SACRAMENTO, CA - When Governor Gray Davis released his proposed 2003-04 state budget last week, there was lots to complain about, such as job-killing tax increases. That having been said, Davis correctly recommends that a slew of special-interest education spending programs be consolidated into a large block grant that will allow greater funding flexibility for local schools.

Of the $28 billion in state General Fund spending on education, close to $13 billion consists of so-called categorical programs, which are programs that earmark money for specific purposes such as desegregation and adult education. These programs have been roundly criticized by the state Legislative Analyst's Office for restricting needed local flexibility, demonstrating no conclusive evidence of success, fragmenting local programs, creating negative financial incentives, and blurring accountability for meeting student needs.

In its recent briefing, "A Ten-Point Agenda for Improving Education in California," the Pacific Research Institute advises that most categorical programs be eliminated and the money be turned into a block grant that would give local schools greater discretion to meet the needs of their students. Davis now proposes just that.

The governor wants to consolidate 64 categorical programs into a $5.1 billion block grant that schools could use for teacher professional development, instructional materials and technology, specialized and targeted instructional programs, school safety, and student services. Davis and others rightly believe that the added flexibility will help make up for any education spending reductions that are enacted.

As worthy as the governor's proposal is, many expensive categorical programs are not part of the plan. For example, class-size reduction is exempted from the Davis scheme.

From 1996-97 to the current 2002-03 budget, the state has spent more than $10 billion to reduce class size. Last February, a research consortium consisting of RAND, the American Institutes of Research, and other organizations issued a report that found that, based on California test scores, "no strong relationship can be inferred between [student] achievement and [class-size reduction]." This is not surprising since the study also found that class-size reduction hasn't fundamentally changed the content or methods of K-3 instruction. In other words, schools that reduce class size but still use ineffective curricula and teaching methods are likely to continue to perform poorly.

Over the summer, the consortium released its final report on the state program and again found that there was no conclusive evidence that class-size reduction was responsible for a rise in test scores.

Further, class-size reduction creates financial hardships on local districts. According to the consortium's February study, two-thirds of school districts reported that state funding wasn't enough to cover the cost of reducing class size. Because class-size reduction requires more teachers, the cost of teacher salaries often grows faster than the state reimbursements given to local districts to reduce class size. The program creates a local deficit that, according to experts, is growing and which forces districts and schools to "reallocate funds and space away from a variety of support and educational programs, and this reallocation has not lessened over time." Eliminating class-size reduction would also lessen the need to pass local school construction bonds that increase homeowners' property taxes.

Reforming categorical programs is a good idea. Now, however, is not the time for half measures. The governor says that the budget crisis requires hard choices. One of them should be adding class-size-reduction funding to the block grant.

Lance Izumi is a Senior Fellow in California Studies at the California-based Pacific Research Institute for Public Policy. He can be reached via email at lizumi@pacificresearch.org.