Jul 09 2009
Stimulus funds at risk with Governor’s education funding plan
The Governor’s plan to fund education puts the state at risk of losing federal stimulus dollars.
The Governor planned to “borrow” $2 billion from local governments, then use that money to fund education. This would free up $2 billion General Fund at a time when the state faces a $26.3 billion General Fund shortage.
Such a move isn’t uncommon in California budget politics. There is often “borrowing” from funds to release General Fund so the General Fund can fund other programs and the state won’t have a shortfall. The problem is that this move would mean that the state falls below the minimum funding guarantee that the federal government has required. The federal government has put certain minimum funding requirements on the states who are receiving federal stimulus money so that the states use the money to stimulate the economy, and don’t use the money to fix their budget shortfalls.
California has received almost half of the $10 billion it was expecting for education, health and prison services. It is unclear if California would have to pay back the money it has already received, or if the state would simply be barred from receiving more funds. If California had to pay back the money it has already received, the budget shortfall would be over $30 billion. That’s a fairly large gap to close.
Democrats are saying that the borrowing plan the Governor has shows how he is confused between reality and what he wants. Republicans are not saying much of anything, but they are encouraging the Governor to not lose federal stimulus money.
The Democrats, Republicans and the Governor are back at the bargaining table, still trying to figure out what to do. Insiders say they are waiting for the report from the experts on education spending, and what can be done to lower the limit. In this case, Prop. 98 and the federal minimum funding levels are complicating matters of reaching an understanding about the minimum level of education funding neccessary to maintain federal stimulus dollars.
