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LAO Offers Analysis of May Budget Revision

May 18, 2018

(Editor’s note: On May 14, the California Legislative Analayst’s Office, or LAO, released the following analysis of Governor Jerry Brown’s May Budget Revision proposal)


In this report, we analyze the May Revision education proposals. We first provide an overview of Proposition 98 funding and then focus on the Governor’s major proposals for K-12 education, child care and preschool, community colleges, universities, and student financial aid. This year, the May Revision does not contain substantially higher amounts of education funding. It does, however, contain a few major new policy proposals and many notable policy revisions to the Governor’s January proposals. Most notably, the May Revision includes a major proposal relating to a new process for certifying and truing up the Proposition 98 minimum guarantee. We believe this proposal merits serious legislative consideration. The May Revision also makes notable revisions to the Governor’s January proposals for building a new system of support for low-performing school districts, restructuring the community college apportionment formula, and creating a new online college. We think some of the policy revisions in the May Revision reflect improvements, but we think they tend not to go far enough in addressing key underlying issues. In the pages that follow, we offer many specific recommendations for the Legislature to consider on these and other issues. Our package of recommendations includes adopting some proposals, modifying others in certain ways, rejecting others but inviting better proposals next year, and rejecting some proposals in their entirety.

Proposition 98 Overview

Below, we explain and assess the May Revision changes in the Proposition 98 minimum guarantee and analyze the administration’s certification proposal.

Major Changes in the Guarantee

Increases Proposition 98 Funding by $727 Million Over the Period. Figure 1 compares Proposition 98 funding under the Governor’s January budget and the May Revision. Compared with January, the May Revision proposes $727 million in additional funding across the 2016-17 through 2018-19 period ($252 million in 2016-17, $407 million in 2017-18, and $68 million in 2018-19). Under the May Revision, total Proposition 98 funding in 2018-19 is $78.4 billion, a $2.8 billion (3.7 percent) increase over the revised 2017-18 level. For each year of the period, the Governor proposes to fund at the revised estimate of the minimum guarantee.

Revises General Fund Revenue Estimates Upward Significantly. Several factors affecting the guarantee have changed since January. One notable change relates to state General Fund revenue estimates. Compared to January estimates, the May Revision has General Fund tax revenue up nearly $8 billion over the three-year period. In most years, upward revisions of this magnitude lead to significant increases in the Proposition 98 guarantee. These increases often reflect higher required maintenance factor payments. The Governor’s budget, however, already assumed the state would end 2017-18 with relatively little maintenance factor outstanding. Given these conditions, the increase in the minimum guarantee attributable to the higher revenue is only about $450 million over the period.

Proposes to Rebench the Guarantee for 2015-16 Shift of Preschool Costs. Another factor affecting the guarantee relates to a rebenching proposal. In 2015-16, the state changed the way it accounted for certain preschool costs. Previously, the state had funded the part-day preschool program using Proposition 98 General Fund and all wraparound care using non-Proposition 98 General Fund. In 2015-16, the state began using Proposition 98 to pay for the portion of wraparound care provided by school districts and county offices of education (with wraparound care provided by nonprofit agencies still funded from non-Proposition 98 General Fund). The Governor now proposes to adjust (or “rebench”) the minimum guarantee upward to account for this cost shift. Rebenching for the shift accounts for approximately $350 million (or half) of the total increase in the guarantee over the period. (The California School Boards Association sued the state over its previous action not to rebench the guarantee. A trial court ruled against the state in late 2016, and the state is in the midst of appealing that decision.)

Incorporates Lower Per Capita Personal Income Rate for 2018-19. Whereas the above two changes increase the guarantee, the recent adjustment to the per capita personal income rate has a downward effect on the guarantee. The administration in January estimated that growth in per capita personal income would be 4.25 percent. (For purposes of calculating the minimum guarantee, the data underlying the per capita personal income rate is lagged one year.) The May Revision incorporates revised data from the federal government showing the growth rate now at 3.67 percent. This lower growth rate offsets about $80 million of the increase in the 2018-19 guarantee that otherwise would result from the increase in General Fund revenue.

