Legislation Update February: State Budget

2012-13 State Budget: School Funding Reform Proposal

Governor Brown’s January Budget proposes to resolve an anticipated $9.2 billion deficit and largely hinges upon voters approving a November 2012 revenue package that includes raising sales and income taxes. The proposal also includes significant reductions to health and human service programs.

For schools, the Governor’s proposal is one of the most far-reaching and robust changes to school finance seen in years. The major education proposals include the following:

Prop 98 funding — Under the Governor’s proposal, Prop 98 funding would increase from $47.7 billion in the current year to $52.5 billion in the budget year. However, due to significant manipulations of Prop 98, there is little spendable funding. Additionally, part of the increase is used to restore the $2.2 billion in ongoing inter-year deferrals.

Ballot Trigger Reductions – If voters do not approve the tax increase on the November ballot, the Prop 98 guarantee will drop by $2.4 billion in 2012-13. In addition, the budget proposes to shift K-14 General Obligation Bond debt service costs into Prop 98, resulting in a savings of $2.4 billion (this would also require a re-benching of Prop 98). As a result of these actions, the total cut to Prop 98 would be $4.8 billion. The $2.2 billion repayment of inter-year budget deferrals, as proposed in this budget, would not be implemented, thus retaining the inter-year deferrals into the next fiscal year. According to the Administration, failure to approve the Governor’s initiative would result in a reduction in education funding that would equate to a shortening of the school year by more than three weeks. Budget documents state that the Administration will work with school officials and stakeholders to develop legislation that protects education programs, but allows schools to develop and implement necessary contingency plans.

No Cost of Living Adjustment — The budget does not provide a cost of living adjustment (COLA) for any K-14 program in 2012-13. The projected 2012-13 COLA is 3.17 percent, which, if funded, would have provided a $1.8 billion increase to the extent Proposition 98 resources were sufficient to provide that adjustment. A deficit factor will be established in 2012-13 for school district and county office of education revenue limit apportionments to reflect the lack of a COLA, ensuring that funding in future years is used to restore this adjustment. The Department of Finance (DOF) estimates deficit factors as the following:

  • 21.666% for school districts
  • 22.497% for county offices of education

School Finance Reform – The budget proposes to move most categoricals into permanent flexibility. It would also begin a six-year phase-in of a new weighted student formula by redistributing the LEAs’ revenue limit and categorical funding. Specifically, his proposal:

  • Moves all categoricals into flexibility except Special Education, QEIA, Proposition 49 After School Programs, and Child Nutrition
  • Uses 2011-12 as the funding base if not in Tier III
  • Allocates 20% of all current categorical and revenue limit funding in the budget year through a weighted pupil formula
    • Formula based on counts of EL pupils and NSLP-eligible pupils with no double counting
    • Base per pupil funding would be approximately $4,900
    • Weights start at 1.37, and adjust up for concentration
    • Modified version of Bersin, Kirst and Liu – Getting beyond the facts: reforming California school finance
  • Makes funds discretionary, and not tied to pupils
  • Begins phase-in with 5% for 6 years with no hold-harmless beginning in 2012-13 (redistribution – there will be winners and losers)
  • Changes apply to charter schools as well as school districts, but not to county offices of education

K 14 Mandates Funding — The Governor proposes to eliminate reimbursements for some mandates and offers two ways to receive funding for the remaining mandates. The first approach would continue with the current claiming process. The second approach it to apply for one-time funding under a new categorical block grant that would be available to LEAs that choose to fully comply with all specified mandates. DOF would require a new compliance process to show LEAs complied with the mandates through compliance measures that have yet to be detailed.

2011-12 State Budget: Home-to-School Transportation Funding Shift

As a result of the budget “trigger” being pulled in December, the remainder of the Home-to-School Transportation funding was eliminated for 2011-12. Over the past couple of weeks, the Legislature moved quickly to reverse this cut. As media reports highlighted, the transportation cut has disparate impacts across the state. The Senate Budget Committee introduced legislation (SB 81) to restore the $248 million cut to Home-to-School Transportation in 2011-12 and instead further reduce school district, county office, and charter school revenue limit funding by an additional .65 percent.

This decision to move the $248 million transportation cut to revenue limits picked up steam when the powerful Education Coalition signaled support for the shift. The statewide associations that make up the coalition cited a broad principle that when the state is cutting school funding, it ought to do so in the most equitable way possible. While all school districts face a roughly $13 per ADA reduction from the “trigger” revenue limit reduction, some school agencies receiving Home-to-School Transportation funds face dramatic additional reductions, in some cases as much as $1,700 per ADA. These districts are mostly small and rural, where the transportation needs are greatest and the ability to absorb the cut into other areas of the budget is more difficult.

The bill passed through the Legislature with record speed and was signed by the Governor on February 10. It takes effect immediately.

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