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California Budget Proposal Endangers Stimulus Funds for Education

Trapped in a deepening fiscal quagmire, California Gov. Arnold Schwarzenegger (R) has proposed a budgetary shift that could jeopardize federal stimulus funding

Jul 31, 202075697 Shares2102682 Views
Trapped in a deepening fiscal quagmire, California Gov. Arnold Schwarzenegger (R) has proposed a budgetary shift that could jeopardize federal stimulus funding for education, the San Francisco Chronicle reports.
Although $10 billion in stimulus funds for education has been granted to the state, those funds come with a caveat, as outlined by the U.S. Department of Education:
As part of the state’s application, each governor must include an assurance that the state will maintain the same level of support for elementary, secondary, and postsecondary education in FY 2009 through FY 2011 as it did in FY 2006.
This is to ensure that states use stimulus dollars to fund innovation and improvement in schools, rather than merely to plug budget holes. If California fails to ensure that its schools will receive the same amount of money from the state general fund as they did in 2006, the state will no longer qualify for stimulus funds for education.
But Schwarzenegger’s proposal leaves education funds unaccounted for until the state borrows money from local governments. According to the Chronicle:
The flaw in Schwarzenegger’s proposal centers on his plan to borrow $2 billion from local governments, which would then be used to pay for education. That move would free up $2 billion in the state’s general fund, which carries the $26.3 billion shortfall.
As a result, the Chronicle reports, California would not meet the Department of Education’s condition that the state maintains its 2006 level of support for education. The money borrowed from local governments would replenish funds to 2006 levels, but the stimulus provision requires that statefunding remain consistent.
Although California has received much of the $10 billion in stimulus funds it was allocated for education, Schwarzenegger’s maneuver could end up jeopardizing the rest of the money, and the initial grants may need to be repaid to the government. Secretary of Education Arne Duncan has warnedboth Tennessee and Pennsylvania lawmakers against similar proposals, but neither state suffers from as dire a budgetary crisis as California. With an unbalanced budget looking him down the nose nine days after California’s new fiscal year began, Schwarzenegger will need to find a sufficient compromise soon — one that isn’t as potentially crippling as his current proposal.
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