The Assembly and Senate on June 1 announced a budget deal and will now begin final negotiations with Gov. Gavin Newsom to work out the main differences between the proposed May Revision and the Legislature’s revisions. The Legislature’s proposal has some good news for schools, but a few issues remain outstanding.
The good news in the Legislature’s proposal:
Payment deferrals: As detailed in the May Revision, the Governor proposed paying down $8.4 of the $11.1 billion in deferrals to local educational agencies, leaving $2.7 billion remaining in the June apportionment deferral.
- CSBA advocated to retire all deferrals before moving to funding new programs. The Legislature proposes to do just that.
CalSTRS/CalPERs pension relief: The Legislature proposes almost $3 billion over a four-year period to cover increased pension costs to LEAs and community college districts.
- CSBA advocated for the state to dedicate General Fund revenues to buy down the long-term liability rates on behalf of school employers. The Legislature’s proposal is welcome news, and although it is a near-term buy down, it is a significant step to alleviate a considerable budget pressure for LEAs.
Unemployment Insurance relief: The Employment Development Department’s recent proposed increase in the Unemployment Insurance rate for the School Employees Fund from 0.05 percent to 1.23 percent equated to a 2,400 percent increase for LEAs. The Governor’s May Revision did not address this issue.
- CSBA advocated for the state to provide $642 million in one-time state General Funds to cover this substantial increase. The Legislature’s proposal would reduce the increase from a 1.23 percent increase to a 0.5 percent increase. Although this does not fully cover the increase, it goes a long way in helping to reduce the unanticipated costs.
Universal transitional kindergarten: The Legislature has embraced the Governor’s proposal with several changes, including a phased roll out over the next five years and a rebenching of Proposition 98 to meet the increased funding needs associated with a programmatic expansion of this size.
- Rebenching of Proposition 98 is rare but welcome news in response to the efforts of CSBA to ensure this occurs. However, there does not appear to be trailer bill language guaranteeing the rebench of the Prop. 98 guarantee, which is problematic in the event future revenues do not materialize to support growth in average daily attendance. Further, CSBA will continue to advocate for one-time funding for both school facilities and transportation and additional ADA funding for community-funded schools that cannot absorb this growth within their existing budgets.
The Legislature’s budget deal takes steps in the right direction; however, significant issues remain on the table:
Cost-of-living adjustment: The Legislature proposes providing a 4.05 percent for all categorical programs, special education and the After School Education & Safety program, an increase over the 1.7 percent proposed by Gov. Newsom.
- CSBA is supportive of this proposal and is advocating to extend the Super COLA of 5.07 percent for the Local Control Funding Formula to include special education, as well as COLA for home-to-school transportation.
Educational Revenue Augmentation Fund (ERAF): Neither the Governor’s May Revision nor the Legislature addressed the need to close a loophole that is currently exploited to exclude charter school ADA from the excess ERAF calculation, resulting in an immediate $900 million loss, and a $350–500 million ongoing loss in Proposition 98 funding. This equates to approximately $60–80 per ADA statewide.
- CSBA is advocating for trailer bill language to close the loophole.
Budget hearings in the Senate and Assembly will occur this week as negotiations between the Governor and the Legislature continue until the June 15 budget passage deadline