On Tuesday, California Governor Gavin Newsom released his proposed 2023-2024 California budget. Unlike last year, when we experienced record surpluses, the budget recognizes that revenues are coming in well below projections and may continue to decline. The budget comes in at $297 billion dollars with a deficit of around $22.5 Billion. With declining revenue, the Governor has made some cuts to existing programs and stopped expanding other programs.

That said, education as a whole avoids most of these cuts. Proposition 98 is funded at $108.8 billion, which is $1.5 billion lower than last year’s projections but still represents a significant state investment in education. Total education funding, including all dollars, is $128.5 billion. K-12 per pupil funding totals $17,519 Proposition 98 General Fund and $23,723 when including all funding sources.

The COLA, for almost all educational programs and special education, is funded at 8.13%. Along with the Proposition 98 funding level, this is a massive win for the education community. Additionally, the Governor has funded a new equity multiplier at $300 million to provide funds for some of the state’s neediest students. This funding is the culmination of efforts by Secretary of State Shirley Weber and her daughter Assemblywoman Akilah Weber. During her time in the State Assembly, Secretary Weber always authored legislation to provide funding for these students, and her daughter continued those efforts over the last two years. The administration has finally agreed to the funding. The Governor also reaffirmed his commitment to Universal Transitional Kindergarten by 2026 ($855 Million) and strengthening the State’s Preschool Program ($116.3 Million). Additionally, the Governor funds Proposition 28, passed by voters last year. It creates a new Arts, Music, and Instructional Materials Block Grant.

Other education funding of note, includes:

Propostion 98 Rainy Day Fund – over $8 Billion
Literacy Recovery Emergency Block Grant – $7.9 Billion one-time funding
Educator Effectives Block Grant – $1.5 Billion one-time funding
$250 Million one-time funding for literacy coaches and reading specialists
$50 Million one-time funding for professional development for educators on learning acceleration in math, literacy, and language development
$15.2 Million for dyslexia research and screening tool pilot projects
$15 Million one-time funding to support 6,000 teachers to receive their supplementary state certification in reading and literacy
$10 Million one-time funding to train educators in evidence-based literacy instruction, literacy interventions, and executive functioning skills
$30 Million one-time funding for the Charter School Facility Grant Program
$3.8 Million to support the K-12 High Speed Network Program (K12HSN)
$3.5 Million for all middle and high school sites to maintain at least two doses of naloxone hydrochloride or another medication to reverse an opioid overdose

Governor Newsom’s budget also continues to pursue the reforms he has targeted for the state’s Special Education Local Plan Areas (SELPAs) by implementing some new proposals. These are:

Limiting the amount of additional funding that SELPAs are allowed to retain for non-direct student services before allocating special education base funding to their member local education agencies.
Stabilizing current SELPA membership by extending the moratorium on the creation of new single-district SELPAs by two years from June 30, 2024, to June 30, 2026.
Increasing fiscal transparency by requiring CDE to post each SELPA’s annual local plan, including their governance, budget and service plans, on its website.

Other than direct funding augmentations, many of Governor Newsom’s proposals will require implementing language in the education trailer bill or bills. Trailer bills are policy bills that accompany the budget, and there are usually more than 20. They contain the actual provisions that will implement the budget’s individual proposals. The trailer bill language should be out in a week or two.

At that point, the California State Assembly and California State Senate will commence budget subcommittee hearings on the Governor’s proposals. Those hearings will allow advocates to weigh in publicly and advocate for or against the proposals or for changes to them. This process will continue for several months until Governor Newsom releases his May Revision to the January budget. The Revision will account for tax receipts and the state’s current fiscal climate. It may also contain different or additional proposals the administration would like to pursue. The budget will pass on or before June 15, with the trailer bills following that date.

On Tuesday, July 26th, CSC hosted a webinar detailing the budget and its implications for schools. We heard from Branché Jones, a Sacramento-based lobbyist and political consultant, and Monique Ramos, Partner with California Strategies & Advocacy.

Both experts agreed: it was a good year for the budget. “Not to say that everyone shouldn’t be fiscally prudent,” Ramos clarified, but overall the budget is good news for charter schools facing staffing shortages and other needs that have increased the cost of education. Both speakers also offered advice for charter leaders as they look ahead.

In case you missed the discussion, here some important takeaways:

Understanding the educational parts of the budget is key. Our experts walked us through the multiple layers of funding for charter schools, highlighting the Learning Recovery Block Grant, the Arts and Music Infrastructure Grant, and Universal Transitional Kindergarten (TK). The provided Budget Proposal Matrix is a helpful document for understanding the educational parts of the budget—everything from student supports, school meals, and educator workforce resources. You can find that matrix at the link here.

Declining enrollment will continue to be a long-term policy discussion. California saw charter school enrollment decline in 21-22 for the first time in 3 decades. With the rise of alternative learning models and faced with the uncertainty of the COVID variants, the past couple of years have, in Jones’s words, “changed the calculus that everyone uses when they think about schools.” Jones and Ramos both emphasized that the larger implications of enrollment continue to be a discussion—and one that all schools need to be concerned about moving forward.

It’s an election year in CA—get to know your legislators now. The outcome of the California primary election will impact who is advocating for your school in the future, and both Jones and Ramos reminded listeners to engage with legislators before the busy election season gets started. That means this summer, while legislators are more likely to be residing in their districts rather than in Sacramento.

