders say, the potential of insolvency if midyear cuts happen. Based on your advice, was it responsible for the school board to build a budget based on the state’s optimistic assumptions? What specifically did you tell the school board about the risk they faced?
The trigger cuts have always been a real possibility. The legislature put the trigger mechanism in the budget bill, and Governor Brown refused to sign a bill in September that would have created an alternative process. The exact probability has and continues to be difficult to calculate. Our economy is tied to national factors and even political dynamics in other parts of the world – like the relative stability in Greece or Italy. As staff, my goal was to make sure the board knew both the reality and size of the downside risk.
Other districts didn’t do any rehiring. Have there been legal consequences for them?
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I don’t believe there have been any lawsuits.
I’ve heard San Diego Unified has written off shortening the school year, which was one of the few options that was laid out for midyear cuts. Why is that?
It’s not just San Diego. When they announced that option, the first question (from school districts) was, “How do you think that’s going to get done?” The biggest potential savings would come from reducing the salaries of teachers who would no longer need to teach those days. But you can’t abrogate their contract midyear.
Education has been cut by 16 percent over the last four years, resulting in deep cuts in places like San Diego Unified. Are there other areas where Sacramento can and should cut instead? Is there really any way to avoid education cuts?
In 2009, the state increased taxes temporarily in addition to making cuts. Those temporary taxes expired this year when the state failed to reach the consensus needed to extend it. If efforts underway to restore those $9 to $10 billion in state revenues prove successful, then education cuts would not be necessary.
On the other side of the equation is the question of expenditures. In years past, some areas of the budget, such as corrections, did not experience year-over-year cuts, even as education was cut dramatically and disproportionately. In a cuts-only budget scenario, it is difficult for education cuts to be avoided completely. But if the state is able to increase revenues, school funding could be stabilized.
Is school funding going to return to normal if the economy gets better?
The foundation of education funding has been hurt in recent years. One of the clearest examples is the issue of deferrals. Deferrals are essentially one-time cuts. In order to spend less money one year, the state will defer payment of state aid until the next year.
The state now defers so many payments of basic school aid that about $10 billion for programs and services this year will not be paid until the 2012-13 fiscal year. It has been a popular solution to close budget holes in Sacramento because districts can “make up” these cuts through borrowing. Most districts now are forced to borrow large sums of money each year just to keep the school doors open.
But there is a limit to how far this strategy can be stretched, and we’re pretty much there now. Also, it will be difficult to unwind the damaging deferrals, even as the economy improves. The state’s cuts to education have been fairly evenly divided between on-going, permanent cuts and the one-time cuts that are deferrals.
New money for schools will probably go first to restore the on-going cuts, so it may be a long time before the structural deferrals are addressed.
People have said this is the time for school districts to advocate, but what can they advocate for? If the Department of Finance forecasts California will be short on revenue, how much wiggle room is there for the state?
Well, if the Finance Department comes out with something very, very close to what the legislative analyst (LAO) predicted, that could still mean education doesn’t face midyear cuts.
Right now the LAO is saying California will be $3.7 billion short. (If the state is at least $2 billion short, schools are slated to be cut.) So how close are the estimates from LAO and Finance typically? One of the LAO staff members said, “We’re typically within 2 percentage points of each other.”
What’s a 2 percent swing? It turns out to be $1.68 billion. So if finance estimates that revenue will be 2 percentage points higher than the LAO, K12 is no longer set up for midyear cuts. That’s how close it is.
All of that is to say that finance could have a very, very similar assessment as the LAO and still have extraordinary differences in what happens for schools. There’s a very serious risk here that shouldn’t be minimized. But I just think it’s important for people to know that this isn’t final.
But if the finance projections do lead to cuts, could the Legislature get together and say, “We won’t do this?”
The sentiment among the majority in the Capital was that the trigger cuts would never take effect, that the deeper cuts that would devastate K-12 were very improbable. Now the possibility is very real.
It would take the governor to call a special session (to revisit the budget). And so far I have not heard a signal that that’s going to happen. Earlier this year, the legislature wanted to change the trigger cuts and they put together a bill. The governor vetoed that bill. And he said he vetoed the bill because it would have undermined investor confidence in California. I think if there is going to be change to the trigger, the person who would be most important to making that happen would be Governor Brown.
President Richard Barrera wants Sacramento to raise taxes on things like oil or alcohol to preserve education. Is this something you’re pushing in Sacramento? If so, what’s the reaction? Likelihood? If not, why not?
We’ve supported stable funding for schools, and increasingly it looks like additional tax revenue will have to be part of the solution. Many Democratic legislators support additional revenues in order to save education and other program areas. But it takes a two-thirds vote to increase tax revenue, so you need Republicans to vote for it too.
Most Assembly Republicans have taken the position that the cause of education under-funding is not the size of pie, but rather how it is distributed between program areas. Governor Brown has been persistent in his efforts to increase revenue, in addition to curbing government spending. The new redistricting maps may help moderate some of the opposition to tax increases, but it’s hard to tell if it will actually translate into votes for that kind of package.
An increase in tax revenue is more likely to come from an initiative placed on the ballot with signatures. And even it does make it to the ballot, Governor Brown and other state and local leaders won’t get the necessary public support to pass it without a clear plan for how the money will be spent well.
Locally, we hear a lot of frustration about the two-thirds threshold for tax increases. People like Barrera want it lowered to 55 percent for education. Is this something you’re pushing in Sacramento and something you think can get done?
The parcel tax threshold legislation is also an uphill battle. Senator Simitian has authored a bill to amend the state constitution in this way for several years now. The problem is that constitutional amendments require a two-thirds vote, and Republicans have held back from voting for it. In the case of school bonds, it took about a decade of concerted efforts to lower the vote threshold. So it’s something that can be done, but it takes time and a lot of work.
Interview conducted and edited by Emily Alpert. What should she write about next? Please contact her directly at emily.alpert@voiceofsandiego.org.
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