California School Spending: Winning the Race to the Bottom?

January 31, 2011

California schools are falling behind the rest of the nation, according to data recently released by the National Education Association. As a result of past cuts, California’s K-12 education spending dropped by more than $1,000 per student (10.2 percent) between 2008-09 and 2010-11 at the same time that US per student spending increased by nearly $550 (5.0 percent). This year, California ranks 47th in the nation in per pupil spending compared to ranking 35th in 2008-09.

Governor Brown’s Proposed 2011-12 Budget essentially “flat funds” K-12 education. However, the Governor’s funding level assumes that voters and lawmakers approve the Governor’s tax plan. Without the revenues raised by the Governor’s tax plan, the Proposition 98 minimum funding guarantee would fall by $2 billion in 2011-12 – equivalent to approximately $300 per K-12 student. If the Legislature and voters reject the Governor’s proposed tax plan and lawmakers chose to make up for lost revenues with across-the-board cuts, the reduction to K-12 education would be approximately $5.6 billion – more than $930 per student. Absent additional revenues, California could fall further toward the bottom in per student spending.

— Jonathan Kaplan

The State of the State

January 31, 2011

The state of the state leaves room for improvement, in light of a $26.4 billion budget shortfall and unemployment that continues on the high side of 12 percent. I’ll be on Capital Public Radio at 5:00 p.m. this evening offering commentary on the Governor’s state of the state.

— Jean Ross

Shining a Light on CalWORKs

January 27, 2011

The Legislature is contemplating tough choices to help bring the state’s budget into balance. On the table are deep cuts that would drop more than 230,000 low-income children from CalWORKs, the state’s highly successful welfare-to-work program. Our new chartbook shows that most CalWORKs recipients are children. In addition, CalWORKs funding makes up only about 3 percent of the state budget, substantially less than in the mid-1990s. Budgets are about values and choices. As the Legislature seeks a balanced approach to closing the budget gap, we hope policymakers will adopt budget “solutions” that leave the state’s safety net intact and avoid putting 230,000 of the state’s children at risk of homelessness.

— Scott Graves

What Does the Research Say About Redevelopment?

January 21, 2011

The debate over Governor Brown’s proposal to eliminate redevelopment agencies (RDAs) is heating up. To help inform the debate, we pulled together a “quick and dirty” review of independent research on redevelopment – often referred to as “tax-increment financing” (TIF). This preliminary overview of the research, which we will continue to add to over the next few days, points to two general conclusions:

  • First, it’s unclear whether TIF boosts property values and results in increased property tax revenues. While the research finds mixed results, the most comprehensive independent study of California’s RDAs, conducted by the Public Policy Institute of California (PPIC), found that redevelopment activities in most RDAs studied failed to generate enough growth in property values to account for the tax increment revenues diverted to redevelopment. The PPIC study concluded that “the existing tax increment system is not an effective way to finance redevelopment. Few projects generate enough increase in assessed value to account for their share of these revenues.”
  • Second, some academic research finds evidence that TIF projects simply shift economic activity within municipalities rather than creating additional economic activity. For example, one study suggests that when employment increases in TIF project areas, it decreases in other parts of the city, which could mean that TIF projects draw jobs from elsewhere in the city, rather than generating new jobs.

The findings of this body of research are echoed in the Legislative Analyst’s Office’s recent review of the economic literature, which concludes, “there is no reliable evidence that redevelopment projects attract businesses to the state or increase overall economic development in California. The presence of a redevelopment area might shift development from one location to another, but does not significantly increase economic activity statewide.”

— Alissa Anderson

Proposed Spending Reductions Target Health and Human Services Programs

January 18, 2011

As promised, we’re digging deeper into the Governor’s Proposed 2011-12 spending plan. As we noted last week, the proposed spending reductions would have a disproportionate impact on health and human services programs. In fact, over half (52.8 percent) the combined total of 2010-11 and 2011-12 spending reductions affect health and human services programs. In contrast, these programs accounted for 30.4 percent of budgeted 2010-11 General Fund spending.

CalWORKs, the state’s highly successful welfare-to-work program, would be cut by $1.5 billion, a reduction of more than a quarter. Proposed policy changes include an unprecedented 13 percent reduction in cash aid payments. In their analysis of the budget, the Legislative Analyst’s Office notes that, “the state has never reduced grants by more than 6 percent before” and that grants “would be the lowest level in decades relative to the FPL.” The Governor would also use $947 million of federal TANF funds to support the Cal Grants program, which provides student financial aid. These costs were previously paid out of the state’s General Fund. The proposed shift would leave families with fewer dollars to make ends meet and diminished access to job training and other services aimed at helping them move from welfare to work.

