Reject Newsom’s Plans for Education Spending, California’s LAO Urges

California Gov. Gavin Newsom speaks in Los Angeles, Calif., on Jan. 3, 2023. (John Fredricks/The Epoch Times)

The California Legislative Analyst’s Office (LAO) has published a series of reports criticizing Gov. Gavin Newsom’s education spending plans and recommended that lawmakers reject them. The reports were published in February after Mr. Newsom announced the 2024-25 fiscal year budget last month.

The Democrat’s budget proposal is an attempt to balance out what his office estimates is a $37.9 billion shortfall, although analysts put that figure closer to $68 billion.

Mr. Newsom’s budget plan includes proposed reductions to various school facilities programs and student housing. The governor has touted the proposal as a way of maintaining the state’s fiscal stability while preserving key investments across education, public safety, mental health care reform, climate action, and the homelessness crisis, among other priorities.

However, the LAO, a nonpartisan agency that gives the California Legislature fiscal and policy advice, warned in the reports that it has “major concerns” over Mr. Newsom’s education spending plan, specifically the “Proposition 98 Funding Maneuver.”

California’s public schools are funded by a complicated formula known as Proposition 98, which requires a minimum of the state budget to be spent on K-14 education and community colleges. As a general rule of thumb, they receive 40 percent of general fund revenue.

However, this also means the overall education budget can vary as the overall tax revenues ebb and flow.

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Mr. Newsom’s proposal would allow schools to keep $8 billion of cash disbursements above the minimum requirement “without recognizing the budgetary impact of those payments,” until 2025-26, according to the analysts.

‘Budget Would Worsen Future Budget Deficits’

“This proposed maneuver is bad fiscal policy,” the report reads. “It sets a problematic precedent for the state and creates a binding obligation that will worsen out‑year deficits and require more difficult decisions in the future. The state could maintain school and community college spending in a number of other ways. We strongly recommend that the Legislature reject the administration’s proposal.”

Elsewhere, the analysts stated that the governor’s budget plan “avoids immediate reductions to school programs but relies heavily on solutions that shift expenditures into the future.”

“Specifically, the budget would worsen future state budget deficits (through the funding maneuver) and set up future shortfalls in ongoing school programs (by using reserves and other one-time funds to cover ongoing costs). This approach positions the state poorly, making spending commitments the state would have difficulty sustaining and setting up more difficult choices next year,” they added.

The agency instead recommended an alternative approach which includes prioritizing core school programs while simultaneously promoting budget stability and aligning school spending with available funding.

The reports come as California is projected to see a $58 billion deficit over the course of three fiscal years—from 2022-23 to 2024-25—amid declining revenue in the state, according to analysts. Meanwhile, the state’s schools and colleges will likely face a $19 billion budget deficit over the next three years, analysts have said.

However, in announcing his budget proposal last month, Mr. Newsom’s office said the state’s 2022-23 revenues are still estimated to be 23 percent higher than pre-pandemic levels, while California’s GDP remained strong last year.

Additionally, the state’s big three revenues—personal income taxes, sales and use taxes, and corporation taxes—are “projected to return to levels consistent with a normal revenue growth trajectory,” his office said.

Mr. Newsom’s office could not be reached for comment.