SAN FRANCISCO — California Gov. Jerry Brown’s proposed budget would likely cause a “substantial” amount of fiscal uncertainty for the state’s school districts, Fitch Ratings said in a report released Tuesday.
Fitch analysts said school districts face major risks from budget cuts Brown’s budget would trigger in the middle of the fiscal year if voters reject the governor’s tax increase initiative in November.
The cuts would force scheduled funding to fall 6% compared with fiscal 2012 levels, which were already down by more than 3% last year, according to Fitch.
“Some districts would face rapid deterioration of their financial positions and overall credit-worthiness without swift implementation of mid-year cuts,” the report said.
Brown has proposed a $92.5 billion spending plan for the fiscal year ending June 30, 2013, that attempts to close a $9.2 billion hole. So far, revenues have continually come in below forecasts in the proposed budget.
The Democratic governor’s revised budget to be released May will likely change to account for the differences and a new tax plan.
The governor last week pivoted on his tax proposal for the November ballot by merging his initiative proposal with one by a coalition of education groups, including a teachers’ union.
The new initiative, which Brown has said could raise nearly $9 billion, has a lower sales tax increase, but higher income taxes on the wealthy compared with his early proposal. It also should raise more money for schools.
If voters reject the tax increases, state spending for schools, universities and community colleges would be cut, according to the proposed budget.
Fitch said the governor’s budget does increase the size of total funding that will help schools’ cash flows. However, it said overall scheduled funding would decline a little after adjusting for the end of federal stimulus spending.
Brown’s budget also proposes an overhaul of how California finances schools.
Fitch analysts are neutral on the overhaul as it would simplify school funding but would not increase spending, and would benefit some at the expense of others.
The rating agency said the budget’s improved financial flexibility for school districts would not mitigate short-term funding risks.