Last week, we lauded the Governor’s proposals for striking a balance between spending reductions and revenue increases. Unfortunately, the proposed spending cuts are far less balanced, leaving hundreds of thousands of Californians to face a precarious future in the still tumultuous waters of a struggling economy.

— Jean Ross

The Good, the Not-So-Good, and a Few Concerns: The Governor’s Proposed 2011-12 Budget

January 14, 2011

Per our last blog post, we here at the CBP have been in “huddle down” mode, reading through the budget and other organization’s analyses of the budget, and trying to assess the impact of the budget within its broader economic context. We will be releasing our signature budget “chartbook” at a briefing on February 3 at 10:00 a.m. in Room 100 of the Legislative Office Building at 1020 N Street in Sacramento. We will be sending out more information on the briefing as soon as we come up with a catchy title for this year’s chartbook (suggestions welcome!). Now that we have had several days to reflect, here are a few observations.

The Good

The Governor’s proposals:

  • Offer a balanced approach, with roughly equal shares of the “solutions” coming on the revenue and expenditure sides of the budget in contrast to the “cuts-only” budgets of recent years.
  • If enacted, would place the state on a glide path to a (temporarily) balanced budget.
  • To shift program responsibility and money to local governments, if done smartly, can encourage stability, innovation, and investment in prevention.
  • To end state subsidies for local economic development efforts that, according to independent research, produce few if any jobs and little “bang for the buck,” is a refreshing steps towards improving accountability and transparency.

The Not-So-Good

The Proposed Budget:

  • Targets a disproportionate share of the cuts to programs and institutions that low-income families rely on to help make ends meet. The impact of the proposed cuts at the street level will be magnified by the loss of federal matching funds, which can double or triple the impact of lost state dollars.
  • Would make cuts that are permanent – while most of the proposed revenues are temporary – making the Governor’s proposal less balanced over time. Moreover, as noted by the Legislative Analyst, “absent a place to replace these taxes, there could be a substantial fiscal ‘cliff’ for the General Fund after the five-year period” and the temporary tax increases expire.
  • Would leave many Californians, including the 230,000 children who would lose cash aid through the CalWORKs Program, with few options in a still struggling economy where jobs are scarce.

A Few Concerns

Our top-line response is that the Governor’s proposals provide a good starting point. As the debate moves toward the Legislature, here are a few areas of initial concern:

  • The potential for achieving innovation and efficiency under realignment may be lost if local governments are reluctant to invest the upfront effort and resources due to a lack of certainty over long-term funding. The solution: a permanent shift of responsibility should be coupled with a permanent funding stream.
  • Additional reductions to health and human services programs will compound prior years’ reductions, magnifying the impact on families and communities, as well as service delivery systems. In particular, we would urge the Legislature to carefully examine how the proposed changes to health programs will affect the state’s ability to implement the new federal health reform law.
  • The devil is always in the details. The Governor’s realignment proposal, in particular, is extraordinarily complex. We’ll have more to say in upcoming days and weeks as we learn more and dig deeper.

— Jean Ross

Still Analyzing the Governor’s Proposed Budget

January 11, 2011

Yesterday, Governor Brown released his proposed spending plan, marking the beginning of the budget season. The staff of the CBP is still analyzing the details of the Governor’s proposal. In a statement released yesterday, CBP Executive Director Jean Ross applauded the Governor for proposing a balanced approach that includes additional revenues, rather than relying on a cuts-only approach. She states, “This represents a departure from past budgets which disproportionately relied on spending reductions, overly optimistic assumptions, and borrowing.” At the same time, particularly as the state faces a troubled economy and high unemployment, she expresses concern for “deep cuts that will weaken the public structures that many Californians rely on, including CalWORKs, the state’s highly successful welfare-to-work program; state assisted child care for families struggling to make ends meet; Medi-Cal, a state-federal health insurance program; and the Healthy Families Program, which helps families purchase affordable health coverage for their children.”

Late yesterday, the CBP released its analysis summarizing the key elements of the Governor’s proposed spending plan. As we get more information, we will update this document, so check our website frequently for additions, clarifications, and corrections.

— Lisa Gardiner


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