Credit: flickr JWillem van Bergen
Gov. Jerry Brown introduced the 2017-18 proposed budget Tuesday.

Citing recent revenue declines and uncertainty about the future, Gov. Jerry Brown has lowered funding for schools by $500 million in the current year and is proposing little more than a cost-of-living increase in the 2017-18 budget that he presented Tuesday.

And in a press conference surprise that will likely frustrate school districts and the construction industry, Brown said that his administration would not issue any of the $7 billion bonds for K-12 school facilities that voters approved in November until the Legislature established better auditing procedures to document how the money will be spent.

Michael Cohen, the director of the state Department of Finance, said, “We must continue to have commitment to taxpayers that the money will be accounted for appropriately.”

Brown was responding to a 2016 Department of Finance report that criticized the Office of Public Construction’s failure to fix weaknesses in auditing procedures for $7 billion in school bonds that that voters authorized a decade ago. Eric Bakke, interim co-director of Los Angeles Unified’s Office of Government Relations and the district’s expert on facilities, said it could take a year to 18 months to pass corrective laws and regulations and train districts in new auditing methods.

The delay will irk school districts whose building needs have to be addressed, Bakke said. “I would hope the process (of responding to the governor) will be expedited,” he said.

Voters passed Proposition 51, the November bond initiative, with a 55 percent majority. Brown opposed it because it kept the state’s current first-come, first-served formula for allocating state building aid, which he said favors wealthy districts with full-time construction staff. He reiterated his displeasure on Tuesday, and he is expected to press hard for some revisions through regulations.

Declining revenues lowered the minimum spending guarantee under the Proposition 98 funding formula by $1.8 billion over three years. The projected increase in 2017-18 would be only 2.1 percent above what the Legislature approved in June for K-12 schools and community colleges. The minimum spending guarantee under the Proposition 98 funding formula would drop by $500 million to $71.4 billion for this year and would rise next year to $73.5 billion. Cohen said that districts would not have to cut their budgets this year, however; they would just get the amount they had expected a month late at the start of next year, in July.

In November, voters approved extending the increase on income tax rates for the state’s top 2 percent of earners. But Proposition 55 will not kick in fully until 2018-19 and will not affect next year’s budget.

Brown has made it his priority to fund the transition to the new Local Control Funding Formula that provides extra money for high-needs students, including low-income students and English learners. Cohen said the state is still on target to reach full funding in 2020-21. That’s the point at which every district will receive at least the inflation-adjusted, pre-recession funding it received in 2007-08. Many districts with large percentages of high-needs students already are funded well above that level. But for next year, funding will remain where it is this year, at 96 percent of full funding, Cohen said.

In response, The Education Trust–West, an advocacy group, said in  a statement, “While we understand the economic reality the state faces, we would like to see the formula fully implemented as soon as possible to accelerate the resources available for closing opportunity and achievement gaps.”

Despite record stock market earnings and continued low unemployment and a rainy day fund that will total $7.9 billion by the end of next year, Brown continued to warn of a recession that could plunge the state into debt. And he said that threats of President-elect Donald Trump and Congress to repeal the Affordable Care Act could jeopardize billions of dollars in federal Medi-Cal health care subsidies for 3.8 million Californians. “The rhetorical thrust (out of Washington) is rather extreme. Whatever happens, we’re going to deal with it,” he said, adding: “We cannot budget for what hasn’t happened.”

But Brown also acknowledged that between now and June, revenue funded by a volatile tax system based on incomes of the wealthiest wage earners could also increase by billions. The Legislative Analyst in November projected that the Prop. 98 guarantee for schools would be $1 billion higher than Brown estimated. The LAO will present its revised estimates for next year on Thursday.

Brown said that the Legislature always takes a sunnier view of revenue and there will be “civil” but vigorous “pushing and shoving” in coming months in anticipation of the May budget revision. Revenue collections in April, reflecting capital gains filings, will be a key figure.

Other budget proposals

Preschool delay: Brown is postponing  planned increases in available preschool slots and reimbursement rates for providers. The 2016-17 budget agreement called for adding another 2,959 full-day preschool slots in April 2017.  Those slots would still be added, but Brown wants to postpone adding another 2,950 new slots slated forApril 2018 until April 2019 during the 2018-19 budget year.

“Folks in the child care field are quite distressed,” said Erin Gabel, a deputy director of First 5 California. “Gov. Brown warns us every year that this is the last year of economic growth. We have not been able to recover from the last recession before we get to the next one.”

