CASBO’s legislative committee met to discuss the Governor’s January Budget proposal and, with recent trailer bill language (TBL) released, worked to develop an initial response. The following recommendations are aimed at enhancing fiscal stability, supporting Local Control Funding Formula (LCFF) adjustments, ensuring effective implementation of new programs, and highlighting critical areas that are creating budget pressures.

Statutory COLA for the LCFF. The LCFF is an equity-based funding system that allows LEAs the opportunity to work with families to meet the needs of students and communities. We request fully funding the statutory COLA for the LCFF and programs outside of the LCFF, including special education and school nutrition.

Instructional Continuity Program and Attendance Recovery Program. We support the administration’s intent to ensure continuity of instruction for students during emergencies/school closures, and opportunities for LEAs to address chronic absenteeism by providing options for attendance recovery and offset funding losses associated with student absences. After reviewing trailer bill language (TBL), we have identified a few concerns around the timing, areas of clarification, and challenges to successfully implement these two newly established programs.

Learning Recovery Emergency Block Grant. The proposal entails several requirements for LEAs, including the development of a needs assessment for unencumbered block grant funds starting July 1, 2024. This assessment would prioritize addressing chronic absenteeism and improving performance on English language arts and math test scores. Additionally, LEAs would need to outline how these funds will be utilized in the subsequent cycle of the Local Control and Accountability Plan. They must incorporate at least one metric to monitor effectiveness of actions or services and provide justification for implementing services supported by research.

Facilities. There is an ongoing need to improve school facilities. The budget proposes a one-time General Fund allocation to the School Facilities Program in 2024-25 to be reduced by $500 million and delay $550 million in the California Preschool, Transitional Kindergarten, and Full-Day Kindergarten Facilities Grant Program from 2024-25 to 2025-26. We support AB 247 (Muratsuchi), which would place a transitional kindergarten through community colleges public education facilities bond on the November 2024 statewide ballot.

Universal Meals. We support the proposed increased funding of $122 million ongoing to continue providing universal meals.

Budget Considerations.

We request the consideration of the following cost pressures LEAs are experiencing, including but not limited to:

Special Education: There is a noticeable rise in demand for services, along with increased costs and a growing number of students requiring Individualized Education Programs (IEPs). Despite a statewide decline in overall enrollment, the post-pandemic surge in student identification is significantly impacting schools’ general funds.

Pension: School employer contribution rates, set at the state level, continue to escalate. With CalSTRS imposing a 19.1 percent contribution rate and CalPERS projected to increase to 28.1 percent in 2024-25 and 28.8 percent in 2025-26, these pension rate hikes pose significant challenges to school budgets.

Liability Insurance: Recent legislation addressing claims related to childhood sexual assault cases has put financial strain on many school districts. A considerable number of districts rely on joint powers authority mechanisms for self-funding their liability and risk-related obligations. However, as these entities are not insurance companies with substantial capital reserves, schools are bearing the financial burden of claims.

Utility Costs: Over the past few years, some LEAs have seen utility expenses rise by 15-20 percent. Participating in programs like the Extended Learning Opportunity Program can further exacerbate these increases, placing additional strain on school budgets.

 

LAO Reports

Over the course of the past week, the Legislative Analyst’s Office released two reports on the Governor’s Budget Proposal as it relates to Proposition 98 and a budget and policy post regarding state revenue update.

The 2024-25 Budget Proposition 98 and K-12 Education

Summary: The Proposition 98 Budget entails $13.7 billion in solutions and reductions affecting schools due to a decrease in state revenue. The major proposals include accruing $7.1 billion in previous payments to schools for future years and withdrawing $4.9 billion from the Proposition 98 Reserve. Additionally, there are $1.4 billion in new Proposition 98 K-12 spending proposals, including ongoing increases and one-time activities.

Recommendations:

  1. Prioritize core school programs and budget stability, rather than shifting expenditures into the future.
  2. Plan for further decreases in Proposition 98 funding and establish priorities accordingly.
  3. Reject the proposed funding maneuver, which worsens future deficits, and consider using Proposition 98 Reserve withdrawals instead.
  4. Reject the proposed cost-of-living adjustment (COLA) due to ongoing program shortfalls.
  5. Reject most other ongoing and one-time increases in the budget.
  6. Explore additional solutions such as reducing unallocated grants, temporarily reducing funding for certain programs with unspent carryover funds, restructuring certain programs to reduce costs, and phasing out antiquated add-ons to achieve savings and reduce funding disparities among districts.

Proposition 98 Funding Maneuver

The LAO’s brief evaluates the Governor’s proposal allowing schools to retain $8 billion of cash disbursements without acknowledging the budgetary impact. It provides background information on the state’s budget and cash positions, as well as school finance basics. The proposed funding maneuver is described, followed by an assessment and recommendation. While the trailer bill language associated with the proposal was not available at the time of analysis, the recommendation is based on the understanding that the maneuver sets a problematic precedent and worsens future deficits. The brief strongly recommends the Legislature reject the proposal and suggests alternative ways to maintain school and community college spending.

Recommendation: Reject the administration’s proposal as it sets a problematic precedent, creates binding obligations worsening future deficits, and necessitates difficult decisions. Alternative methods to maintain school and community college spending should be explored.

The 2024-25 Budget: Deficit Update

The LAO revenue update indicates a $15 billion growth in the state’s budget deficit, increasing the estimated $58 billion deficit to $73 billion due to recent revenue collections reflecting further weakness. The LAO highlights the need for the Legislature to find new budget solutions to balance the budget for 2024-25. Options include revenue increases, spending reductions (both one-time and ongoing), reserves, and cost shifts and presents tables suggesting one-time and temporary spending reductions as a possible first option to address the larger budget problem. The rationale behind these reductions is explained, along with a detailed method for estimating the available amounts for budgetary savings.