Makes No Notable Changes to Student Attendance Estimates. Data from the California Department of Education show that final student attendance for 2016-17 came in slightly higher than the administration had projected in January. The May Revision updates the 2016-17 guarantee to account for the new data but makes essentially no changes to 2017-18 or 2018-19 attendance estimates. Under the administration’s projections, attendance increases by 0.01 percent in 2017-18 then declines by 0.29 percent in 2018-19. Similar to January, the assumption about attendance growth in 2017-18 is significant because it triggers a two-year hold harmless provision set forth in the State Constitution. The provision effectively prevents the projected attendance decline in 2018-19 from affecting the 2018-19 minimum guarantee.

Property Taxes Down From January Budget. Compared to January, the administration estimates that Proposition 98 property tax revenue is down $627 million over the period (down $234 million in 2017-18 and down $393 in 2018-19). The administration updates its 2017-18 estimate using data recently reported by schools and colleges. This data shows some weakness relative to January. Some of the weakness is the result of lower-than-expected revenue from the 1 percent tax levied on the value of most properties. The administration assumes this weakness in 2017-18 carries forward to 2018-19. The administration also makes a downward adjustment to the estimates of revenue attributable to local Educational Revenue Augmentation Fund accounts in 2018-19.

A New Certification Process

State Originally Created Certification Process to Finalize the Calculation of the Minimum Guarantee. The state created the certification process through statute in 1989 after voters approved Proposition 98 the previous year. Under the law, the Director of Finance, State Superintendent of Public Instruction, and California Community Colleges Chancellor are to agree upon and certify a final calculation of the minimum guarantee within nine months following the end of the fiscal year. Though intended to be an annual process, those responsible for certification have rarely agreed on all aspects of the Proposition 98 calculations. These disagreements have tended to delay certifications for many years after the statutory deadline. The last time the state certified the minimum guarantee was in 2008-09. Even that year, the Legislature decided to set forth the minimum guarantee in statute rather than use the process outlined above.

May Revision Proposes New Process for Certifying the Minimum Guarantee. The Governor proposes a new certification process that would be managed by the Director of Finance. Under the new process, the administration would publish a tentative recalculation of the prior-year minimum guarantee in the May Revision. This estimate would include all of the underlying factors used in the calculation of the guarantee. Similar to current practice, some of these factors (such as General Fund revenue and state population) would reflect the administration’s final estimates for the year whereas other factors (such as student attendance and local property tax revenue) would reflect amounts reported by the California Department of Education and the California’s Community Colleges Chancellor’s Office. The publication of this tentative calculation would begin a public comment period that would allow any interested party to submit feedback on the estimates. After reviewing and responding to these comments, the administration would publish a final calculation of the guarantee by June 30. Over the next 90 days, a concerned party could submit a legal challenge over any issue not resolved through the comment process. Assuming no legal challenges, the guarantee would be deemed certified at the end of the 90-day period.

May Revision Also Includes New Companion Process for Finalizing Prior-Year Spending. The Governor also proposes a new process that would automatically adjust the spending that counts toward the minimum guarantee when the guarantee increases and decreases based upon the final certification. For years in which the guarantee drops, the state on paper would reduce spending counting toward the guarantee and credit the difference to a newly created true-up account called the “Proposition 98 Cost Allocation Schedule.” For years in which the guarantee ends up higher during certification, the state would apply any available credits in this account toward the spending required to meet the higher minimum guarantee. If the credits in the account were insufficient to meet the higher guarantee, the state would provide the remaining difference to schools and community colleges through a settle-up payment. As under current practice, the Legislature could decide how to allocate this settle-up payment. If the Legislature did not specify an allocation method, the State Controller would distribute the payment to schools and community colleges based on student attendance.

Proposal Caps Credits in the True-Up Account. The administration proposes to limit the total amount of credits in the account to 1 percent of the minimum guarantee being certified that year. Each year, the state would adjust spending and add credits to the account only to the extent the minimum guarantee dropped and existing credits in the account were below the 1 percent threshold. Any spending above this threshold would continue to count toward the guarantee.

Proposal Also Entails Certifying All Earlier Years. As part of the switch to a new certification process, the administration proposes to certify the guarantee for 2009-10 through 2015-16. The certified amounts would reflect final Proposition 98 spending for each of those years. The administration proposes using a similar public process over the coming year to share these amounts publicly and allow for a set period of comment, review, and potential challenge.