Jones recommended two ways to engage with local legislators:

Invite them to visit your school. Giving legislators a tour that introduces them to principals, teachers, site leaders, students, and families is going to allow them to understand the enrichment you offer your community. A meeting like this could change the way they look at charter schools in California, seeing first-hand how your school operates. “It seems simple but it’s really effective,” Jones stressed.

Support legislation. We all know about fighting legislation that will negatively impact schools, but don’t forget to weigh in positively as well. When there’s a piece of legislation that you believe in or that impacts members of your student population, Ramos suggests finding ways to support local assembly members. “Send in support letters to offer support for specific bills,” she urged, along with signing up for email newsletters. Engaging legislators in this way might mean they are more likely to keep your best interests in mind. As Ramos stated: “It’s a two-way street.”

Additional resources for school leaders can be found below:

CCSA on the state budget update here.
Budget Proposal Matrix here.
Trailer Bills language here.
Other Categorical and Federal Funding Sources here.
Categorical Programs – Allocations & Apportionments here.
LCFF Website for Base Funding Info here.
Local Control Funding Formula – Allocations & Apportionments here.

California has a historic budget surplus of $97.5 billion. Of which, $49.2 billion is in discretionary funds after Prop 98 and other commitments are accounted for.

Budget Overview

$300.7 billion in the total budget
$227.4 billion in the General Fund
$37.1 billion in reserves
$9.5 billion in the School Stabilization Reserve

K-12 Overview

The May Revise includes total funding of $128.3 billion ($78.4 billion GF and $49.9 billion other funds) for all K-12 education programs.

LCFF COLA Increase – 6.56%

$1.1 billion ongoing Prop 98

LCFF Base Funding Increase

$2.1 billion ongoing Prop 98

Declining Enrollment

$2.1 billion for declining enrollment
To minimize reductions in LCFF funding that would otherwise result due to increased absences, the May Revise proposes allowing all classroom-based local educational agencies to be funded at the greater of their current year average daily attendance or their current year enrollment adjusted for pre-COVID-19 absence rates in the 2021-22 fiscal year.
Specifically, the May revision enables local educational agencies to utilize a modified version of 2021-22 average daily attendance to determine their 2021-22 LCFF allocations.

The May Revise also proposes further modifying the three-year rolling average to conform with this adjustment. The total ongoing costs associated with these policies are estimated to be $3.3 billion ongoing Prop 98 and $463 million one-time Prop 98.

Discretionary Block Grant

$8 billion one-time Prop 98 in discretionary funds, allocated on a per-pupil basis.

Community Schools

$1.5 billion one-time Prop 98 to expand access to the community schools grants.

Nutrition

$611.8 million ongoing Prop 98 to augment the state meal reimbursement rate sufficient to maintain meal reimbursement rates beginning in 2022-23.

Facilities

$3.9 billion in School Facilities
- New Construction – $1.8 billion GF, allocating $2.2 billion one-time GF in 2021-22, $1.2 billion one-time General Fund in 2023-24, and $625 million one-time GF in 2024-25 to support new construction and modernization projects through the School Facility Program.
- Maintenance – $1.8 billion one-time Prop 98 for schools to address outstanding school facility maintenance issues.

Expanded Learning Opportunities Program

$4.8 billion, and full funding implementation of $2,500 for every low-income student, English language learner, and youth in foster care in the state.
$1 billion one-time Prop 98 to support Expanded Learning Opportunities Program infrastructure, with a focus on integrating arts and music programming into the enrichment options for students.
LEAs will be required to offer expanded learning opportunities to all low-income students, English language learners, and youth in foster care, and local educational agencies with the highest concentrations of these students will be required to offer expanded learning opportunities to all elementary students.

Local Assignment Option for Transitional Kindergarten Teachers—To temporarily increase the pipeline of qualified transitional kindergarten teachers, allows teachers with preschool teaching permits who hold bachelor’s degrees that meet basic skills requirements and are enrolled in coursework leading to be assigned as the teacher of record in a credential to teach transitional kindergarten. This flexibility is proposed to sunset on June 30, 2026.

Educator Workforce

$500 million one-time Prop 98 to expand residency slots for teachers and school counselors.
Expand the Golden State Teacher Grant Program to school counselors, social workers, and psychologist candidates who earn a credential and serve in a priority school for four years.
$86 million one-time Prop 98 to create a Pre-K through 12th grade educator resources and professional learning to implement the Next Generation Science Standards, Math Framework, Computer Science Standards, and math and science domains in the Preschool Learning Foundations. $300 million one-time Prop 98 to augment LEAs professional learning through the Educator Effectiveness Block Grant with a priority for STEM educators.

From the January Budget:

Independent Study

The budget emphasizes the Governor’s commitment to in-person instruction but recognizes the need to streamline independent study and allows LEAs to choose between traditional independent study and course-based independent study for short- and long-term instruction models.
- In addition, the budget proposes streamlining the administration of programs allowing synchronous instructions to count for instructional times in traditional independent study, in addition to student work product, and flexibility in collecting signed independent study plans.

Early Literacy

Coupled with other investments in early education, professional development, along with support for dyslexia and other learning disabilities, these investments will support improved literacy outcomes for children.

