A coalition of education organizations and nearly 100 school districts has called on U.S. Secretary of Education Arne Duncan to deny Gov. Schwarzenegger’s request for the federal Okay to cut K-12 spending as much as he proposes. If Ducan buys their argument, the governor would have to come up with an additional $850 million for schools.

The ed groups appear to make a strong case.

In agreeing to accept $6 billion in federal stimulus money for public schools, Schwarzenegger, like other governors, had to agree to maintain the amount of K-12 spending as before the recession. The point was to prevent states from funneling federal money intended for schools to other priorities, like roads and prisons, or to reduce taxes.

Faced with a $21 billion budget deficit over 18 months, Schwarzenegger is seeking  to cut school spending an additional $3.1 billion and is requesting that Duncan grant a waiver. Duncan can do so, as long as the state budget commits at least the same proportion to K-12 funding as in the past, even if total state spending drops.

The coalition, which includes the California school boards and administrators associations, argue in a Feb. 5 letter that Schwarzenegger is using gimmicks and funny accounting to make the wavier request look legit.

One way, accounting for $250 million, the groups argue, is to spend money this year that’s already been committed for 2010-11 for a program benefiting some low-income schools.  Known as the Quality Education Investment Act, the program is the result of a legal settlement a few year ago between the California Teachers Association and Schwarzenegger. (The program could prove to be an inefficent use of money, but that’s another story.)  Forward funding of money, putting future spending in jeopardy, violates a “bright line” of accounting, the letter says.

The bigger issue involves the way Schwarzenegger has manipulated revenue to lower the state’s obligation to fund schools. The governor is proposing to end the sales tax on gasoline, which counts toward the Proposition 98 obligation, and replace it with an excise tax on gas, which doesn’t. As the ed groups point out, total state revenues are projected to increase  $1.2 billion next year. But the governor wants to use the money elsewhere, so he has lowered the Prop 98 obligation.

If the feds look at education as a percentage of total revenues, not just the manipulated Prop 98 numbers, Schwarzenegger would have to spend $600 million more next year to comply with the stimulus law’s requirement.

With most federal stimulus dollars running out – and districts about to lay off thousands of teachers for lack of money – it will be interesting to see which legal – or political – argument moves Duncan.

(Update: Senate Democrats were poised to vote for a similar tax swap on Tuesday, although they would also rescind corporate tax breaks to compensate for lost revenue  for schools. Faced with a threatened veto by the governor, the Democrats postponed a vote, for now. )

By John Fensterwald on February 21st, 2010