Taking the brunt of the blow once again is education which has now had over 17 billion dollars in cuts in the last two budget deals. That represents nearly one-third of the funding for education which is also the single largest line item on the budget.
On the other hand, Democrats were able to avoid a suspension of Proposition 98 which would have devastated education further by changing the formula by which educational funding was allocated outside of this year. In addition, the Democrats got an agreement to put around $9.5 billion back into the budget in future years. Thus in the short term these cuts will be devastating to many school districts, in the longer term, money will end up going back into education.
Higher education also took a huge hit in the budget. We have discussed at length the UC Furloughs and student fee hikes and we have the proposed CSU furloughs, fee hikes and cutbacks to enrollment. Higher education took a $3 billion hit, just under one-third of their state revenue, though a small portion of their overall operating budget.
All told $9 billion of the $26 billion deal (over one-third) came out of education.
The measure of good news is that the CalGrants program for college students was spared, that means that poor students will still be able to get funding for their higher education.
The poor and health care plans took a hard hit. CalWorks was spared total devastation but still took a $528 million hit. Likewise home health aides and healthy families were also spared total devastation but took $226 million and $124 million respectively. Medi-Cal took a $1 billion hit.
Some of these hits will be magnified by cuts to county services and the huge deficits that counties face.
Prisons got off relatively unscathed taking just a $1.2 billion hit to their nearly $10 billion overall budget.
Stateworkers on the other hand have taken another huge hit and face three furlough days which represents about a 13.8% total pay cut. This comes just a few months after Republicans killed an agreement between a portion of state workers and the Governor that would have limited their cut. Now the workers are without a contract and threatening to strike and attempt to shutdown part of the state.
Local government took a huge hit with $2 billion in borrowing from local government, another $1 billion in money that would go to repair roads and $1.7 billion from redevelopment. All told $4 billion being taken from cash-strapped local government.
What was not included in this bill is just as telling. There were almost no revenues aside from shifting the amount of income tax withholding and increasing estimated tax payments for businesses and self-employed, schemes that are said to generate a total of $2.3 billion even though they do not actually increase taxes.
There are no new taxes here unless you count fee hikes to college students, pay cuts to state workers, and benefit cuts to millions who rely on state benefits new taxes.
Rejected was a $1.50 per pack tax on cigarettes. Another item rejected was a $15 annual vehicle license fee hike. And the big one that has been rejected is the 9.9% tax on oil extraction that would have given around $1 billion to higher education and could have offset some of the cuts there.
Commentary: Sorting Out the Winners and the Losers
But they are not the only winners.
Corporations and business were big winners as they did not have to face increased taxation. Oil companies escaped without oil severance taxes that all of the major oil producing states have. Tobacco escaped without another cigarette tax increase.
The no new taxes line means that the entire impact of the budget cuts falls directly on middle and working class California and away from the wealthy and business community. People can of course debate the wisdom of such policies, however, when one argues that the pain is shared in this budget deal, I find that a very difficult argument to sustain. Again, tell me where businesses, corporations, and the wealthy were hit in this budget deal–I certainly do not see it.
While there is little doubt that law enforcement and prisons are not happy with the $1.2 billion in cuts to the prisons, that is the only cut they have sustained and they have largely escaped intact thanks in part to the power of CCPOA. Word came out the a Group of California Police Chiefs has targeted a number of Democratic lawmakers on the early prison release plan and CCPOA was supportive of recalling the governor, though apparently not taking a strike vote. The bottom line is that prisons and their $10 billion industry were spared the worst of the budget cuts and there have been no meaningful reforms to sentencing, parole, or other aspects of the criminal justice system. We still house large amounts of people who are relatively not dangerous to society.
The losers here are easy to figure out and you can begin with Speaker Karen Bass and Senate President Pro Tem Darrell Steinberg who got completely out-maneuvered and rolled in this deal. They will argue they got the best they could by preventing the elimination of CalWorks, CalGrants, the elimination of healthy families insurance for children, the avoidance of closures to the state parks, the prevention of the suspension of Prop 98, and the $9.5 billion commitment to put money back into education (essentially Prop 1B from May). I would argue that they only got this on the margins. They did not win one major fight other than to avoid worse carnage. They ceded new taxes early and never were able to get them back on the table. There was much more they could have done, but they simply were outplayed by the Governor and legislative Republicans.
Children might be the biggest loser in this budget deal. You have the cuts to education and also the devastating cuts to various health care programs.
The poor avoided the elimination of several programs but ended up with cuts to health care and to CalWorks. In addition, with the devastation of county governments and severe cutbacks in their services, it was not a good day for the poor.
Schools took the single biggest hit. $6 billion from K-14 (including community colleges). That is actually just the tip of the iceberg because it does not count the nearly $11 billion in cuts from February. All told this year, about one-third of the educational budget was slashed in California. Sure they will eventually put about half of that back, still a big loss for education.
Higher education loses about one-quarter of its state apportioned budget this go around. The impact on students is devastating with another wave of 10 percent fee hikes in store for both UC and CSU students. On top of that is the cutbacks to enrollment. The one small feather is that CalGrants were spared complete elimination. But this was not a good day for education in California.
Local government was big losers. Prop 1A bent but did not completely break. But we have followed what has happened to local and county government enough to know what has happened to them. What happened yesterday was $4 billion in either cuts or diversions. How this impacts our county and city budgets we do not know.
Finally state workers take it on the chin. $1.3 billion which includes three furlough days and nearly a 15% pay cut. The public seems to have little sympathy for workers who generally do not make a ton of money to begin with taking a huge pay cut. But there it is. As we mentioned earlier, there is still no contract and the threat of strike by the state workers, which could make things interesting.
All told this was a bad day for the California economy. It was also reported that CalPERS lost $57 billion–that’s with a “b.” The state’s bond ratings have taken a huge hit. The state sits at 11.6% unemployment. What will be the fall out from a massive $26 billion cut of money from the state’s economy? That is the unforeseen impact of it all. Will this plunge the state into a deeper recession or depression which it will not have the resources to get itself out of? That question looms in the next few days. What is clear is that this budget is better than no budget, but not much.
—David M. Greenwald reporting