Governor Newsom Releases the 2023-24 State Budget Proposal

Governor Newsom Releases the 2023-24 State Budget Proposal

Today, Governor Gavin Newsom released the 2023-24 state budget proposal that focuses on resiliency and protecting existing investments, while emphasizing the use of one-time funding. The budget proposal forecasts General Fund revenues will be $29.5 billion lower than the 2022 Budget Act projections, and California now faces an estimated budget gap of $22.5 billion in the 2023-24 fiscal year.

K-12 Highlights

• $108.8 billion Proposition 98 General Fund
• 8.13 percent cost-of-living adjustment (COLA)
• $1.2 billion reduction from the Arts, Music, and Instructional Materials Discretionary Block Grant that was included in the 2022 Budget Act, going from $3.5 billion to $2.3 billion
• $750,000 ongoing Proposition 98 General Fund to support the professional development of local educational agencies’ (LEAs) Chief Budget Officers through mentorship programming by the Fiscal Crisis and Management Assistance Team (FCMAT)

Trailer Bill Language

Additional details will be released as part of the trailer bill language in the weeks to come. CASBO will analyze the Administration’s budget proposals and provide recommendations and position statements during this year’s budget deliberation process.

Proposition 98 General Fund

Proposition 98 funding is $108.8 billion, a decrease of about $1.5 billion from last year’s budget. The Guarantee continues to be in Test 1 for all years 2021-22 through 2023-24 and is “rebenched” from 38.3 percent to 38.6 percent to accommodate enrollment increases for the implementation of Universal Transitional Kindergarten (UTK). Beginning in 2024-25, the Proposition 98 Guarantee will be “rebenched” according to the requirements of the Arts and Music in Schools—Funding Guarantee and Accountability Act.

The budget includes total funding of $128.5 billion ($78.7 billion in the General Fund and $49.8 billion in other funds) for all K-12 education programs. K-12 per-pupil funding totals $17,519 per Proposition 98 General Fund and $23,723 per pupil when accounting for all funding sources.

Proposition 98 Funding

2012-13 to 2023-24

(Dollars in Billions)

Source: Governor’s 2023-24 Budget Proposal

Proposition 98 Rainy Day Fund

Due to a decrease in capital gains revenues, and a projected deposit of $366 million in 2023-24, the total balance of the PSSSA has decreased to $8.5 billion, down from the $9.5 billion projected in the 2022 Budget Act.

The balance of $8.1 billion in 2022-23 continues to trigger school district reserve caps in 2023-24.

Local Control Funding Formula (LCFF)

One of CASBO’s priorities is for the state to fund the statutory cost-of-living adjustment (COLA). We recommended to the Administration that before considering new programs/priorities, the state fund existing obligations, including providing the statutory COLA for the LCFF and other programs outside of the LCFF that receive a COLA.

There is a decline of 2.2 percent average daily attendance (ADA), which brings the total LCFF funding to $80.1 billion in 2023-24. The budget proposes an LCFF COLA of 8.13 percent, an increase of $4.2 billion. For the state to fund this COLA, the budget provides about $613 million in one-time funding in 2022-23 and about $1.4 billion in one-time funding for 2023-24.

LCFF Equity Multiplier and Accountability Improvements

It is estimated that LCFF for annual supplemental and concentration grant funding, is $13.4 billion. The budget proposes $300 million ongoing Proposition 98 General Fund to create an equity multiplier as an add-on to the LCFF, intended to close opportunity gaps. Without providing the details of what the targeted methodology will be, these funds will be allocated based on a school-site eligibility and is intended to support the highest-needs schools. We anticipate the funding being allocated to LEAs with schools serving high concentration of students eligible for free meals (90% or more free meal eligibility for elementary and middle schools and 85% or more free meal eligibility for high schools) and LEAs would be required to use those funds on services and support that directly benefit those eligible schools, along with providing stakeholder engagement for the use of the funds.

We will share more information once trailer bill language is released but, in the meantime, we anticipate that there will be a requirement for LEAs, where student group performance is low based on the school dashboard indicator at the school level, to include specific actions, goals, and funding in both the LCAP and LEA budget, as well as subsequent evaluations that include stakeholder input. The LCAP review and approval process will be adjusted accordingly. Changes will also be made to the LCAP planning process to equip community members on how to use the dashboard.

The budget does share that there will be changes to the accountability and continuous improvement system through the Local Control and Accountability Plan (LCAP) and Differentiated Assistance (DA) based on research and data evaluations. We anticipate trailer bill language that will tie the Local Control Accountability Plan (LCAP), dashboard, and the state system of support.

Early Education

Transitional Kindergarten (TK)

Based on updated enrollment and attendance data, the budget provides revised estimates for the first year investments, including a reduction of approximately:

• $10 million, for the first year investment from $614 million to $604 million.
• $46 million, to add one additional certificated or classified staff person from $383 million to $337 million.

The budget includes $690 million to implement the second year of transitional kindergarten expansion (approximately 46,000 children) and $165 million to support the addition of one additional certificated or classified staff person in TK classrooms serving these students.

California State Preschool Program (CSPP)

The budget proposes to maintain what was planned for in the 2022 Budget Act of $64.5 million Proposition 98 General Fund and $51.8 million General Fund to continue a multi-year plan to ramp up the inclusivity adjustments for the State Preschool Program and students with disabilities will be required to make up at least 7.5 percent of State Preschool Program providers’ enrollment.

