School Finance Forum Marin County Office of Education Brooks Allen and Mike Fine February 4, 2019 1
Budget At A Glance 2
K12 At A Glance • Reasonable assumptions • Proposition 98 growth - $2.8B to $80.7B • COLA on LCFF and remaining categoricals - 3.46% • Special Education investment - $576M ($186M is one-time) • Relief on STRS rate increase – 1% for 2 yrs; .5% on-going • Proposition 51 rollout – doubling to $1.5B per year • Full-Day Kindergarten facilities - $750M (one-time) • No per-ADA, one-time discretionary funding projected 3
Revenues • Estimates state revenues will increase by $8.1B for the three year period 2017-18 through 2019-20 combined from the estimate used in June’s adopted budget. • Concerns are raised about the impact on the economy by increased federal debt, higher interest rates, trade matters and the 2017 federal tax changes. • Increase in the state’s rainy day fund of $1.8B to $15.3B • Plan is to get to $19.4B by 2022-23 4
Proposition 98 • Proposition 98 growth - $2.8B to $80.7B • Identical growth that LAO forecasted in November • $2.0B to statutory COLA of 3.46% for LCFF • Net of $388M in ADA losses in 18-19 • $187M to COLA of 3.46% for categoricals • $9M to COLA for county offices • $576M to Special Education ($186M one-time) • $20M to county offices for differentiated assistance work • $4M (presumably one-time) to eight county offices to address capacity to support differentiated assistance 5
Cost of Living Adjustment (COLA) • COLA of 3.46% • Applied to LCFF • Other categoricals (e.g., AB602 Sp Ed) • County offices • Higher than November LAO estimate of 3.1% which was higher than June adopted budget estimate of 2.57% • Approximately three times the average of the last four years 6
Special Education • COLA of 3.46% • New $390M recurring and $186M one-time investment ($576M) • Details not yet completely formulated; initial budget trailer bill language expected by Feb. 1 • “…to support expanded special education services and school readiness supports at LEAs with high percentages of both students with disabilities and unduplicated students…” • “…services not currently included in an IEP.” • “…adopt strategies to improve special education student outcomes identified through the statewide system of support…” 7
STRS Rate Relief • $3B non-Proposition 98 contribution to STRS on behalf of school employers • $700M ($350M attributable to each year) for 2019-20 and 2020-21 to reduce the statutory STRS rate increase by approximately 1% each year. • 1.8% increase from 2018-19 to 2019-20 to 18.1% will be reduced to approximately .8% increase or 17.1% • .97% increase from 2019-20 to 2020-21 to 19.1% will be reduced 1% to 18.1% • $2.3B to reduce the long-term STRS rate by an estimated .5% beginning in 2021-22 8
Facilities Funding • Increases the pace of rolling out Proposition 51 bond funds to a goal of $1.5B for 2019-20 • $1.2B sold to-date in the past two years • Doubles the rate of apportionment • Adds staff to OPSC to review and approve $4.5B in pending projects for funding 9
Full-Day Kindergarten Facilities Funding • Builds on 2018-19’s $100M one-time, by adding $750M one-time, non- Proposition 98 funds for constructing new or retrofitting existing facilities to support full-day kindergarten programs • Facilities viewed as barrier to implementing full-day • Note: The 2018-19 $100M kindergarten facilities program has 72 applications for $121M as of February 1. 10
Preschool Governor and legislative priority • Universal preschool roadmap - $10M non-Proposition 98 to research and develop roadmap and long-term plan • $124.9M non-Proposition 98 to increase access to subsidized full-day, full- year preschool for 4 year-olds; goal is to serve all low-income 4 year-olds by 2021-22 • Shifts $297.1M from Proposition 98 for part-time programs at non-LEAs 11
A Time of Transition • Governor Newsom – “A California for All” • Continuity • Local Control Funding Formula • State System of Support and Accountability • New Priorities • “Cradle to Career” – ECE, K12 & Higher Ed • Longitudinal Data System ($10m one-time) • Whole Child Focus • Charter Schools 12
Routine Restricted Maintenance Account 13
