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.

2018-2019 California Budget May Revision

On Friday the Governor released his 2018-2019 California budget May Revision. Below are some highlights compiled by our partners at Capitol Advisors.

Overall, the 2018-2019 California budget May Revision contains positive news for California’s economy, General Fund revenues, and Proposition 98 funding. We have known for several months that tax revenues are higher than what was projected in the January budget proposal, but several variables related to the Proposition 98 minimum guarantee formulas indicated that recent increases in tax receipts would not result in significant additional 2018-19 funding for schools. That view is confirmed in the May Revision – however, the fairly strong growth in the Proposition 98 guarantee projected in the January budget proposal is retained in the May Revision. The minimum guarantee for K-14 schools is slightly higher ($68 million) in the May Revision compared to the January proposal, which is good news given recent Legislative Analyst’s Office (LAO) analyses suggesting that the Proposition 98 guarantee might actually end up lower than January estimates.

Highlights of the 2018-19 California Budget May Revision

• $142 billion General Fund resources available
• $137.6 billion General Fund spending (including transfers)
• $17 billion total state budget reserves
• $78.4 billion Proposition 98 Guarantee
• $3.3 billion increase for LCFF (over 2017-18)
• “Full implementation” includes 2.71% COLA
• Proposes an additional $166 million increase to base grants
• $2 billion one-time, discretionary funding (roughly $344 per ADA)
• Retains recognition and funding for county office support role
• No major K-12 policy/funding changes from January

Governor Brown’s Press Conference

Governor Jerry Brown appeared in a good mood as he seemed to ad lib his way through a stack of familiar charts indicating that good budget years are always followed by bad budget years. Governor Brown reminded the audience of Sir Isaac Newton’s observation that “what goes up, must come down,” and with regard to fiscal prudence and the budget surplus he intends to leave his successor, he added, “I’ve said it before and I’ll say it again: let’s not blow it now.”
Consistent with the last several budget proposals from this Administration, Governor Brown focused on the importance of maintaining a large reserve in anticipation of the next recession; significant one-time investments ($2 billion) for state infrastructure; a mixture of ongoing and one-time expenditures for public schools; addressing poverty (including homelessness, health care, child care, etc.); and combatting climate change.
Early comments from leaders in the Legislature are supportive of the Governor’s fiscal approach and are also mostly supportive of his various program and funding proposals.

Revenues, General Fund and Budget Reserves

Compared to January, and after accounting for transfers (which include both required (Proposition 2) and discretionary budget reserve and debt payments), the May Revision forecasts General Fund revenues to be higher by almost $2.6 billion in 2017-18 and more than $3.7 billion higher in 2018-19. Most of that increase is from higher personal income tax revenues related mainly to stock market gains through the end of 2017, although a fair amount also comes from higher corporate tax revenues related to new incentives (repatriation of foreign earnings) from federal tax reforms.
Including the prior year balance, the May Revision identifies $142 billion in total resources available for 2018-19, proposes $137.6 billion of spending (including reserve and debt transfers) with an ending fund balance of $4.4 billion.
The Proposition 2 automatic transfers amount to $3.5 billion, with half going to repay state debt and the other half going to the Budget Stabilization Account (BSA or Rainy Day budget reserve). The May Revision retains the January proposal to make a discretionary transfer to fully fund the BSA at 10% of General Fund revenues, which equates to a BSA fund of about $13.8 billion by the end of 2018-19. An additional $3.2 billion proposed for the discretionary reserve for economic uncertainties would leave the state with about $17 billion in General Fund reserves.

Proposition 98 and LCFF Funding

The May Revision calculates the 2018-19 Proposition 98 guarantee to be $78.4 billion, which includes a very small $68 million increase over the January proposal. For those of you following the LAO reports and our prior updates on variables impacting the Proposition 98 guarantee, the slight 2018-19 increase is largely dependent on an assumption of an attendance growth of about 600 students in 2017-18. This has the effect of resetting a Proposition 98 provision providing a one-year delay in accounting for the attendance decrease of about 16,000 students projected for 2018-19 (in other words, the 2018-19 guarantee is not adjusted downward for this loss of attendance – that adjustment will likely be made next year). Additional variables include a shift from Test 3 to Test 2, payment of the remaining maintenance factor and changes in per-capita income growth. We’ll cover all these issues in detail at our May Revision Workshops.
The Proposition 98 guarantees for 2016-17 and 2017-18 are also shifted upwards in the May Revision, resulting in about $660 million of additional funding. The increases of about $730 million over the three-year budget period allow the Governor to provide additional ongoing and one-time resources for K-14 education, including for LCFF and one-time discretionary funding.
The Governor achieves “full implementation” of LCFF as planned in his January proposal, with a few minor adjustments. In the January proposal, LCFF was increased by just over $2.9 billion. A COLA of 2.71% instead of 2.51% requires additional funding of over $150 million, and the Governor proposes a $166 million increase to base funding as well. It is not clear whether the additional base funding is a partial response to the Senate proposal to increase LCFF funding by $1.2 billion, or whether it is simply to achieve the round number of a 3% increase to the formula. In any case, compared to the 2017 Budget Act, LCFF funding is increased by roughly $3.3 billion, so a little more than what was proposed in the January proposal.
As you know, many supporters of public education are reminding the Governor, the Legislature and the public of the severely insufficient level of per-pupil funding in California. While achieving full implementation of the LCFF is a positive outcome, much work needs to be done to ensure our students are provided the educational resources necessary to compete on an equal footing with their peers in other states with respect to entering the workforce or advancing to higher education.