Potential Upside for State Revenue but Not for the Minimum Guarantee. Our estimates of General Fund revenue from the personal income tax are higher than the administration’s estimates in 2017-18 and 2018-19. The difference primarily reflects our higher projections of capital gains in 2017 and 2018 and higher wages and salaries in 2019. (Our estimates of the other major sources of General Fund revenue—the sales tax and the corporation tax—together are somewhat lower than the administration’s estimates, offsetting a small portion of our higher personal income tax estimates.) If General Fund revenue were to increase a few billion dollars in either or both years from the May Revision estimates, the minimum guarantee, however, would not increase. This is because the May Revision already assumes the state pays all remaining maintenance factor in 2017-18 and the minimum guarantee grows based upon per capita personal income. Faster revenue growth under these conditions does not increase the Proposition 98 guarantee. As a result of these dynamics, any additional revenue beyond the levels included the May Revision would be available for any legislative priority.

Administration’s Estimate of 2018-19 Minimum Guarantee Likely High Based on Recent Attendance Data. Not only is the minimum guarantee unlikely to increase further in 2017-18 or 2018-19, but the administration’s estimate of the 2018-19 guarantee could be too high. In March 2018, the state received preliminary student attendance data for the first half of the 2017-18 school year. The data suggest attendance is likely to decline by 0.03 percent, compared with the 0.01 percent increase included in the May Revision. Since this change equates to only a few thousand students, the effect on the 2017-18 guarantee would be minor. The effect on the 2018-19 guarantee, however, would be more significant (a several hundred million dollar drop) because the hold harmless provision would no longer be operative and the 2018-19 guarantee would decline in tandem with the decline in attendance projected for that year. Assuming this drop occurs, the state would have provided more funding than required to meet the minimum guarantee in 2018-19, which could lead to a higher minimum guarantee moving forward.

Administration’s Property Tax Estimates Seem a Bit Low. We estimate Proposition 98 property tax revenue is nearly $650 million higher over the period than the administration’s estimate. About $500 million of this difference is in 2018-19. Our higher estimate primarily reflects higher assumptions about growth in assessed property values. Whereas the administration assumes property values will grow 5.6 percent in 2018-19, we assume growth of 6.4 percent. In 2017-18, assessed property values grew 6.2 percent. We believe a modest uptick in the growth rate for 2018-19 seems likely given recent trends in home price and building permits. Home prices ticked up from 7 percent in 2016 to 8 percent in 2017 and have grown at a 9 percent annual rate thus far in 2018. In addition, residential building permits increased from 101,000 in 2016 to 113,000 in 2017 and are on pace to be above 2017 levels thus far in 2018. Though higher property tax revenue would not affect the minimum guarantee, it would reduce General Fund spending required to meet the minimum guarantee dollar for dollar.

Certification Proposal Has Clear Advantages Over Current Process, Recommend Adopting. Though straightforward in concept, the current certification process has a number of drawbacks. Below, we describe four ways the Governor’s proposal would improve upon the current process.

  1. Clearer Lines of Accountability. By diffusing responsibility across three separate entities, the current certification process hinders the Legislature’s ability to hold any one actor accountable for the timely certification of the guarantee. The Governor’s proposal addresses this issue by clearly assigning the duty to the Director of Finance.
  2. Faster Resolution of Disputes. Many disputes over the Proposition 98 calculations have lingered for years because the current certification process does not promote a timely resolution of these disputes. By limiting legal challenges to a specified period, the state would encourage these disputes to be resolved more quickly.
  3. Less Financial Risk for the State. As part of the 2001-02 May Revision, the administration revised its state population estimates as far back as 1995-96. These revisions increased the 1995-96 through 1997-98 minimum guarantees by nearly $600 million, even though schools and community colleges had long since closed their books on these years. Certifying the guarantee more promptly would reduce the likelihood of such post-year budget surprises.
  4. Greater Transparency. Currently, the key inputs and assumptions affecting the final calculation of the guarantee are not widely available to the public. The Governor’s proposal would make these factors available and could help legislators and the public better understand the complex calculations underlying the minimum guarantee.

For all these reasons, we recommend the Legislature adopt the May Revision certification proposal.

New True-Up Process Would Automate Common Budget Practice. Managing changes in the minimum guarantee can be one of the Legislature’s more difficult budget responsibilities. Over the past ten years, changes to the guarantee within the fiscal year have ranged from an increase of more than $6 billion to a drop of nearly $9 billion. Somewhat smaller changes have occurred after the fiscal year is over, ranging from an increase of more than $1.3 billion to a decrease of nearly $200 million. When the guarantee increases, the state typically responds by making additional appropriations as part of next year’s budget plan. When the guarantee drops, the state typically responds with various actions to reduce spending to the lower guarantee. In some cases, such as payment deferrals or mid-year budget reductions, these actions affect school and community college budgets directly. More commonly, however, the Legislature enacts statute to reclassify some or all of the spending above the guarantee as a payment toward a different fiscal year when the state did not fully fund the guarantee. This approach allows schools and community colleges to retain appropriations the state previously approved while still setting spending equal to the guarantee. The Governor’s proposal automates this practice, making it the state’s default action.

