Newsom says his plan — a complex accounting maneuver — would shield public schools from $8.8 billion in immediate cuts. But California Teachers Assn. President David Goldberg said it would end up costing districts nearly $12 billion in the future.
Goldberg said the union, which represents 310,000 educators across the state, would launch advertisements on Monday to “raise awareness about this unconstitutional maneuver.” If that doesn’t work, he said a lawsuit could be next.
“We will not stand by and let this happen,” he said during a news conference. “When you have clear violations of the Constitution, often you go to legal remedies. So that is definitely one of the tools in our toolbox.”
The public opposition from teachers signals a turning point for Newsom, who until now had mostly avoided major fights with core constituencies during the state’s recent budget troubles. Newsom addressed last year’s shortfall by borrowing while deferring and delaying spending that preserved most major programs. But the deficit has only gotten bigger, squeezing Newsom — who is widely seen as a potential presidential candidate.
Last week, Newsom announced a budget deficit that, when including previous actions agreed to by his administration and the Legislature, is at least $45 billion. The nonpartisan Legislative Analyst’s Office says the deficit is actually $55 billion — mostly because of the cuts to public education spending that Newsom has not counted as part of the deficit.
Newsom defended his proposal last week, saying it was the best option for public schools because it would protect them from immediate spending cuts.
“I don’t want to see thousands and thousands of pink slips go out. I don’t want to see disruption in the system,” he said.
The issue is the voter-approved formula for how California pays for public schools, known as Proposition 98. The formula says schools will get a certain amount of money each year. California gave public schools $76 billion in the 2022-23 fiscal year because that’s what they thought the formula required. However, state tax collections that year ended up being 25% less than what the state had predicted.
The Newsom administration says that retroactively affected the formula for public school funding. Now, they say the state was only required to give schools roughly $67 billion that year. It’s an $8.8 billion difference.
Newsom could ask for schools to give this money back. But they’ve already spent it. Returning $8.8 billion would likely lead to massive layoffs and other difficult cost-cutting measures throughout the state’s 1,019 school districts. Instead, Newsom wants to let the schools keep the money. But he wants the state to pretend the schools gave it back.
The state’s accountants would not immediately count that $8.8 billion in spending. Instead, they would spread this cost out over future budgets, starting in 2025-26. It’s the equivalent of the state giving itself a zero-interest loan.
“It’s pretending it doesn’t exist. Literally just saying ignore that $8.8 billion,” said Karen Getman, an attorney and school funding expert who has represented the California Teachers Assn.
California can afford to float this spending because, while it has a budget deficit, it still has plenty of cash. California had $95.8 billion in unused borrowable resources at the end of April, according to state Controller Malia M. Cohen. That’s because while all of the state’s money is budgeted, it has not all been spent. A large chunk of it is sitting in reserves. Other portions are committed to things like large construction projects that have not been built yet.
School advocates are alarmed because, while the maneuver would protect districts from immediate cuts this year, they say it would slash their budgets in the future. By not including this $8.8 billion in the public education budget, it changes how the formula for school spending is calculated. The California Teachers Assn. calculates that this means schools would get nearly $12 billion less in public spending this year and next year than it otherwise would have received.
“They are trying to rewrite history in order to drive down the proposition 98 guarantee going forward,” Getman said, adding: “That’s a fiction with no basis in fact or law.”
Kevin Gordon, a lobbyist for school districts in California, said instead of changing the past, Newsom could instead change the future. Newsom could negotiate with school districts to suspend the school funding formula, meaning the state would not have to pay them all of that nearly $12 billion they were supposed to get. Instead, districts could be repaid that money over time.
“The overpaid $8 billion is kind of a fiction. What’s real is they probably owe schools [$12] billion more and the school community is willing to say, ‘We know you don’t have it, so we can forego that and do a suspension,” he said. “The approach the governor used needs to be fixed. But … the goal of insulating public schools from cuts is the right goal.”
The Legislative Analyst’s Office also doesn’t like the proposal, calling it “bad fiscal policy” that “creates a binding obligation that will worsen out-year deficits and require more difficult decisions in the future.”
Newsom doesn’t see it that way. He says his proposal would “maintain the commitments in terms of the investments we’ve made” in previous years.
“We respectfully disagree with that position,” he said.