Child care advocates were also hoping to see a change in eligibility rules that reflect new increases in the minimum wage. But the governor made no such proposal.

“We have families currently losing care because they have two minimum wage workers in the household,” Gabel said. “It’s ridiculous.”

Teacher shortage: Brown proposes no new money to deal with the state’s teacher shortage; last year’s budget included $20 million for planning grants for colleges to combine a teacher’s credential and an undergraduate degree in four years, and $10 million to subsidize hourly school staff who want to pursue a credential. Advocates and legislators will look to the May revision to make their case for new initiatives.

Special education reform: Brown signaled in his budget summary that he wants to move forward with reforming how special education is funded. A report in November by the Public Policy Institute of California called for directly funding special education through school districts, instead of distributing money through regional intermediaries known as Special Education Local Planning Areas. Brown endorsed that recommendation and called for discussions on new approaches to begin this spring. Advocates for change had hoped the administration would take a leading role.

Reactions to the budget included praise and criticism.

Assemblyman Patrick O’Donnell, D-Long Beach, who chairs the Assembly Education Committee, said the budget proposal “reflects our shared desire for a fiscally prudent budget. However, fiscal restraint must not be shouldered by California’s students or come at the cost of their education. While the Governor’s proposal allows K-12 per pupil spending to keep pace with enrollment growth and inflation, the Legislature will want to examine proposed accounting changes to Prop. 98.” And he added, “I agree with the Governor that the school bond program needs improvements, but voters approved Proposition 51 and the state should avoid any hurdles to the allocation of these funds. These facilities impact the health and safety of students.”

James Steyer, founder and CEO of the children’s nonprofit advocacy organization Common Sense, said in a statement, “We understand the level of caution in the Governor’s proposed budget given the uncertainties we face in federal policies and volatile state revenues. But the reality is, the status quo for kids in California is absolutely unacceptable. We need to respond with fundamental change, not incremental pauses and cuts that impact health care, child care and early learning opportunities.”

Susan Frey contributed to this story.

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  1. Ben 2 months ago2 months ago

    Brown was absolutely right to hold off on issuing any more school construction bonds until there is improved oversight and auditing. There is substantial waste, fraud, and abuse in these construction programs up and down the state. The bond oversight committees often provides a false sense of security to voters - all too often these committees are stacked with school district cheerleaders, staffed by unpaid volunteers without any training in financing, school … Read More

    Brown was absolutely right to hold off on issuing any more school construction bonds until there is improved oversight and auditing. There is substantial waste, fraud, and abuse in these construction programs up and down the state. The bond oversight committees often provides a false sense of security to voters – all too often these committees are stacked with school district cheerleaders, staffed by unpaid volunteers without any training in financing, school construction, etc. and have no budget or real authority to carry out their oversight function. For example, they have no budget for independent audits or an independent legal review of an issue. When school construction programs become large and complex undertakings, they cannot provide the oversight necessary to stop fraud, waste, and abuse.

    Replies

    • Tom 2 months ago2 months ago

      Ben, I'm not sure if your criticism is directed at school district personnel or bond oversight committees, or both. In regards to the school district personnel, these people DO have finance and construction expertise and are paid well to do their jobs though sometimes there are abuses and people go to jail as a result. This happens in every industry and that's why we have laws. There is a need to fix … Read More

      Ben, I’m not sure if your criticism is directed at school district personnel or bond oversight committees, or both. In regards to the school district personnel, these people DO have finance and construction expertise and are paid well to do their jobs though sometimes there are abuses and people go to jail as a result. This happens in every industry and that’s why we have laws. There is a need to fix the construction contracting methods which results in many distortions of the market. Bond oversight committees are usually parents who do have some type of expertise in accounting or finance though usually not as deep as school district personnel. This is not a fatal flaw because they act only as an additional layer to involve and inform the community and that is a good thing.

      I would argue that State government has been derelict in their duty and obligation to provide adequate facilities for our kids. This led to a grassroots effort to generate money for facilities and the public voted in favor of it. I find it very arrogant for the Governor to stand in the way of the will of the people and the needs of its most vulnerable and most important population – our children. At least he is consistent in showing more support of expensive boondoggles like high-speed rail than of schools.

