News

Friday, February 27, 2008

Impact of the State’s Adopted Budget on Our School Districts

A message from Deputy Superintendent Eric D. Smith

Background

On December 9, 2008, the districts’ board of education was presented with its First Interim Financial Report. At that time, the districts self certified the report as “positive,” meaning that we were able to demonstrate that we could meet our current and subsequent two-year fiscal obligations. Yet, perhaps more importantly, we were able to report that the districts ended the 2007-08 fiscal year with a combined unrestricted reserve of 8.58 percent, making last year’s fiscal recovery ostensibly complete.

In October, we reported that the state had to attack the budget problem quickly and aggressively, making permanent improvements through major programmatic reductions and revenue increases. Now after months of political gridlock, a budget deal has finally been brokered by the California Legislature and signed into law by the governor. This 17-month state budget plan addresses a $41.6 billion budget deficit through reduced spending, increased taxes and internal and external borrowing. The final version of the plan contains both mid-year cuts to education and cuts for the next budget year. The plan is as follows:

CURRENT YEAR CUTS (2008-09)

Total cuts to K-12 in the current year would be about $2.3 billion, with the .68 percent COLA being repealed and a further cut to revenue limits of $944 million (about $160 per ADA or about $2.2 million for our districts, far less than the $4.3 million originally envisioned in the governor’s December budget proposal). In addition, there would be a separate $944 million cut to certain categorical programs. Categorical programs are treated differently by being considered three separate ways:

TIER 1

Programs that will receive no cuts and are not subject to program flexibility

Included in this category are Economic Impact Aid, child development, Quality Education Investment Act (QEIA), K-3 class size reduction (K-3 CSR), special education, home-to-school transportation, Proposition 49 after school programs, and child nutrition.

TIER 2

Programs that will be subject to a 15 percent cut, but are not subject to program flexibility

Included in this category are adults in correctional facilities, apprenticeship programs, English Language Acquisition Program, Foster Youth, K-12 High Speed Network, partnership academies, state testing, agricultural vocational education, charter school facility grants, and multi-track year round education.

TIER 3

Programs that are subject to a 15 percent cut and are subject to the program flexibility provisions

Everything not listed above is included in this category.

In the elementary district, Tier 3 programs include: pupil testing (STAR, CELDT, etc.), supplemental hourly programs, deferred maintenance, physical education teacher recruitment grants, Community-based English Tutoring (CBET), school safety block grants (Carl Washington), Arts and Music Block Grant, Gifted and Talented Education (GATE), instructional materials fund, Professional Assistance Review (PAR), Professional Development Block Grant, Targeted Instructional Improvement Block Grant, School and Library Improvement Block Grant, District and Site Discretionary Block Grant, education technology and instructional materials.

In the secondary district, Tier 3 programs include: pupil testing (STAR, California High School Exit Exam, CELDT, etc.), California High School Exit Exam intervention grants, counselors for grades 7-12, Economic Impact Aid (LEP and SCE), instructional materials fund, PAR, Pupil Retention Block Grant, Professional Development Block Grant, Targeted Instructional Improvement Block Grant, School and Library Improvement Block Grant, and District and Site Discretionary Block Grant.

Also included in the flexibility provisions is the ability to tap into 2007-08 ending balances for use in the current year and 2009-10. The districts would also be able to reduce their contribution to routine restricted maintenance to one percent, and the dollar-for-dollar matching contribution to the deferred maintenance fund is suspended.

K-3 CLASS SIZE REDUCTION PENALTIES

While K-3 class size reduction (CSR) is not included in the program flexibility provisions, the penalties under the program are being modified significantly, as follows:

• No penalty up to 20.5:1
• 5 percent penalty 20.5:1 up to 21:1
• 10 percent penalty up to 22:1
• 15 percent penalty up to 23:1
• 20 percent penalty between 23:1 and 25:1
• 30 percent penalty above 25:1

BUDGET YEAR CUTS (2009-10)

There will be no cost-of-living adjustment (COLA) provided in 2009-10 to revenue limits and categorical programs. Additionally, there will be $265 million in cuts to the revenue limit (about $45 per ADA or $616,995 for our districts versus the $2,111,494 originally envisioned in the governor’s December proposal) and another across-the-board cut to categorical programs of $265 million. The cuts to categorical programs will be allocated in 2009-10 the same way as in the current year (see current year reference above) and will amount to an additional cut of about five percent. Additionally, the budget eliminates the high priority schools.

RESERVE FOR ECONOMIC UNCERTAINTIES

The California Legislature rejected the governor's proposal to reduce the minimum reserve requirement by one half (from 3.0 percent to 1.5 percent for most districts). School districts will be required to maintain the statutory minimum reserve for the current and subsequent two fiscal years.

In response to the state’s budget crisis, we have instituted the following measures:

• spending freeze on all general fund expenditures, including funding for state categorical programs;
• freeze on overtime and extra time;
• identification of vacant positions that can be left unfilled;
• replacement of only those positions that are deemed mission critical by the Superintendent’s Cabinet;
• dialogue with both employee associations regarding the state’s fiscal condition and its implications for our districts;
• visits to school sites to discuss the budget crisis and solicit input on how to reduce expenditures and increase revenues.

TIMELINE FOR MAKING BUDGET REDUCTIONS

The board has adopted a timeline for making both mid-year and budget-year reductions:

• March 10, 2009 Notice of release of probationary and temporary staff and approval of reduction of particular kinds of services
• April 14, 2009 First reading of Fiscal Solvency Plan
• April 28, 200 Second reading of Fiscal Solvency Plan
• June 9, 2009 Board review of preliminary 2009-10 budget and updated multi-year projections.
• June 23, 2009 Adoption of final budget.