“Spend less, collect more, do it now.” Just seven simple words will lead to a balanced budget according to State Senator Joe Simitian, who held a town meeting last month to review Governor Arnold Schwarzenegger’s state budget proposals.

Most of the state’s elected Republicans have pledged “no new taxes,” making “collect more” nearly impossible according to Simitian. In addition, Simitian said, “these folks [Republicans in the State Assembly and State Senate are not concerned if government comes to a standstill.” The governor’s response to the current $14.5 billion budget cut is that, “this is a spending problem not a revenue problem,” said Smitian.

Central to the discussion, which attracted more than 100 people, were the proposed cuts to the State Education Budget: approximately 10 percent; statewide this means a $667 per pupil cut next year or $4 billion for 2008-2009 plus $400 million for 2007-2008. Because state funding is currently about $7,000 per pupil, this cut will be significant for many school districts.

Palo Alto is a Basic Aid District, which means the PAUSD uses local property tax revenues and does not rely on the state to fund the schools. State funds do come to Palo Alto for specific programs like library funds and Gifted and Talented Education (GATE). This revenue is in the form of categoricals, specific funds for specific categories of expenditures. Secondary schools receive more categoricals than elementary schools.

No one in the PAUSD has a clear answer as to how specifically the proposed budget cuts will affect Paly. Looking at the projected $890,000 for 2008-2009 revenue reduction to PAUSD according to Business Officer, Kathy Mak’s, presentation to the school board, 68 percent in categoricals, suggests that Paly and Gunn may lose up to $100 per student. This may not sound like a major loss, but the Paly budget is predominantly allocated to staffing and maintenance. Discretionary funding is supplied by the state, with categorical funding of about $124 per student, in the PAUSD, with a base allocation of $121 per student, and Palo Alto Partners in Education, which provided $118 per student for 2007-2008. The revenue reduction also includes a projected $237,000 from Special Education. Since many of the special ed programs are federally mandated, these funds will have to be pulled from elsewhere in the PAUSD budget according to Mak.

In the aftermath of Proposition 13, an act passed in 1978 to limit property taxes for both residential and commercial properties, school funding in California has suffered dramatically. At that time, 60 percent of property tax revenue came from commercial property and 40 percent from residential. Prop 13 provided for reassessment of property when the property is sold. But commercial property held by a corporation is not considered to be sold when the corporation is sold. Turnover in commercial property is so small that today 60 percent of property tax revenue comes from residential and 40 percent from commercial property, a role reversal.

Local California school districts must now ask the state when special areas need to be funded. Thus, all districts in the state receive the same types of specialty funding, even if the funds would be better spent on another area. State funding for such extras as Driver’s Education and Regional Occupational Program or career and vocational education come to all high schools. These funds are needed by Paly, since Paly has no other source of funding for career and vocational education.

The key to the governor’s education budget cut proposal is the suspension of Proposition 98. In the simplest terms, Prop 98 provides a floor for education funding K-14 and contains language providing for suspension with a 2/3 vote of the Legislature. In 2004, Prop 98 was suspended and later reinstated. If it is suspended again in 2008 Simitian points out, “we don’t have the minimum guarantee protected” and with this “tool we have to be sure that in any given year we don’t toss education to the side” is non-functional.

Aside from Prop 13, one of the reasons California has such a large budget shortfall is that the Vehicle License Fee was suspended when Governor Schwarzenegger went into office. Initially, this caused a $4 billion loss of revenue. Today, that loss of revenue will be $6 billion.