$500 million in one-time P98 available over 5 years for high-needs schools to train and hire literacy coaches and reading specialists.
$200 million in one-time P98 for the establishment of grant programs to enable LEAs to create or expand multi-lingual schools or classrooms.
$10 million in on-time P98 for the California Department of Public Health and First 5 California on the Books for Children Program.
$2 million one-time P98 to incorporate early identification for learning disabilities into the state’s preschool assessment tool and $60 million one-time P98 to provide training for professional development.

Trailer bill language clarifies that expanded learning opportunities programs may be used to hire literacy tutors.

Special Education

$500 million ongoing P98 for special education funding formula, paired with the following policy changes:

Improve LEAs abilities to project their special education funding allocations and undertake comprehensive program planning, amend the special education funding formula to calculate special education base funding allocations at the LEA level rather than Special Education Local Planning Area (SELPA) level.
Consolidate two special education extraordinary cost pools into a single cost pool to simplify the current funding formula.
Allocate Educationally Related Mental Health Services directly to the LEA rather than to SELPAs.
Develop a Special Education Addendum to the LCAP that will include planning and promote cohesion by linking special education and general education planning, so parents of students with disabilities have a defined role in the LCAP development.
Support efforts to develop comprehensive IEPs by focusing a special education resource lead on IEP best practices and establishing an expert panel to continue the work of creating a model IEP template.
Establish an alternate diploma and a workgroup to explore alternative coursework options for students with disabilities to demonstrate completion of the state graduation requirements.

Improving Services to Young Children with Disabilities

$849,000 GF and 6 positions to support CDE’s transition process efforts.
$51 million GF in 2022-23 and $68.1 million GF ongoing to reduce regional center service coordinator caseload ratios to 1:40 for children through age five to increase family visits from bi-annually to quarterly and strengthen federal compliance with timely service delivery and transitions.
$10 million GF to promote inclusion in preschool of three- and four-year-olds served by regional centers. Resources will support preschool efforts to improve the accessibility of their programs.
$3.2 million GF to establish IDEA Specialists at each regional center. The IDEA Specialists will provide expertise on IDEA services through technical support to both regional centers and local education agencies providing school-age services.
$1.2 million GF to increase DDS resources to make improvements to the Early Start Program to drive toward inclusive services, help streamline intake processes, align systems, and increase interagency collaboration with CDE.

Educator Workforce

$54.4 million for accelerated preparation and supporting, training, and retention of well-prepared educators:

$24 million one-time GF to waive some teacher exam fees,
$12 million one-time GF to extend the waiver of select credential fees.
$10 million one-time GF competitive grants programs to public and private institutions to develop and implement integrated teacher preparation programs.
$5.2 million P98 and $322,000 GF to re-establish the Personnel Management Assistance Teams to support LEAs in improving hiring and recruitment practices.
$1.4 million GF to establish career counselors for prospective educators at CTC.
$924,000 GF to support multiple grant programs and fee waivers.
$900,000 for CTC to contract a public outreach to highlight the value and benefits of educational careers in prekindergarten – 12th grade.
Extend CTCs ability to authorize any holder of a credential or permit issued by CTC to serve as a substitute teaching assignment, aligned with their authorization for up to 60 cumulative days for any one assignment.
$5 million one-time P98 for community college-university teacher credential collaboratives.

California Legislative Update: Governor Presents May Revision

Here’s your latest California legislative update:
Last week, Governor Newsom presented the May Revision to his January budget proposal. The Revision reflects funding and policy changes to the Governor’s original proposal. Below are some of the more prominent changes in the document.

The May Revision includes $101.8 billion ($58.9 billion general fund and $42.9 billion from other funds) for all K-12 programs.
Proposes $696.2 million ongoing Proposition 98 funding for special education. This is $119.2 million more than the January budget proposal.
Includes $500,000 one-time non-Proposition 98 funds to increase local educational agencies’ ability to draw down federal funds for medially related special education services and improve the transition of three-year-olds with disabilities from regional centers to local educational agencies.
Includes $89.8 million one-time non-Proposition 98 funds to provide 4,500 loan repayments (of up to $20,000) for newly credentialed teachers to work in high-need schools for at least four years.
$44.8 million one-time non-Proposition 98 funds to provide training and resources for classroom educators to build capacity around inclusive practices, social emotional learning, computer science and restorative practices as well as subject matter competency.
Includes $15 million one-time non-Proposition 98 funds for broadband infrastructure.
$1 million one-time non-Proposition 98 funds, available over four years, to the State Board of Education to establish a state Computer Science Coordinator.
Includes an additional $150 million in one-time non-Proposition 98 funds to reduce the employer contribution rate in 2019-20 for CalSTRS. This is in addition to the $3 billion included in the January budget.

The Revision also includes a specific section on charter schools; see below.

California legislative update for Charter Schools:

The Administration is committed to a system where traditional and charter schools work together to serve the best interests of all students in a community. The May Revision proposes statute to level the playing field for both traditional and charter schools. Specifically, the May Revision includes the following proposals to prevent families from being wrongfully turned away from the public school of their choice:

Prohibits charter schools from discouraging students from enrolling in a charter school or encouraging students to disenroll from a charter school on the basis of academic performance or student characteristic, such as special education status.
Prohibits charter schools from requesting a pupil’s academic records or requiring that a pupil’s records be submitted to the charter school prior to enrollment.
Creates a process for families of prospective and current charter school students to report concerns to the relevant authorizer.
Requires the Department of Education to examine the feasibility of using data from the California Longitudinal Pupil Assessment Data System to identify charter school enrollment disparities that may warrant inquiry and intervention by corresponding authorizers.

