Governor’s 2013-14 Education Budget Proposal

Barrett Snider, Capitol Advisors Group
January 2013

Investing in Education & “Subsidiarity”

On January 10, 2013, Governor Jerry Brown unveiled his State Budget proposal and underscored his proposed increase in per-student education funding levels of $2,681. The dollar amounts for per-pupil increases are eye-opening, but before you start counting your chickens it is important to note that these are targets to be met over a 7-year period - possibly longer. Knowing that schools are the overwhelming winner among many areas of the state budget next year, the Governor emphasized that increased education funding is the best place the State can invest in its future. In that respect, the Administration has rewritten and renamed their school finance reform funding formula to answers many of the concerns raised last year, including a more impressive “hold-harmless” provision.

The word that becomes the cornerstone of the Governor’s philosophy on education is “subsidiarity,” a term he described as “letting problems be solved closest to where they exist…giving the most authority to solve those problems at that closest level beginning in the classroom…” Local control, flexibility and a focus on equity capture the essence of his plan for schools.

The Administration’s proposal provides Proposition 98 funding of $56.2 billion for 2013‐14, amounting to an increase of $2.7 billion over the anticipated funding in the current fiscal year. The budget document acknowledges that the passage of Prop 30 translates into dramatically fewer cuts than would have otherwise occurred.

Budget Deferrals

As we expected, the budget proposes repayment of approximately $1.8 billion in funding to buy down inter-year deferrals. The deferred funding as a budget approach to delay real spending for school agencies grew to more than $10 billion and has remained a high priority of the Governor to reverse. Under his plan, all inter-year deferrals are gone by 2016-17. This is a very laudable and important part of the budget plan.

School Finance Reform

The Governor’s Budget proposes school finance reform that is consistent with the vision that the Governor pursued in last year’s Weighted Pupil Formula proposal. However, the Administration is no longer referring to this proposal as the Weighted Pupil Formula, but as the Local Control Funding Formula (LCFF).

Allocations in the Form of Base/Supplemental/Concentration Grants

As in last year’s proposal the bulk of payments to schools will come in a Base Grant that replaces the base revenue limit; Base Grants are paid per unit of ADA. The level of Base Grant will be adjusted for grade span differences (with grade spans for grades K-3, 4-6, 7-8 and 9-12). As conveyed to us in conversations with the Department of Finance, the Administration proposes the Base Grant amounts as follows:

  • K-3 = $6,342
  • 4-6 = $6,437
  • 7-8 = $6,628
  • 9-12 = $7,680

The Administration states that when fully implemented (they estimate 7 years), this Base Grant will equal the current average undeficited revenue limit. Base Grant funding is proposed to be completely discretionary.

A Supplemental Grant equal to 35% of the base grant will be paid to local educational agencies for each unduplicated English learner (EL), economically disadvantaged (defined by free and reduced price lunch eligibility), and foster pupil. If a student is EL and also economically disadvantaged, that pupil only generates 35% (not 70%).

A Concentration Grant equal to 35% of the base grant will be paid (in addition to the Supplemental Grant) to local educational agencies for each EL and economically disadvantaged pupil, if the proportion of EL and economically disadvantaged pupils in the district exceeds 50% of the total student population. For example, if an LEA has 100 students and 70 of the students generate an unduplicated supplemental grant, the concentration grant only applies to those 20 students over the 50% of the LEA population.

As currently proposed, both the Supplemental and Concentration Grant funds could be used for any purpose benefiting those EL and economically disadvantaged pupils on which this funding is calculated. Note that this expenditure requirement is very broad is not the same as requiring the funding to “follow the student.” We expect the civil rights and EL groups to push for more accountability around the use of these dollars.

It should be noted that the Administration proposes that both the Supplemental and Concentration Grant be payable for any EL student for no more than 5 years. That 5-year designation would follow the student.

Transition and Hold Harmless

For the years in which the proposed funding system would transition to full implementation (i.e., an estimated 7 years starting in 2013-14), the Base Grant (equal to the current average undeficited revenue limit) plus the Supplemental and Concentration Grant, for an LEA, will constitute an Entitlement Target for that LEA. For the 2013-14 fiscal year, each LEA would be held harmless and provided at least the same total amount of funding (for deficited revenue limits, as well as for all included categoricals) that was provided in 2012-13. The multi-year transition from this hold-harmless amount to the entitlement target would be funded by annual growth in Proposition 98 funding. Each year, 1/2 of the funding generated by growth in Proposition 98 would be used to move LEAs toward their entitlement targets, with that movement being proportional to the difference between the level of funding in the prior year and the entitlement target (the other half of the growth in Proposition 98 funding would be used to buy down inter-year deferrals).

The Administration proposes that each year the LEA’s entitlement target will grow by the application of a COLA. At the end of the transition period, each LEA would be receiving a Base Grant equal to the current average undeficited revenue limit (COLA’d up through the transition years) plus its funding under the Supplemental and Concentration Grants, as applicable.

After LEA’s calculate the Base Grant, Supplemental and Concentration Grants, the the Administration proposes a per ADA K-3 Class Size Reduction (CSR) funding augmentation equal to 11.23% of the K-3 Base Grant (not the Base Grant plus the Supplemental and Concentration Grants). They intend to require LEAs hold a district average pupil-teacher ratios in K-3 of 24:1, unless another ratio is otherwise bargained at the local level. The administration also says they intend for this pupil/teacher ratio requirement to be implemented in stages through the transition period, and violation of the requirement could lead to a loss K-3 CSR augmentation funds.

