When state lawmakers missed their deadline Monday to agree on a budget for 2003-04, they froze a river of funding to community colleges. However, officials say local colleges were prepared for a delay in state funding and will survive with reserves and interim loans to keep doors open to students.

By law, the state is supposed to pass its budget no later than July 1. Last year, lawmakers did not agree on a spending plan until nearly two months after the mandated deadline. In the past when a state budget was not passed on time, colleges still received funding from the state to stay in business. A May 2003 state Supreme Court ruling, however, put payments to colleges in jeopardy.

The ruling, a result of a Howard Jarvis Taxpayers Association lawsuit against State Controller Steve Westly, found that California has no legal right to make certain payments without a spending plan in hand. The ruling also capped state employees' wages at minimum wage in the event a budget is not passed by the deadline.

The Howard Jarvis Taxpayers Association filed the lawsuit with hopes that a court ruling would force state legislators to take the budget deadline more seriously. Despite the ruling, however, an approved spending plan was not in hand Monday.

Ray Giles, director of special programs for the Community College League of California, said Westly's announcement last week that the colleges wouldn't get money after June 30, ignited fear among faculty and students at community colleges throughout the state.

Without an on-time approved budget, the state will not be able to pay July's $200 million payment to California's 108 community colleges, Westly said. July's payment is about 8 percent of the annual state funding to community colleges.

"(Colleges) have been planning for this possibility for some time. There's no crisis going on, but there's a heck of a lot of concern," said Giles, whose office represents Mt. San Jacinto College in San Jacinto and Menifee, Palomar College in San Marcos, and MiraCosta College in Oceanside.

MSJC, which gets much of its funding from the state, will pay its bills with borrowed money until the state passes the budget, said Bill Marchese, college spokesman.

"We're not going to cancel classes or anything like that," he said.

Faculty members at area colleges are on contract and will not have their pay reduced to minimum wage, Marchese said.

Palomar College will be able to cover July's expenses to keep the school afloat, said Jerry Patton, the college's vice president for finance and administrative services. In August, however, the college may have to borrow money if a state budget is not approved, he said.

Marchese said Mt. San Jacinto's interim loan will run dry in September. The college has not determined what it would do if the state's budget is not approved by then.

"We'll greet the devil when he says 'Hello' if we have no budget at that time," he said.

While community colleges, by law, can't receive their slice of funding from Sacramento without an approved state budget, public schools are in better shape.

School districts throughout California will still receive their per-student funding from the state starting in July, payments that make up about 90 percent of funding to local districts.

However, program-specific funds, for such programs as class-size reduction and adult education, are frozen with the uncertain state budget. Local districts will be able to cover the funding gap by borrowing from the general fund or district reserves until a state budget is approved.

Southwest County school districts approved 2003-04 spending plans in June based on the governor's latest budget proposal, which was presented in mid-May and mapped out millions in cuts to program-specific funding for schools.

Assistant Superintendent Jeff Okun, who was responsible for drafting a $140.6 million spending plan for the Temecula Valley Unified School District, said districts are more concerned with whether the state will cut deeper into public education.

"It's not unusual for the state to not adopt a budget on time. The concern is the uncertainty in funding," he said.