Proposed Cap on True-Up Account Works Counter to Intent of Proposal. As we understand the Governor’s proposal, the true-up account is intended to make the process of aligning spending with the minimum guarantee a routine part of the state’s budget closeout. The proposed cap, however, seems to work counter to this intent. If drops in the guarantee exceeded the 1 percent threshold (approximately $785 million in 2018-19) or if the state had credited amounts to the account in previous years, the state would not be able to align spending with the guarantee that year. Moreover, the cap might result in the state taking other actions to align spending with the guarantee that would be more disruptive to district budgets. For example, if the state were anticipating a drop in the guarantee, it might choose to make a larger mid-year programmatic reduction knowing that the true-up process would not necessarily help it align spending with the guarantee. For these reasons, we recommend the state approve the Governor’s proposal without the cap and monitor the true-up calculations over the next several years to see whether additional refinements might be needed.

Recommend Adopting Proposal to Certify Guarantee From 2009-10 Through 2015-16. The state last certified the guarantee nearly ten years ago—the longest delay in certification since the passage of Proposition 98. Holding the calculation open for such a long time (1) invites further disputes over past calculations of the guarantee, (2) complicates the state’s efforts to calculate future minimum guarantees correctly, and (3) exposes the state to higher potential costs if some unexpected development emerged to increase the guarantee for many years retroactively. For all these reasons, we recommend the Legislature adopt the Governor’s proposal to certify the guarantee from 2009-10 through 2015-16 using a transparent process.

K-12 Education

K-12 Proposition 98 Funding Up $812 Million Across Period. Figure 2 compares total K-12 funding under the Governor’s January budget with the May Revision. The May Revision provides an additional $812 million in Proposition 98 funding for K-12 education across the 2016-17 through 2018-19 period. Under the May Revision, total Proposition 98 funding for K-12 education in 2018-19 is $67.9 billion, reflecting an increase of $2.2 billion (3.4 percent) over the revised 2017-18 level. Proposition 98 funding per student is $11,428, an increase of $404 (3.7 percent) over the revised 2017-18 level.

May Revision Contains Mix of Ongoing and One-Time K-12 Proposals. Though K-12 Proposition 98 funding that counts toward the minimum guarantee is up $812 million over the period, notable K-12 May Revision spending proposals total $697 million. The difference is largely due to certain automatic cost increases that reduce the amount available for new spending. Of the $697 million in K-12 spending proposals, $289 million is for ongoing programs and $409 million is for expanded or new one-time initiatives. Figure 3 shows these proposals. Below, we describe and assess them. We focus first on the three largest K-12 proposals, then highlight a few other notable K-12 proposals. We discuss preschool proposals in the next section. 

Major Changes

Increases One-Time Discretionary Funding by $286 Million. The Governor’s January budget included nearly $1.8 billion for one-time discretionary grants to local education agencies (LEAs). The May Revision provides an additional $286 million, bringing total one-time discretionary funding to more than $2 billion. This funding would be scored against LEAs’ outstanding mandate backlog claims. Consistent with the January proposal, the administration proposes to distribute these grants based on student attendance, with the rate increasing to about $340 per student (up from about $300 per student in January). An LEA could use the funds for any education purpose, but the administration encourages LEAs to use the funds for deferred maintenance, professional development, and employee benefits, among other priorities. The administration also retains its January proposal to deduct each district’s obligation under the Medi-Cal billing agreement from its individual grant amount but revises its estimate of these obligations down from $222 million to $145 million.

Increases Local Control Funding Formula (LCFF) by $277 Million. This increase brings the Governor’s total proposed LCFF augmentation in 2018-19 to $3.2 billion. This augmentation is slightly more than needed to reach the LCFF target funding rates. Of the $3.2 billion, $3.1 billion is provided for reaching the target rates and $166 million is provided on top of the target rates (reflecting a 0.3 percent increase). The May Revision proposal effectively serves to provide a larger cost-of-living-adjustment (COLA) to the program (3 percent rather than the statutory COLA rate of 2.71 percent).

