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LAO Forecasts Modest Growth for Prop. 98 School Funding in Upcoming Budget Year

November 15, 2018

The Legislative Analyst’s Office (LAO) issued a forecast on November 14 for school funding under Proposition 98 in the upcoming 2019-2020 state budget, which will be the first state budget under recently-elected Gov. Gavin Newsom.

According to the LAO’s Office:

Modest Growth Projected for School and Community College Funding in the Upcoming Budget Year. Each year, the state calculates a “minimum guarantee” for school and community college funding based upon a set of formulas established by Proposition 98 (1988). Under our near-term outlook, the 2019-20 minimum guarantee is up $2.4 billion (3.1 percent) over our revised estimate of 2018-19 funding. After accounting for this increase and backing out various one-time initiatives funded in the prior year, among other adjustments, we estimate the Legislature would have an additional $2.8 billion for Proposition 98 programs in 2019-20. The state could use this funding to cover a 3.1 percent statutory cost-of-living adjustment for school and community college programs (estimated to cost $2.3 billion) and certain other previously scheduled commitments (estimated to cost $57 million). Were the state to fund those increases, about $480 million would remain available for other activities. The Legislature might wish to consider using this remaining funding for one-time initiatives, as doing so would provide a modest buffer in case the minimum guarantee drops after the budget year. The volatility of the minimum guarantee, the possibility of a recession sometime after 2019-20, and the lack of funding in the state school reserve are all reasons the Legislature might wish to budget cautiously in the upcoming year.

Report Provides Our Fiscal Outlook for Schools and Community Colleges. State budgeting for schools and the California Community Colleges is governed largely by Proposition 98, a constitutional amendment approved by California voters in 1988 and modified in 1990. The measure establishes a minimum funding requirement, commonly known as the minimum guarantee. In this report, we examine how the minimum guarantee might change over the next several years and discuss the factors likely to be driving those changes. We then examine key aspects of district budgets—focusing on the main cost pressures facing districts over the next several years. (The 2019-20 Budget: California’s Fiscal Outlook contains a summary version of our Proposition 98 outlook, along with the outlook for other major programs in the state budget.)

To read the LAO’s complete Proposition 98 outlook, click here.

Sources: Legislative Analyst’s Office

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