Governor’s Proposals for the 2008-09 State Budget and K-12 Education
Presented by
Carol A. Berg, Ph.D.
Introduction
California’s budget has two parts: revenues and expenditures
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Expenditures have moved predictably higher
No political will in Sacramento to cut anything
Revenues are beyond the control of the state – almost random
The Budget looks good when revenue forecasts are high and bad when they are low
Unanticipated revenue windfalls have rescued the Budget ● This year, weaker-than-forecast revenues sink it
Revenues are clearly the independent variable in the equation
And forecasts have often missed the mark by a mile
Introduction
Proposition 98 did not cause the current Budget crisis – but it pays the
price
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The enacted 2007-08 Budget did not “overfund” the Proposition 98 guarantee Instead, the guarantee has fallen because revenue collections have fallen short of the mark – by billions Over the long run, the actual growth in Proposition 98 has been similar to education funding gains in other states – not excessive
Suspending Proposition 98 twice in four years violates the desire of the
voters for stable education funding
Funding Proposition 98 at the floor makes some sense in a bad year –
a $4 billion suspension does not
Introduction
Contrary to the Governor’s assertion, we do have a revenue problem
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The cost of government services does not go down when revenues are weak
California and the United States clearly operate on a growth model
The Legislative Analyst Office states that a reasonable solution to the
Budget crisis should include both revenues and expenditures
The Governor’s proposal does not do this
Overview of the State Budget and the State Economy
Mid-Year Actions Under Proposition 58
The Governor declared a “fiscal emergency” under Proposition 58,
triggering the following:
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The Legislature was called into Special Session to deal with the Budget crisis The Legislature had to adopt a plan to address the problem by February 24 (that is, within 45 days of the declaration) otherwise it could not act on any other legislation and it could not adjourn ● The plan had to be adopted by a two-thirds vote of the Legislature, allowing the savings to take effect immediately
● Solutions for 2007-08 only
Mid-Year Cuts to Education Programs
in SB 2 - $507 million in reductions to Proposition 98
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On February 15, 2008 a $1 billion package of mid year cuts was approved
Sweep of unspent 2007-08 categorical appropriations and prior year unspent balances One time deferral of the 2008-09 Advance apportionment from July to September Use Public Transportation Authority (PTA) funds for Home to School Transportation (HTST). Basically an accounting move that will have no impact at the local level.
Governor’s Approach to 2008-09
$16 billion dollar problem in February
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Governor problem has grown from a $14.5 billion problem in January to a Across-the-board cuts in all areas of government Suspension of Proposition 98
Needed to make a $4+ billion cut to education
Dramatic cuts in all areas also have
an impact on children and families
Social services
Health services
Prisons Infrastructure
Governor’s Approach to 2008-09
The effect of the suspension working from the revised 2007-08 base
revenue limit:
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COLA is declared at 4.94%, but not funded Revenue limit deficit is imposed at 6.99% of new base revenue limit The 2.4% revenue limit reduction is from the 2007-08 base before mid-year cuts Most categorical programs have a net loss of about 6.5% from the 2007-08 pre-mid-year cuts base
The overall reduction to revenue limits for 2008-09 is about 2.4%
Governor’s Approach to 2008-09
Special education is especially hard hit
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No COLA
Cuts from prior-year levels Increased costs
No help from the feds
Declining Enrollment
Most districts are still declining
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The Budget counts 31,000-student regular K-12 decline in 2008-09
Charters are assured to grow at 14.1% Regular K-12 decline is 1.2%
Declining enrollment adjustment has
not changed
Still a one-year safety net
Do not plan for legislative or Budget
relief this year
State Revenue Outlook
Current-year General Fund revenues were budgeted at $101.2 billion
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The Governor’s Budget has revised this down by $4.8 billion, or $96.4
● To restore this loss, the Budget proposes sale of $3.3 billion in Economic Recovery Bonds and transfer of $1.5 billion from the Budget Stabilization Account to the General Fund
For next year, the Governor’s Budget anticipates
slow baseline revenue growth of 2.8%, yielding total revenues of $102.9 billion
The year-over-year gain is $1.7 billion
Budget Summary
the Governor’s proposal cuts K-12 education by $4.4 billion
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Compared with full funding for COLA and growth for programs in 2008-09,
These cuts average about $740 per ADA from 2008-09 full funding levels Saying it another way . . . Governor’s proposal is for 2008-09 funding to be about $1.8 billion less than current year, equal to average cuts of:
$129 per ADA from Revenue Limits $30 per ADA from Special Education $146 per ADA from Categoricals
Total loss of about $305 per ADA from current year levels!
