Standard & Poor’s said in a report Wednesday that California’s newest budget proposal would allow for more financial flexibility for schools.
“Standard & Poor’s further believe that the governor’s proposed changes to the education funding formula, if adopted, will strengthen school district credit on average,” the report said. “In a state funding environment characterized by fewer constraints on spending, pressure to restore programs, and continued uncertainty with respect to state funding, financial management could become an increasingly important factor in determining credit quality.”
The firm said that it would take years to fully restore base funding to a minimum level guaranteed by the state’s Proposition 98.
Because Proposition 98 forces the state to spend a certain amount of its tax take on education, new revenue is largely slated for schools and universities in Gov. Jerry Brown’s new proposal.
In the May Revision budget, Brown’s administration forecast that weaker tax collections will erase much of the $4.5 billion of unexpected tax revenues collected since January.
The Democratic governor’s new general fund spending plan of $96.4 billion for fiscal 2014 is a 1.3% drop from his $97.7 billion proposal in January.
State general fund expenditures would still be 3.6% higher than last year’s $93 billion budget, driven partly by the passage of a new taxes to support education.