Credit: Courtesy of John Affeldt
John Affeldt

With increased revenues in the state’s coffers, there are many things to like in the budget signed by Gov. Jerry Brown last week, but three key developments are setting off alarms for education advocates and community groups who supported the landmark Local Control Funding Formula reform. With each of them, the governor seems to be shaping or restricting the newfound flexibility in the funding formula in ways that principally benefit teachers’ interests and not the high-needs students supposedly at the heart of the reform.

First came the lightning bolt in the May revision of the budget, in which Brown proposed to address the state’s $74 billion unfunded liability in the California State Teachers Retirement System primarily on the backs of school districts. There is no question that the CalSTRS issue needs to be addressed and that failing to do so only makes matters more expensive down the road. But Brown’s solution is to increase the annual contributions from the state and teachers somewhat – and from districts a whole lot. The state’s responsibility and share of the burden vis-à-vis districts should be roughly reversed, with Sacramento instead carrying 70 percent of the load and districts only 20 percent. But rather than propose a plan to raise state revenues for the CalSTRS paydown, Brown wants districts to shoulder the bulk of that burden – with the existing inadequate level of school funding. This only worsens the consequences for kids. Districts use K-12 Proposition 98 funds to pay their CalSTRS share; the state’s contribution is from the General Fund. Thus, under the governor’s district-centric solution, there will be fewer Prop. 98 dollars statewide and fewer dollars from the Local Control Funding Formula on the ground for districts to use for programs and services for students.

Restricting districts’ reserves

Then at the 11th hour came another shocker. In conference committee, Brown inserted a statewide maximum on districts’ budget reserves, the size of which teacher and classified unions have long grumbled about. Now, when the state has a good year or two economically and puts money into its rainy day fund, districts will be forced to spend down their own local rainy day reserves. This might make sense if the state were guaranteeing its fund would fully cover district shortfalls should the economy go south or if the state guaranteed adequate annual funding for schools, but neither is the case. As such, it is folly to undercut local districts’ ability to plan prudently. For every good year that brings rainy day investments, subsequent economic downturns will surely follow. Hundreds of districts were negatively qualified by county offices of education during the recent downturn, and more than a few were close to insolvency. The ability to shore up reserves kept most districts afloat and served students well.

The Brown administration, with union support, slipped in this significant new restriction on local spending without any public hearings or debate or time for thoughtful consideration. With it in place, stores of local rainy day funds around the state will eventually be funneled straight onto the bargaining table in one chaotic swoop. Some funds will go toward temporary new programs and services (only to be eliminated via cuts and layoffs when school funding next takes a hit); other dollars will inevitably flow right into permanent salary increases. In many cases there will be too many new dollars coming too suddenly for districts to absorb into new programs and/or to withstand the bargaining pressure. The result will be better paid staff, but not necessarily new or better services for high-needs students as promised by the Local Control Funding Formula. Either way, when the bad times come, not having the local reserves to keep things afloat will lead to even more calamitous cuts and layoffs, ill serving the neediest students, who typically suffer the most when the cuts come.

For a governor who promised increased local decision-making under a new regime of “subsidiarity,” Brown just contradicted himself with two whoppers…

Limiting transparency

To punctuate the trifecta, near the close of budget negotiations the administration, with CTA’s urging, quietly removed a provision in the budget trailer bill to increase transparency around how supplemental and concentration dollars for high-needs students are spent by districts. The proposal to modify the state’s school accounting codes was advanced by civil rights advocates and community groups in an effort to increase the transparency for locals and policymakers on how this grand LCFF experiment is playing out for the students it is intended to serve. Both houses in the Legislature included language on transparency in their budget versions. The proposal would not have converted any LCFF funds into restricted dollars like the old categoricals nor reduced any flexibility in how LCFF dollars are spent. It merely would have shown, in broad categories, how supplemental and concentration dollars were being spent. Before the conference committee could even consider the proposal, the administration had it removed.

Mind you, the state has acknowledged, without concern, that many local districts are tracking these dollars with local accounting codes. Apparently, the objection is to the statewide aggregation of data and its potential effect on policy. As CTA told the conference committee in opposing the effort: “That aggregated analysis will misrepresent what is truly happening at local districts and will result in the same kind of statewide, data driven critique that the LCFF sought to reverse.”

So now that we value local control, we no longer can analyze aggregated data and respond appropriately? Could it be that the CTA and the governor don’t want it easily known that the bulk of supplemental and concentration dollars are flowing to higher benefit and salary costs (aided by the new CalSTRS fix and the local reserve cap) and not necessarily to new staff and higher services for high-needs students?

For a governor who promised increased local decision-making under a new regime of “subsidiarity,” Brown just contradicted himself with two whoppers: a new state mandate to spend limited funds on CalSTRS and a new prohibition on local fiscal planning. It’s true that most teachers deserve raises, just as most high-needs students deserve greater services to succeed with the new Common Core standards. But we trusted Brown that funding formula distributions would be decided locally, through the LCFF process – not precluded through CalSTRS mandates, funneled predominantly into salaries, and hidden from view.

