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Stakeholders Quick to Respond to May Budget Revision

May 22, 2017

Education groups, business groups and other stakeholder offered varying assessments of the Governor’s May Budget Revision, announced on May 11.

The Association of California School Administrators (ACSA) said:

“The governor continues to note the state’s economy is three years past the traditional recovery period following an economic recession and warns of the uncertainty created by the potential repeal of the federal Affordable Care Act. Gov. Brown also notes that the state continues to face ongoing liabilities such as state infrastructure and retiree health care benefits. Further, it was noted that the state has added considerable ongoing commitments since the passage of Proposition 30 and that the budget is projected to return to a deficit since a recession at some point is inevitable. Despite these cautionary warnings, the May Revision economic forecast reflects continued growth over the next four years.

Overview

Gov. Brown’s budget proposes a total budget plan of $124 billion, with special funds included the total state budget plan equates to $183.4 billion. This includes continued investments in public education. The governor budget proposes to fund the Proposition 98 minimum guarantee with $74.6 billion in 2017-18.

Other highlights from the May Revision include the following:

  1. $6 billion supplemental payment to CalPERS with a loan from the Surplus Money Investment Fund that will reduce unfunded liabilities and stabilize state contribution rates.
  2. Prevents a scheduled reduction in financial aid awards to low-income students at private colleges and universities.
  3. A revised $8.5 billion total balance for the state’s Rainy Day Fund to reach 66 percent of the constitutional target.

Education Budget

Proposition 98 is significantly impacted by the volatility of the state revenues. The Proposition 98 guarantee funding is increased by $326 million in 2015-16, decreased by $489 million in 2016-17 and increased by $2.5 billion in 2017-18. These changes revise the Proposition 98 guarantee levels at the May Revision as follows for 2015-16 through 2017-18 fiscal years: $69.1 billion (15-16), $71.4 billion (16-17), and $74.6 billion (17-18).

Other changes to the education budget include the following:

  1. New resources in the May Revise are sufficient to eliminate the $859 million deferral proposed in January.
  2. Increases funding for the Local Control Funding Formula by providing an additional $661 million more than the governor January Budget. In total, the more than $1.4 billion investment will bring the formula to 97 percent of full implementation.
  3. An additional $750 million, providing a total of more than $1 billion in discretionary one-time funding to local educational agencies in 2017-18 to further the implementation of the state-adopted academic standards and support investments in other areas, such as professional development, deferred maintenance and technology needs.
  4. The administration reinforces a prior position that Proposition 51 school facility bonds will be issued once the proposed front-end agreements and K-12 audit guide requirements are in place, yet there is no indication of the timing of the bond sale schedule or the amounts.
  5. Proposes to leverage federal funds to attract and support professional development of teachers, principals and other school leaders.
  6. Cost of Living Adjustment (COLA) is increased from 1.48 percent to 1.56 percent.
  7. Maintains the governor’s proposed early childhood education alignment and program flexibilities proposed in January. These include exemptions to the Title 22 regulations for preschool programs operated by LEAs, as well as more flexible child to adult ratios.
  8. As a result of the modest General Fund revenue increases since the January proposal, the May Revision proposes eliminating the pause on prior funding commitments to early childhood education, and instead includes funding to provide a 6 percent increase reimbursement rate for State Preschool and other direct-contracted child care and development providers and additional 2,959 State Preschool slots.
  9. No changes to special education funding, but indicates the administration will continue these discussions in the coming months.

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The California School Boards Association said:

“Despite a modest funding increase that brings the Local Control Funding Formula to 97 percent of full implementation, the revised 2017-18 state budget proposal suspends the Proposition 98 guarantee.

“When Proposition 98 was approved by California voters, the intent of the measure was to get California into the top ten nationally in per-pupil funding for public education,” said California School Boards Association President Susan Henry. “Today, California instead ranks in the bottom ten, as the Proposition 98 funding guarantee has been consistently treated as a ceiling instead of a floor. Now, this budget cuts a hole in the floor.”