One-Time Discretionary Funding

Consistent with his fiscally conservative approach over the last several budget cycles, the Governor avoids any significant ongoing expenditures other than for LCFF, and again proposes a large one-time funding expediture. The May Revision adds $286 million to the January proposal of $1.8 billion, bringing one-time discretionary funding to just over $2 billion. This comes out to about $344 per ADA for 2018-19, and a total of almost $8 billion in one-time funding over a five year period, a trend that is not likely to continue at this level for much longer. These funds continue to count as an offset to any outstanding mandated costs reimbursement claims by local education agencies (LEAs).

Other Programs and Issues

Fiscal Transparency

The 2018-2019 California funding May Revision expands upon the January proposal for a budget summary aligning school district expenditures to LCAP strategies. The updated proposal specifies that this information be displayed in a parent-friendly format that includes graphics (when possible) and additional information that explains how supplemental and concentration funds are being used to increase and improve services for eligible students.

County Offices of Education (COEs) and Accountability

The January proposal recognized the important role of COEs in the state’s new accountability system and proposed $55 million in ongoing funds to support their work to provide assistance to school districts under the LCFF/LCAP structure. The January proposal also included a $4 million competitive grant program for eight individual COEs to act as resource and training centers for other COEs.
The May Revision does not propose any changes to the COE funding provided in January, and this funding appears to have support in the Legislature, so we expect this funding to be included in the final budget. There are some minor changes related to funding for the California Collaborative for Educational Excellence (CCEE) and for the Fiscal Crisis and Management Assistance Team (FCMAT).

Proposition 98 and LCFF Technical Adjustments

The Governor also makes a technical proposal related to future funding of the LCFF COLA, and two additional technical proposals related to the Proposition 98 Guarantee, which could result in future impacts on funding for K-12 education. First, the Governor proposes to put the annual cost of living adjustment applied to LCFF base grants on auto-pilot (making them part of the “continuous appropriation”), meaning that there would not have to be a separate action in the annual budget act to fund the LCFF COLA.
The Governor also proposes to move the responsibility for making the final calculation (called “certification”) of the Proposition 98 Guarantee for any given fiscal year to the Department of Finance (DOF), while current law creates a joint responsibility between the Director of DOF and the State Superintendent of Public Instruction. Finally, the Governor proposes to rebench (or recalculate) the Guarantee to include child care expenditures that were used by the state to meet the Guarantee in 2015-16. If expenditures on programs that were previously funded outside of Proposition 98 are counted toward meeting the Guarantee, then the Proposition 98 Guarantee should be expanded to provide for those expenditures. This was not done when funding for full-day State Preschool wraparound services provided by LEAs was brought under Proposition 98 in 2015-16. The Governor’s proposal would resolve this issue.

Career Technical Education (CTE)

As we mentioned in our review of the January budget proposal, the future of CTE funding and support is an ongoing topic of discussion between the Governor and the Legislature. We are currently in the last year of the CTE Incentive Grant Program, which provided $900 million over the past three years to encourage the creation and expansion of high-quality CTE programs. Members of the Legislature have proposed extending and expanding this program, while the Governor in January countered with a $200 million program to establish a K-12 specific component of the Strong Workforce Program administered by the Community College system.
As expected, since no one thought that the Governor would start negotiating with himself, the Governor maintains his proposal to provide $200 million for K-12 CTE through the Strong Workforce Program. He also makes no change to the $12 million in funding for technical assistance.
The 2018-2019 California budget May Revision continues to advance the Governor’s position that the LCFF 9-12 grade-span adjustment (2.6% of the LCFF 9-12 base grant) accounts for the higher cost of delivering CTE at the high school level, and that a separate CTE program is not necessary. CTE advocates and members of the Legislature continue to object to this revised view of how CTE programs have been, and should be, funded.
The Administration does partially respond to some of the criticisms of the January CTE proposal, clarifying:
• Grant decisions for the K-12 component will be made exclusively by the K-12 Selection Committee.
• Requirements that apply to the new K-12 component of the Strong Workforce Program.
• A role for the Technical Assistance Providers established under the California Career Pathways Trust Program, and further clarifying roles and responsibilities of the Workforce Pathway Coordinators.
• Additional resources are available to the consortia for administering the regional grant process, including resources to support the K-12 Selection Committee duties.
Again, as expected, this will be an item of negotiation between the Governor and the Legislature. Most Legislative Members are holding their position that K-12 CTE funding should be administered by the CDE, and flow through to K-12 entities directly without community college intervention. The feeling in the Legislature is that providing that funding through the CTE Incentive Grant is the common-sense way to proceed. The good news remains that the Governor continues to propose the $200 million in ongoing funding for K-12 CTE, rather than eliminating state funding altogether at the conclusion of the current three-year program.