These proposals build on charter school transparency legislation signed by the Governor earlier this year and other legislation proposed in the Governor’s Budget that better aligns the governance, transparency, and accountability requirements of school districts and charter schools.
The Governor’s Budget identified growing charter school enrollment as a factor affecting the fiscal condition of some school districts. The Governor requested that the State Superintendent of Public Instruction convene a task force to examine the fiscal impact of charter schools on school districts. The Charter Task Force is expected to deliver recommendations to the Administration by July 1.

Since the company’s inception in 2007, Charter School Capital has been committed to the success of charter schools. We help schools access, leverage, and sustain the resources charter schools need to thrive, allowing them to focus on what matters most – educating students. Our depth of experience working with charter school leaders and our knowledge of how to address charter school financial and operational needs have allowed us to provide over $1.8 billion in support of 600 charter schools that have educated over 1,027,000 students across the country. For more information on how we can support your charter school, contact us. We’d love to work with you!

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California Legislative Update: The Governor’s 2019 Budget

California Legislative Update: Thursday, Governor Gavin Newsom released the first budget of his administration. At the beginning of his press conference, he admitted that his presentation would be longer than most other Governor’s performances—and he did not disappoint, holding court for around 50 minutes. His budget includes a large reserve and lays out what will be the administration’s objectives over the next three years. It also includes a brief discussion of the need for charter school transparency, which he mentioned in his presentation. Below is an excellent description of the budget’s details by Gerry Shelton of Capitol Advisors. Gerry is an expert on California’s education laws and one of the most knowledgeable people that I know.

We’ve done a review and analysis of Governor Gavin Newsom’s 2019-20 Budget Proposal sent to you earlier today. While the proposed budget essentially includes the same amount of Proposition 98 spending as estimated by the Legislative Analyst’s Office (LAO) in November, there is some very good news in the budget for schools. Governor Newsom is providing significant assistance to school employers struggling with increases in the pension contribution rates. This assistance is outside of Proposition 98, so does not reduce expenditures for other priorities, including providing a 3.46% cost of living adjustment (COLA) for LCFF and other programs.

Highlights of 2019-20 Budget Proposal

$143 billion in General Fund (GF) revenues in 2019-20
$18.5 billion total state budget reserves ($15.3 billion in the Rainy Day Fund)$80.7 billion Prop 98 guarantee
$3 billion one-time (non-Prop 98) payment for school employer CalSTRS liabilities
3.46% COLA applied to LCFF and categoricals
Over $1 billion increased investment in early childhood services (details below)
$576 million in Prop 98 GF ($186 million of which is one-time) for expanded special education services and support
$1.5 billion in additional released school facilities bond funds authorized under Prop 51

Governor Newsom’s Approach

At his press conference earlier today, Governor Newsom repeatedly recognized former Governor Jerry Brown’s efforts to eliminate budget deficits, create a new budget surplus, and build a Rainy Day Fund to mitigate future economic downturns. He provided a more collaborative tone than Brown, giving credit to individual legislators who championed various issues (such as early learning, health care, pension costs, housing, etc.) that he highlighted in his press conference. Overall, Newsom was focused on finding the right balance between continued fiscal responsibility and increased investments in programs.
With respect to fiscal responsibility, Newsom slightly lowered revenue projections for future years, prioritized paying off debts and decreasing liabilities, increased reserves and provided additional “Safety Net” funding. The Governor also highlighted several areas in which he hopes to see significant investments, including a $1 billion investment in a rebranded Earned Income Tax Credit (now the “Working Family Tax Credit”), subsidies to ensure middle-class Californians can afford health insurance, emergency and disaster preparedness and response, and of course, K-14 education.
Below we provide a brief summary and analysis of the budget proposal, including revenues, Proposition 98 spending, and policy and funding changes to K-12 programs.

Revenues, General Fund, Debts and Liabilities, and Budget Reserves

Due to continued growth in California’s economy, the Department of Finance (DOF) estimates approximately $143 billion in total 2019-20 GF revenues (including transfers pursuant to Prop 2), and has revised its estimates upward for 2017-18 by $3 billion and for 2018-19 by $2.7 billion. Before transfers, this amounts to an $8.1 billion increase in GF revenues over the three fiscal years, as compared to the 2018 Budget Act. In addition to allowing an increase in state GF spending, this significant influx of revenue generates additional 2019-20 Prop 2 transfers to the Rainy Day Fund budget reserve, and an equivalent amount to pay down state debts and liabilities.
Though this budget is based on the assumption of continued economic growth, it does note that economic uncertainties, and even the likelihood of a future economic downturn, have been increasing. As a result, Governor Newsom proposes a $700 million increase to the Safety Net Reserve created in the 2018 Budget Act, bringing the total in this reserve to $900 million.
The budget also includes a $1.77 billion mandatory transfer to the Prop 2 Rainy Day Fund, as well as $2.3 billion in the discretionary Special Fund for Economic Uncertainties. Combined, this brings total state GF budget reserves to $18.5 billion by the end of 2019-20. The budget also projects that the Prop 2 Rainy Day Fund alone will rise to $19.4 billion by 2022-23.
Under Prop 2, the $1.77 billion transfer to the Rainy Day Fund also triggers an equal $1.77 billion payment toward reducing state debts and liabilities; the budget proposes to meet this requirement by paying down the state’s retiree health and unfunded pension liabilities by that amount. In addition, Governor Newsom is proposing $4 billion to eliminate other state budgetary debts. Those actions include the full repayment of loans from special funds made during the Great Recession, and elimination of deferrals of state payroll and CalPERS payments also implemented during the recession.

