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    Stephon Clark shooting anniversary, death penalty, CA Dem & CA GOP cash on hand, pension airtime, and much more 

MONEY MATTERS: Looking at indicators, particularly the cash and economic reports from the Controller Betty Yee and the Department of Finance respectively, CALmatters's Dan Walters writes that the state's financial picture may not be as rosy as thought in January when the 2019-20 budget is put to bed in June. This could lead to tension between legislative Democrats, who want to spend more, and Governor Newsom, who already started in January with a fairly conservative spending plan.

EDUCATION FUNDING, LAYOFFS, AND OAKTOWN: I didn't mention it on Friday, but it the Ides of March wasn't just a bad day for Caesar. It also marks the day by which school districts have to give "March 15 notices" notifying academic and nonacademic employees that they may be released, demoted, or reassigned when the "new school year" begins July 1. The notices are required by Education Code § 44949.

This is usually an exercise in identifying the range of budget scenarios between the January budget, May Revise, and final budget. After all, March 15 notices are prophylactic--they must be given to avoid legal liability but can be withdrawn. Without issuing them, the education employer faces either a budget problem or legal liability. Lawyers would argue to always issue based on the worst case scenario. However, believe it or not, educational administrators and school boards care about the humans on the other end of those notices. This is particularly true knowing that in classrooms and other services, it's usually "last in, first out"--the youngest employees (and families) are the first affected in a reduction in force.

I spent many years counseling community college district leaders on the fiscal and political outlook leading up to the March 15 date, including providing dynamic scenarios for each district. These were particularly variable under several budgets in each of the three last governors, even with the Protections of Proposition 98. It was heart-wrenching for boards and administrators, many of whom served in the types of teaching and non-teaching positions receiving notices early in their careers. Some did not make the tough decisions and fell under state receivership or other dire consequences. 

This year's budget, however, is pretty darn good for schools and community colleges. Like any other part of the government, they will always want more, and the K-12 community including charters have a demand for "Full & Fair Funding," turning away from the Proposition 98 minimum funding guarantee that has relatively protected them vis à vis their UC and CSU counterparts. They point to it as a minimum funding guarantee and call for billions above that guarantee to increase California's rank in relation to the national average funding per student.

To do so requires one of two things. It requires either a significant tax increase or taking funds from health and human services. After all, K-12 and health and human services account for 68.8% of the state General Fund budget in 2018-19. Add community colleges, which are part of the Proposition 98 guarantee, and you are at 73.5% of the general fund.

People like to point to prisons, but that's only 8.7% of the budget. The state is under federal court order to maintain a policy of reducing those incarcerated or build more prisons because of overcrowding. The policy changes were pursued under Governor Jerry Brown and approved by the voters with Proposition 47 (2014) to reclassify some non-violent theft and drug felonies from felony to misdemeanor and allow for those previously convicted under those statutes to have their sentences reclassified as such.

A ballot measure supported by prison guards and law enforcement to largely repeal the reforms of Prop. 47 has already qualified for the November 2020 ballot. We may end up finding ourselves forced to build more prisons under that federal degree.

(A side effect of Governor Newsom's death penalty moratorium could be the decommissioning of San Quentin and sale of the prime Marin County land to allow new, more modern prisons elsewhere. This has been considered many times before but is largely opposed to be death penalty foes who want to keep death row in the area of the state that it is most opposed--in Marin County, just across the Golden Gate from the City of Saint Francis of Assisi.)

So, K-14, health and human services, and corrections account for 82.2% of the budget. We can start closing parks (that was a lot of fun when we did it before and ask the feds how that worked for them in January) or close courthouses, which already have gone to ridiculous filing fees. 

K-12 advocates obviously don't want to directly attack health and human services, as their neediest students rely on these exact programs. UC and CSU fees have pretty much hit market rates, and are testing them for nonresident and professional students. When I graduated UC Davis Law in 2000, tuition and fees totaled $11,000. In the current year, they are $47,723. If adjusted for CPI, it would be $16,241. Non-residents pay a 19% premium at $56,974, but it used to be a resident:nonresident differential of around 1:3.

The higher education orange has largely been squeezed.

The Full & Fair Funding K-12 campaign, largely brought to Sacramento over the last couple of weeks in several lobbying days, can't be something solved in the state budget. Advocates are zeroing in on reducing existing tax breaks and blocking new ones championed by Democrats and Republicans alike. That's smart, but it alone would not move California up many notches in per-student funding in the ranking of the states. 

The big ticket tax increases that are on the table are an oil and gas severance tax and the "split roll" property tax change to treat commercial/industrial property at market rate rather than with the assessed valuation change caps in Proposition 13. The latter has qualified for the ballot and to say it will be a difficult row to hoe is a huge understatement based on polling. Because it amends the California Constitution, that requires a ballot vote (simple majority) that would lead to an enormous battle that would make last year's Proposition 10 (rent control) seem like Spring Training.

This leads to the one that is before the Legislature this year--the oil and gas severance tax. It is currently in SB 246 (Wieckowski), which would be a 10% tax deposited in the General Fund. The bill just passed its 30-day-in-print deadline this week but has not been assigned to a policy committee yet, which is unusual. That said, if leadership wants to move it, they would likely be counting noses right now. Because it is a tax levy, it requires a two-thirds vote in both houses and it is a tough vote for many members. 