Continuously Appropriates LCFF COLA. Under current law, school districts and charter schools automatically receive last year’s LCFF allocation adjusted for changes in attendance. Any other LCFF increases, including COLA, require annual budget authorization. As part of the May Revision, the Governor proposes to begin continuously appropriating the LCFF COLA.

Other Changes

Provides $22 Million to Convert the English Language Proficiency Assessments for California (ELPAC) From Paper to Computer Based. The ELPAC assesses whether students from non-English speaking households require special support to learn English. The pencil-and-paper version of the ELPAC is being rolled out this spring. The ELPAC replaces the California English Language Development Test (CELDT), which is no longer aligned with state academic content standards.

Provides $5.9 Million to Develop Alternative ELPAC for Students With Disabilities. Some students with severe cognitive disabilities cannot be accurately assessed using the ELPAC, as developed to date. Currently, these students’ Individualized Education Program (IEP) teams are tasked with identifying appropriate alternative assessments on a case-by-case basis. The Governor’s proposal would replace this case-by case method of selecting alternatives with a single, statewide alternative assessment.

Provides $21.1 Million Backfill for Charter School Facility Grant Program (CSFGP) in 2017-18, Adjusts 2018-19 Appropriation Downward. The CSFGP helps some charter schools in privately leased facilities cover their rent and certain other facilities costs. The Governor proposes $21.1 million one time to backfill a CSFGP shortfall in 2017-18. Absent this backfill, current-year CSFGP awards would be prorated down to 80 percent of the full statutory rates. For 2018-19, the Governor adjusts ongoing program funding down by $3.6 million, for a year-over-year augmentation of $24.8 million (rather than the $28.4 million proposed in January). The administration indicates that the adjustment is based upon updated program data.

Provides $15 Million for New School Climate Pilot Program. The May Revision proposes to award this funding to the Orange and Butte County Offices of Education (COEs). In recent years, these COEs received a total of $30 million (one-time Proposition 98) to develop a statewide framework for Multi-Tiered Systems of Support (MTSS), which involves strategies for serving academically and behaviorally challenged students. The May Revision proposes that these COEs partner with a California institution of higher learning to design a pilot program that would test out new strategies for addressing issues such as bullying and student trauma. The May Revision requires the two COEs, in coordination with the selected institution of higher learning, to submit to the administration and Legislature an expenditure plan for the funds by December 1, 2018.

Increases K-12 Strong Workforce Proposal by $2 Million Ongoing. This augmentation is intended to help Strong Workforce consortia administer the new high school career technical education (CTE) program proposed in the Governor’s budget. The funds would support consortia staff (likely community college administrators) in performing various functions, such as managing the Workforce Pathway Coordinators that serve as liaisons to high school CTE programs.

Clarifies COEs’ Role in Supporting Low-Performing Districts. The May Revision provides greater detail regarding the types of support COEs may provide low-performing districts. Specifically, the proposal allows COEs to assist a school district in identifying its strengths and weaknesses, reviewing its performance data, and identifying evidence-based strategies for addressing its areas of weaknesses. Rather than providing direct support, COEs also may work with a school district to access assistance from another academic, fiscal, or programmatic expert to determine areas of weakness and identify strategies to address those weaknesses. COEs may request the California Collaborative for Educational Excellence (CCEE) provide advice and assistance to the school district. COE assistance is not required if a school district chooses to work with another entity in undertaking these activities.

Reduces Funding for Single-District COEs. The Governor decreases the January augmentation for COEs by $1 million—from $55.2 million to $54.2 million. The May Revision removes base funding for COEs serving a single district. Specifically, these COEs would not receive the proposed $200,000 in base funding that goes to other COEs for building capacity to support districts.

Makes Modest Programmatic Changes to Lead Agencies. The May Revision makes minor changes to the responsibilities for the proposed COE and special education lead agencies. Regarding COE lead agencies, the May Revision specifies that a COE or a school district identified in need of assistance could request a COE lead agency provide it with support. The proposal also specifies that prior to reselecting a COE to continue serving as a lead agency, the COE must demonstrate it is fulfilling its lead responsibilities. Its performance assessment is to be based on its progress in building COEs’ capacity and the number of school districts required to receive support within its geographic region. Regarding special education lead agencies, the May Revision specifies that at least three of these lead agencies will focus on building the capacity of Special Education Local Planning Areas to work with low-performing districts.

