California schools better prepared for ‘rainy days’ thanks to Jerry Brown

Guest comment written by

Luis Freedberg

Louis Freedberg is director of the Advancing Education Success Initiative and executive producer of its “Sparking Equity” podcast.

Surprisingly, it appears that California’s public school system will overcome the state’s multibillion-dollar budget deficit more or less intact.

That’s because the state will draw down more than $6 billion from the colloquially called “rainy day fund” that will essentially keep school funding at last year’s record level, assuming lawmakers approve budget revisions unveiled by Gov. Gavin Newsom this week. month.

This near-miraculous achievement was partially obscured by a highly technical controversy over how Newsom’s financial gurus have calculated what the state owes schools under Proposition 98, a bewilderingly complicated initiative approved by voters in 1988. Powerful education groups threatened to litigate before reaching an agreement this week. promising additional funds in the coming years.

But the fact that schools are emerging from budget battles largely unscathed, at least for the next year, is largely due to former Gov. Jerry Brown’s determination — even obsession — to boost the state’s reserves. The search for him presented a rare and now nearly forgotten display of bipartisanship in the Legislature a decade ago.

When Brown was elected governor in 2010, California was experiencing one of the worst budget crises in its history following the Great Recession.

Schools suffered a big hit. By the 2012-13 school year, annual spending had fallen by an average of more than $2,000 per student. The full impact, while substantial, was somewhat mitigated by a huge injection of one-time federal funds through the American Recovery and Reinvestment Act.

At the time, California had no real buffer to lessen the impact of the economic crisis. Its reserves were virtually nonexistent, down to the equivalent of just two days of the state’s operating budget. Only one other state had a smaller reserve fund.

This was despite Proposition 58, an initiative that voters approved in 2004 and backed by Governor Arnold Schwarzenegger, which required the state to regularly transfer money to the emergency fund.

But the initiative had a huge loophole: It imposed no restrictions on when funds could be withdrawn and allowed the governor to suspend payments. As a result, only two payments had been made to the reserve in a 10-year period.

Brown set out to change that. He called a special legislative session in 2014 to increase reserves.

“I am determined to avoid the fiscal disaster that the last governors had to face,” he declared.

Lawmakers emerged from that effort by putting an initiative with fewer escape routes on the ballot. It required the state to put 1.5% of the state’s general fund each year into its reserves, and even more when personal income taxes from capital gains exceeded 8% of the general fund.

It also established a reserve fund specifically for schools and established a requirement for state deposits.

Republican lawmakers enthusiastically endorsed the strategy, and California voters ultimately agreed, approving the initiative by a 69% majority.

As the state recovered from the recession, Brown came under intense pressure to spend state surpluses on new programs. But he stood his ground. In his last budget as governor in 2018, he convinced lawmakers to put another $5 billion into the rainy day fund.

To be clear, many school districts will continue to be affected by Newsom’s plan. Some districts will remain in the red and will have to make painful cuts, especially those with declining enrollment or budget problems rooted in their own particular histories. It also proposes cutting funding for an ambitious mental health initiative and expanding a range of child care and early education programs.

But it could have been much worse. Looking ahead, when (not if) the state again enjoys large surpluses, the danger is that the Legislature will be tempted to spend the money on a series of programs, rather than investing in reserves.

Fortunately, Newsom appears to be aware of the dangers. Earlier this year, he said the state should be even more aggressive about increasing its reserves, and that could include raising the current limit on how much can be allocated to them. Depending on the reserve, it cannot exceed the equivalent of 10% of the general fund, or the spending required by Proposition 98.

The reward for Brown’s persistence a decade ago offers lessons for California’s future. No matter how well the state does, tough times are almost certain to come and we need to prepare for them.

Otherwise, we put our schools and our children’s future at risk.