Obviously, I've written about the SD33 (Long Beach) special election quite a bit in this space, and the oil and gas industry has spent $1.1 million in support of favorite, Long Beach City Council member Lena Gonzalez (D). "Big oil" is bad, but remember that it accounts for lots of union jobs in communities that house the industry. In SD33, it's truck drivers and longshoremen in particular. Yes, we may find the advertisements on our teevee distasteful about the faces behind industries that we don't care for and point to executive salaries, but make no doubt about, you're talking about union members who fill union halls and Democratic Party committee meetings, driving endorsements and campaign money.

Let's think back to last August when "Big PG&E" was the bogeyman in the Capitol (little has changed). In the legislative hearings to support SB 930, which some people called a "PG&E bailout," the faces of testimony were labor and community organizations. Two weeks before the bill's vote on the last night of session, the California State Electrical Workers Union (IBEW) gave $1 million to the California Democratic Party. It was a highly unusual contribution from the organization, perhaps the biggest ever. Labor wanted to keep PG&E out of bankruptcy. Of course, two months later (two days after the election), the Camp Fire in Butte County broke out and PG&E went to bankruptcy court.

The point is that, like PG&E, "Big oil" is bad. You have your opinion on that and you know that I am forgoing a car these days like many others living downtown. My job in this space, however, is not to preach but rather to talk about the policy-politics intersect. I mentioned truck drivers and longshoreman in SD33 where the Long Beach port is above, but don't forget the electrical workers who are big forces where the refineries are, in particular. So, while a legislative district may not have extraction subject to the proposed new tax, refining facility workers would likely be mobilized by any "threat" to the industry.

Thus, not unlike the district-specific analysis I wrote on Friday about ACA 12 (death penalty), a similar analysis would need to be conducted. Although, it's not as easy as comparing a district vote on a state measure on the death penalty in 2016. Some of them are clear overlaps. For example, for new senator Melissa Hurtado (D-SD14), it is a tough vote for the death penalty measure (Prop. 62 no+21.8), but the oil and gas severance tax might be even harder, given that her district has some of the biggest oil fields in California.

Significant new revenue is going to be flat out difficult. One can look at "sin" taxes, but they are usually packaged to address the societal ills of the "sins" or prevention. And, the goal of sin taxes is to reduce those engaging in the "sin" (smoking, alcohol, sugary beverages), meaning that if they work, they are a declining revenue source. You don't want to build your ongoing school funding on that.

However, the budget isn't the only reason March 15 notices are issued, but rather one has to look at the totality of the circumstances of the district. K-12 and community colleges have funding determined largely on enrollment and fluctuations can significantly change funding over time on the upside or the downside. In K-12, this is particularly true with the proliferation of charter schools, and that's why we have seen high-profile teacher strikes in Los Angeles and Oakland. Next is likely Sacramento.

Thus, Steve Rubenstein reports for the Chron that March 15 notices went out to many non-teaching employees in the Oakland Unified School District. Already financially beleaguered and buoyed by "temporary" parcel tax measures, the district is absorbing a costly new collective bargaining agreement that ended the teachers strike. Rubenstein writes: 

"Hundreds of Oakland school clerks, library workers and other staff will receive layoff notices in coming weeks as the school district grapples with the expense of the contract concessions that settled the seven-day teachers strike this month, the school board has decided.

The layoffs of 257 “full-time equivalent” positions are part of a $22 million cut from next year’s budget.

. . .

Among the positions on the district’s chopping block are two dozen security officers, 22 kindergarten reading tutors, 20 “restorative justice” discipline officers and scores of clerks, receptionists, college application coaches, library technicians and others.

“In order to invest in our talent, we had to make cuts elsewhere,” [district spokesman John] Sasaki said, using the district’s euphemism for teacher pay raises. The new contract calls for an 11 percent pay raise over four years and a one-time bonus of 3 percent.

President Keith Brown of the Oakland Education Association teachers union said that linking the layoff notices to teacher pay raises in the new contract “is a ploy that nobody is going to fall for.”

I have not seen any fiscal analysis from either side as to what the new collective bargaining agreement means and what assumptions are included, let alone independent analysis by the state's Fiscal Crisis Management Assessment Team (FCMAT), which previously warned about the district's finances. The district is operating under a loan from the state, thus triggering the previous FCMAT report (final "management letter," essentially the executive summary). 

I wrote before and have seen nothing to contradict it, but the collective bargaining agreement appears to assume

  • AND
  • That's to stay above water under the new contract that lasts through 2021-22. 

    Of course, decisions to increase, reduce, or maintain expenses also have out-year impacts. Oakland Unified has two parcel taxes that have expiration dates in addition to one that is "permanent."

    • Measure N, passed in 2014, is $120/parcel. It expires in 2024.
    • People on both sides of the bargaining table wanted an end to the strike as the district was losing $1 million per day in lost average daily attendance state funds. Was it too optimistic? Is it the reason for the March 15 notices? Will the notices turn into actual layoffs at midnight July 1? Will the Legislature adopt a moratorium on new charter schools?

      I am not sure anybody knows. I welcome thoughts with facts from anyone.

      #CAKEDAY after the jump . . .

      Probolsky Research


      Okay, I'm tired. Have a great Sunday! I just talked to my dad and he says 80 in OC today. 73 here...time to get outside!

      #CAKEDAY: Light the candles for Owen Jones and Tisha Rylander!



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