No immediate local impacts as state starts new fiscal year
without a spending plan
Local officials join the rest of the state in playing the waiting game as the end of one fiscal year and the beginning of the next – Tuesday, July 1 – passes without legislators and Gov. Gray Davis approving state budget.
Facing a possible $38 billion deficit, lawmakers are divided along partisan lines regarding tax increases vs spending cuts to erase the red ink. One of the problems they face, that many other states do not, is the two-thirds majority required to approve the budget.
While school district and city officials are keeping a close eye on developments in the capitol, both say they can meet their immediate needs.
However, summer school programs in the Morgan Hill School District are safe – despite a freeze on state funds because the state is without an approved budget – at least for now.
“Summer school could be funded with dollars we have now in anticipation of receiving reimbursement,” Superintendent Carolyn McKennan said Monday, the last day of the fiscal year. “Now, if we never get any money for summer school from the state, that could be problematic for us.”
Local government across the state held their breath Monday, but legislators left early that night before coming to any agreement about the budget.
On Tuesday they were back at their desks working on the problem and Davis announced that compromise was near. By Wednesday a tax shuffle and further cuts had been proposed but, while the eyes of millions of Californians are on them, the Legislature had not found a solution.
Wall Street has warned that California is in jeopardy of receiving “junk bond” status; it already has the lowest of any credit rating of any state in the nation, a factor that would make borrowing even more difficult.
The city and school district’s budgets, like the state’s, must be approved before the end of the fiscal year, June 30, and they were.
According to the Office of the State Controller, among the workers who might not be paid without a budget are the governor’s appointees and some civil service-exempt state employees, plus the legislative staff. The Legislature itself will continue to be paid.
This year, estimates were that the state budget would not be approved until September or October.
Last week, State Controller Steve Westly said if the new budget was not in place by July 1, he must freeze millions of dollars in payments to public schools because of a court ruling in May.
Programs most likely to be affected are community colleges, summer school programs and special education. A $192 million monthly payment to community colleges statewide could be missed, as well as a $250 million payment that funds special education programs and remedial math and reading.
At this point, district officials said, there is nothing to do but wait and see what happens at the state level.
Special education programs, which are already under-funded, district officials said, could be impacted later in the year.
“We have just approved our budget for next year, based on conservative estimates, and we can’t do anything more now except wait,” Deputy Superintendent Bonnie Branco said Wednesday. “The dilemma we face, however, is that if the state does not fund programs at the level we anticipate, we could be looking at additional budget cuts later in the year.”
The School Board recently approved $3.4 million in cuts to the new fiscal year’s $51 million budget, based on declining enrollment and decreased state funding.
“We all ready provide (special education) services and programs over and above what the state funds,” Branco said.
CITY MAY HURT, TOO
City Manager Ed Tewes, who has been wrestling with budget deficits of his own, has watched the dance in Sacramento with trepidation. He regularly announces at City Council meetings that the city is waiting to see what revenues the state will take away when it adopts a budget and decides how to tame the $38 billion budget shortfall.
Until that time, he said, the city won’t really know what it has or how bad it will be.
While the Morgan Hill budget of $101 million will have a gap in 2003-04, the city has stored up a “rainy day” fund with which it has been able to maintain city services. If the state keeps too much, the drain on the city will translate into some service reductions. Tewes and the council are not yet prepared to say which services.
In the meantime, with no state budget, among the various agencies that won’t be paid according to the Office of the State Controller, are local governments.
City Finance Director Jack Dilles said Wednesday that he did not yet know which payments would be in question.
“Literally we watch the mailbox each day,” Dilles said. “Normally the state sends us a list telling us when to expect each payment.”
Ten years ago, he said, funds were withheld until the budget was passed.
In case state funds are not forthcoming, Dilles said citizens should not worry about Morgan Hill.
“We are making sure we have contingency plans in case we don’t get the money in,” he said. “We will have plenty of liquidity.”
