Budget negotiations to intensify as Legislature meets June 15 deadline

The Legislature on Monday, June 15, passed a 2020–21 budget bill that staves off immediate and drastic cuts to K–12 education, however, the spending plan is far from final as negotiations with the Governor’s Office continue. The Legislature’s action meets the requirement that lawmakers pass a balanced budget by midnight on June 15; Gov. Gavin Newsom has 12 days to act on the measure. The two sides will continue to negotiate and adopt an amended budget that will help answer major financial questions that are still outstanding during this unprecedented crisis. It is now expected that a final deal will include a level of funding below what the Legislature approved — but not below the May Revision.

The uncertainty leaves California’s local educational agencies playing the waiting game as they prepare for the monumental task of safely reopening campuses in the 2020–21 school year. Schools will receive $8.1 billion in Proposition 98 funding above what was proposed in the May Budget Revision, face unworkable cuts proposed by the Administration, or see something in between.

The Legislature’s version, while not perfect, is far preferable and includes a 2.31 percent cost-of-living adjustment to the Local Control Funding Formula. The plan reflects the advocacy work of CSBA, its members and the Education Coalition.

CSBA will continue to keep members informed of any developments and advocate for an adopted budget that supports schools in the effort to serve all students and respond to COVID-19. Members should also be ready for budget-related alerts as specific issues arise in negotiations.

The major difference: Cuts vs. deferrals

The crux of the debate is how the two versions account for whether the state will see a much-needed injection of federal stimulus funds beyond those received through the CARES Act. The Administration frontloads $14 billion in cuts with a trigger that will restore spending if federal funds arrive, while the Legislature’s version includes the anticipated federal money, establishing trigger solutions should the funds not arrive by Sept. 1, 2020; the trigger solutions would take effect on Oct. 1.

If further federal funds do not arrive, the Legislature’s plan would convert $5.3 billion of school and community college funding to apportionment deferrals, which would nearly double the size of deferrals over the amount proposed in the May Revision. Deferrals would allow governing boards to budget the deferred amounts in their adopted budgets for 2020–21, but payment from the state will be pushed into the 2021–22 fiscal year, creating cash-flow management issues.

While cuts and deferrals both offer challenges to local budgeting, deferrals offer a method to protect current spending levels at a time when costs are increasing, especially as schools prepare to reopen campuses for classroom instruction.

Key points of the Legislature’s budget

  • Leverages anticipated and in-hand federal funds to spend above the Proposition 98 minimum guarantee in the 2020–21 budget year
  • Rejects 10 percent LCFF reduction from the May Revision and adopts an LCFF COLA adjustment of 2.31 percent
  • Allocates $4.56 billion in discretionary federal funds for one-time COVID-19 closure impacts on schools and children:
    • $1.5 billion to all LEAs, based on special education enrollment for learning loss
    • $2.9 billion to all LEAs, based on LCFF for learning loss
    • $45 million for existing community school models
    • $112.2 million for LEA school meal reimbursements during summer and COVID closures
  • Allocates $1.4 billion in federal ESSER funds directly to LEAs based on mandatory Title I allocation
  • Provides $2.3 billion ($1 billion in budget year) in funding relief for LEA statutory contributions to the STRS and PERS retirement systems
  • Provides $645 million in Proposition 98 funding for special education services and supports: $545 million to base rate increases, $100 million for low-incidence pool
  • Extends the ADA Hold Harmless to the 2020–21 school year, contingent on student engagement reporting and local Continuity of Learning plan elements
  • Maintains instructional day requirements but allows flexibility for instructional minutes in 2020–21 school year (no furlough days)

Educational Revenue Augmentation Funds (ERAF) update

The May Revision proposed trailer bill language to ensure excess Educational Revenue Augmentation Funds provided to schools and community colleges is appropriately calculated according to current law. The trailer bill language included penalties to the counties that miscalculate ERAF funds, of which a percentage would be paid to the affected school districts.

Due to intense pressure by five affected counties, the Legislature’s budget package rejects the penalties. Absent these penalties, the counties could continue their miscalculations, which may result in an ongoing loss of approximately $352 million annually to Proposition 98 at a time when schools are struggling to make ends meet.

CSBA continues to advocate with the Legislature and the Administration to stress the importance of the penalty language to protect the integrity of school funding.