January 10, 2006
TO: ACSA Leadership and Members, Interested Parties
FROM: Brett McFadden, ACSA Lobbyist bmcfadden@acsa.org
Sal Villasenor, ACSA Lobbyist svillasenor@acsa.org
RE: Governor's 2006-07 budget proposal
RECIPIENTS ARE WELCOME TO FORWARD THIS MESSAGE TO COLLEAGUES AND INTERESTED PARTIES
The Legislature is back and the annual budget deliberation process has started up
with today's release of the governor's 2006-07 proposed budget. The following is
an analysis of the proposal.
Overview:
California's revenue condition has improved dramatically in the past two years.
The Department of Finance estimates that general fund revenues have increased by
$5.5 billion over the past two years. Revenues will increase in the budget year
(2006-07) by another $4.3 billion for a total three year increase of $9.8 billion.
It appears that overall general fund expenditures under the administration's proposal
will increase by 8.4% (7.6 billion). The governor continues his pledge that he will
not raise taxes despite a nagging structural deficit. The bottom line is that this
budget is markedly different than the one he proposed last year.
Proposition 98:
The governor's budget includes $54.3 billion for Proposition 98 funding in 2006-07.
This represents an increase of $4.3 billion over the current year (2005-06). Of
this amount, the administration proposes to use a portion of that funding in a manner
that has already caused concern among ACSA and the Education Coalition.
How the governor uses maintenance factor funding: The governor stated in his State
of the State address that he is repaying $1.673 billion of the existing Proposition
98 maintenance factor. The maintenance factor is a statutory component of Proposition
98. It is the amount that is required to restore Proposition 98 funding after a
suspension or lower funding resulting from a ''Test 3'' year. The Department of
Finance estimates that the maintenance factor is approximately $3 billion. The
Education Coalition has argued that it more like $5 billion.
Per the 2004-05 education funding agreement, available new funds were to be allocated
according to a prescribed direction until Proposition 98 funding was restored:
1. Pay off remaining deficit factor
2. Pay off outstanding mandate claims
3. 75% to go for unrestricted dollars, 25% for new or expanded programs per legislative/governor priorities
In repaying $1.673 billion of the maintenance factor, the administration has instead
decided to utilize those dollars for specific 2006-07 funding obligations. The
administration uses the amount to pay for:
1. $428 million for Proposition 49 implementation
2. $561 to cover part of the K-12 COLA costs
3. $400 million to pay for the governor's new and expanded program initiatives
Obviously this is contrary to the 2004-05 agreement. This will be a significant
point of contention with ACSA and the education community as we enter into budget
deliberations. In addition, we believe there are legal questions regarding the
utilization of maintenance factor funding for Proposition 49.
Prop.49 becomes activated:
Proposition 49 was a before and after-school initiative
passed by voters in 2002. The initiative is triggered by certain budgetary and
revenue conditions. Estimates are that it will go into effect in 2006-07. The
governor proposes a $428 million general fund expenditure to expand before-and-after
school programs. This amount comes from the non-98 side of the budget, but augments
Proposition 98. As noted above, the Governor's proposal would count this $428 million
appropriation as part of the Proposition 98 ''Maintenance Factor'' repayment. Legislative
leadership has signaled that they intend to take a serious look and Proposition
49 and whether it should be activated, deferred or eliminated.
Growth and discretionary funding:
ADA growth: ADA growth is projected at 0.21 for 2006-07. This reflects a continued
trend of low enrollment growth over a five-year projected timeframe. The budget
provides $156 million to fully fund statutory enrollment growth across all programs.
COLA: The cost of living adjustment (COLA) is estimated at 5.18 percent - the highest
we've seen since the 1980s! As in the current year, the budget proposes to fund
the COLA across all revenue limits and the majority of K-12 categorical programs
including special education, CSR and Home-to-School. The following is an estimate
of program and per pupil amounts:
Program Amount
Per Pupil
Revenue Limits $1.7b
$267
Categorical Programs $314m $52
CSR $78m
$13
Special Education $162
$27
Deficit Reduction:
The governor proposes $205 million to repay revenue limit deficit
reduction. This would be approximately two-thirds of the remaining deficit factor
from the 2003-04 revenue limit cuts. The Department of Finance stated that the outstanding
deficit factor for districts is .299% and for counties is .106%.
Equalization:
The governor proposes $200 million for school district revenue limit
equalization. The administration stated that the 2006-07 proposal will erase approximately
one-half of the remaining disparity between LEA revenue limits.
Misc. categorical programs and accounts:
Special education:
The budget includes $161.6 million to fund statutory COLA on
state special education funding and $6.5 million to fund enrollment growth. The
bifurcated COLA remains - no COLA on federal special education dollars. Estimates
are that the state could experience a $10 million reduction in federal special education
funding. Because of this, special education will not realize the complete benefit
associated with a 5.18% COLA.
