We have extensive information on the state budget early and expect the Governor will formally release the budget as early as tomorrow morning (was originally scheduled for release on Friday). We want to give you a preview of the key components of the Governor’s proposals in the area of K-12 Education.A few key points up front, 1) you may have been following the interest among the legislative leadership regarding the creation of Transitional Kindergarten for all 4-year olds. Because the administration does not proposes to do this in this budget, expect a big debate in 2014 over this issue; and 2) There will be competing priorities for the use of one-time funds in 2014-15 – particularly around calls for additional funding for common core implementation.

We will follow-up with additional commentary and analysis.

The Governor’s 2014-15 budget proposes the following in the area of K-12 education:

Increases Prop 98 funding to $61.6 billion – “The Budget includes Proposition 98 funding of $61.6 billion for 2014-15, an increase of $6.3 billion over the 2013 Budget Act level. When combined with increases of $3.4 billion in 2012-13 and 2013-14, the Budget proposes a $9.7 billion investment in K-14 education. Building off the increases in funding provided in the Budget Acts of 2012 and 2013, the Budget proposes investments for 2014-15 that will significantly increase funding distributed under the Local Control Funding Formula, providing additional funding to school districts and students most in need of these resources.”

Eliminates deferrals – According to the budget documents, “The Budget also eliminates all remaining budgetary deferrals, ensuring that schools receive all of their resources on time.” The budget proposes repayment of approximately $6.4 billion in remaining inter-year K-14 deferrals.

Constitutional amendment to strengthen “Rainy Day Fund” and create a Prop 98 Reserve – the administration proposes “Doubling the maximum size of the Rainy Day Fund from 5 percent to 10 percent of revenues and creating a Proposition 98 reserve, whereby spikes in funding would instead be saved for future years of decline. This would smooth school spending to prevent the damage caused by cuts. The reserve would make no changes to the guaranteed level of funding dedicated to schools under Proposition 98.” The administration is proposing this for the November 2014 ballot.

Additional funding for LCFF implementation – the Governor proposes “a second-year investment of $4.5 billion in the Local Control Funding Formula, enough to eliminate more than 28 percent of the remaining funding gap.”

Additional Investment in Adult Education – According to the Administration, “Adult education consortia plans will be completed by early 2015, and the Administration intends to make an investment in the 2015-16 budget for adult education, including adult education provided in county jails, through a single restricted categorical program. The Administration will continue to work jointly with the State Department of Education and the California Community Colleges Chancellor’s Office to complete the adult education consortia plans, while working with the Legislature to ensure that any legislation pertaining to adult education aligns with and supports the planning process currently underway, and provides consistent guidance to the K-12 and community college districts.”

Common Core Implementation – The governor proposes an increase of $46.5 million to implement AB 484 (Bonilla, 2013). We are working to understand specifically how this funding would be used under the administration’s proposal.

Prop 39 Energy Efficiency Investments – Of the fund made available under Prop 39, “The Budget proposes to allocate the $363 million of energy efficiency funds available in 2014-15 as follows:

• $316 million and $39 million to K-12 school and community college districts, respectively, for energy efficiency project grants.
• $5 million to the California Conservation Corps for continued technical assistance to K-12 school districts.
• $3 million to the Workforce Investment Board for continued implementation of the job-training program.

“While the Budget does not propose funding for additional revolving loans under the Energy Conservation Assistance Act (which was provided $28 million in 2013-14), this program will continue to be considered for future funding.”

No State School Facilities Bond for 2014 – The administration proposes to continue the dialogue around school facilities needs in the state as part of the 2014 Five Year Infrastructure Plan. More specifically, the administration “proposes to continue a dialogue on the future of school facilities funding, including consideration of what role, if any, the state should play in the future of school facilities funding. This infrastructure discussion should also include the growing debt service costs associated with the state’s increased reliance on debt financing.”