“California’s school districts are already struggling to balance budgets and avoid cuts to educational programs in the face of increasing cost pressures from pension contributions and other sources,” Henry added. “The notion of ‘over-appropriation’ for public education at a time when state revenues are still increasing defies the spirit of the Proposition 98 law, and is a step away from where we need to be, not toward it.”

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Eric Heins, president of the California Teachers Association, said:

“Recognizing higher state revenues than expected in January, Governor Brown maintains his ongoing commitment to increase funding to our students of greatest need in the May Revision of his state budget plan. Adding $1.4 billion to the Local Control Funding Formula will help local school districts recruit and retain high quality teachers, and help students have access to the tools and resources they need. The revised budget also eliminates the nearly $1 billion funding deferral that would have been a nightmare for local districts and corrects the inappropriate manipulation of the minimum school funding law proposed in January. We are, however, reviewing a new provision that appears to pre-approve some cuts to schools in future years. We are happy to see money restored to allow more children to attend state preschool programs and to support child care providers. We also share the governor’s commitment to provide healthcare to all children, but also share his concerns about the healthcare cuts being proposed by the Trump administration and the devastating impact they would have in California.”

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The California Legislative Analyst’s Office (LAO) said:

“This year, the May Revision departs notably from prior years in that it funds above the required Proposition 98 levels – providing $1.6 billion more than required over the 2015-16 through 2017-18 period. This augmentation, coupled with another $594 million in higher Proposition 98 General Fund support that primarily covers lower property tax estimates, results in schools and community colleges reaping nearly all of the benefit under the May Revision. We analyze this approach and present alternative approaches in the first section of our report. We then analyze other key aspects of the May Revision, including the additional funding provided to accelerate implementation of the Local Control Funding Formula and unpause implementation of the budget agreement on child care and preschool. In the report, we also discuss many other proposals, including those related to community colleges, tuition increases at the universities, Cal Grant award increases, and the recent audit of the University of California.”

To read the LAO’s complete report analyzing the impact of the May Budget Revision on education, click on the link below:

http://lao.ca.gov/Publications/Report/3670

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The California Budget and Policy Center released a “first look” analysis of the May Budget Revision, making the following points:

“On May 11, Governor Jerry Brown released the May Revision to his proposed 2017-18 state budget. The Governor forecasts revenues $2.5 billion higher – over a three-year window – than projected in January, mostly reflecting higher personal income tax (PIT) projections due to stock market gains.

“In addition to showing an upturn in the fiscal outlook, the May Revision makes several improvements over the Governor’s January proposal. The revised budget provides funds to offset a large portion of the In-Home Supportive Services program costs that are being shifted to counties. In addition, the May Revision continues plans – which the Governor’s January proposal had put on hold – for a multiyear reinvestment in subsidized child care and preschool. Higher-than-expected revenues result in increases in the Proposition 98 minimum guarantee for K-14 education spending. Also, the May Revision shifts funds to cover higher Cal Grant costs due to recently adopted tuition increases at the California State University and University of California.

“The May Revision assumes current federal policies and funding levels, yet still reflects deep uncertainty about potential federal actions. The revised budget highlights the prospect of major changes to Medicaid, other areas of federal spending, and tax policy, among others.

As the Governor and Legislature work toward a budget agreement in the coming weeks, they do so amid the continuing, and in many ways troubling, prospect of federal cuts that could threaten health care coverage for millions of Californians, the social safety net, and other critical services. California’s Congressional delegation needs to ensure that federal policy choices provide the necessary support to communities in California and elsewhere.”

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Rob Lapsley, president of the California Business Roundtable, said:

“We support the governor’s position that more spending is not possible given the current and future budget pressures and his leadership has put California in a better financial situation to protect all Californians against a future recession.

"However, the Department of Finance is projecting a moderate recession will drop state revenues $20 billion annually for several years. That deficit will grow when you add in long term liabilities for salary, healthcare and pension costs plus future legislative spending.

