As he promised in his State of the State address, Gov. Arnold Schwarzenegger protected K-12 schools and higher education from cuts in his proposed $83 billion spending plan for  2010-11.

Or did he?

Some Democrats and the California School Boards Association are condemning the governor for cutting K-12 funding by $1.5 billion. As have other governors and Legislatures, Schwarzenegger appears to have manipulated the level of funding under Proposition 98, the primary source of money for schools and community colleges, said CSBA President Frank Hugh. “This year, it looks as though nothing has changed.”

Proposition 98 guarantees that at least 40 percent of state spending goes to K-12 and community colleges. The funding level is tied to state revenue, and arcane formulas with  factors including student population, cost of living and  per capita income.

Under most scenarios,  if the Legislature doesn’t fully fund the Prop 98 obligation, it must gradually repay what it owes in future years. But not in this particular case. The governor is saying that the state overpaid its Prop 98 obligation by $2.3 billion in 2008-09, when revenues came in far below what the governor and the Legislature had predicted. Therefore, the administration says, the IOU from  that year should be wiped out.

The technical reason, for Prop 98 mavens, is revenues were so low, it became a Test 1 year instead of Test 2 year. Under Test 1, there is no obligation to repay the IOU or “maintenance factor.” The difference would be $800 million less this year and next.

The Prop 98 level for 2009-10 would now be $49.9 billion instead of $50.4 billion. The state says it can find the savings without calling for midyear cuts from the schools.

Next year’s Prop 98 funding for K-12 would be $50 billion, an increase of $102 million. But it too would be higher, except that Schwarzenegger is proposing to replace the 6 percent sales tax on gasoline with an additional 10.8 cent excise tax on gas. There is reason to do so; the state has been sued for diverting the sales tax on gasoline to non-transportation uses. But revenue from the sales tax is included in the Prop 98 calculations; the higher excise tax  won’t be.  The difference would mean a loss of $836 million to schools and community colleges.

What’s indisputable is that, at least for now, schools and colleges would fare far better than others dependent on state services. That includes poor children whose health insurance could again be in jeopardy and families dependent on Medi-Cal. They’ll get whacked, especially if the federal government doesn’t deliver billions of dollars that Schwarzenegger claims is California’s due.

Spending for K-12 schools has been cut, by various calculations, between $13 billion and $17 billion over the  past two years.

Instead of praising the governor, the California School Boards Association is chastising him and staking out a Prop 98 higher figure, which will give it a cushion when it comes ultimately to compromising.

By John Fensterwald on January 8th, 2010