Instructional materials:
There are no major policy or fiscal changes proposed in
this program. The administration proposes $401.5 million (about $63 per pupil)
for K-12 instructional materials. This is about a $40 million increase over last
year with $20 million going for restoration of amounts vetoed from last year and
$20.6 million to fund COLA and growth. Another $208 million comes from Lottery
funds (about $33 per pupil).
Program Improvement (PI) school assistance:
The Governor proposes $81.9 million in one-time federal grant carryover funds from various sources to assist schools identified as Program Improvement (PI). Approximately $19 million in Migrant Education Program carryover funds are included in this appropriation. The Department of Finance stated that Migrant Education monies would be spent on migrant students only and
that PI schools would be required to work in collaboration with migrant regions
to develop appropriate programs.
Proposition 98 reversion account:
The administration estimates one-time reversion funding to be $138.6 million and proposes re-appropriating the funding per the following:
• $106.6 million for school facility emergency repairs, consistent with the Williams
...agreement.
• $63.7 million for CalWORKs Stage 3 child care.
• $18.7 million for mandates
• $9.6 million for teacher credentialing
• $9 million for charter schools.
• $3 million for teacher recruitment.
• $1.1 million for school business officer training.
• $500,000 for coaches training
• $39,000 for attendance accounting.
K-12 mandates:
The budget proposes three sources of funding for mandate claims.
The first, $133.6 million to fund mandate claims from 2006-07. This is an attempt
to get back to annual claim reimbursement. Second, another $133 million from Proposition
98 settle-up funds would be appropriated per statute to pay backlog claims - the
oldest first. Third, $18.7 million is provided from the Proposition 98 Reversion
Account to fund prior year mandate claims on programs that were eliminated via legislation
in 2004.
New programs:
The administration proposes to establish four new programs costing approximately
$400 million in maintenance factor dollars:
Art and Music Block Grant Program
Physical Education Grant Program
Digital Classroom Block Grant Program
School Enrichment Block Grant Program
Art and Music Block Grants:
The Governor's Budget proposes $100 million to create
a new Art and Music Block Grant program to support standards-aligned art and music
instruction in kindergarten and grades one through eight. These grants will be distributed
to school districts and county offices of education and will be available for uses
that include hiring additional staff; purchasing materials, books supplies, and
equipment; and staff development. The funding formula intends to ensure that grants
are functional at smaller schools.
Physical Education Grants:
The governor's budget proposes $85 million overall to provide resources to support PE instruction, improve student health, and expand curricular opportunities for students.
The proposal includes $60 million to establish a new Physical Education Grant Program
to support standards-aligned PE instruction in K-8 schools. These grants will be
for uses such as hiring qualified staff, professional development, reducing class
size, purchasing equipment, and developing and purchasing curricula. Funding will
be allocated at a minimum of $3,000 for school sites with 10 or fewer students and
a minimum of $5,000 per site with 11 to 420 students, with remaining funds being
allocated to school sites with more than 420 students at an equal per-pupil rate.
The proposal also includes $25 million for incentive grants to school districts
to hire more credentialed PE teachers in elementary and middle schools. Grants of
$25,000 will be made available to 1,000 schools serving any of grades K-8.
Digital Classroom Grants:
The governor's budget proposes establishing a Digital
Classroom Block Grant. This $25 million Block Grant will provide participating schools
with $3,000 per classroom to support additional investments in classroom technology.
The administration claims that proposed funding for 2006-07 is sufficient to provide
grants to approximately 8,300 classrooms. It is the intention of the administration
that subsequent budgets will continue the program until all California classrooms
have received the one-time grants.
School Enrichment Block Grant:
The administration proposes establishing the School
Enrichment Block Grant. Specifically, the Governor's Budget proposes that $100 million
be made available to school districts, based on the number of pupils in the schools
whose Academic Performance Index has placed them in the bottom three deciles. Funds
will be allocated at a rate of approximately $50 per pupil with a district minimum
of $5,000 per school site.
The block grant can be used to fund efforts such as:
• Student loan forgiveness for teachers and principals.
• Targeted improvement in school environments.
• Differential pay for teachers and principals in hard-to-staff subjects or schools.
• Signing bonuses.
• Recognition pay.
• Human resources recruitment training.
• Professional development/leadership training, including Advancement Via Individual
...Determination.
• Housing incentives, including relocation costs and mortgage assistance.
Program Expansions
The administration proposes to expand the following programs:
Beginning Teacher Support and Assessment System (BTSA): The governor's budget proposes
increasing BTSA funding by $65 million to support a required third year of induction
for beginning teachers in deciles 1-3 schools and, at district discretion, a voluntary
year for experienced teachers who are new to deciles 1-3 school sites.
