BRIEF: The Assembly Speaker’s New Budget

Yesterday, the Assembly Speaker Perez of California released his counter state budget proposal – which the Capitol Morning Report described as

So, for those of you following along at home, the Speaker’s budget proposal goes something like this: You undo two parts of the triple flip, leaving just a single flip, raid a bankrupt special fund, replace those funds with a new Wall St. loan. Pay the loan back with a new oil tax.

Oh yeah.  Oh yeah.  KQED CapNotes talks about how the revenue side works for this proposal:

The state would borrow $8.9 billion from Wall Street investors by “securitizing” 20 years worth of revenues in the state’s beverage container recycling fund (money tied to bottles and cans of soda, beer and more, and a fund that’s currently cash-starved).

The package includes more annual dollars for local governments by increasing the local portion of the sales tax by one-quarter of a penny (which also reduces some obligations of the state’s general fund) and then decreasing the state portion of the sales tax by an equal amount. So, say Democrats, that part is a wash for California consumers.

But if the proposal ended there, it would leave the state general fund with less money. And that’s where… wait for it… the oil severance tax comes in. The oil tax would be set at a level that’s exactly equal to the now missing state portion of the sales tax.

All which is super interesting.

What does this mean for higher education?  What is Perez giving to Higher Education?

So the Governator’s budget gave 371m to the UC.  Overall, it gave 1.9billion to higher education (that’s including the CalGrant, Competitive CalGrant, etc.etc.).  He did not include any fee decrease.  And he funded this by putting in huge cuts to health and human services. Yeah.

Perez’s budget doesn’t have the same cuts to the health and human services.  But to higher education, he says that he’s putting in 1billion dollars – but I’m not really sure in what place and where.  Or what’s the cut between UC and CSU and CCC.  But the way it looks, it’s also modeling the 371m to the UC.

So overall, they both give money to higher education.  I’m not sure if Perez gives as much as the Governor’s budget does, that will wait to be seen.  It’s also kind of difficult because the Governor ties it to huge cuts, and Perez ties it to a really difficult and huge revenue process.  So both have tied higher education funding to very very controversial revenue streams.

In the long term, both of the Gov’s budget and Speaker’s budget are probably one-time  budget solutions, they’re not sustainable.  The Gov’s because it’s tied to huge cuts, and it’s debatable whether they deal with the structural deficit of 20b.  The Speaker’s because his revenue plan is a one-shot deal, and will only cover this year, and thus is unlikely to create the same revenue next year to fund higher education.

The one difference – Perez says he’s going to roll back the UC and CSU student fee increases this past year by 50% There are a couple of issues with this.

1) At least for the UC, Perez actually has no jurisdiction in this area.  He can’t say how much the fees should be increased or decreased for UC students.  That power only rests with the UC Regents.  And no matter what Perez might say, I don’t think the UC Regents feel like the UC is on financially stable enough footing to do a fee roll back – which would leave the UC with around a 200m budget gap.

2) It leaves both the UC and the CSU with a budget gap.  The fee increases have already been factored into the permanent budget of the UC – we assume that the money is coming in, and we’ve allocated hiring, class allocation, department size, everything, based on the idea that the fee increase funding is coming in.  It sucks, but it’s there.  Forcing the UC to implement the fee rollback means that in the middle of our budget, we suddenly have to account for a 200m dollar loss.

This would be totally fine if Speaker Perez planned to pay for that 200m dollars that would be taken away by the fee rollback.  But he doesn’t.  His allocation to the UC doesn’t even cover all of the state’s budget cuts to public higher ed in the past two years.  The UC asked for 900m to be on good financial footing – assuming we would still have the fee increase.  Perez and the Gov has given us 300m.

So this is not to say that I don’t support a fee rollback.  I totally want accessibility.  I just wanted to point out the implications of the fee rollback, and the difficult budget decisions that come afterwards. I know.  Bummer.

So in conclusion – the Gov’s plan and the Speaker’s plan really differs in where they get the revenues from, and what they plan to do with health and human services.  In terms of higher education, the Speaker is more vague and may not give as much as the Gov does, and has tied those increases to a questionable revenue source, but it does look like the UC will be receiving the same amount on both sides (kinda) from the State.  The Speaker wants us to reduce the fees, he has no power in that area, and might cause a small internal budget mess in the UC and the CSU if we do reduce fees.  But accessibility is important.

I’m sorry that hurt.  It hurt a lot to write that.


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