The December 18 issue of Straight A’s reported that growth in state revenue is expected to decline in 2008 and that the budget environment would get much tighter as increases in health care spending another other issues constrain state budgets and force states to cut spending or look for other ways to raise revenue. Starting earlier this month, many of the nation’s governors began to deal with these issues firsthand in their state of the state addresses. Given the tight budget environment and limited available funding, creative solutions to financial problems were a popular theme in their speeches.
California: Schwarzenegger Calls for Constitutional Amendment to Control Spending
In his state of the state address on January 8, California Governor Arnold Schwarzenegger (R) said that the state’s economy continues to thrive despite the weakness in the housing market. He projected that the state’s revenues were not going to decline, but instead were going to hold steady compared to last year. However, all is not bright in the Golden State, as Schwarzenegger explained. Expenses are projected to grow by 7.3 percent, a fact that the governor largely attributed to automatic spending increases guaranteed by legal formulas and state contracts. Additionally, California’s health care system is “collapsing under its own weight” and is weakening the state economy. Taken together, these factors help to explain why California is facing a projected budget deficit of $14 billion in the 2008-09 fiscal year.
To help reduce the budget deficit, Schwarzenegger announced that he will propose a budget that will cut spending across the board. In addition, he also called for a constitutional amendment that would automatically reduce spending when tax revenues increase more slowly than average and set aside extra money for the future when revenues surge.
According to an article in the Los Angeles Times, Schwarzenegger’s proposed constitutional amendment is similar to one that was rejected by the state legislature in 2004 and California voters in 2005. Approval from both would also be required this time and, although administration officials said they made changes to reduce potential cuts to education and give lawmakers more power to decide which programs would not be funded, initial reaction from Democrats, who control the legislature, was negative.
Senate President Pro Tempore Don Perata (D) said the constitutional amendment would hurt California’s schools, colleges and universities, and programs for senior citizens, among others. “Advocating automatic cuts but failing to establish priorities and how to fund them is political expediency at its best and political leadership at its worst,” he said.
Given the budget shortfall, Schwarzenegger acknowledged that creative solutions would be needed to help reform education in the state. He announced that California would use powers granted to it by the No Child Left Behind Act (NCLB) that require a state to take action after five straight years of noncompliance by a school district. He said that there were ninety-eight school districts in California that were “to varying degrees” out of compliance with NCLB and that he had targeted several districts that “on a whole have persistently failed to education children.” As part of Schwarzenegger’s proposal, the state would allocate a higher percentage of NCLB funds to districts that need the greatest assistance and intervention. “No more waiting,” he said. “We must act on behalf of the children.”
Continuing to focus on education, Schwarzenegger said that the number of high school students who take advanced math and science courses has increased by 53 percent since 2003. He called this “terrific” news for the state’s high-tech future. On the other hand, Schwarzenegger was troubled by the state’s dropout rate, which he pegged at between 15 and 30 percent, but acknowledged that he “[doesn’t] even know exactly the number.” He added that the students who drop out are “not just a statistic,” but are “children lost in the black hole of ignorance, poverty, and crime.”
Governor Schwarzenegger’s complete speech is available at http://gov.ca.gov/speech/8445/.
New York: Spitzer Boasts of 2007 Increase in Education Spending, Faces Difficulty for Similar Increase in 2008 Because of Looming Budget Deficit
Declaring that “without world-class education, we cannot have a world-class economy,” New York Governor Eliot Spitzer (D) used his state of the state address on January 9 to remind voters of the boost in education funding that the state provided for its K-12 education system in 2007 and to outline a new plan to create a $4 billion endowment for the state’s universities and colleges.
Spitzer called the 2007 increase of $1.76 billion, or 9 percent, for New York schools the “single-largest education investment in New York’s history,” but stressed that the new funds would not come without increased accountability. As a condition of receipt of new monies, failing districts that receive at least a 10 percent increase in funding must sign a Contract for Excellence with the state, agreeing to use the money on proven reforms such as smaller classes, more time in school, and teacher training. Additionally, Spitzer pledged to “take education accountability to the next level” and outlined accountability provisions for schools that he would seek, including improvement targets for specific schools and school districts. “We will track the progress of individual schools every single year and we will intervene in districts and in schools that are still failing,” he said.
The 2007 education funding increase represents the first-year down payment of a four-year plan to increase school aid by $7.6 billion and satisfy the requirements of an agreement that emerged from a process that began in 1993 with a lawsuit filed by the Campaign for Fiscal Equity (CFE). The lawsuit claimed the state shortchanged New York City public schools and other urban school districts. Although the New York State Court of Appeals ultimately ruled in favor of CFE in 2003, the years following the ruling were marked by missed deadlines and more appeals. It was not until last year that the governor and the state legislature were able to come to an agreement.
However, whether the state can meet the rest of the four-year commitment is a hot topic in New York. Last year, Spitzer said that he would provide an additional $1.4 billion for schools during the 2008-09 school year, but some observers think the amount may have to be reduced in light of the approximately $4 billion budget deficit that could grow to as much as $8 billion due to the slowdown in the financial services sector. During his speech, the governor did not explicitly mention the budget shortfall, but he did offer “plain talk about the hurdles that stand in [the] way,” and alluded to “fiscal realities,” “hard choices,” and “challenging fiscal times.”
On a positive note, he also said that New York could not let itself “be paralyzed by challenging fiscal times,” adding, “Our state and our nation have always used times of challenge to expand and invest in our democracy. I believe we can-and must-do so today.”
To meet that challenge, Spitzer, like Schwarzenegger, turned to a creative solution under which the state would lease its lottery to private investors to help pay for a $4 billion endowment for state universities and colleges. He said the proposal would allow the state to retain the approximately $2.1 billion it receives annually to fund K-12 education, while the endowment would “generate $200 million in operating funds each year” and propel New York’s universities into “international centers of research and learning, and into engines of economic growth.”
Observers saw the governor’s lottery plan as a way around a recommendation by a commission on higher education that suggested the state’s public universities be allowed to raise tuition without state approval and charge different prices at different campuses. After the speech, some university officials questioned whether there would be funds for improvements if the lottery plan did not pass and there was no tuition increase.
Governor Spitzer’s speech is available at http://www.ny.gov/governor/keydocs/2008sos_speech.html.