On Going Budget Crisis

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On Going Budget Crisis
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State Revenues

• Planned on 103 billion
• Current estimate is 14.5 billion less in 08-09
  and 15.3 billion less in 09-10.
• Equals a 16 shortfall
• Could be worst downturn since Great Depression
• State Unemployment rate is highest of all states
  at 8.4

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Californias Problem

• with prop. 13, california changed from reliance
  on property taxes, to reliance on income taxes
  and fees as the means to support State Government
• Property taxes are a stable revenue source, while
  others sources have greater volatility
• Income and Capital Gains receipts have fallen
  dramatically --- all state funded programs suffer
• steep progressive income tax relies most on
  highest wage earners

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CApital gains roller coaster
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in just a matter of months!
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Proposals Abound

• Since October
• Governor has made two proposals
• Democrats have made two proposals and the
  Republicans one
• The Legislature voted down the Governors first
  proposal and he vetoed their proposal
• The Governors latest proposal contains many of
  the same provisions that was voted down earlier

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Governors Latest

• Goal is to address 41 billion shortfall by
  increasing revenues, decreasing expenditures and
  borrowings and transfers
• Increases Revenue by 1.5 cent sales tax increase,
  broader tax base, 5 cent alcohol tax, increase
  oil taxes, reduced dependent exemption, higher
  vehicle fees, borrowing and transfers
• Generates 4 billion in 08-09 and almost 12
  billion in 09-10
• Decreases Expenses by 3 billion in 08-09 and 14
  billion in 09-10

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Governors Latest con,t.

• Education expenses are reduced by over 2 billion
  in 08-09 and another 4 billion in 09-10
• Borrowings Transfers total 9.4 billion and
  includes borrowing against future lottery
  revenues and borrowing against future tax
  receipts
• Tax increases and redirection of funds will
  require voter approval and a June ballot is
  planned
• LAO gives this proposal a mixed review... too
  much borrowing, should cut specific categorical
  programs, too hard on K-12 education - ...will
  likely leave many districts in financial hardship

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Governors Proposal - Impact on SVUSD

• In 08-09
• no COLA lt1.37 milliongt
• 4.5 reduction to Rev Limit lt8.48 milliongt
• will offset cuts with categorical flexibility,
  reduced reserve levels and Def. Maint. match
• will likely cause filing of Qualified at 2nd
  Interim Report i.e. may not meet financial
  obligations...

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Governors Proposal - Impact on SVUSD

• In 09-10
• no COLA lt9.91 milliongt
• 2.8 reduction to Rev Limit lt5.27 milliongt
• will offset cuts with categorical flexibility,
  reduced reserve levels and Def. Maint. match
• will still need to reduce expenses through
  staffing and program reductions for a combined
  reduction of lt15 milliongt
• Solvency will depend on making the required
  reductions

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impact on revenue limit
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SVUSD State Revenue limit funding
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At Issue

• implementation of mid-year reductions
• potential for cash shortfall due to deferrals
• 5 day reduction in school year 09-10
• voter approval of tax increases and redirections
• categorical program flexibility
• reserve levels

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Timeline

• February - prepare reductions listing
• March - issue layoff notices as needed
• April - finalize reductions listing
• May - revise 2009-10 budget, finalize layoffs
• June - adopt 2008-09 budget