State Budget Update - Nov. 6, 2008

To: All Administrators and Senate Leaders,
Here is the general information regarding mid-year cuts from the Governor hot off the press. Once we develop an approach district wide and receive more specific targets from the Chancellor's Office we will begin our work. The news clearly is not good for the General Fund or the catagorical programs. Our next steps will be to overlay this news onto our specific budget . Difficult work will follow but we will approach it in a responsible and collaborative manner. As always, if you have questions or concerns please feel free to contact me.

Jeanine Hawk
Educational Resources & College Operations
De Anza College
21250 Stevens Creek Boulevard
Cupertino, CA 95045
(408) 864-8976

Subject: Budget Update -- November 6, 2008

Dear Colleagues:
Governor Schwarzenegger just held a press conference at which he declared a fiscal emergency, triggering a special session of the Legislature to address the state's current-year budget problem. Here are the highlights:

  • The governor identified a current-year revenue shortfall of $11.2 billion. In addition, he is projecting a $13 billion shortfall for 2009-10 if no corrective action is taken.
  • The governor called for quick action in four areas: 1) balancing the budget; 2) steps to stabilize the housing sector; 3) implementation of an economic stimulus package; and 4) stabilizing the Unemployment Insurance Fund.
  • The governor's proposal to balance the budget includes a total of $8.9 billion in new solutions--$4.5 billion in cuts to current-year spending and $4.4 billion in current-year tax increases. In addition, the governor's plan would spend the $1.7 billion reserve from the state budget. The remainder of the shortfall would be carried forward into the 2009-10 budget.
  • For the community colleges, the governor proposes $332.2 million in current-year reductions. These include:
  • Elimination of the 0.68 percent COLA for apportionments ($39.8 million)
  • $292.4 million reduction to apportionments.
  • Flexibility for districts to redirect categorical monies to the district general fund. This flexibility would be limited to the amount of the apportionment reduction. In addition, districts would be required to hold public meetings in regards to any such redirections.
  • The governor stated his expectation that districts would take steps to protect course offerings in the areas of transfer, basic skills, and CTE.
  • The tax increases proposed by the governor include:
  • Temporary increase in the sales tax of 1.5 percent. This increase would be in place from January 2009 to January 2012. Estimated to generate $3.54 billion in 2008-09 and $7.319 billion in 2009-10.
  • Broadening of sales and use tax to include certain services. This increase is estimated to raise $357 million in 2008-09 and $1.156 billion in 2009-10.
  • Implementing an oil severance tax. Estimated to generate $528 million in 2008-09 and $1.195 billion in 2009-10.
  • Increase in Alcohol and Excise taxes. Estimated to generate $293 million in 2008-09 and $585 million in 2009-10.
  • VLF fee increase. Estimated to generate $150 million in 2008-09 and $359 million in 2009-10.
Please keep in mind that all these proposed changes would require passage by the Legislature and approval by the governor. It is quite likely that negotiations between the governor and legislators over the next couple weeks will result in changes to this budget package. The end of the current legislative session on November 30 creates an immovable deadline for state leaders to enact a budget solution if they hope to do so before a new batch of legislators are sworn in.
That is all the information we have at this time. We will continue to meet with legislators and administration officials to work for the best outcomes possible for the community colleges. Community college advocates are meeting today to strategize over the governor's proposal in order to coordinate our efforts. More information to follow.
Erik Skinner
Vice Chancellor for Fiscal Policy
Chancellor's Office of the California Community Colleges

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