Analysis of the 2007-08 Budget Bill: Education

Home-to-School Transportation

The Governor proposes to shift ongoing funding for the Home-to-School Transportation program ($627 million) from Proposition 98 to the Public Transportation Account (PTA). In a related action, the administration proposes to reduce the Proposition 98 minimum guarantee by a like amount. Taken together, these actions are intended to achieve ongoing General Fund savings. (The administration has stated, however, that if the PTA is insufficient to maintain the same funding level for school transportation in the future, General Fund would be used to backfill the difference.) Given serious legal and policy concerns, we recommend the Legislature reject the set of proposals. Instead, we recommend using a smaller amount of PTA monies on a one-time basis to support the Home-to-School Transportation program in 2006-07. Such action also would produce ongoing savings by lowering the Proposition 98 obligation for 2007-08.

Reject Home-to-School Transportation Proposals

Given serious legal and policy concerns, we recommend the Legislature reject the Governor’s school transportation proposals.

The Home-to-School Transportation program provides funding for school districts to purchase and operate school buses for transporting students to and from school. Recent data indicate that almost all school districts (930) participate in the program, transporting a total of approximately 936,000 students (including special education students), or about one in six K-12 students.

We have three major concerns with the Governor’s school transportation proposals—one related to the viability of the PTA as an ongoing funding source for the school transportation program and two related to the rebenching of the Proposition 98 minimum guarantee.

PTA Might Not Have Sufficient Funds to Support Program in Future. Although school bus transportation appears to meet the eligibility requirements for PTA funding, it is uncertain whether PTA will have sufficient funds to support the Home-to-School Transportation program on an ongoing basis after 2007-08. In “Funding for Transportation Programs,” in the Crosscutting Issues section of the Transportation chapter, we provide a detailed review of PTA, its funding sources, and its cost pressures. We find that the PTA fund condition can fluctuate significantly from year to year because one of its underlying revenue streams is very volatile—fluctuating based on changes in both the economy and gasoline prices. Given such volatility, PTA might not have sufficient funds to cover school transportation costs in future years.

Rebenching Proposal Appears Unconstitutional. After consulting with Legislative Counsel, we think the administration’s proposed rebenching of the Proposition 98 minimum guarantee is likely unconstitutional. The State Constitution does not contain any language authorizing such a rebenching of the minimum guarantee. On the contrary, the clear intent behind the voter-approved measure was to ensure a minimum level of funding for Proposition 98 and insulate K-14 education from other potentially competing state priorities. Given this legal concern, we think the administration’s rebenching proposal is very risky.

Rebenching Minimum Guarantee Sets Bad Policy Precedent. We also believe implementing the Governor’s proposal would set a bad policy precedent. Given that Proposition 98 is intended to offer protection to K-14 programs from funding reductions, a rebenching proposal that lowers the guarantee seemingly would require some underlying policy rationale. The Governor’s proposal, however, offers no reasonable explanation as to why a program historically funded from Proposition 98 should now be excluded from it. Under the administration’s approach, the state could shift funding for any K-14 program from Proposition 98 to another source and reduce the minimum guarantee anytime it wanted to achieve savings. Once the program was removed from the “protected” guarantee, the state could then defund it in future years and realize additional ongoing savings. As a result of such shifts and subsequent eliminations, the minimum guarantee—and the “protection” it is supposed to provide to K-14 funding—would be rendered meaningless.

Use PTA to Maximize Current- and Budget-Year Savings Without the Risk

We recommend the Legislature use roughly $300 million in Public Transportation Account (PTA) monies on a one-time basis in the current year to support the Home-to-School Transportation program. Using PTA monies in such a way could produce substantial savings not only in the current year but also in the budget year.

Using PTA for School Transportation Could Be Major Part of Current-Year Budget Solution. In the “Proposition 98 Update” section of this chapter, we discuss our current estimates of the minimum guarantee in 2006-07 and 2007-08. Revenues have fallen substantially from initial estimates for 2006-07—lowering the Proposition 98 guarantee by roughly $600 million. Thus, the Legislature could reduce spending and still meet the minimum guarantee. In the “Proposition 98 Priorities” section of this chapter, we recommend the Legislature take several actions to reduce spending and meet the minimum guarantee in the current year without making disruptive cuts to school districts. One action we recommend is swapping available PTA monies for Proposition 98 monies on a one-time basis. This would provide the school transportation program with the same level of funding while generating substantial General Fund savings. Because the transfer would be one-time in nature, and the PTA is carrying a large balance in 2006-07, the account would have sufficient funds to support a swap in the magnitude of $300 million.

Action Produces Potential Out-Year Savings. Reducing Proposition 98 spending in the current year also reduces the minimum guarantee by roughly a like amount in the budget year. This means the Legislature would have additional savings options available as it builds its 2007-08 budget plan. (In the “Proposition 98 Priorities” section of this chapter, we have additional recommendations for how the Legislature can reduce Proposition 98 spending in 2007-08 while holding school districts essentially harmless.)

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