Tax Increases, However, Do Not Solve Budget Woes
By Joshua H. Silavent
November 20th, 2012 – Had voters not given the green light for Proposition 30 at the ballot box November 6, Long Beach K-12 schools and higher education institutions would have been hit with more than $72 million in additional budget cuts. Teacher layoffs, loss of school sports programs, increased class sizes, elimination of university courses and other program reductions would have ensued.
To cover these funding shortfalls, Gov. Jerry Brown spearheaded Proposition 30, which raises taxes on personal income over $250,000 for seven years and increases sales taxes for a four-year period.
The Golden State’s current maximum personal income tax rate is 9.3 percent. Proposition 30 would raise that to between 10.3 and 12.3 percent for top earners and is applied retroactively to income earned since January 1, 2012. The sales tax would increase to a minimum 7.5 percent.
Estimates vary on the amount of revenue that will be generated by Proposition 30, ranging from $6.8 to $9 billion in fiscal year 2013 and $5.4 to $7.6 billion annually over the next five years.
Cuts are still coming to the Long Beach Unified School District (LBUSD), California State University, Long Beach (CSULB) and Long Beach City College (LBCC), however, as Proposition 30 simply limits the amount rather than providing new revenue. The three educational institutions serve more than 142,000 students and employ 13,000 people, the largest industry source of employment in Long Beach.
For example, the LBUSD – the state’s third largest school district – is staring down about $20 million in budget cuts, but it could have been $15 million higher without the passage of Proposition 30, or about $435 per student. The LBUSD has slashed more than 1,000 jobs since 2008 as a result of $300 million in budget cuts.
“Voters have sent a clear message that California must stop the drastic cuts to our public schools,” LBUSD Superintendent Christopher Steinhauser said in a statement. “We deeply appreciate this vote of confidence. We know that money is tight for so many Californians, yet they continue to make education a top priority. The passage of Prop. 30 is a step toward stabilizing funding for public education, and it’s a morale booster for our employees and parents who have felt the brunt of state budget cuts for far too long.”
The LBUSD Board of Education is currently reviewing where to trim its budget, but school officials said that proposals to reduce the academic year by one month and abolish sports programs and music education have been taken off the table.
Meanwhile, the California State University (CSU) system had been preparing for $250 million in mid-year cuts, with CSULB readying for $20 million in lost funding. Per student spending at CSULB would have fallen to $3,500, well below the national average of $7,200. Moreover, about 2,000 classes would likely have been eliminated and 2,000 students would not have been enrolled next year. But this is no longer the case, Rick Gloady, CSULB spokesperson, told the Business Journal.
Moreover, CSULB students no longer face a $150 tuition increase for the spring 2013 semester. In fact, the entire CSU system has rolled back its most recent 9 percent tuition increase, which means students will be reimbursed for the additional $249 per semester fee they paid at the beginning of the current academic year. Gloady said layoffs also have been avoided for the 2013-14 school year and that Proposition 30 likely saved upward of 500 class sections.
“Even though Prop. 30 does not address the long-term impacts of the severe budget cuts the CSU and our campus have endured over the past several years,” CSULB President F. King Alexander said in a statement, “it offers some hope that the state and its citizens are very concerned about the disinvestment trends in public education that continue to negatively impact California.”
Finally, LBCC has avoided what officials called a “doomsday scenario” that would have meant an additional $6.4 million in budget cuts in the 2013-14 academic year had Proposition 30 failed.
The school still faces about $2 million in reductions next year but now will not have to slash enrollment by as much as 1,300 students, as had been proposed. In fact, spokesperson Mark Taylor told the Business Journal that LBCC might actually be able to increase enrollment instead.
Up to 17 programs and 30 faculty positions had been on the chopping block, but most of these will likely be saved. Taylor said that final recommendations for next year’s budget would be presented in January. “We still have some challenges to get through this year, but those challenges are much more manageable now than they would have been if Prop. 30 failed,” he added. “Hopefully, we can begin thinking again about how we can serve more students, not less.”
But the state’s budget remains stuck in a precarious place, and K-12 schools and higher education institutions might continue to feel the pinch in coming years as public education accounts for more than 50 percent of state expenditures. Moreover, the state has the nation’s highest total debt at about $617 billion, which includes outstanding bonds, unfunded pensions and other liabilities, and budget shortfalls. In addition, tax revenue projections for the current fiscal year have fallen by $379 million, thus far.
“We still are going to have to grapple with what may be overzealous budget estimates,” Taylor said. “The state budget is not performing as expected. We may have to make cuts beyond the original $2 million.”