Community Engagement and Improving School Climate

The Administration proposes to $13.3 million in one-time Prop 98 funds to create a Community Engagement Initiative to “help communities and school districts engage more effectively when developing LCAPs.” They also propose $15 million in one-time Prop 98 funds to the Butte and Orange County Offices of Education to be used to contract with a California institution of higher learning to expand the state’s Multi-Tiered System of Support framework to foster positive school climate in both academic and behavioral areas, including but not limited to, positive behavior interventions and support, restorative justice, bullying prevention, social and emotional learning, trauma-informed practice, and cultural competency.

Miscellaneous

While special education, the educator shortage, early learning and child care, and other programs and issues continue to receive a lot of attention in the Legislature and among advocates, the Governor’s May Revision does not include any major new initiatives related to these programs and issues.

This week California Governor Jerry Brown presented his May Revision, which revises his January budget proposal. It is forecast that the state’s revenues will come in at $2.4 billion more than earlier anticipated. This is positive news for charter school education in California. The major pieces of his May Revision are:

Creation of a larger state rainy day fund (which already has reached agreement with the legislature)
A Proposition 98 reserve
Paying off the deficit in the State Teacher’s Retirement Fund
Expansion of the state’s Medi-Cal program

The May Revise includes total funding of $75.9 billion ($45.1 billion General Fund and $30.8 billion other funds) for all K-12 programs. Specifically, the revise continues the changes outlined in the Governor’s January budget proposal by maintaining the additional $4.5 billion proposed for implementation of the Local Control Funding Formula (LCFF), creation of a Proposition 98 reserve and focusing on eliminating inter-year deferrals. He is also proposing to create a K-12 High Speed Network to study Internet connectivity and infrastructure and allocate grant funding to those school districts with the greatest need. This will aid in meeting technology requirements associated with Common Core implementation and adaptive testing. The revise contains $26.7 million for this program. It also proposes a fix for an issue that some schools participating in Provision 2 and 3 of the National Schools Lunch Program are having with the implementation of LCFF. Additionally, there is good news for charter schools with independent study programs as the Governor modifies his January proposal by:

Eliminating the requirement that teachers and students meet weekly to assess if a student is making satisfactory grades
Provides schools the opportunity to offer site-based blended learning, utilizing a universal learning agreement for all students enrolled in the same course or courses
Funds students enrolled in course-based indpendent study programs on the basis of average daily attendance, and not enrollment, and applying the statewide excused absence rate to average daily attendance claimed by local education agencies

To review the entire May Revision go to www.dof.ca.gov and click the link for 2014-2015 May Revision. We’ll be posting additional updates and information on the Governor’s revision and additional budget and legislative information as it becomes available, so check back or subscribe to our blog for ongoing posts on this topic and others relevant to charter schools.

On Tuesday the California Governor released his May Revision which contains changes to his January budget proposal. As expected, with some tweaks and changes, the Governor doubled down on his efforts to change how we fund education in California. The May Revision estimates that revenues will be up $2.8 Billion over estimates provided in January. Though this is good news it is a low projection when thoughts were that revenues could have increased as much as $4.5 Billion. However, these funds have allowed the Governor to increase spending in some areas while still maintaining an overall modest budget proposal. Specifically, for Proposition 98 the Governor proposes a one-time investment of $1 billion for Common Core implementation allocated to all schools outside of the Local Control Funding Formula (LCFF) on an ADA basis. This will be about $170 per student. Ignoring the complaints about the base funding being too low for schools in his LCFF and that his concentration grants should be eliminated, the Governor has produced data showing that 80% of his LCFF funding going to base grants, 16% to supplemental grants (for ELL students, students in poverty and foster youth) and only 4% going to the concentration grants.
Additionally, the Governor’s May Revision provides additional Proposition 98 funds for the following one-time K-12 uses including:

$1.6 Billion to accelerate repayment of inter-year deferrals and;
$61 Million to backfill the reduction in federal funding for Special Education under the sequestration cuts

For charter schools specifically the Governor did not change any of his January proposals which is very positive. The only issue that will affect charter schools is he has dropped his proposed changes to ‘online’ education and said that he will pursue those changes during next year’s budget debate.
To view the May Revisions and all of the proposed changes go to the Department of Finance’s website at www.dof.ca.gov.