Unprecedented revenue growth drives historic Proposition 98 funding.

California tax revenue continued to grow at an extraordinary rate after the initial shock of the COVID-19 shutdowns. The “big three” taxes (personal income, corporations and sales) grew about 30% in 2020-21 and an additional 20% in 2021-22. General Fund revenues that count toward the calculation of the Prop. 98 Guarantee reached just over $220 billion in the 2022 Budget Act. That translated to historic growth in the Prop. 98 Guarantee, with expenditures for K-14 schools surpassing $110 billion. This level of funding is roughly $16.5 billion above the previous high mark for Prop. 98 in the 2021 Budget Act.

LCFF increase, COVID attendance relief and one-time funding among highlights of the Budget.

Once the final calculations were made in the K-12 budget clean-up bill, the total increase to the LCFF base grant amount over the level funded in the prior year was 13.26%, which includes a cost-of-living- adjustment (COLA) of 6.56% and an additional augmentation of 6.7%. The budget included both a three-year rolling average ADA option to help school districts with declining enrollment, and a current year ADA fix that protects LEAs from attendance disruptions caused by COVID and related issues. In addition, the budget included two large block grants of one-time funding, a nearly $8 billion Learning Recovery Block Grant and a roughly $3.5 billion Arts, Music, and Instructional Materials Discretionary Block Grant.

Revenue situation uncertain for next several years.

Economic conditions, including high inflation, rising interest rates, supply chain disruptions and asset volatility, combined with the impacts of the Russian war in Ukraine, are creating a great deal of uncertainty related to revenue collections for the next few years. While it is too early to make predictions about the next California budget, revenue collections are down over the last month of the prior fiscal year and the first couple months of the current fiscal year. It appears likely that General Fund revenues and the Prop. 98 Guarantee hit a high mark in the 2022 Budget Act that will be difficult to improve upon (or even match) in the near future. Local education agencies (LEAs) may want to focus on stabilizing and maintaining existing programs rather than growth and expansion.

Major TK-12 components of the 2022 Budget Act.

Some TK-12 highlights of the budget include:

• LCFF base grant increase – 13.26% above prior year
• COE funding – More than $100 million additional for COE operation grants and to provide a minimum state aid add-on
• COVID ADA disruption protections – For 2021-22, eligible classroom-based LEAs will be funded at the greater of their current year ADA or their current year enrollment adjusted for pre- COVID absence rates
• Declining enrollment relief – Moving forward, school districts can utilize the greater of current year, prior year, or the average of three prior years’ ADA
• Learning Recovery Emergency Block Grant – $7.9 billion to LEAs based on ADA multiplied by unduplicated pupil percentage, available to increase learning time, close learning gaps, etc.
• Arts, Music, and Instructional Materials Discretionary Block Grant – $3.6 billion to all LEAs based on ADA, available for any operational costs but encourages use for instructional materials and professional developments related to arts, music and other subject areas
• Expanded Learning Opportunities Program (ELO-P) – Total ongoing funding expanded to $4.4 billion
• Community Schools – $1.1 billion expansion of community schools grant to cover every eligible LEA willing to apply
• Transitional Kindergarten – Continues rollout of program, funding provided to mitigate staffing needs
• Special Education – Additional $500 million to raise the special education base rate to $820
• School Nutrition – $650 to implement universal meals in 2022-23 school year and additional funds to augment meal reimbursement rate and improve kitchen infrastructure
• Transportation funding increase – $637 million in additional funding to reimburse LEAs for up to 60% of prior year transportation costs reported to the state

The Governor signed the following school finance bills:

