May 14: Budget Update - May Revise
When the need to shelter in place to protect the most vulnerable of us from the COVID-19 pandemic began in March, we knew the resulting stock market drop, storefront closures, unemployment, and underemployment would take a toll on the economy and on state revenues that support public education. With today’s release of Governor Newsom’s May Revision, we have our first look at the budget impact.
The May Revision proposes a very different 2020-21 budget from what Governor Newsom proposed in January. The economic impacts of the COVID-19 shutdowns are dramatic. The Governor estimates state unemployment to reach 18% in 2020 with a projected decline in per capita income of 9%. All told, the Governor estimates a state deficit of approximately $54.3B over the 2019-20 and 2020-21 budgets. Needless, to say the dramatic changes in the economy bring dramatic changes in the budget, and education is not spared from reductions.
Negative economic activity has a negative impact on the Proposition 98 guarantee which provides a minimum floor of funding for K14 education. This guarantee is estimated to be $19B lower at May Revision than was estimates in January. The Governor proposes mitigating a portion of these losses by suspending some business credits and directing federal stimulus funds to schools, but the reductions remain severe. The Governor proposes reductions of approximately 10% to K12, UC, CSU, and a similar amount to community colleges.
Specifically, the Governor eliminates the COLA for the 2020-21 year and reduces statewide funding for the SCFF by $593M, a reduction of approximately 8% year over year. The Governor also reduces the Strong Workforce program by $135.6M, the Student Equity and Achievement program by $68.8M and programs support PT faculty by $7.3M. Additionally, the state proposes to defer $330M in payments to colleges from May/June of 2020 into the next fiscal year, and $662.1M from 2020-21 until 2021-22.
While the May Revision does not provide estimates of Community College funding for future years, the Governor notes the state is expected to be in a deficit for several years, meaning that we likely face a multi-year problem. An advantage we have not shared by most districts, though, is our high property-tax base. This should help protect us from some of the cuts, as there is only so much the state can cut from us before we become a basic aid district.
Please note that the information received so far is not sufficient to clearly detail the precise impacts these reductions will have on our funding, but we will be working to provide that information as soon as we can. Of course, at this early stage, no decisions have been made as to how Cuesta College will address the problem. We do know that there is no solution to solve the budget issues without making painful choices. Community colleges are people-heavy institutions, and we are no exception as you can see from the chart below:
Budget reductions are challenging in the best of times and to have such significant reduction during the uncertainty of the pandemic elevates the matter. We recognize that this information raises more questions than it provides answers. It is shared to keep our campus community informed of the rapidly changed economic outlook from the Governor’s January proposal to today’s May Revise. Over the next several days, the fiscal services team will calculate the impacts to Cuesta College. We will share updated COVID-19 reopening and budget information in an Open Forum on Thursday, May 21, 2020, via Zoom beginning at 12:10 PM. A link to the Zoom meeting is provided below and will be sent via a Cuesta Announcement.