Provides $234,000 to CCEE for Administrative Operations. The May Revision increases funding to CCEE by $234,000 to reflect updated estimates of the agency’s administrative costs. The total appropriation for CCEE in 2018-19 would be $11.5 million.

Provides $13 Million for Professional Learning Networks Focused on Community Engagement. The May Revision provides $13 million one time for CCEE and a lead agency to jointly administer professional learning networks focused on community engagement. Funding would be used to operate the professional learning networks over the next six years.

Assessment and Recommendations

Figure 4 summarizes our recommendations for the May Revision K-12 proposals. We provide our assessment of the most notable of these proposals below.

Use One-Time Funding to Strategically Retire Mandates Backlog. Although the May Revision identifies the discretionary grants as a component of the administration’s broader goal of reducing debt, the Governor’s proposal would do relatively little to retire the K-12 mandates backlog. By distributing discretionary funding purely based on attendance, we estimate less than 20 percent ($334 million) of the $2 billion included in the May Revision would reduce the mandate backlog. This is because nearly two-thirds of LEAs have no outstanding claims and the claims for other LEAs vary widely on a per-student basis. We estimate that continuing to use a per-student approach to retire the entire backlog would cost nearly $200 billion (about $34,000 for every student in the state). As in the previous years, we recommend the Legislature use one-time funding more strategically to retire the mandate backlog. Under our recommended alternative, all districts could receive funding but districts with outstanding claims would need to agree to write off their existing claims.

May Revision LCFF Proposal is One of Several Reasonable Options. Of the $277 million increase in LCFF funding under the May Revision, $111 million funds the higher statutory COLA (which increased from 2.51 percent to 2.71 percent based upon updated data). Funding the higher COLA for LCFF is consistent with typical state budget practice. Beyond adjusting the target rates for COLA, the Legislature has many options for further augmenting LCFF. Though providing an additional 0.3 percent to LCFF funding rates is one reasonable option, we lay out several other basic augmentation options in The 2018-19 Budget: Proposition 98 Education Analysis. For example, the Legislature could designate all the additional funds for increasing supplemental and/or concentration rates. In considering its augmentation options, we recommend the Legislature weigh competing priorities, such as alleviating broad-based cost pressures facing all districts versus addressing persistent achievement gaps among student groups.

Recommend Rejecting Continuous Appropriation of LCFF COLA. The Governor’s proposal to continuously appropriate the LCFF COLA would limit the ability of future Legislatures to build both the K-12 part of the budget and, in turn, the overall state budget. Deciding how much to augment LCFF is one of the most important—and costly—budget decisions the Legislature makes each year. In a year with a particularly high COLA rate (for example, 5 percent), the associated LCFF augmentation costs more than $3 billion. Though the Legislature historically has been inclined to provide a COLA to schools’ general purpose funding, we believe making this decision as part of annual budget deliberations is important both for the sake of transparency and flexibility. Such flexibility is particularly important for helping the state build its budget in any given year, as fiscal conditions change—allowing for augmentations beyond COLA in some years and not supporting any augmentation in other years. For these reasons, we recommend rejecting the proposed continuous appropriation and maintaining the state’s current practice of providing LCFF augmentations as part of the regular budget process.

Reject Computer-Based ELPAC Proposal, Revisit Next Cycle. A computer-based ELPAC likely would have advantages over the pencil-and-paper version. For example, computer-based assessments typically allow for more timely feedback to teachers and students. The May Revision proposal, however, seems particularly expensive. In developing the pencil and paper ELPAC, the state already completed the most challenging elements of test design, such as developing questions and ensuring validity. By contrast, converting an existing test from pencil and paper to computer based should be relatively inexpensive. The proposed cost for this conversion, however, is more than twice what was originally requested to develop the pencil-and-paper version. Consequently, we recommend the Legislature reject this proposal. Given the potential benefits of a computer-based exam, the Legislature could invite the Department of Finance (DOF) and the California Department of Education (CDE) to submit a new budget proposal next year which either reduces the estimated cost or better justifies the cost.