RRMA Deposits • Some confusion over flexibility continues • If the LEA receives P51 funding, • In 2017-18, the flexibility ends in 2018-19 and a 3% deposit is required • In 2018-19 and beyond, the flexibility ends in the year received and a 3% deposit is required • Non-P51 LEAs, • Flexibility ends and 3% deposit is required in 2019-20 14
Proposed Facilities Legislation 15
Currently Introduced Bills • By midyear of 2019, all $7 billion allocated for K12 projects from the 2016 California Public School Facility Bonds Initiative (Proposition 51) will be exhausted. • AB13 (Eggman, D-Stockton): Would place a $7B higher education bond on the 2020 ballot for the Hastings College of Law, $2B for the CSU system, and $3B for the construction of new CSU campuses. • AB 48 (O’Donnell, D-Long Beach): Would place a K12 and community college school facilities bond on both the 2020 and 2022 ballots (amount currently undetermined). 16
Currently Introduced Bills • AB 124 (McCarty, D-Sacramento): Would place a $500 million preschool facilities bond on the 2020 ballot. • SB 14 (Glazer, D-Orinda): Would place a $4B higher education bond on the 2010 ballot with $2B for the UC system and Hastings College of Law and $@B for the CSU system. 17
The Red Shirt Movement ABC Charter School 18
Context • The LA strike was about the “broader common good, and not so much about a narrow working contract.” –Alex Caputo-Pearl, 2019 • “Forty years of underinvestment in public education cannot be solved in just one week or with just one contract.” -Austin Beutner, 2019 • “…charter school’s role in the district played a significant factor in tensions between the teachers’ union and school district.” -SCNG, 2019 • “…a charter school cap will do almost nothing to solve the district’s financial problems. Independent experts who are not beholden to the district, UTLA or charters have stated clearly and unambiguously that L.A. Unified would be facing a fiscal crisis even if there were no more new charter schools.” –Myrna Castrejon, CCSA, 2019 19
Consequence • “…tremendous concerns over insolvency.” -Austin Beutner, 2019 • “We’ll cross that bridge when we come to it.” -Austin Beutner, 2019 • “I’m so proud of the teachers for giving up their paychecks and walking the picket line, fighting for their students and, from what we’ve been told, really achieving most, if not all of what they were asking for their students.” – Senator Connie Leyva, 2019 • “Our numbers say that it can be paid for – and Austin Beutner agreed to it.” -Alex Caputo-Pearl, 2019 20
Movement • Oakland – fact-finding hearing 1/31 and 2/1 • Sacramento – cash insolvent November 2019, court hearing February 2019 21
Fiscal Health of Districts 22
District Health At A Glance • Disapproved Budgets – 6 initially, 1 continues, up from 2 PY • First Interim Financial Reports (December 2018) • 39 self-certified qualified, down from 42 PY 1 st / up from 25 PY 2nd • +3 downgraded by COE from positive to qualified • 4 self-certified negative • Sac City, Sweetwater Union High, So. Kern, Feather Falls Union El • 1 lack of going concern • Alvord 23
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Responsibility for Fiscal Stability • Fiscal stability and solvency of LEAs is the responsibility of governance team. • The preparation, approval, monitoring and reporting of budgetary and actual financial data rests with the LEA. 25
Oversight • The county superintendent has the responsibility to assess, concur or not concur, and monitor a district’s reporting and fiscal condition. • For a charter school, the authorizer is responsible for oversight. • For a county office, the State Superintendent of Public Instruction is responsible for oversight. 26
Determining Fiscal Risk High Risk High Risk Medium Risk Budget Development and Fund Balance and Reserve for Special Education Adoption Economic Uncertainty Budget Monitoring and Updates General Fund – Current Year Low Risk Cash Management Information Systems and Data Annual Independent Audit Management Collective Bargaining Agreements Internal Controls and Fraud Charter Schools Prevention Contributions & Transfers to Leadership and Stability Facilities Other Funds Deficit Spending Multiyear Projections Employee Benefits Non-Voter-Approved Debt and Risk Management Enrollment and Attendance Position Control 27
Thank you! 28
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