Today, Governor Newsom released the 2020-21 state budget that prioritizes addressing climate change, affordable health care, and housing. The state reserves have reached $21 billion to mitigate future economic challenges and continues the suspension of about $2 billion in programmatic expansions until July 1, 2023. The Governor’s economic forecast assumes federal approval of the Managed Care Organization (MCO) tax authorized in the 2019 Budget Act, with revenues reflecting in the 2021-22 fiscal year, which would maintain a structurally balanced budget through 2023-24.

2020-2021 Governor’s Budget

General Fund Revenue Sources

(Dollars in Millions)

Major State Proposals

    • Addressing Housing & Health Care. The Budget proposes $6.8 billion across multiple departments to address housing issues and proposes to expand the state’s ability to consider the best prices offered by pharmaceutical manufacturers internationally and increase the state’s purchasing program. The Budget proposes to establish a single market for drug pricing within the state, as well as the state’s own generic drug label.
    • Early Childhood and Learning. The Budget proposes to create the Department of Early Childhood Development under the Health and Human Services Agency, effective July 1, 2021. This new department will implement recommendations from the Master Plan for Early Learning and Care.

The Budget proposes $50 million in ongoing funding from the Cannabis Fund to support over 3,000 General Child Care slots previously funded with General Fund, and an additional $10.3 million Cannabis Fund for an increase of 621 General Child Care slots.

The Budget proposes an increase of $31.9 million in 2020-21 and $127 million ongoing non-Proposition 98 General Fund to support an additional 10,000 State Preschool slots at non-local educational agencies beginning April 1, 2021.

    • Pension Relief. The Budget allocates the remaining required Proposition 2 debt payment to reduce unfunded retirement liabilities, including $340 million toward retiree health and $870 million to repay the loan from the state’s Surplus Money Investment Fund used to make a $6 billion supplemental payment to CalPERS authorized in 2017. In 2023-24, an additional supplemental payment of $1.1 billion will be made to CalPERS, generating $2.3 billion in additional savings over the next three decades.

Proposition 98 General Fund

The Budget provides an additional $3.8 billion over a three-year period to Proposition 98, for a total of $84 billion in 2020-21. In 2018-19 and 2019-20 fiscal years, Proposition 98 increased from the 2019 Budget Act by $301.5 million and $517 million, respectively, due largely to an increase in property tax revenue in 2018-19 and increased General Fund revenues in both 2018-19 and 2019-20. Test 1 is projected to be operative for fiscal years 2018-19 through 2020-21.

The Budget projects that an additional deposit of $147.7 million is required into the Account in 2019-20, for a total of $524.2 million. In 2020-21, a withdrawal of $37.6 million is projected to be made from the Public School System Stabilization Account. Since the balance in 2020-21 is $486.6 million, school district reserve caps are not required in 2021-22.

Local Control Funding Formula (LCFF)

The Budget proposes $1.2 billion Proposition 98 General Fund increase for the LCFF, reflecting a 2.29 percent cost of living adjustment (COLA), for a total of $64.2 billion.

The Budget proposes $600,000 in one-time Proposition 98 General Fund to make the Local Control and Accountability Plans (LCAPs) easily accessible to the public by developing an online LCAP portal and co-locate the SARC and LCAP online, with the goal to make it easier to compare both accountability tools.

The new LCAP template, which was adopted by the State Board of Education on January 8, 2020, will include an expenditure table that displays total LCFF funds expended on actions that increase or improve services for high-need student groups, and requires local educational agencies to identify actions from prior LCAPs that were not implemented as planned, including differences between planned and actual expenditures.

The Administration will engage in the coming months on a process to identify potential avenues for strengthening accountability to provide increased or improved services for high-need students, particularly when actions described in an LCAP are not implemented as planned.

During his press conference, Governor Newsom reinforced the importance of making significant progress to close the academic achievement gap for all students, and turned his attention to the need to improve outcomes for African American students.

Pension Payments

Local educational agencies will continue to see pension relief provided in last year’s State Budget Act, including an estimated $850 million to buy down the employer contribution rates in 2019-20 and 2020-21.

Education Recruitment and Professional Development

The Budget makes investments to support educators and address the teacher shortage. The Budget proposes $900 million for educator and recruitment training which includes the following teacher training initiatives:

    • Educator Workforce Investment Grants: Provides $350 million in one-time Proposition 98 General Fund. Funding will be provided through a competitive process for
      • LEAs to conduct training in the following high-need areas:
        Special education, including inclusive practices, universal design for learning, and dyslexia identification
      • Multi-tiered systems of support and mental health interventions
      • Supporting English language learners
      • Social-emotional learning and restorative practices
      • Non-discrimination, anti-bullying, and affirmative supports for LGBTQ and other marginalized students; and
      • Computer science and science, technology, engineering, and math (STEM).
    • California Collaborative for Educational Excellence (CCEE): Provides $18 million in one-time Proposition 98 General Fund to support LEAs in improving students’ outcomes in state priority areas.
    • Workforce Development Grant Program: Provides $193 million in one-time Proposition 98 General Fund to address workforce shortages in high-need subjects and areas.
    • Teacher Residency Program: Provides $175 million in one-time Proposition 98 General Fund to expand the existing program, which supports locally sponsored, one-year intensive, mentored, clinical teacher preparation programs dedicated to preparing and retaining teachers in high-need subject areas in high-need communities.
    • California Teacher Credential Award Program: Provides $100 million in one-time Proposition 98 General Fund for $20,000 stipends for fully credentialed teachers who complete four years of teaching service in a high-need subject at a high-need school.
    • California Classified School Employees Credentialing Program: Provides $64.1 in million one-time Proposition 98 General Fund, which provides grants to K-12 local educational agencies to recruit non-certificated school employees to become certificated classroom teachers.
    • Accreditation Fees. Suspends accreditation fees for institutions of higher education and LEAs that administer a teacher preparation program or induction program.