Proposition 98 and LCFF

The DOF calculates the 2019-20 Proposition 98 guarantee to be $80.7 billion, an increase of $2.8 billion over the 2018-19 Prop 98 guarantee provided in the 2018 Budget Act. The DOF’s Prop 98 calculation is consistent with the estimate provided by the LAO in November 2018.
Due to continued declines in both average daily attendance (ADA) and GF revenue growth, the Prop 98 guarantees for both 2017-18 and 2018-19 are adjusted downward by $120 million and $526 million, respectively, in the Governor’s proposed budget. However, the Governor also proposes to hold K-14 education harmless with respect to those adjustments, by over-appropriating the guarantee in 2017-18 and using $686 million in Prop 98 settle-up funds to cover what could have been a reduction in funding for 2018-19.
Growth in Prop 98 allows the Governor to cover a 3.46% COLA, providing a $2 billion increase to district and county office of education LCFF allocations and a $187 million increase for certain categoricals. This growth also allows additional funding to expand special education services, further support the state’s new accountability system, begin to rebuild the state’s education data systems and support his early learning agenda.
Despite this growth in spending and the one-time funding to “buy-down” employer contribution rates in CalSTRS, there remains a growing interest among school advocates to focus on addressing California’s woefully insufficient per-pupil spending. Concerns about funding levels are particularly acute given the rapid increase in the costs of running schools, including everything from pension to health benefits to transportation to education technology expenses.
Discussions continue to focus on creating new funding goals, perhaps a new LCFF target that moves California closer to the per-pupil funding provided by the top 10% of states. Even after all of the increases in the Prop 98 guarantee since the Great Recession, “full implementation” of the LCFF, and continued growth in Prop 98, California remains in the bottom 10% of states in cost-adjusted per-pupil spending.

Immediate Reduction in CalSTRS Employer Contribution Rate

By proposing to invest $3 billion in one-time funds towards K-14 pension liabilities, the Governor hopes to free up billions of dollars in operational funds for school districts: $700 million over the next two years and approximately $6.9 billion over the next three decades.
For years, school districts and county offices have underscored the need to bolster the financial sustainability of not only the underfunded pension systems but local education agencies (LEAs) themselves, due to rising pension costs. Governor Newsom’s first budget validates and responds to those concerns.
In the short-term, a total of $700 million from the non-Proposition 98 side of the budget will be provided to buy down the employer contribution rates in 2019-20 and 2020-21, the final two years of the CalSTRS funding plan’s statutory rate increases. By offsetting these rate increases, the Governor will keep an equivalent amount of money in the classroom.
The Budget also proposes to invest $2.3 billion towards school employers’ long-term unfunded liability at CalSTRS. The prepayment is expected to reduce contribution rates by 0.5 percent (ongoing), or approximately $6.9 billion over the next three decades.
Elsewhere, the Budget proposes $5.9 billion in GF expenditures to address the state’s long-term pension liabilities—including a one-time $3 billion cash supplemental pension payment to CalPERS and $2.9 billion (using Proposition 2 funds) over the next four years to CalSTRS. These supplemental pension payments are intended to curb the growing costs of the state’s retirement programs and are estimated to result in $14.6 billion in savings over the long term.

Early Childhood Expansion

As promised on the campaign trail, Governor Newsom proposes to expand child care and early learning programs.
State Preschool – As a step towards his goal of universal preschool in California, the Governor proposes to increase access to the existing State Preschool Program for all low-income four-year-olds. Specifically, the Administration proposes to:

Provide $124.9 million non-Prop 98 GF in 2019-20 and additional investments in the next two state budgets to fund a total of 200,000 preschool slots by 2021-22.
Eliminate the existing requirement that families of four-year-olds provide proof of parent employment or enrollment in higher education to access full-day programs.
Shift $297.1 million Prop 98 GF for part-day State Preschool Programs at non-LEAs to non-Prop 98 GF, to allow non-LEA providers to draw down full-day, full-year reimbursement from a single funding source and to provide the flexibility to make better use of their contract funding.

Full-Day Kindergarten – The Governor proposes $750 million one-time non-Prop 98 GF for eligible school districts to build or retrofit facilities for full-day Kindergarten programs. See the Facilities section below for additional information.
Child Care – The Administration proposes $500 million one-time non-Prop 98 GF to expand subsidized child care facilities in the state and improve the education and professional development of child care providers. The Governor also proposes $247 million in one-time funds to the California State University to be used for child care infrastructure for students on college campuses.
CalWorks Stage 2 and 3 Child Care – The Governor proposes a net increase of $119.4 million (non-Prop 98) to reflect an increase in the number of CalWORKs child care cases. Total costs for Stage 2 and 3 are $597 million (Stage 2) and $482.2 million (Stage 3).
Child Savings Accounts (CSAs) – The Administration proposes $50 million one-time GF (non-Prop 98) to support pilot projects and partnerships with First 5 California, local First 5 Commissions, local government, and philanthropy to increase access to CSAs for incoming kindergartners.