"When that day occurs, the Legislature will look to redirect funds from every program to help balance the budget. This will undoubtedly include the tens of billions in potential revenue from SB 775 (Weickowski) – which are the real hidden taxes in his cap-and-trade proposal. If we don’t have the right cap-and-trade plan in place with adequate fiscal safeguards, these revenues that should be dedicated to achieving our greenhouse gas goals will end up being spent to fill the holes in the Legislature’s spending priorities.”

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The Oakland-based advocacy group Children Now said:

“The May Revision of the state budget is a mixed bag for the state’s most vulnerable kids. While the proposal does restore previously proposed cuts to child care and preschool, it doesn’t fully recognize the reality of working families who need quality early care options. On the positive side, the Governor does include needed funds to support foster youth living with family members.

“The Governor reversed his initial proposal to “pause” last year’s commitment to incrementally raise reimbursement rates for state-funded child care and preschool programs to keep pace with the increasing state minimum wage and the rising cost of providing quality services. By returning to last year’s good faith deal, which also included expanding state preschool, the May Revise avoids seriously harming an already fragile and under-resourced system.

“However, the May Revise ignores the staggering unmet need for subsidized child care across the state: over 1.2 million eligible low-income children are not receiving child development services. The proposal misses critical opportunities to counteract the impacts of poverty by not increasing the income eligibility limit for families receiving child care assistance, which is outdated by more than a decade, nor expanding the family eligibility period to 12 months, which would ensure greater consistency in children’s care and reduce bureaucratic burdens on working families and employers.

“We applaud Governor Brown for his wise decision to fulfill last year’s commitment to child care and preschool programs,” Children Now President Ted Lempert said. “Yet, because California’s future prosperity depends on quality early learning programs that give kids a strong start intellectually, socially, and emotionally, the May Revise still misses the mark by failing to leverage available resources to expand funding beyond the baseline commitment made last year.”

“On the positive side, the Governor’s proposal finishes work started last year to support family members who take in foster children. Historically, these families received less financial support than non-relative caregivers. In 2016, the state established parity for relative caregivers in the foster care rate system. The budget proposal includes funding to expand this parity to foster children with developmental disabilities and foster youth with young children of their own, creating a fair rate system for all caregivers.”

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Another advocacy group based in Oakland, The Education Trust–West, said:

The Education Trust–West appreciates Governor Brown’s commitment in the May Revision to keeping the Local Control Funding Formula on track to full implementation. Fully implementing LCFF continues to be one of the most important steps we can take as a state to close opportunity and achievement gaps for English learners, foster youth, and low-income students. As the state looks to the future and faces possible budget constraints, we urge the Governor and Legislature to stay the course and uphold a strong commitment to LCFF and the equitable resources that it can provide, while also seeking out new revenue sources for education. Adequately and equitably funding California’s education system should be our highest priority.

“Furthermore, as local education leaders, community members, and other stakeholders look for ways to improve LCFF in practice, we see a crucial need for the state to improve the collection and reporting of school-site level expenditure information. In his press conference today, Governor Brown referenced the need for local advocates to be engaged in the LCAP process as part of ensuring LCFF funds get to the students they’re intended to reach. One of the best ways the Governor and the Legislature can support those efforts is to ensure those local advocates and stakeholders have transparent, accessible school-site level expenditure information as required by Assembly Bill 1321 (Weber), a bill we are currently co-sponsoring along with Children Now.

“With this data, stakeholders will be better able to engage in local decisions about their schools, and we will be able to ensure our schools are equitably resourced. To that end, we look forward to the policy discussion about how AB 1321 will promote equity and transparency in school expenditures and urge the Legislature and Governor to support the legislation. California’s future hinges on how well we educate our students. As the Legislature works to finalize the 2017-18 California budget, we urge them to remember that our most invaluable state resource is the young people in our schools, colleges, and universities.

Source:  Complied by EdBrief staff from online resources.



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