Special Education

During the fall of 2019, the Legislature and Administration visited special education programs to learn more about opportunities to improve the state’s system of special education and best practices. In their findings, the Administration recognized a need to prepare teachers in inclusive practices and the reality of the shortage in special education teachers and specialists, which increases costs and makes it difficult to meet the needs of students with special needs.

The budget proposes a three-phased, multi-year process to improve how the state funds special education, provides services, and achieves improved student outcomes.

Initial Phase: Increased Funding, a New Funding Formula, and Expanded Statewide Supports. The Budget proposes a new base formula that uses a three-year rolling average of LEA’s ADA (but still allocated to SELPAs) and includes a 15 percent increase in the Proposition 98 General Fund contribution to the base formula funding. For roughly 100 LEAs with base rates higher than the proposed base rate, they will be held harmless. The ongoing increase in the base rate is funded with $645 million that was provided in the 2019 Budget Act minus the funding for the Early Intervention Grant Program, resulting in about $493 million.

The Budget proposes an additional $250 million in ongoing Proposition 98 General Fund based how many 3 to 5 year-olds with exceptional needs are served. Funding will be allocated on a one-time basis to school districts based on the number of preschool-age children with disabilities that the district serves. Having all other existing AB 602 special education categorical funding sources remain as in current law until a finalized formula is adopted in future phases, is also proposed.

Future Phases: Finalizing the Funding Formula, Implementing Reforms, and Improving Specialized Services. In future phases, without setting a specific timeframe, the Administration anticipates:

    • Finalizing the new special education funding formula to support equity, and more inclusive practices and early intervention services.
    • Incorporating changes in statute based on recommendations from the governance and accountability workgroups established in the Budget.
    • Pursuing reforms related to family and student engagement, including whole-child and family wrap-around services, and refining funding, accountability, and service delivery for specialized services such as out-of-home placements, non-public school placements, and the State Special Schools.
    • Incorporating recommendations from the Master Plan for Early Learning and Care into the K-12 infrastructure of early intervention services for young children with exceptional needs.

Community Schools

To strengthen the support of community schools, the Budget proposes $300 million one-time Proposition 98 General Fund to establish Community School grants for local educational agencies supporting innovative community school models.

Opportunity Grants

To support LEAs in improving student outcomes, the Budget proposes $300 million one-time Proposition 98 General Fund to establish Opportunity Grants for the state’s lowest-performing schools and school districts and expand the capacity of the CCEE in its role within the statewide system of support. Funds for the CCEE will be used to:

    • Improve the school and school district review process.
    • Expand educational leadership training.
    • Provide expert assistance to support local improvement plan implementation.
    • Evaluate state and local continuous improvement efforts.

Computer Science

To support the implementation of the new standards, the Budget proposes:

    • $15 million one-time Proposition 98 General Fund for grants to local educational agencies to support the preparation of approximately 10,000 K‑12 teachers to earn a supplementary authorization on their credential to teach computer science.
    • $2.5 million one-time Proposition 98 General Fund for a county office of education within the Statewide System of Support to identify, compile, and share computer science resources for professional development, curriculum, and best practices.
    • $1.3 million one-time non-Proposition 98 General Fund to develop a new UC Subject Matter Project in computer science and $340,000 non-Proposition 98 General Fund for one cohort of approximately 1,200 educators to participate in the new project.

School Nutrition

To encourage participation in the state and federal school nutrition programs, the Budget proposes:

    • $60 million in one-time Proposition 98 General Fund for school nutrition programs, bringing the state reimbursement rate to $0.3357 per meal. Trailer bill language is expected to require LEAs to report how they use the funding to increase access or improve the nutritional quality of meals served to students.
    • $10 million one-time Proposition 98 General Fund to train school food service workers to promote healthier and more nutritious meals.
    • $10 million one-time non-Proposition 98 General Fund in 2020-21 and $1.5 million annually thereafter for the California Department of Food and Agriculture to establish a Farm to School Grant Program.

Major K-12 Budget Adjustments

This section highlights the budgets significant adjustments to various educational programs outside of the Local Control Funding Formula.

Higher Education
The Budget proposes total funding of $36 billion, of which $21.2 billion is in General Fund support, for the state’s higher education systems.

    • Fresno DRIVE. Proposes $50 million one-time General Fund to support the Fresno Developing the Region’s Inclusive & Vibrant Economy (DRIVE) Initiative.
    • Community Colleges. Proposes $83.2 million Proposition 98 General Fund support for apprenticeship programs. It also proposes to consolidate technical assistance set-asides into one category titled the California Community Colleges System Support Program.
    • University of California. Proposes a 5 percent increase, $217.7 million, in ongoing General Fund support.
    • California State University. Proposes a 5 percent increase, $199 million, in ongoing General Fund support and $6 million one-time General Fund for development and expansion of degree completion via the Extended and Continuing Education programs, with a focus on online programs.

What to Expect Next

Department of Finance is expected to release the budget trailer bill language first week of February, and we will provide a report with greater detail on major policy proposals on the Governor’s budget as events and further analysis warrant. The release of the budget is only the first leg of a six-month marathon, and we will endeavor to keep CASBO members informed along each stage of the journey.

CASBO NewsBreaks and Advocacy tools are posted on our website. For more information, contact CASBO’s Governmental Relations staff: Sara Bachez, Assistant Executive Director or Elizabeth Esquivel, Legislative Advocate and Policy Strategist. Remember that the most effective and convenient way to become involved is by joining CASBO Advocacy Network.