Governor Releases May Revision;

Highlights Following Department of Finance Briefing

This morning, Governor Gavin Newsom released the 2023-24 May Revision, which reflects a shortfall of $31.5 billion, up from $22.5 billion in the Governor’s Budget. Although it is a time of uncertainty, it does not predict a recession and the Governor is not looking to dip into reserves at this time. It is worth noting that the economic fallout from a debt limit impasse, higher interest rates, uncertainty in financial institutions, and delayed tax receipts can impact future revenues.

This Newsbreak follows a briefing by the Department of Finance, highlights the May Revision as it relates to CASBO’s budget priorities and advocacy efforts, and provides a summary of what is included in K-12 education.

CASBO Budget Priorities

Statutory Cost-of-Living Adjustment (COLA)

CASBO supported fully funding the statutory COLA of 8.13 percent in the Budget proposal for the Local Control Funding Formula (LCFF), and categoricals such as special education and school nutrition.

The May Revision adjusts and fully funds the LCFF COLA at 8.22 percent, about $3.4 billion when combined with declining enrollment. The May Revision also uses about $2.7 billion one-time Proposition 98 General Fund (GF) to support overall LCFF costs in 2023-24. The 8.22 percent COLA is also applied to categoricals outside of the LCFF, including County Offices of Education (COEs), special education, adult education, and school nutrition.

When it comes to school nutrition, the May Revision provides an increase of $300 million ($110 million one-time and $191 million ongoing) in Proposition 98 GF to fully fund universal meals in the 2022-23 and 2023-24 fiscal years.

Arts, Music, and Instructional Materials Discretionary Block Grant

CASBO opposed the Budget proposal to reduce $1.2 billion in the Arts, Music, and Instructional Materials Discretionary Block Grant that was included in the 2022 Budget Act, recognizing that some districts have already adopted plans for how to use these funds. CASBO recommended funding the committed block grant before creating and funding new programs.

The May Revision reflects an additional $607 million one-time Proposition 98 reduction, on top of the $1.2 billion from the Governor’s Budget, an overall reduction of about $1.8 billion (about 50 percent).

The Governor, in his press conference, refers to Proposition 28 funding to offset “some modest adjustments.” The May Revision also references $933 million ongoing Proposition 98, expected from Proposition 28, beginning in 2023-24.

We anticipate further clarification in trailer bill language for Proposition 28, which will require a 2/3rds vote.

LCFF Equity Multiplier

The May Revision maintains the commitment of $300 million ongoing in Proposition 98 GF to create an equity multiplier.

CASBO had expressed appreciation for the intent to allocate these funds to help close opportunity gaps. Given the narrow scope of school-site eligibility based on free meals, CASBO recommended consideration for a different threshold or criteria which focuses on gaps in student performance rather than free meal counts.

Expanded Learning Opportunity Program (ELOP)

Although not included in the Budget proposal, CASBO supported, advocated for, and requested carrying over 2022-23 funds to 2023-24, understanding that some local educational agencies (LEAs) are still working to build up this program.

The May Revision extends the expenditure deadline for funds received in 2021-22 and 2022-23 from June 30, 2023, to June 30, 2024.

K-12 Education Highlights

In the spirit of maintaining strong support for schools and a decline in Proposition 98 resources, the May Revision repurposes prior one-time allocations to support core ongoing programs. Although the state Public School System Stabilization Account (PSSSA) for TK-12 and community colleges is projected to rise $2 billion, now up to $10.7 billion because of projected increases in capital gains receipts, the May Revision does not reflect a discretionary withdrawal.

Proposition 98

Proposition 98 reflects a three-year decrease in the minimum guarantee of $2 billion below the Budget proposal and the May Revision now estimates it to be:

  • $110.6 billion in 2021-22
  • $106.8 billion in 2022-23
  • $106.8 billion in 2023-24

This results in $23, 706 total per pupil spending and $17, 444 in Proposition 98 per pupil spending, a decrease of about $17 per pupil from the Governor’s Budget.

Test 1 continues to be projected for all three budget years (2021-22, 2022-23, and 2023-24).

Learning Recovery Emergency Block Grant (AB 182, 2022)

The Budget Act of 2022 provided $7.9 billion in one-time Proposition 98 GF to help address learning recovery for use through 2027-28.

The May Revision proposes a decrease of $2.5 billion, reducing the allocated funds to $5.4 billion. As a reminder, AB 182 passed with a 2/3rds vote and funds have already been allocated. It is unclear how the state would recover these appropriated funds.

Early Education

The May Revision continues to fully fund the first and second years of expanded eligibility for Transitional Kindergarten (TK) and allows the continuation of waiving family fees from July 1, 2023, through September 20, 2023, for the California State Preschool Program, using funds from the 2022 Budget Act.

It is worth noting that due to reduced TK enrollment projections, first-year costs are revised from $604 million to $357 million and second-year costs are revised from $690 million to $597 million.

The first-year costs to add additional staff to every TK class are revised from $337 million to $283 million and the second-year costs remain the same.