Proposition 98: Basic, Current-Year Budget Issues, Out-Year Budget Issues and Promises
Proposition 98 – 2008-09
In calculating the cut to K-12 programs, the Governor proposes to:
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Increase entitlements by the 4.94% COLA Adjust most programs for enrollment changes Impose a 10.9% across-the-board cut on the inflated state aid share of funding
The year-over-year net result is a 2.4% cut in K-12 revenue limit funding
but a 6.5% cut for most categorical programs
2008-09 K-12 Revenue Limits
4.94% Inflation Increase
6.99% Deficit 2.4% Cut for Average District 2008-09 Funded Revenue Limit 2008-09 Computed Base Revenue Limit 2008-09 Base Revenue Limit After Deficit
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2007-08 Funded Revenue Limit*
2007-08 Base Revenue Limit
*Assumes mid-year cuts are absorbed by other means
Revenue Limits – Hourly Programs
cut by 10.9%
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Funding for the hourly programs is increased by the 4.94% COLA, but then Resulting hourly rate is estimated to be $3.81 – down from $4.08 in 2007-08 Plus – chronic shortfalls in funding for the hourly
programs are expected to continue, so plan on further deficits as follows (all of which are the same as our current estimates of deficits in 2007-08):
K-12 Core Academic Program – 12% Grade 2-9 Remedial Program – 14% Grade 2-6 Remedial Program – 28%
Other Programs etc
net decrease of 6.5% below 2007-08 levels
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Transportation funding for 2008-09 reflects 4.94% COLA, but 10.9% cut, for Categorical programs are expected to share the pain in 2008-09
No COLA
No growth
And a rollback in funding of approximately 6.5% from 2007-08 Budget levels
Child Development
programs
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$198.9 million in reductions proposed to Proposition 98-funded child care
No funding for COLA, growth, and reductions in program services
Governor estimates that approximately 8,000 child care slots will be lost
from state preschool programs, but cuts in services to other programs, such as general child care and the Pre-Kindergarten and Family Literacy program, are expected
In addition, it now seems unlikely that funding for full-day grants, included as part of the Pre-Kindergarten and Family Literacy Program, will continue
The Challenges Ahead for ACSD
The Second Interim Report
On March 10 we will present our Second Interim Report to the Board
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Required to use the Governor’s proposals as basis for 2008-09 and 2009-10
budget building blocks
May only use “real cuts” in projections The virtual COLA of 4.94% and the deficit factor
of 6.99% creates a budget gap for ACSD of
$6,842,681
We may need to declare a Qualified budget
if we cannot show at least a 3% reserve in 2008-09
The Second Interim Report
Directions and support for OCDE
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Allows 520 students in 2008-09 Going to lose $133 per ADA from Revenue Limit dollars Have Special Education cut $30 per ADA Going to reduce Categorical dollars by $142 per ADA TOTALS: LOSE $305 PER ADA FROM CURRENT YEAR LEVELS FOR 2008-09 PLUS $2.7 MILLION LOSS FOR DELINING ENROLLMENT IN 2009-10
The Second Interim Report
Orange County Department of Education direction and support :
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Allows districts to assign a positive certification for 2007-08 based on significant budget reductions in 2008-09 not yet approved Requests that the Board approve an action item that identifies the dollar amount of needed reductions
In certifying the 2007-08 Second Interim Report as positive, the Board
understands its fiduciary responsibility to maintain fiscal solvency for the current and subsequent two fiscal years. It is recognized if the Governor’s January 2008 Budget Proposal is enacted as proposed, or if the fiscal condition further deteriorates, the district will implement $XXXXXXX in ongoing budget reductions to maintain the positive certification. It is further recognized that the district will submit a detailed list of Board approved ongoing budget reductions with the 2008-09 July 1 Budget.
Budget Reduction Criteria
Cabinet and the budget reduction focus group continue to refine the
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criteria for use in the budget reduction process. The following criteria are applied in all budget reduction discussions and reviews:
Review all programs for relevancy, effectiveness, and efficiency Study work calendars and daily schedules of certificated and classified management and classified employees (i.e., custodians, district office support and secretarial staff, etc.) not affected by earlier negotiated agreements Incorporate negotiated single track agreements and associated savings, effective July 1
Budget Reduction Criteria
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Align downtown support with student needs and school calendars Shift as many expenditures to categorical programs as possible Redirect categorical funds to maximize school support; first priority would go to Program Improvement schools Evaluate each open or soon-to-be vacated position to determine whether it should be filled Ensure that all units share in and contribute to the fiscal solutions for 2008-09
Count the Savings that are Real Now
Negotiated agreements for 2008-09 single track implementation
$1,126,057 Management work year reduction at single track schools $195,677 Savings from NYS scheduling $464,554
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● Total to date = $1,786,288
Shortfall
Targeted Reductions needed to fill the 2008-09 and 2009-10 gaps
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TARGET
IN HAND NEED
$6,842,681 $1,786,288 $5,056,393
Topics Under Discussion As Potential Reductions – DRAFT 2008-09
Reduce consultants Substitute reduction Replace 3 new vice principal positions with leadership assistants Reduction of district office department budgets by 10% Reduce encroachment of Special Education transportation Eliminate District Office position: Principal on Special Assignment Eliminate District Office position: Position Control Reduction of five work days for District Office mgmt & support Night custodians – Reduction of two hours per day
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$1,000,000.00 $1,000,000.00 $52,260.00 $1,035,000.00 $500,000.00 $134,610.00 $58,872.00 $337,797.25 $711,116.94
General fund teachers – Reduce work year/pay one day
Total
$303,893.47
$5,133,549.66
Suggested Budget – DRAFT TOTAL
Deficit Suggested Budget Cuts Needed reductions for 2009-10
C-9 $6,842,681.00 $5,133,549.66 $1,709,131.34
Thank You