School Facilities

School Facilities Bonds – In a major reversal from the prior administration, Governor Newsom proposes to issue $1.5 billion in Proposition 51 (2016) bonds next year and increase the Office of Public School Construction’s funding by $1.2 million to speed the processing of applications. This shift reflects—almost exactly—the requests by the educational advocacy community over the past two years. It also reflects a $906 million year-over-year increase in bond sales compared to the current fiscal year.
Facilities Funding to Implement Universal Full-Day Kindergarten – Citing the long-term academic benefit of children attending full-day, high-quality early primary education programs, the Governor proposes $750 million in one-time, non-Prop 98 GF to eligible school districts to construct new or retrofit existing facilities for full-day kindergarten programs or “to fund other activities that reduce barriers to providing full-day kindergarten.” This would build on last year’s $100 million grant program for full-day kindergarten facilities.
Potential Threat to District Developer Fees – In response to the housing crisis—both supply and affordability—the Governor has highlighted the need to address local developer fees, which he believes contribute substantially to the cost of development. It is not clear the Governor was referring to developer fees used to cover the costs of building new schools, incurred when home construction creates local demand for educational facilities. The Governor stated in his budget presentation that he will create a task force on the subject.

Accountability, Data, and the Statewide System of Support

County Offices of Education – COEs were given a major role to play in the overhaul of the state’s accountability system. To support the role COEs play in supporting their districts, the proposal provides an increase of $20.2 million Prop 98 GF dollars, consistent with the formula that was adopted in last year’s budget.
Improved and Expanded Data Systems– Governor Newsom put a high priority on improved educational data systems throughout his campaign. Reflecting that priority, the budget proposal provides $10 million to plan and begin development of a longitudinal data system that would integrate existing data systems to provide more comprehensive information on how students are progressing from cradle to career.
Promoting User-Friendly Accountability Systems – To promote community interaction with the electronic pieces of the accountability system, the Budget Proposal provides $350,000 one-time money to merge the Dashboard, the LCAP electronic template, and other reporting documents, including the School Accountability Report Card.

Special Education

The administration proposes an infusion of $576 million Proposition 98 GF dollars, of which $186 million is proposed as one-time. This is more than likely a response to annual calls from special education advocates that the system is administratively burdensome, underfunded, and too often ineffective at increasing academic performances of those it serves.
These new grants will be focused on LEAs with high concentrations of either special education students or unduplicated pupils. Allowable expenditures of these dollars appear to be fairly broad, and can range from special education supports outside of an existing individualized education program to preventive measures that might lessen future needs. The Administration is not proposing any major structural shifts in the way special education services are provided across the state.

Since the company’s inception in 2007, Charter School Capital has been committed to the success of charter schools. We provide growth capital and facilities financing to charter schools nationwide. Our depth of experience working with charter school leaders and our knowledge of how to address charter school financial and operational needs have allowed us to provide over $1.8 billion in support of 600 charter schools that have educated over 1,027,000 students across the country. For more information on how we can support your charter school, contact us. We’d love to work with you!

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2018 California Budget Passes

Last Thursday the Legislature acted on the 2018 California budget and sent it to the Governor for his signature. There are still some trailer bills that they must pass but the document represents an agreement between the Governor and Legislative leadership. Additionally, the budget agreement covered areas of disagreement between the administration and the legislature. Items that were agreed to prior to the Budget Conference Committee meetings were not highlighted. Though the budget continues to grow, the Governor as in past years, has attempted to keep spending under control.
Additionally, the budget includes the $3.5 billion mandatory transfer to the Budget Stabilization Account, along with a supplemental deposit of $2.6 billion. Essentially placing those dollars into a rainy-day fund.
Total spending is $138.3 billion in general fund revenues. In May, both Houses of the Legislature adopted the Governor’s Proposition 98 number at $78. billion. Proposition 98 funds K-Community College in California. The final budget agreement added $3.67 billion to fund the Governor’s Local Control Funding Formula (LCFF), that is $407 million above the Governor’s May Revision proposal. The budget also proposes an additional $300 million in one-time funding for the state’s lowest performing students. This represents a deal with Assemblywoman Shirley Webber who is carrying legislation to make this funding ongoing for the lowest performing subgroup.
Below are some additional education related issues:

$1 billion in one-time funds, these dollars are discretionary and will add about $168 per ADA.
$150 million in ongoing funds for the California Technical Education Incentive Grant administered by the Department of Education.
$150 mllion in ongoing funds for the Governor’s proposed K-12 CTE program administered by the California Community Colleges.
$14 million in ongoing funds to support the Workforce Pathway Coordinators, K-14 Technical Assistance Providers and the Strong Workforce consortia.
$50 million in one-time funds to address the special education teacher shortage and $25 million to address the overall teacher shortage.
$250,000 for Homeless Student Grants.
$200,000 to redesign the LCAP template.
$200,000 to develop the Budget Summary for Parents intended to improve LCFF transparency.

