CBP Analysis Looks at How California Schools Get and Spend Their Money

May 24, 2012

School dollars are once again at the center of the state’s budget debate. However, California’s education finance system is so complicated that many lawmakers, school officials, and state budget mavens alike find it difficult to comprehend. Yesterday, the CBP released a new publication that explains how California schools get and spend their money. The report shows, for example, that the state budget provides the majority of schools’ dollars, which helps explain why schools feel the pinch when state lawmakers cut education spending, as they have in recent years. The report also explains that while the state Constitution requires a minimum level of funding for schools and community colleges, the so-called Proposition 98 guarantee has often served as a ceiling for the amount of dollars provided to schools as well as a floor. On the other side of the ledger, our analysis shows that schools spend the largest share of their dollars on their workforce. That helps explain why recent cuts to state education spending led schools to reduce California’s teacher workforce by 11 percent between 2007-08 and 2010-11.

Policymakers are currently debating whether to make substantial changes to the state’s education finance system by moving to a system of “weighted student funding.” By aligning state education spending more closely with school costs, weighted student funding could make the state’s system of education finance more transparent and equitable. A special section of our new report discusses weighted student funding and some of the policy issues it raises.

– Jonathan Kaplan

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Statement: The California Budget Project on the Release of Governor Jerry Brown’s May Revision

May 14, 2012

The California Budget Project, a nonpartisan public policy research group, released the following statement today from Senior Policy Analyst Scott Graves in response to the release of Governor Jerry Brown’s May Revision to his proposed 2012-13 budget:

“California’s economy continues to slowly recover from the Great Recession. However, lower-than-anticipated tax collections in recent months add significantly to the challenges the state faces in closing the budget gap. For example, the Governor’s May Revision projects lower-than-expected corporate tax revenues, due in part to the massive corporate tax breaks enacted in recent years.

“The May Revision highlights the need for significant additional revenues to help address the budget shortfall. Without a balanced approach to addressing the budget gap – one that includes additional revenues – we face even deeper cuts to schools, colleges, and other core public structures that are essential to the lives of all Californians. The tax measure the Governor plans to put before voters in November provides a reasonable, sound approach to stabilizing the state budget and creating a foundation on which to rebuild going forward.

“To the extent that cuts are made to address the budget gap, such reductions should be carefully targeted so they don’t endanger vulnerable families, children, and seniors, who have already borne the brunt of recent years’ budget cuts. With many families still struggling in the wake of the worst recession in the post-World War II era, we are concerned that the Governor’s May Revision deepens his proposed cuts to the state’s safety net, while also making significant reductions to child care and other programs and supports that help Californians prepare for and keep jobs.

“In the coming weeks, the state’s leaders should work to bridge the budget gap while ensuring sufficient support for the public structures and systems that provide the foundation for our quality of life and a strong economy.”

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The Steady Decline in Smoking: Good for Public Health, Bad for Tobacco Bonds

May 7, 2012

The steady decline in smoking is unquestionably positive from a public health perspective. But what does it mean for states, such as California, that sold bonds backed by annual payments from tobacco companies following a landmark 1998 settlement? A recent New York Times article suggests an answer: Reductions in smoking could mean that several states, including California, will receive payments that are too small to cover the principal and interest due on the bonds. Why? Because the size of the payments partly depends on how well cigarettes are selling. Less smoking leads to smaller payments. States could dip into reserves to make up the difference – California already has done so – but “if smoking keeps declining at the current pace, some of the reserves set up as backstops will run dry,” according to the Times. “At that point, investors – including individuals, insurance companies and mutual funds – will be at a loss” because states, in general, are not legally obligated to step in and make the payments with their own tax dollars.

California, which sold tobacco bonds to help close budget shortfalls in the early 2000s, is a case in point. The state is not required to make up the difference if annual payments and reserve funds fall short, as we explain in our recent analysis of Proposition 29, the June ballot measure that would increase the state cigarette tax by $1 per pack. Some of the tobacco bonds, however, include a back-up state “guaranty,” which requires the Governor to ask the Legislature for funding to make bond investors whole. Does the Legislature have to provide the funds? No. But if tobacco payments and reserves drop below the level needed to repay the bonds, policymakers would either have to make up the difference from the state’s General Fund or allow the bonds to slip into default – a decision that most policymakers would probably hope to avoid.

– Scott Graves

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CBP Analysis Looks at June Ballot Measure That Would Raise Cigarette Tax

May 3, 2012

Accustomed to facing a long list of ballot measures, California voters might be pleasantly surprised to see that the June 5 statewide ballot contains only two propositions. One of these is Proposition 29, which asks California voters to approve an increase in the cigarette tax. Under Proposition 29, the cigarette excise tax would increase by $1 per pack, more than doubling the current per-pack tax of 87 cents. The proceeds of the tax – an estimated $810 million in 2013-14, the first full fiscal year after implementation ­– would support a number of tobacco-related programs, including research on cancer and other diseases.

Yesterday the CBP released an analysis of this ballot measure, Proposition 29: Should California Increase the Cigarette Tax? This publication provides key facts about the state’s current tobacco taxes, shows how the new cigarette tax revenue would be allocated, and discusses key policy issues raised by the measure. The CBP neither supports nor opposes Proposition 29. This analysis is designed to help voters make an informed decision based on the merits of the issues.

– Steven Bliss

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Getting Food Assistance to Eligible Families: A Chance for Another Step Forward

April 23, 2012

CalFresh is an integral part of our state’s safety net for low-income families. The program provides food assistance – funded entirely by the federal government – to nearly 4 million Californians, more than three-fifths of whom are children. Yet despite the importance of this program, California ranks last among states in enrolling eligible individuals. In 2009, the most recent year for which data are available, only 53 percent of eligible Californians participated in CalFresh.

In recent years, the Legislature has taken a number of steps to help boost participation, but more can be done. A bill currently moving through the Assembly, AB 1560 (Fuentes), would take another big step forward by linking CalFresh and Medi-Cal, which provides health care services to more than 7 million low-income Californians. Many Californians enrolled in Medi-Cal – more than 1 million, according to some estimates – are eligible for CalFresh, but do not participate. AB 1560 would allow counties to use information that families already provided when they applied for Medi-Cal to help enroll those families in CalFresh. By connecting CalFresh and Medi-Cal and simplifying the enrollment process, AB 1560, which will be heard in the Assembly Appropriations Committee on Wednesday, could help boost the number of families receiving food assistance at a time when many California families continue to struggle in the wake of the Great Recession.

– Scott Graves and Sam Sellers

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