The budget also proposes a $152.7 million General Fund to support reimbursement rate increases previously supported by available one-time federal stimulus funding. This is in addition to approximately $63.3 million General Fund and $112 million Proposition 98 General Fund to support an 8.13 percent statutory cost-of-living adjustment.

The budget proposes an increase of $763,000 in Proposition 98 General Fund to support the preschool Classroom Assessment Scoring System.

California Preschool, Transitional Kindergarten and Full-Day Kindergarten Facilities Grant Program (FDK)

The budget proposes to delay the $550 million that was planned for, in the 2022 Budget Act, from 2023-24 to 2024-25.

Literacy

The budget adds $250 million one-time Proposition 98 General Fund to the existing Literacy Coaches and Reading Specialist Grant Program to continue helping improve the quality of reading for students. It also includes a $1 million one-time General Fund to create a Literacy Roadmap to better help educators understand how to use existing resources.

Transportation

The budget provides $238,000 General Fund, for the school bus driver training program, of which $138,000 is ongoing.

Special Education

Another CASBO budget priority is special education and we recommended to the Administration that future COLA for special education, through the AB 602 formula, be treated the same as the LCFF to ensure that the staff and programs supported through this allocation are not disproportionally affected. We believe these funds will make progress toward equalizing funding rates.

We are pleased to see an increase of $669 million ongoing Proposition 98 General Fund to reflect an 8.13 percent COLA for categorical programs that remain outside of the LCFF, including special education. This increases the ADA rate to about $886.

The Administration continues to prioritize special education and the budget includes some programmatic changes including:

• Limiting the amount of additional funding that Special Education Local Plan Areas (SELPAs) are allowed to retain for non-direct student services before allocating special education base funding to their member local educational agencies (LEAs).
• Stabilizing current SELPA membership by extending the moratorium on the creation of new single-district SELPAs by two years from June 30, 2024, to June 30, 2026.
• Increasing fiscal transparency by requiring the California Department of Education (CDE) to post each SELPA’s annual local plan on its website, including its governance, budget, and services plans.

Educator Workforce

Another CASBO budget priority is addressing staff shortages. CASBO recommended suspending certain requirements and bringing back, for a short-term, hiring flexibilities for retirees.

The budget highlights the multi-year investments made to address the educator shortages in the 2021 and 2022 Budget Act and expresses the commitment to continue funding those programs.

Arts and Cultural Enrichment

The budget acknowledges the passage of Proposition 28 (Arts and Music in Schools—Funding Guarantee and Accountability Act) and provides about $941 million from the General Fund for this purpose. As anticpated, the budget reduces $1.2 billion from the Arts, Music, and Instructional Materials Discretionary Block Grant that was included in the 2022 Budget Act, going from $3.5 billion to $2.3 billion, which is intended to help cover LCFF costs.

The budget also includes a $100 million one-time Proposition 98 General Fund (about $100-200 per high school senior in a public school) to provide cultural enrichment experiences. Details around this proposal are still being developed.

Major K-12 Budget Adjustments

This section highlights the budget’s significant adjustments to various educational programs outside of the LCFF.

Budgetary Reserves

The Budget reflects $35.6 billion in total budgetary reserves. These reserves include $22.4 billion in the Budget Stabilization Account. The reserve total also includes:

• $8.5 billion in the Public School System Stabilization Account (PSSSA),
• $3.8 billion in the state’s operating reserve – the Special Fund for Economic Uncertainties
• $900 million in the Safety Net Reserve

To help close the $22.5 billion budget gap, the budget reflects the following:

• $7.4 billion in funding delays
• $5.7 billion in reductions and pullbacks
• $4.3 billion in fund shifts, specific to the California State University, bonds to cash projects, and zero-emission vehicle commitments
• $3.9 billion in trigger reductions, primarily in climate and transportation, housing, parks, and workforce training ($55 million)
• $1.2 billion in limited revenue generation and borrowing

The budget does not project a recession; however, the volatility of revenue conditions may change in the coming months. The Administration acknowledges if that is the case, they can propose to withdraw from reserve accounts as well as additional program reductions.

The budget also provides the following measures to close projected shortfalls in the coming years:

• $7 billion to address inflationary adjustments, which were scheduled over 2024-25 and 2025-26, are now withdrawn.
• $4 billion in supplemental deposits to this reserve account had been scheduled over 2024-25 and 2025-26. These are now withdrawn.
• $4 billion in additional deposits to the Safety Net Reserve had been scheduled in 2024-25 and 2025-26. These are now withdrawn.
• $2.1 billion in General Fund had been scheduled to reduce lease revenue bond liability in 2022-23 through 2025-26, which is reverted to lease revenue bond funds to pay for capital projects.
• $1.7 billion in General Fund, which had been scheduled in 2024-25 to reduce General Obligation bond liability through the redemption of callable bonds, is now withdrawn.

General Fund

2023-24 Governor’s Budget

General Fund Budget Summary

(Dollars in Millions)

Source: Governor’s 2023-24 Budget Proposal

2023-24 General Fund Expenditures

(Dollars in Millions)

Source: Governor’s 2023-24 Budget Proposal

Materials

Governor’s Budget Summary

K-12 Education Summary

Education Budget Agency Report