These represent some of the larger items to come out of the 2018 California budget, there are some other one-time expenditures for school district facilities ($6 million for Sweetwater Unified and $4 million for San Francisco Unified), After School Kids Code Grant Program ($15 million) and there will be some dollars for Suicide Prevention Training.

Here are some major education highlights from the budget that the Legislature passed this week. The Governor will now have 30 days from passage to sign it or veto it. He can also ‘blue-line’ some of the funding including in the proposal.

Prop 98 Funding

The Governor’s Prop 98 proposal was approved:
2014-15: $67.2 billion
2015-16: $69.1 billion
2016-17: $71.9 billion
The budget deal assumes the Governor’s local property tax estimates and does not re-bench Prop 98 by $10 million due to Prop 47 savings.
Reductions:

$40 million (on-going) for LCFF Implementation
$120 million (one-time) in flexible funds (for mandate claims)

Eliminations:

$100 million Emergency Repair Revolving Loan Program (one-time)

Additions:

$43.7 million (on-going) for preschool rates
$7.8 million for full-day Preschool slots (on-going, with scheduled increases from 2017-2020)
$200 million (one-time) for the College Readiness Block Grant
$24 million (one-time) for California Collaborative for Education Excellence (CCEE)
$35 million (one-time) for Teacher Workforce Package

LCFF Funding

Provides $2.94 billion in funding for LCFF, bringing total LCFF funding to $55.8 billion in 2016-17.

One-time Funding

Provides $1.28 billion in one-time discretionary funding (pays down prior-year K-12 mandate backlog). This provides approximately $214 per ADA – the same amount proposed in the Governor’s January Budget proposal.

K-12 College Readiness Block Grant

Provides $200 million in one-time Prop 98 funding for K-12 College Readiness Block Grant for LEAs to better prepare low income, EL, and foster students for college admission.

Early Education and Child Care

The agreement provides for 8,877 new full day preschool lots over the next three years and increases reimbursement rates for the RMR, SRR and Licensed Exempt Rates.

California Collaborative for Educational Excellence (CCEE)

Provides $24 million in one-time Prop 98 funds for the CCEE to conduct statewide training on the LCFF evaluation rubrics and to conduct a pilot program for supporting LEAs ($20 million for training and $4 million for the pilot program)

Charter School Start-up Grants

Provides $20 million in one-time Prop 98 funding for the Charter School Startup Grants program and requires CDE to spend down available federal carry-over first.

Teacher Workforce Package

The budget deal expands upon Governor Brown’s May Revision proposals to address the state’s growing teacher shortage.

$20 million in one-time Prop 98 funding to re-establish the Classified School Employee Teacher Credentialing Program to provide grants for classified employees to get their teaching credential
$10 million in one-time General Fund to provide grants to postsecondary institutions to develop four-year integrated teacher credential programs
$5 million in one-time Prop 98 funding to create the California Center on Teaching Careers, to strengthen statewide recruitment of individuals into the teaching profession
No one-time funding to establish a pilot teacher residency program
Does not reestablish the Assumption Program of Loans for Education (APLE) loan forgiveness program

Other K-12 education Budget Issues

$2 million in one-time Proposition 98 funding to expand the existing School Breakfast Startup Grant program in order to increase participation in the School Breakfast program
Approve the Governor’s May Revision proposal to provide an additional $2 million in ongoing funding to support the Student Friendly Services college planning website
$1.2 million in one-time federal Title III state level carryover for CDE to develop a best practices video series to provide guidance to LEAs on effective English Language Development (ELD) instruction for English learners and to revise the CDE’s guidance document on instruction for English learners
No additional ongoing funding and no statutory COLA for the After School Education and Safety (ASES) program
$1 million in one-time Proposition 98 funding for the Los Angeles County Office of Education to contract with the Special Olympics Northern and Southern California to expand Special Olympics in schools
No new funding for CDE’s state operations to increase staff for district reorganization workload
$150,000 in one-time General Fund and trailer bill language requiring the SPI to estimate the average costs associated with full-day and part-day kindergarten programs and recommended options for incentivizing full-day kindergarten, including providing differentiated funding rates for full-day and part-day kindergarten.
No ongoing or one-time funding for the California Association of Student Councils
$1.7 million in one-time General Fund to build a new middle school activity center at the California School for the Deaf in Fremont

Other issues to be addressed in K-12 education trailer bills

Trailer bill language specifying that the Math Readiness Challenge Grant shall be administered by CDE and shall prioritize LEAs with high proportions of needy students and high rates of math remediation
Trailer bill language requiring CDE to apportion three-fourths of the total funding for the K-12 High Speed Network by August 31st of each fiscal year in order to address the K-12 High Speed Network’s cash flow needs
Supplemental Report Language requiring the SPI to report to the Legislature on the interim and formative assessment tools available through the Smarter Balanced Assessment Consortium and how teachers can use these tools to match specific state standards, or clusters of standards

This week California Governor Jerry Brown released his proposed budget that invests significantly in K-12 education. The California budget update contains very good news for the education community while also storing away money in a healthy reserve. This begins the budget deliberation process, next the legislature will begin to hold hearings on the various proposals in the budget and the Governor will submit revisions to his budget in May. In this proposed budget the Governor wants to continue to restrain spending and increase budget reserves, and these dire economic predictions support his proposal to add about $3.5 billion to the Rainy Day Fund in 2016-17. This proposal seeks to transfer $2 billion more to the Budget Stabilization Account (BSA) than what is required under Proposition 2, and would bring the BSA total to just over $8 billion.

