Stock Market Losses Likely to Force More School Cuts

The S&P shocked the world Monday by downgrading the US credit rating from AAA to AA+ and sent the .

But amidst the stock market’s dizzying tumbles and gains, the has resolutely kept its eye on one figure: $4 billion. If the state can raise this anticipated revenue, school budgets will not be affected. Should the state not hit this figure, further cuts will be made to school districts already operating with limited .

The state will assess the state’s proximity to the $4 billion “trigger” figure on Dec. 15, according to the district’s Chief Business Official Raul Parungao.

The School Services of California, an independent finance resource for educational agencies, said in its recent report that it believed the state would not hit expected revenues, making midyear cuts likely.

“There is no question that these recent developments threaten California's aggressive revenue estimates, which are now much less likely to be met,” it wrote.

Should the state only make $3 billion or more, no budget changes will be made.

If the state only raises $2 to 3 billion, there will be $23 million cuts in childcare programs, but not to preschool. Community colleges would face a $30 million cut and have to charge $10 per unit more for classes. Higher education would suffer $548 million cuts as well.

Any revenue less than $2 billion would include the aforementioned cuts and affect K-12 budgets, a budget safe haven that the governor had promised not to touch. These budgets would suffer $1.5 billion cuts, of $250 per student in the Redwood City School District. School transportation would suffer $248 million cuts, and community colleges would face an additional $72 million reduction.

Perhaps most alarmingly, the school year could be cut up by another seven days, in addition to the five days that districts can cut from the typical 180 day school year.

The state relies on capital gains taxes as part of its revenue, but the stock market losses over the past week have “wiped out the gains of the past year,” according to the SSC report.

The Public Employees’ Retirement System (PERS) and State Teachers’ Retirement System (STRS) had reported excellent returns, according to the report, but the stock market gains made in the last months could have been lost in the past few days. The state, employer or employee contribution rates to PERS and STRS may increase.

The district can only wait for the Dec. 15 Judgment Day and continue on with the school year that has already felt the brunt of several cuts.

“We’ve been proactive in balancing our budget,” Parungao said of $1.5 million cuts.

The $250 cut per student would increase the the Redwood City School District and other surrounding districts. Redwood City relies primarily on state funding while other districts receive thousands of dollars per student from property taxes in addition to the same state funding.