Arnold Schwarzenegger’s attempts to repair the state budget now hinge on passage of Propositions 57 and 58 on the ballot for March 2. The ballot measures may have shaky support from voters, according to the latest surveys, but the shadow of imminent economic breakdown has helped the Governor to rally bipartisan support for 57 and 58.
In his budget proposal on January 9, Schwarzenegger said failure to pass these measures would necessitate drastic cuts and be “disastrous” for the state.
Proposition 57, the Economic Recovery Bond Act, would establish a $15 billion bond to pay off the deficit when payments come due in June. This bond would replace a $10.7 billion bond created last year, which is facing legal challenges because it did not require a popular vote.
Proposition 58, the California Balanced Budget Act, would amend the State Constitution to require the Governor and the Legislature to enact a balanced budget proposal each year, create a reserve fund to smooth spending and prohibit long-term borrowing to pay off debt.
If either measure fails, neither will go into effect.
A Legislative Analyst’s Office’s report said that, on the whole, the Economic Recovery Bond would show immediate benefits to the state in savings this year, but after the one-time savings the annual payments on the bond would add up to create a $7 billion budget deficit in 2005-2006, leaving $5 billion in debt through 2008-2009.
“This shortfall would occur even if all of the savings and other solution assumptions in the Governor’s plan were fully realized,” the report stated.
However, if the propositions are not passed, the report said, a $5 billion shortfall will result, increasing to $13.6 billion if last year’s bond is ruled unconstitutional.
A State Budget Update from the Community College League of California reported, “Community colleges receive about 3.2 percent of state general funds (excluding property taxes). Therefore, the community college ‘share’ of $5 billion is $160 million; the ‘share’ of $13.6 billion is $435.2 million. If the Legislature were to consider the property taxes and student fees received by community colleges, the ‘share’ would double.”
Therefore, community colleges may have to make $870.4 million in cuts if Proposition 57 fails and last year’s bond is ruled unconstitutional.
The Public Policy Institute of California’s “PPIC Statewide Survey,” dated February 20, said likely voters supported Proposition 58 by a 29-point margin, but Proposition 57 received “mixed reactions,” the majority opposed by a three-point margin.
Smaller surveys taken following Schwarzenegger’s television advertisements showed a slight decrease in opposition, shifting voters to the “Don’t know” category instead.
A press release from the PPIC stated, “People have real misgivings about doing anything that will put the state further into debt-including passing bonds, which has historically been the most palatable way of raising money.”
Still, advocates for the propositions are hoping that bipartisan support will swing more of the undecided voters in their favor. Indeed, few in the capitol have opposed the propositions. The California Democratic Party has pledged its support and Democrats backing the measures include State Controller Steve Westly and United States Senators Dianne Feinstein and Barbara Boxer.
“By the end of June, California will be facing a major cash liquidity crisis that could cause substantial damage,” Senator Feinstein said at a press conference in Santa Monica. “If California is unable to meet its bond amortization payments, it will effectively be in default. The damage from this default would ricochet across our entire economy.”
In a show of support from California Community Colleges, the California Community College Trustees and the Chief Executive Officers of the California Community Colleges passed resolutions supporting Propositions 57 and 58. Both the Yuba College Board of Trustees and the Yuba College Academic Senate also passed similar resolutions in February supporting both propositions.
Yet California State Senators Tom McClintock and Bill Morrow are among Republicans opposed to the propositions, along with the state’s treasurer Phil Angelides (D).
A statement issued by Angelides read, “This unprecedented $15 billion deficit bond is an integral part of a budget plan, proposed by Governor Schwarzenegger, which is fiscally irresponsible, unfair to working Californians, and damaging to our future economic competitiveness.”
Community colleges will undergo several changes in the new budget, regardless of whether either proposition passes. For one, student fees will increase from $18 per unit to $26 per unit for undergraduates and from $26 per unit to $50 per unit for graduate students.
Also, the budget assumes that state public universities will reduce their freshmen enrollment and increase fees: a 10 percent increase in fees for undergraduates will occur annually until the increase is 50 percent, and a 40 percent increase in fees for graduate students will occur this year.
If that happens, the budget predicts that 10 percent of freshmen will shift to the community colleges, with help from dual enrollment incentive programs. That amounts to an increase of 33,000 students statewide.
A nonpartisan report on the state budget from the Legislative Analyst’s Office advised the legislature to adopt the Governor’s plans for community colleges, but made numerous suggestions, including the changing of provisional language in current laws to give local governments greater control of spending under the proposed categorical reforms.
The Legislative Analyst’s Office also recommends rejecting funding for equalization of schools this year. Instead, the Office recommends using the funds to repay deferred costs from last year, redirecting $30 million in financial aid and outreach programs to the K-12 system for college preparation.
Perhaps most significantly to community college students, the Legislative Analyst’s Office recommends increasing community college student fees even more in the future, to cover 50 percent of instruction costs