Continued Growth in K-12 Spending and LCFF Implementation

The Governor estimates that the Proposition 98 guarantee for 2016-17 will be $71.6 billion, which he compares to the pre-recession guarantee of $56.6 billion in 2007-08 and the deep recession guarantee of $47.3 billion in 2011-12. The increase in the guarantee for 2016-17 is sufficient to provide a fourth year investment of about $2.8 billion for LCFF implementation. The Department of Finance calculates that this funding will eliminate about 49% of the remaining LCFF funding gap, and when combined with the roughly $12.8 billion provided over the prior three years, will bring total LCFF implementation to about 95%. The budget proposal also provides a very modest $1.7 million increase to the county office of education LCFF to cover COLA and ADA adjustments.

One-Time Discretionary Funding

Upward adjustments of the Prop. 98 Guarantee in 2014-15 and 2015-16 allow the Governor to again propose an allocation of fully flexible, one-time funding to school districts, county offices and charter schools. The amount proposed for 2016-17 is $1.2 billion, and builds on the $3.6 billion provided over the last two budgets. Note that all of these funds count toward offsetting any mandate reimbursement claims filed by the LEAs receiving the funds.

California School Facilities

The Governor continues to cite “deficiencies” with the existing school facilities program and emphasizes the need for a new state program that is less complex and focuses on districts that have less local capacity to build or modernize schools. He observes that the $9 billion bond proposed for November 2016 does not reform the existing program but, in response to a question at his press conference this morning, did not state that he is currently opposed to that measure. The budget proposal, however, makes fairly clear that he intends to work with the Legislature and stakeholders to provide some sort of alternative to the November school bond measure.

Early Education Block Grant

The Administration proposes to consolidate Prop. 98 funding for the State Preschool Program, transitional kindergarten, and the Preschool Quality Rating and Improvement System Grant into a $1.6 billion Early Education Block Grant. The Governor suggests that the block grant will provide greater local flexibility to address community needs and focus on the most at-risk children. The proposal does not include many specifics, but promises further detail by the May Revision. Many legislators, including Speaker of the Assembly Anthony Rendon, have stated that expanding early education opportunities is their top priority. Stay tuned.

Career Technical Education

The Governor proposes to continue the commitment made in the 2015 Budget Act to provide $900 million in one-time funding over three years for competitive matching grants to support high-quality CTE programs. Funding for 2016-17 will be $300 million.

Proposition 39 Energy Efficiency

The budget proposes $365.4 million to support school district, county office and charter school energy efficiency projects in 2016-17. This is an increase of about $50 million over what was provided last year.

Cost-of-Living Adjustments (COLA)

The COLA is calculated at 0.47%, and the budget proposal includes $22.9 million to provide COLAs to categorical programs that remain outside of the LCFF, including Special Education, Child Nutrition, Foster Youth, Preschool, American Indian Education Centers, and the American Indian Early Childhood Education Program.
Any questions on how this may impact your charter school? Let us know at GrowCharters@charterschoolcapital.com

Late last month, the California legislature adjourned for the year, ending the 2015-2016 legislative session. The session saw a flurry of legislative activity, some related to charter school operations in the state.
We’ve invited Branché Jones, California Legislative Consultant, and Barrett Snider, Partner at Capital Advisors Group, to join our President and CEO, Stuart Ellis, for a California Budget and Legislative Update webinar that will provide high level updates and commentary around the most recent budget and legislative cycle.
California Budget and Legislative Update, Tuesday, October 27, 9:00 – 10:00 a.m. PST.
Branché, Barrett, and Stuart plan to cover the following:

Political Updates
Legislative Updates
Budget Updates
2016 Prospectus

Please join us by registering for the webinar. We look forward to seeing you there!

This month, budget hearings are set to begin as the California Budget Subcommittees of the Legislature look at the Governor’s January budget proposal. Each subcommittee will start hearing the respective issue areas that they have jurisdiction over.
For education this means that Assembly Budget Subcommittee #2 and Senate Budget Subcommittee #1 will start examining the Governor’s proposal for funding Proposition 98. The Governor has proposed to increase Proposition 98 funding by $7.8 billion for schools and community colleges. Specifically, $5 billion will be for programmatic increases and $2.8 billion will be for retiring existing debt. The legislative analysts office has examined all of the Governor’s proposals and published recommendations on all of them.
As budget hearings begin, another issue is gaining steam in Sacramento: Should the state propose a school bond?
It is well accepted that school districts and charter schools throughout the state are in need of facility assistance. The administration has been resistant to legislative efforts to sponsor a school bond while members of the legislature have introduced two measures to place a bond on the ballot. Additionally, a coalition of school builders and construction officials have submitted a $9 billion proposed bond to the state and are beginning to gather signatures to get it qualified for the ballot. They will need to gather 366,000 signatures to get it on the ballot.
It is unclear if this is a serious effort (because the bond campaign would cost millions of dollars and everyone is not on board yet) or if it is an effort to force the state to place a bond on the ballot by applying additional pressure to state officials. What is clear is the fight will only intensify over the next few months as we go through the budget hearing process.
Check back for more details and legislative updates.