The Administration is also proposing a per ADA augmentation to the Grades 9-12 Base Grant of 2.8% for Career Technical Education (CTE). These funds would be completely discretionary.

What Current Funding is in the Proposal, and What’s Out

A number of specific funding streams became issues of discussion during last year’s debate and during the stakeholder meetings held by the Administration last Fall. According to the Administration, other than the programs mentioned here, funding for categorical programs is folded into the Base Grant.

Home to School Transportation funding would be outside of the Base / Supplemental / Concentration Grant formula, but will be provided as a permanent add-on to the new allocation for each district; use of this funding will be completely discretionary. This would be equal to the entire amount of funding the LEA received in 2012-13.

Targeted Instructional Improvement Grant (TIIG) funding, as with Home to School Transportation, would be outside of the Base / Supplemental / Concentration Grant formula, but will be provided as a permanent add-on to the new allocation for each district; use of this funding will be completely discretionary. This would be equal to the entire amount of funding the LEA received in 2012-13.

As was the case last year, funding for QEIA, Special Education, After School Education and Safety, Child Nutrition, Preschool, various programs not distributed to all districts (e.g., High-Speed Internet Access, FCMAT), and federal funds are also excluded from this proposal and are funded separately from the LCFF.

Adult Education funding is retained by K-12 districts as part of the hold-harmless, but the requirements for the program go away. The Administration proposes to move Adult Ed under the authority of the Community Colleges and funds a new $315 million Adult Education Block Grant. K-12 districts could continue to operate Adult Ed programs, close them down, or contract with the local CCC going forward.

Although CTE (including ROC/P), K-3 CSR and Adult Education are not excluded from the categorical consolidation, it is important to note that the funding for any of these programs that was received by districts, county offices of education or charter schools in 2012-13 is used to determine the hold harmless amount of funding that those LEAs will receive starting in the 2013-14 fiscal year and through the transition period.

Other Issues

Under LCFF, charter schools are treated the same as school districts; however, a charter school cannot receive a Concentration Grant that is greater than that received by the district in which the charter is located.

A Basic Aid District, under the new proposal, would be defined to be a district where local property tax revenues equal or exceed the district’s Entitlement Target; the district would continue to retain local property tax revenues in excess of that allocation. Basic Aid districts would also benefit from the hold harmless provisions that are part of the proposal; in other words, no Basic Aid district would lose state funding as a result of the proposal.

County Offices of Education are proposed to be funded through a new two-part formula that provides per-ADA funding for county community and juvenile court schools, and discretionary general fund for county offices based on total ADA within the county. County offices would receive a separate base grant for alternative school pupils and the same Supplemental Grant for EL and economically disadvantaged pupils. County Offices of Education would also benefit from the hold harmless provisions that are part of the proposal; in other words, no County Offices of Education would lose funding as a result of the proposal.

New Approach on Accountability

During three meetings held in November to solicit input on a new school finance system, the Administration talked about the multi-layered accountability system we have for schools that is badly in need of streamlining. The budget plan does not address all the aspects of accountability, but it makes an ambitious start. The basic premise is an outcome based model rather than one focused on inputs.

The Budget would have a district-based accountability focus on core requirements and outcomes expected of schools and proposes to link that to the local school district budget process. The plan eliminates most programmatic and compliance requirements that school districts, county offices of education, and charter schools are currently subject to under the existing system of school finance. Governor Brown envisions an approach that makes schools accountable to the district’s elected governing board, with less emphasis on the State. Because federal NCLB remains in law and California has not been granted waivers on the many accountability provisions that exist, this new approach to accountability must retain some of the top-down structures that accompany the federal requirements. Additionally, the Administration propose to keep some of the important fiscal and budgetary controls and academic performance requirements.

The Budget would require that all school districts adopt a District Plan for Student Achievement “concurrent and aligned” with each district’s annual budget and spending plan. While school districts would have discretion regarding the content of the plan, all plans would be required to address how districts utilize state funding received through the new funding formula toward improvement in key areas including:

  • Basic conditions for student achievement (having qualified teachers at each school site, sufficient instructional materials available for students, and school facilities in good repair). Think Williams requirements.
  • Programs or instruction that benefit low‐income students and English language learners.
  • Implementation of Common Core content standards and progress toward college and career readiness (as measured by the Academic Performance Index, graduation rates, and completion of college‐preparatory and career technical education courses).

Consistent with the Governor’s emphasis on local control, Administration officials suggested that no State agency would review these District Plans, but instead that the K-12 Audit Guide would be revised to require independent auditors to verify that the Plans contain all mandatory elements and to compare actual expenditures with those contained in the Plans.

Issues for CAWS and International Baccalaureate

This is certainly an ambitious opening budget from the Governor. It proposes to fundamentally change how schools in California are funded. CAWS will be working with the Administration and the Legislature to ensure that either the funding formula or the related accountability provisions contain incentives for schools to offer course options and differentiated instruction for all students. We think the Administration has done a fairly remarkable job addressing a number of the major political obstacles to last year’s Weighted Student Funding formula. This year, we think the accountability provisions will largely hold the keys to success of the LCFF. Without meaningful accountability provisions, the Legislature is not likely to support the proposal.

Remember, this is just an opening budget proposal. The Legislature will now hold a series of budget and policy hearings to debate the merits. The Governor will revise his budget on May 15th. In the meantime, Legislators and the Administration will be watching state revenues to see if the economy is improving faster than anticipated. The Legislature must send a budget to the Governor by June 15, or they stop getting a paycheck. So we anticipate an on-time budget.

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