California will issue IOUs starting tomorrow, but schools will get more of them

The California budget has been at impasse for the last month and the state is about to start issuing IOUs instead of paying its bills. The Democrat controlled legislature wanted to solve a $24 billion budget problem with roughly 2/3 cuts and 1/3 new revenues (tax increases and fees) and the governor and minority legislative Republicans want an all cuts solution including the elimination of the state’s welfare program. The two sides have been at impasse for weeks, but the clock keeps ticking. And, a failed effort yesterday was the last day to come up with a solution without having to start to issue IOUs. So the state will start issuing IOUs later this week.

While the state’s budget is a disaster, there is a ray of sunshine for schools in all of the bad news. Yesterday was the last day of the fiscal year, and the legislature and governor had planned to reduce funding for schools for the 2008-09 fiscal year by $3.3 billion. Because these reductions were not made in the 2008-09 fiscal year, schools get to keep the money. It gets better. The state’s constitution provides a minimum funding guarantee referred to as Proposition 98. The minimum guarantee for each year, takes the prior years funding level and adjusts it for growth in the economy and number of students. So, the fact that the state did not cut funding for 2008-09 means that the state’s funding obligations for future years will also be higher. Of course the cuts to school budgets will have to be paid with IOUs, but that is a technical detail. For once, it appears that Sacramento’s dysfunction has actually benefited schools. Of course, finding a budget solution was hard enough with education being cut. Now it will be almost impossible. Health, social services and prisons were big losers last night because they will likely need to be cut even further to make up failure of the education cuts. But expect fewer lay offs in the schools this next year because of last nights stalemate. I am sure that California educators will keep their head low on this one, but it seems that they will have something to quietly celebrate this 4th of July.

Update: The Governor has declared a state of emergency, called a special session and proposed to suspend the constitutional school funding guarantee for 2009-10. This guarantee has only been suspended one other time and it did not go well ending in a lawsuit that eventually settled between Schawarzenegger and the teacher union.