It’s as if the administration has forgotten that LCFF was passed and carries legitimacy precisely because so many stakeholders came together – not just the unions, but also many districts and superintendents and civil rights and grassroots organizations representing parents, students and community advocates. These late-breaking, insider maneuvers risk undermining the consensus support for the new law. To restore that delicate consensus, a new conversation on how to adequately fund our schools (including the CalSTRS obligation) should begin; more immediately, the reserve cap should be removed and the transparency reporting provision reinserted. And going forward, these late-dropping, ground-shifting surprises have to be avoided.

•••

John Affeldt is Managing Attorney at Public Advocates Inc., a nonprofit law firm and advocacy organization.  He has been recognized by California Lawyer Magazine as a California Attorney of the Year.

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  1. Mark Lewis 5 years ago5 years ago

    I very much agree with your first point John, but for a slightly different reason. What many fail to understand about the 70/30 "split" for funding the STRS shortfall is that forcing school districts to pay more doesn't just take money away from the kids, it also takes money away from the teachers, as well as other district employees. I work for a California community college district and when this "phase in" … Read More

    I very much agree with your first point John, but for a slightly different reason. What many fail to understand about the 70/30 “split” for funding the STRS shortfall is that forcing school districts to pay more doesn’t just take money away from the kids, it also takes money away from the teachers, as well as other district employees. I work for a California community college district and when this “phase in” is fully implemented our district will have to pay an additional 11 million dollars a year into the STRS fund. The only way to cover that cost is for our district managers to reduce staffing (meaning layoffs and furloughs for classified employees), and reduce course offerings (meaning layoffs for part time teachers). In addition, we will all have to take compensatory salary and benefits cuts. Jerry Brown seems to think “the school district” is some magical entity separate and apart from its employees and students, and that it sits on some magical cache of hidden wealth. Like most wishful thoughts, it just isn’t true. When you divert funds from “the district” you are hurting the students, teachers, and employees who ARE the district.

    Replies

    • navigio 5 years ago5 years ago

      Well, that’s probably the whole point. The easiest way to reduce the pension liability is to reduce the number of people hired. Making it more expensive for districts to hire people will cause them to hire fewer. It will also push even more people into the non-unionized (and non-pensioned) alternative.

      • Don 5 years ago5 years ago

        Is that right? I would think we’d need more not less payers in the system to keep the payout solvent.

        • navigio 5 years ago5 years ago

          At the macro level, sure. However, there is no local incentive to increase contributors for that reason (districts have no direct long term pension burden), and it is districts that do hiring. Rather this is a 10% increase in short term employee cost that will come on top of all the other planned increases and is something that makes charter teacher overhead relatively even lower (read can provide more 'services' for same cost). The state, … Read More

          At the macro level, sure. However, there is no local incentive to increase contributors for that reason (districts have no direct long term pension burden), and it is districts that do hiring. Rather this is a 10% increase in short term employee cost that will come on top of all the other planned increases and is something that makes charter teacher overhead relatively even lower (read can provide more ‘services’ for same cost). The state, in contrast, has a huge stake in the size of the pensioned population, especially as the pension fund goes upside down and the size of the contributor pool continues to drop as a result of charter school expansion. There is nothing so powerful as the invisible hand. I am very surprised that people don’t see this dynamic.

          • don 5 years ago5 years ago

            That makes a lot of sense, Navigio. However, if the exemptions on the penalties of the Class Size Reduction Act where removed that would incentivize hiring in the K3 space. As for charters, until LCFF charters received less per pupil and continues to suffer from lack of economies of scale as well as rental costs. My son's charter has some substantial staff turnover as teachers seek better pay with the improving outlook and … Read More

            That makes a lot of sense, Navigio. However, if the exemptions on the penalties of the Class Size Reduction Act where removed that would incentivize hiring in the K3 space. As for charters, until LCFF charters received less per pupil and continues to suffer from lack of economies of scale as well as rental costs. My son’s charter has some substantial staff turnover as teachers seek better pay with the improving outlook and return to hiring. As we all know one of the most significant shortcomings of CA K12 ed is large class sizes. Legislative efforts to tackle that problem would also ameliorate the pension issue to some extent. Conversely, long overdue raises would eat up that opportunity. We are experiencing shrinking pains as a state in serious financial straights despite the recovery.From my cell

  2. SD Parent 5 years ago5 years ago

    Amen, John. It is clear that no one in the vaults of Sacramento really cares about students. I am weary of fighting against big money and powerful lobbyists to show how children are getting shafted because it’s clear that for Sacramento, it is all about the adults and cities/counties and ignore the consequences for kids.

  3. Floyd Thursby 1941 5 years ago5 years ago

    This is a significant funding increase. It will be egg on the face of the entire status quo if we don't see better test scores as a result as compared to other states. This will answer the question, does more money lead to better education. And if they succeed in raising minimum wage from 7.25 to 10.15, a nearly 6k annual increase, when we've heard for years these families can't afford notebooks … Read More

    This is a significant funding increase. It will be egg on the face of the entire status quo if we don’t see better test scores as a result as compared to other states. This will answer the question, does more money lead to better education. And if they succeed in raising minimum wage from 7.25 to 10.15, a nearly 6k annual increase, when we’ve heard for years these families can’t afford notebooks or lettuce, we will see if that has a significant impact on test scores. My prediction is that neither will make much difference as neither addresses the root issues.