County Offices of Education (COEs)

The May Revision provides an $80 million ongoing increase in Proposition 98 GF for COEs serving juvenile court and other alternative school settings and a 50 percent increase to the base grant for differentiated assistance, increasing from $200,000 to $300,000 beginning in 2023-24.

Literacy

The May Revision requires LEAs to screen students in kindergarten through second grade, for risk of reading difficulties, including dyslexia, beginning in the 2025-26 school year. It also provides $1 million one-time Proposition 98 GF to convene a panel of experts to approve a list of screening instruments.

Senator Anthony Portantino has attempted legislation to require dyslexia screening over the last couple of years. This year, he introduced SB 691, which would require LEAs serving students in kindergarten to second grade, to annually screen students for risk of dyslexia, beginning in the 2024-25 school year, unless a student’s parent objects in writing.

Educator Workforce

The May Revision makes statutory changes for educator workforce programs, which include:

  • Increasing the Teacher and School Counselor Residency Grant Program per-candidate allocation.
  • Authorizing the Commission on Teacher Credentialing to issue a comparable California credential to any U.S. military servicemember or their spouse who possesses a valid out-of-state teaching or services credential.
  • Allowing residency candidates to complete their service requirements in eight years instead of five, along with the flexibility to fulfill their service requirements by teaching in schools outside of the sponsoring district.

Accountability

The May Revision reflects several clarifying changes to strengthen the accountability changes in the Budget proposal. Two changes worth noting include; requiring all focus schools to address the disparities in preparing educators and clarifying the definition of “long-term English learner” to align with the federal definition.

Notable Adjustments

 

Issue Proposal

 
Bipartisan Safer Communities Act, Stronger Connections Program Increase: $119.6 million one-time federal funds to support state-level activities.
Categorical Program Cost-of-Living Adjustments Decrease: Around $1.7 million ongoing Proposition 98 GF for selected categorical programs for 2023-24 to reflect updated COLA and changes in enrollment projects.
The Arts and Music in Schools: Funding Guarantee and Accountability Act (Proposition 28) Decrease: Around $8 million to support the implementation. With this adjustment, support for the program would be approximately $933 million in 2023-24.
Bilingual Teacher Professional Development Program Increase: $20 million one-time Proposition 98 GF to be available through the 2028-29 fiscal year.
Restorative Justice Practices Increase: $7 million one-time Proposition 98 GF to provide support for LEAs opting to implement the Restorative Justice best practices that will be developed and posted on CDE’s website by June 1, 2024, pursuant to AB 2598, 2022).
Golden State Teacher Grant Program Increase: $6 million one-time federal funds to support grants to teacher candidates enrolled in a special education teacher preparation program who agree to teach at a high-need school site
After-School Education and Safety Programs Increase: $3 million ongoing Proposition 98 General Fund to the Los Angeles County Office of Education to contract with Save the Children to support after-school programs in rural districts.
California School Information Services Increase: About $2.1 million ongoing Proposition 98 GF.
Professional Development and Leadership Training Increase: $1 million ongoing Proposition 98 GF for the Los Angeles County Office of Education related to antibias education and creation of inclusive and equitable schools.
Local Control and Accountability Plan Query Tool and eTemplate Increase: $148,000 ongoing Proposition 98 GF to support refinements.
Basic Aid Wildfire Property Tax Backfill Increase: $632,000 one-time Proposition 98 GF to backfill reduced property tax revenues for certain school districts that were impacted by the Kincade Fire.

 

 What’s Next

 Trailer Bill Language: Once released, CASBO will analyze the language in greater detail and release a NewsBreak.

Legislative Committee: CASBO’s legislative committee is meeting on Thursday, May 18, 2023, to discuss the May Revision, hear from the Department of Finance and Legislative Analyst Office, and develop CASBO’s response to the May Revision.

Legislative Budget Hearings: The legislature will begin hearings in the budget committees and subcommittees to discuss the May Revision in the coming weeks. The Legislature has until June 15th to pass the State Budget.

Continuing Advocacy Efforts: The following issues are also part of CASBO’s budget priorities and are not reflected in the May Revision. CASBO will continue to advocate for these issues throughout the rest of the budget process.

  • Facilities Funding: CASBO supports AB 247 by Assemblymember Muratsuchi, a K-14 2024 state school bond.
  • Employer Pension Contributions: CASBO supports additional funding that will help pay down school employer liabilities for CalPERS and CalSTRS.
  • Address Staff Shortages: CASBO supports hiring flexibility for retirees and currently supports SB 765 (Portantino).
  • Transitional Kindergarten (TK) Staff Qualification: The Governor’s Budget proposed creating a new requirement for an adult assigned to a TK classroom, beginning in the 2028-29 school year. CASBO believes this new requirement will make it more difficult to retain existing staff and recruit for these positions and therefore opposes this proposal. CASBO recommends immediate relief and extension of the credential requirement for universal transitional kindergarten (UTK).

 Materials

 Governor Newsom’s State Budget Presentation

May Revision Fact Sheet

2023-24 Proposed May Revision Adjustments to the Governor’s Budget