Attendance

• AB 1777 (Aguiar-Curry) – Migrant education: extended school year program: average daily attendance.
  AB 1777, commencing on January 1, 2024, authorizes up to two local educational agencies (LEAs) to provide an extended school year program to migratory pupils who, due to family agricultural migratory movement, enroll in kindergarten, including transitional kindergarten, or any of grades 1 to 6, inclusive, on or after March 1 of the school year and depart on or before December 1 of the next school year, and authorizes average daily attendance (ADA) funding for those pupils if certain requirements are met.
  Chapter 483, Statutes of 2022 School Finance
• AB 178 (Ting) – Budget Act of 2022.
  Termed the Budget Bill Junior, AB 178 makes technical and substantive changes to SB 154, the Budget Act of 2022.
  Chapter 45, Statutes of 2022
• AB 179 (Ting) – Budget Act of 2022.
  Another Budget Bill Junior, AB 179 makes technical and substantive changes to the Budget Act of 2022 to incorporate changes made as part of the August budget package.
  Chapter 249, Statutes of 2022
• AB 181 (Committee on Budget) – Education finance: education omnibus budget trailer bill.
  AB 181 is the K-12 education omnibus trailer bill that includes many K-12 appropriations and policy changes that go along with the Budget Act of 2022.
  Chapter 52, Statutes of 2022
• AB 182 (Committee on Budget) – COVID-19 emergency response: Learning Recovery Emergency Fund: appropriation.
  This bill established the Learning Recovery Emergency Block Grant and appropriates $7,936,000,000 for that purpose. The bill requires the State Superintendent of Public Instruction (SPI) to allocate these appropriated funds to school districts, county offices of education (COEs), and charter schools based on their 2021-22 unduplicated pupil percentage. The bill authorizes allocated funds to be used for learning recovery initiatives through the 2027–28 school year that, at a minimum, support academic learning recovery, and staff and pupil social and emotional well-being. The bill requires LEAs receiving these allocations to report interim expenditures to the California Department of Education (CDE) by December 1, 2024, and December 1, 2027, as well as a final report no later than December 1, 2029.
  Chapter 53, Statutes of 2022
• AB 185 (Committee on Budget) – Education finance: education omnibus trailer bill.
  AB 185 is the “clean-up” education trailer bill, which includes, among other things, additional clarity regarding the 2021-22 ADA-protection language included in AB 181, an extension of the ability of students to complete a career technical education (CTE) course to meet graduation requirements, in lieu of a course in visual or performing arts or foreign language, until July 1, 2027, an extension of the Districts of Choice program until July 1, 2028, new procedures regarding recouping wage overpayments, and language establishing an alternative design-build contract process.
  Chapter 571, Statutes of 2022
• AB 1491 (McCarty) – Adult education: consortia: carryover of allocated funds.
  Current law establishes the Adult Education Program and authorizes a community college district, school district, or COE, or a combination of these entities in a joint powers authority, to be members of an adult education consortium. Current law requires that the amount distributed to a member of a consortium not be reduced, except as provided, unless the consortium makes specified findings related to the member for which the distribution would be reduced, including that the member has been consistently ineffective in providing services that address the needs identified in the adult education plan. AB 1491 authorizes a consortium to reduce a member’s allocation by no more than the amount of the member’s carryover, if the consortium makes a finding by a majority vote, based on the member having excessive carryover for at least 2 consecutive fiscal years beginning with the 2022–23 fiscal year, that the member has been consistently ineffective in providing services that address the needs identified in the adult education plan.
  Chapter 519, Statutes of 2022
• AB 1912 (Bonta, Mia) – Emergency apportionments: closure and consolidation requirements.
  AB 1912 requires a school district under financial distress, before approving the closure or consolidation of a school, to conduct an equity impact analysis in its consideration of school closures or consolidations. The bill also requires the governing board of the school district to develop a set of metrics for the development of the equity impact analysis, and to make those metrics public at a regularly scheduled meeting of the governing board of the school district so that the public can provide input regarding the metrics being used to conduct the analysis. Additionally, AB 1912 requires a school district to provide its recommendations regarding school closures and consolidations to the public at a regularly scheduled meeting and to show how the list of closures was prepared. The bill ’s provisions do not apply to a school district’s closure of a school due solely to the unsafe condition of the school’s facilities and will become inoperative as of July 1, 2028.
  Chapter 253, Statutes of 2022
• AB 2038 (Gipson) – School finance: administrative employees to teacher ratio.
  Current law, for purposes of determining the allowable ratio of administrative employees to teachers for the San Diego City School District, excludes from the numbers identified pursuant to the above the number of employees and the full-time equivalent of all of the fractional time of employees serving the school district in positions mandated as the result of the school district’s court-ordered integration plan. This bill extends this exclusion to the Los Angeles Unified School District (LAUSD). The bill also, for purposes of calculating the administrative employee-to-teacher ratio in the 2022–23 to 2024–25 fiscal years, inclusive, authorizes LAUSD to include in the definition of “teacher,” when calculating the ratio of administrative employees to teachers in the 2022–23 to 2024–25 fiscal years, inclusive, teachers who spend a majority of their time with pupils as intervention specialists or teachers who spend a majority of their time on a school campus providing training, coaching, or professional development to other teachers, or both of those.
  Chapter 908, Statutes of 2022
• SB 154 (Skinner) – Budget Act of 2022.
  This is the main 2022 Budget Act bill that contains most of the appropriations to fund government activity for 2022-23.
  Chapter 43, Statutes of 2022

Capitol Advisors Group has produced a set of comprehensive client briefs detailing new education laws that were passed by the Legislature and signed into law by Governor Newsom in 2022. Each brief is organized by subject area and includes an executive summary highlighting major changes we think you should know about. Bills signed by the Governor take effect on January 1, 2023, unless the bill specifically states otherwise.