  4. navigio 5 years ago5 years ago

    I expect #1 is payback from Brown for the move earlier this year to increase the LCFF base grant.

  5. Paul Muench 5 years ago5 years ago

    I suppose the hope of having the state pay the lion’s share of the CalSTRS unfunded liability is to increase overall education spending because the state money must come out of some other state service budget?

    Replies

    • navigio 5 years ago5 years ago

      It’s not an unfunded liability anymore. 🙂

      • Paul Muench 5 years ago5 years ago

        Ah yes, just a liability 🙂

  6. Don 5 years ago5 years ago

    Mr. Affeldt, do you have any idea as to how much the CalSTRS burden will be to a district's annual budget in proportional terms? Obviously, the debt is astronomical and one would expect it to have a significant impact at the local level. The new funding formula theoretically increases the apportionments over the 8 year rollout, but to what degree will this CalSTRS curveball reduce those increases in practical terms once districts meet their budgets? … Read More

    Mr. Affeldt, do you have any idea as to how much the CalSTRS burden will be to a district’s annual budget in proportional terms? Obviously, the debt is astronomical and one would expect it to have a significant impact at the local level.

    The new funding formula theoretically increases the apportionments over the 8 year rollout, but to what degree will this CalSTRS curveball reduce those increases in practical terms once districts meet their budgets?

    If the impact of the CalSTRS revision is significant, it wouldn’t be hard to form a conspiracy theory. Here we have increases under a new funding formula heralded in with much hoopla and acclaim for the governor and then later, under cover of legislative darkness, a backend maneuver that offsets those very gains.

    As far as to the CTA’s interest in all teachers, it has never shown much regard for those new teachers who take the brunt of RIF layoffs. If creating CalSTRS solvency at the expense of students is perceived as the best outcome for teacher pensions, I don’t see CTA opposing it even if it means less funding for students and puts the lie to LCFF.

  7. Jennifer Bestor 5 years ago5 years ago

    John, your arguments are compelling. Would you be willing to clarify three points? (1) Your commentary proposes that the State should have carried 70% of the burden of the CalSTRS overhang, rather than throwing it onto districts. Is this because so much of the overhang was caused by the Legislative (political) decision in 1999 to increase benefits and cut contributions -- a State decision for which the State might be expected to take … Read More

    John, your arguments are compelling. Would you be willing to clarify three points?

    (1) Your commentary proposes that the State should have carried 70% of the burden of the CalSTRS overhang, rather than throwing it onto districts. Is this because so much of the overhang was caused by the Legislative (political) decision in 1999 to increase benefits and cut contributions — a State decision for which the State might be expected to take financial responsibility (viz mandates)? Or for a different reason? And why would (or should) such State payments be outside Prop 98?

    (2) You correctly highlight the folly of forcing districts to dump reserves when any Prop 98 funds go into a State reserve (rather than being paid in the year they’re owed under that voter-approved 1991 proposition), but don’t seem to question the fundamental premise that Prop 98 was meant as a stimulus, rather than brake, to building school funding. Is this because you support that idea, or because you suspect it hurts students more than (or as much as) teachers?

    (3) Is it really teachers as a group who benefit from these last-minute changes, or unions? The newest teachers, who disproportionately end up in the most challenging classrooms, and will not benefit from the overhung pensions, and are the first to be laid off when district reserves fail, seem to be as vulnerable as students from these undiscussed, unanalyzed forced decisions.

    Replies

    • John Affeldt 5 years ago5 years ago

      Jennifer, (1) The State is the entity with the non-delegable duty for ensuring that the education guaranteed in the State Constitution is realized; the “deal” to date has been that the State is responsible for its share of CalSTRS outside of Prop 98 so as not to diminish educational programs. As you note, the State Legislature set benefits at current levels, not districts. All this adds up, in my mind, to warrant having … Read More

      Jennifer, (1) The State is the entity with the non-delegable duty for ensuring that the education guaranteed in the State Constitution is realized; the “deal” to date has been that the State is responsible for its share of CalSTRS outside of Prop 98 so as not to diminish educational programs. As you note, the State Legislature set benefits at current levels, not districts. All this adds up, in my mind, to warrant having the State take on the lion’s share of the responsibility here. (2) I don’t think I’m understanding the thrust of the second question. What I can say is that Prop 98 was a stop gap, a plug to halt the rapidly plunging level of funding public education was receiving as the 1980’s wore on. Prop 98 funding is not based on what our students need to succeed on state-adopted standards in the 21st century, but simply on a formula principally derived from what we spent on education last year. As such, it was only ever meant to be a floor, not the ceiling some have sought to convert it to. (3) There are aspects of these budget maneuvers that the unions like but they are not all simply fulfilling union wishes. The CalSTRS issue in particular cuts many ways, not always in favor of all teachers. And, I don’t think the unions as a whole are happy either to see that much of Prop 98 devoted to non-program costs.