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Majority-vote state budget hits schools, redevelopment agencies

Yesterday, on a majority vote and for only the second time in twenty-years, the Democrat-led California legislature approved a state budget.

Cities and schools will feel further pain, mostly from accounting gimmicks that juggle state payment obligations at their expense.

Those gimmicks bridge the last $9.6 billion gap to get to a balanced budget, instead of further spending cuts or Governor Brown’s preferred five-year sales-tax extension.

The state will defer payment — that is, stall or stonewall on an fiscal obligation — of $3.4 billion to public schools, community colleges and the University of California. To meet payroll and other expenses that cannot be put off, these educational institutions will be forced to borrow to maintain cashflow — an additional cost ultimately paid by California taxpayers. Or the institutions must further cut their own budgets to make up the shortfall.

New Los Alamitos Unified School District Superintendent Sherry Kropp and Cypress School District Superintendent Beverly Hempstead will immediately face the question of how to manage their districts despite the state payment deferrals.

The state will swipe $1.7 billion from local redevelopment agencies, a theft that those agencies will likely take the state to court over.

The Cypress City Council, acting as the Cypress Redevelopment Agency, will have to decide whether to join with other redevelopment agencies in an effort to oppose the raid on redevelopment funds.

Confusing the picture is an unexpected increase in state tax revenue as of mid April. Rosy projections through June 2012 undermined the governor’s efforts to extend higher tax rates. However, no one knows whether revenue will remain above expectations, or drop back to earlier lower levels.