“While the state examines the future of its role in school facilities, the Budget also includes the following proposals totaling an investment in school facilities of nearly $400 million:

• “Transfer $211 million of remaining School Facility Program bond authority from the specialized programs to the core new construction ($105.5 million) and modernization ($105.5 million) programs to continue construction of new classrooms and modernization of existing classrooms for districts that have been awaiting funding. Approximately $163 million, $3 million, $35 million, and $10 million of general obligation bond authority currently remains in the Seismic Mitigation, Career Technical Education, High-Performance Incentive Grant, and Overcrowding Relief Grant programs, respectively.
• “Dedicate $188.1 million of one-time Proposition 98 General Fund to the Emergency Repair Program to provide grants or reimbursement to local educational agencies for the cost of repairing or replacing building systems that pose a health and safety threat to students and staff at eligible school sites. Schools previously identified by the California Department of Education as ranked in deciles one, two, or three based on the 2006 Academic Performance Index are eligible for funding.”

Revises Independent Study – The administration proposes address the paperwork burden and cumbersome nature of the current Independent Study law. According to the administration, “to address the deficiencies in the existing independent study process and provide schools with additional instructional flexibility, the Budget proposes legislation to both streamline and expand the instructional opportunities available through this process.

This mode of learning has the potential to solve problems that are not easily addressed in traditional classroom-based settings and may help fill instructional gaps, while stabilizing or increasing the attendance of students who may have otherwise dropped out or transferred to other private instructional providers to accelerate their educational progress.

“Schools offering instruction through this new streamlined process shall provide every student with a high quality education, and must ensure that independent study courses meet the following requirements:

• “Are of the same rigor and educational quality as their classroom-based equivalent courses.
• “Maintain the same number of total educational minutes as their classroom-based equivalent courses.
• “Provide adequate teacher and student interaction, including at least one meeting per week to verify the student is working toward successful course completion.
• “Maintain classroom-based equivalent pupil-to-teacher ratios unless a new alternative ratio is collectively bargained.
• “Do not result in the local educational agency claiming more than one total unit of ADA per year for each student enrolled in independent study.”

Significant K-12 Budget Adjustments – Following is a list of the K-12 significant adjustments listed in the Administration’s budget proposal:

• K-12 Deferrals — An increase of more than $2.2 billion, when combined with the $3.3 billion Proposition 98 General Fund provided from 2012-13 and 2013-14 funds, to eliminate all remaining outstanding deferral debt for K-12.
• School District Local Control Funding Formula — Additional growth of approximately $4.5 billion for school districts and charter schools in 2014-15, an increase of 10.9 percent.
• County Office of Education Local Control Funding Formula — An increase of $25.9 million for county offices of education in 2014-15.
• Charter Schools — An increase of $74.3 million to support projected charter school ADA growth.
• Special Education — A decrease of $2.2 million to reflect a decline in Special Education ADA.
• Cost-of-Living Adjustment Increases — The Budget provides $33.3 million to support a 0.86 percent cost-of-living adjustment for categorical programs that remain outside of the new student funding formula, including Special Education, Child Nutrition, American Indian Education Centers, and the American Indian Early Childhood Education Program. Cost-of-living adjustments for school districts and county offices of education are provided within the increases for school district and county office of education Local Control Funding Formula implementation noted above.
• Emergency Repair Program — An increase of $188.1 million in one-time resources for the Emergency Repair Program.
• Local Property Tax Adjustments — An increase of $287.1 million for the school district and county office of education local control funding formulas in 2013-14 as a result of lower offsetting property tax revenues. A decrease of $529.7 million for school districts and county offices of education in 2014-15 as a result of increased offsetting local property tax revenues.
• Average Daily Attendance — A decrease of $214.5 million in 2013-14 for the school district and county office of education local control funding formulas as a result of a decrease in projected ADA from the 2013 Budget Act. A decrease of $42.9 million in 2014-15 for school districts and county offices of education as a result of projected decline in ADA for 2014-15.

A link to the Governor’s entire budget proposal can be found here.

Thanks,

-The Team at Capitol Advisors

Barrett Snider
Partner
Capitol Advisors Group
925 L Street, Suite 1200
Sacramento, CA 95814
916.557.9745  office
916.548.0409  mobile
916.443.7468  fax
www.capitoladvisors.org