Withhold Recommendation on Alternative ELPAC Pending Additional Information. School districts’ current practice of selecting alternative assessments on a case-by-case basis for students with disabilities might be resulting in some students not being assessed appropriately. In addition, CDE indicates the case-by-case method of selecting alternative assessments might violate federal law, which requires that all students receive an appropriate assessment of their English proficiency. The state, however, has never before had such an assessment. Additionally, CDE estimates that only about 8,000 students take an alternative assessment each year. Moreover, we do not have sufficient information at this time to know whether the proposed cost is justified, as the documentation CDE provided does not clearly separate the costs of developing the alternate ELPAC from the costs of converting the traditional ELPAC from pencil to computer based. Were the Legislature interested in authorizing a new English proficiency assessment for students with disabilities, it could request DOF and CDE to submit better documentation. Specifically, it could request more information about (1) relevant federal requirements (including whether the federal government has issued any formal complaints against California’s current practice) and (2) the cost of developing the alternative assessment.

Recommend One of Two Approaches on CSFGP Backfill. Last year, the state increased the maximum per-student CSFGP award from $750 to $1,117. The increase was driven by two main considerations: (1) the original $750 rate established in 2001 had never received a COLA and (2) the program had unspent funds that could support the award increase. Despite this understanding last year, revised budget estimates show that a sizeable augmentation will be needed in 2017-18 to fund the higher award amount. To address this situation, we recommend the Legislature take one of two actions. It could fund the program consistent with the new statutory rules. We estimate this would cost $24 million (or $3 million more than the May Revision proposal). Alternatively, it could provide $3 million to ensure no charter school receives less in 2017-18 than 2016-17. This latter option helps to address an unintended consequence of last year’s budget decisions, while positioning the Legislature were it to want to rescind the 2017-18 actions moving forward (as discussed below).

Recommend One of Two Approaches on Ongoing CSFGP Augmentation. Regarding the ongoing augmentation, we believe the administration still is underestimating the likely growth in program costs. If the Legislature wishes to fund the program under current statutory rules, we estimate it would need to provide an augmentation of $50 million (relative to the Governor’s January budget, for total program funding of $162 million). Alternatively, if the Legislature wishes to rescind last year’s increase in the maximum grant award and return to funding the program under its historical $750 maximum per-student award, we estimate it would need to provide an augmentation of $8 million (also relative to the Governor’s January budget, for total program funding of $120 million).

Reject School Climate Proposal. The administration has not clearly identified what school climate issues it wants to address that have not already been addressed through other state and local efforts. Importantly, the state’s earlier $30 million MTSS grant was intended to address many of the general issues of school climate that the administration is now highlighting. The administration also has not explained how the proposed funds are to be used, nor has it submitted an expenditure plan for use of the funds. For all of these reasons, we recommend the Legislature reject this proposal.

Continue to Have Overarching Concerns With K-12 Strong Workforce Proposal. We recommend rejecting the Governor’s approach to supporting high school CTE, including rejecting the $2 million May Revision augmentation. As we discussed in The 2018-19 Budget: Proposition 98 Education Analysis, we believe the Governor’s approach is inconsistent with the state’s broader approach of supporting local control and fails to leverage CDE’s existing expertise in high school CTE. We continue to recommend the state support CTE through LCFF or else adopt a categorical approach similar to the existing CTE Incentive Grant Initiative.

Recommend Further Clarifying COEs’ Role. We recommend the Legislature provide greater clarity regarding the role of COEs in supporting districts. Specifically, we recommend requiring COEs to help districts (1) determine their strengths and weaknesses and (2) implement effective strategies to address identified weaknesses. A COE could be exempt from these activities if the district demonstrates it is working with another entity to perform them. A COE also could request that CCEE provide the assistance directly to the district. Given COEs’ existing levels of LCFF funding specifically intended for district support, we recommend not providing any additional funding to COEs for these activities.

Continue to Recommend Rejecting Lead Agencies Proposal. We continue to have concerns that the administration’s lead agencies proposal is duplicative of existing entities and blurs the lines of accountability across numerous support providers. Notably, the COE lead agencies are tasked with supporting districts—a key COE responsibility. Their other core responsibility—supporting COEs—is a key CCEE responsibility. In addition, the proposal does not clarify the role of special education lead agencies. For these reasons, we recommend rejecting the proposals.

CCEE Does Not Need Additional Funding to Focus on Community Engagement. We recommend rejecting the Governor’s proposal to set aside funding for CCEE and another lead agency to establish community engagement professional learning networks. The CCEE currently administers 56 professional learning networks on a variety of topics. If the Legislature is interested in more focus on community engagement, it could add provisional budget language requiring CCEE to undertake such work using its existing funding.

Sources: Legislative Analyst’s Office

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