Governor's Science and Math Teacher Initiative: The budget proposes the final increment
of funding in the amount of $1.5 million to extend the program to all relevant campuses
in both systems. The 2005-06 budget included the governor's Science and Math Teacher
Initiative to increase the number of science and math teachers trained at the University
of California (UC) and the California State University (CSU) systems. According
to the administration, the UC system will quadruple its annual production of credentialed
math and science teachers and CSU will double its production by 2010.
Career Technical Education Courses:
The budget proposes a $30 million augmentation, increasing total funding from last year's $20 million to $50 million, to expand and improve CTE courses offered at high schools, regional occupational centers and programs, and the California Community Colleges (CCCs). Specifically, these funds were provided to support what are known as "Tech Prep" or "2 + 2" programs. These funds will be provided through the CCC budget and be allocated through
a grant process to CCC districts.
Supplemental Instruction for the California High School Exit Exam:
The budget proposes providing an additional $20 million, for a total of $40 million, to assist eligible pupils in passing the CAHSEE. This block grant will support supplemental instruction
to pupils who are required to pass the CAHSEE in 2006 and 2007, and who have failed,
or are at risk of failing, one or both parts of the exam.
Other budget augmentations:
Charter School Categorical Block Grant: Pursuant to Chapter 359, Statutes of 2005,
the Governor's Budget provides nearly $36 million to increase the funding level
of the Charter School Categorical Block Grant. This amount reflects an increase
of over $100 in the base Block Grant per-pupil amount
CSIS Cohort and CALPADS:
The budget funds $1.2 million in General Fund dollars to
fund a new cohort for the California Student Information System (CSIS) and $940,000
in federal funds for the California Longitudinal Pupil Achievement Data System (CALPADS).
Predictions - Things you can likely bank on: Although the budget process has just begun, we think you can bet to see the following in the adopted 2006-07 budget:
• The size of the K-12 pie will remain the same. The Legislature will tinker, reprioritize
and move things around, but the overall dollar amount will stay the same.
• Maintenance factor funding will remain the same - ACSA will advocate changing
how it is being used.
• Growth will remain at the 0.21% range.
• COLA might fluctuate at May Revise, but will stay in the 5.18% range
• Deficit factor funding could go up. The Legislature may just want to pay that
off completely and be done with it. It won't decrease, however, from what the governor
has proposed. Safe to bank on it.
• Equalization funding might decrease. It is not a high priority for legislative
democrats. Watch this one, too early to bank all of it just yet.
• Governor's new programs are likely subject to legislative reductions or eliminations.
Recommend not devoting a lot of time analyzing them until we get a sense if they
will stick around.
ACSA's initial response and talking points:
Below is ACSA's initial response to the governor's proposal. ACSA members and interested
parties are encouraged to utilize these as talking points in their local communities:
• The Governor's budget proposal is a start to deliberations about the 2006-07 state
budget. Although the proposed budget includes full funding for the cost-of-living
adjustment (COLA) required by law, it falls short of providing the necessary funding
for education overall and there is no commitment to repay the money owed schools
under Proposition 98.
• Schools and students are awaiting almost $4 billion owed and promised to them
by Governor Schwarzenegger and echoed by lawmakers per statute enacted in 2004.
In California we hold students, educators and schools to very high standards. We
have similar expectations for our Governor and we look forward to working with the
administration and the Legislature to develop the framework and investment strategy
to meet those expectations.
• California has some of the highest academic standards in the nation. It also has
some of the largest class sizes, highest teacher to student ratios, greatest lack
of librarians, nurses and custodians and highest principal to student ratios in
the nation.
• The Governor's proposal to use Prop. 98 repayment (i.e. Proposition 98 maintenance
factor) funding in order to fund Proposition 49 does not match the commitments made
to voters when they passed the initiative and falsely implies that the money owed
to schools under Prop. 98 is being repaid.
• Proposals to begin new categorical programs are premature considering the immediate
needs schools have to restore programs and services cut in recent years.
Final Comments:
This year's budget will likely be a more ''normal'' process. We do not anticipate
a major statewide battle conducted on the airwaves. Rather, ACSA's advocacy will
likely take place within the legislative arena with ACSA members advocating locally
to their legislative representatives. The legislative process for the budget will
occur over the next six to seven months. The ACSA board of directors will take
a formal position on the governor's proposal on February 3rd. We will have additional
updates to you as the budget process proceeds. Please contact us for additional
information or assistance.
Association of California School Administrators
1029 J Street, Suite 500, Sacramento, CA 95814
tel. 916.444.3216/800.890.0325
fax. 916.444.3245