Last week, Governor Schwarzengger became the nation’s first governor to file an application with the U.S. Department of Education for monies from the “Education Stabilization Fund” (ESF) portion of the “State Fiscal Stabilization Fund” (SFSF) that was established by Congress in the American Recovery and Reinvestment Act (ARRA). California is slated to receive about $4.9 billion from ESF, based on a population formula approved by Congress.

The purpose of the ESF is to restore the four public education segments to specified benchmarks (based on the higher of the levels of state support provided in 2007-08 and 2008-09). California would receive about $3.1 billion of the ESF monies on an expedited basis, following federal review of the application and the legislative review of the Governor’s spending plan. The federal government would allocate the remaining $1.8 billion in the fall, provided it is satisfied that the State of California is adhering to specified assurances in its treatment of the first $3.1 billion.

The Governor’s application calls for $268.5 million of one-time funds for the California State University (CSU). This amount includes $255 million that was already built into the CSU budget approved by the Legislature and Governor last February. Because they were part of the approved February budget, these funds are not “new” and do not change the CSU’s difficult budget circumstances.

The Governor’s application does also include $13.5 million of “new” federal funds. These funds are one-time, meaning they will not continue into future budgets. Also, the amount is too small to really change the CSU’s budget circumstances. Even counting these new funds, the CSU is enduring almost $587 million of impacts across the 2008-09 and 2009-10 fiscal years in terms of budget cuts and mandatory new costs.

While the allocation of these federal funds to CSU is welcome, we must keep in mind that we still face great fiscal uncertainties. The next milestone where we expect to have better information about the state fiscal condition will be after the May 19th special election and after the release of the Governor’s May Revision, expected on May 28th.