  2. tom 3 months ago3 months ago

    John, As I recall, Brown threatened to cut school funds by $6 billion if proposition 55 did not pass. So now he is proposing to cut less - $500 million - even though the Prop 30 tax still in effect and is said to bring in $2-$3 billion for schools, as I recall. Is the balance going into the rainy day fund for future use when the economic downturn happens? … Read More

    John, As I recall, Brown threatened to cut school funds by $6 billion if proposition 55 did not pass. So now he is proposing to cut less – $500 million – even though the Prop 30 tax still in effect and is said to bring in $2-$3 billion for schools, as I recall. Is the balance going into the rainy day fund for future use when the economic downturn happens? If so, how easy is it to direct those rainy day funds elsewhere? Please advise.

    Replies

    • John Fensterwald 2 months ago2 months ago

      Tom: How much schools receive from the General Fund is determined by Prop 98, passed in 1988, and Brown is simply proposing to provide schools the minimum that Prop 98, a complicated formula, requires. What he is saying is that, based on General Fund revenues so far this year and in 2015-16, he and the Legislature appropriated too much when they passed the budget last July, so he is cutting school revenues by $500 million. … Read More

      Tom: How much schools receive from the General Fund is determined by Prop 98, passed in 1988, and Brown is simply proposing to provide schools the minimum that Prop 98, a complicated formula, requires. What he is saying is that, based on General Fund revenues so far this year and in 2015-16, he and the Legislature appropriated too much when they passed the budget last July, so he is cutting school revenues by $500 million. Of course, if revenues come in higher in the spring, as some speculate they will, he may have to cancel that proposed cut in the May budget revision. Lowering the Prop. 98 requirement for the past two years will also lower the obligation in 2017-18, which is why schools will also be getting less next year than they expected.

      Prop. 30 is widely misunderstood. Revenues from the tax flow into the General Fund and are subject to Prop. 98’s formula. As a result, Prop. 30 has helped raise more money for K-12 and higher ed. Because of the way Prop. 98 works, in the first years of Prop. 30, nearly every cent of its revenues went to education; the Prop. 98 formula says that in really good revenue years (which occurred when Prop. 30 went into effect), the Legislature must start paying schools back revenue they lost during down years. But on average, about 40 percent or Prop. 30’s revenue will go to K-12 and community colleges. When Prop. 55 replaces Prop 30, some of what remains after K-12 and community colleges get their share will go into the General Fund’s rainy day fund and some of it will go to health care for the poor.

      You are correct: Brown did threaten to cut $6 billion from schools if Prop. 30 failed. Fortunately, we didn’t have to see if he would stick to his word.

      Prop. 98 experts: Please jump in to expand or clarify what I have written. That includes you, Rick Simpson, if, in your retirement, you are still reading EdSource.

      • Jim Wilson 2 months ago2 months ago

        John: I used to qualify as a Prop 98 "expert" but I retired in 2010, so my understanding of recent moves is incomplete, particularly with how Prop 30 revenues have been treated. With regard to Prop 98, it was revised by Prop 111 in June 1990 to allow the state to use a lower minimum funding amount in years when state revenues decline sufficiently. It is this "Test 3" provision that appears … Read More

        John: I used to qualify as a Prop 98 “expert” but I retired in 2010, so my understanding of recent moves is incomplete, particularly with how Prop 30 revenues have been treated. With regard to Prop 98, it was revised by Prop 111 in June 1990 to allow the state to use a lower minimum funding amount in years when state revenues decline sufficiently. It is this “Test 3” provision that appears to be anticipated by the Governor here. I doubt that the Legislature “appropriated too much last year”, but rather that the Legislature appropriated (and the Governor signed) too little to meet the Prop 98 guarantee based on a higher level of state revenues. This appears to be prudent, because now that lower state revenues appear to be likely, the Prop 98 guarantee may be reduced pursuant to Test 3, and an additional $500 million of appropriations will not be required to meet the guarantee that was anticipated last June.

        If state revenues come in higher than currently anticipated by the May revise, the Prop 98 guarantee for the current fiscal year (2016-17) may have to be based on a higher Test 3, or even an unreduced Test 2, and more funding may have to appropriated for 2016-17. This would also mean that the Prop 98 guarantee level for 2017-18 and later years would be increased accordingly since the 2016-17 base of appropriations would be higher.

        One more point to make is that the Prop 98 guarantee in met with both state appropriations and local property tax revenues. If the property tax revenues increase faster than state revenues, under either test, then the need for state appropriations in reduced. This is why an added $500 million in appropriations this year, may require only $400 million next year if property tax revenues increase faster than the overall Prop 98 guarantee.

        • John Fensterwald 2 months ago2 months ago

          Thanks, Jim.

  3. Sonja 3 months ago3 months ago

    Students with disabilities completely overlooked in LCFF and this budget. Claiming that IDEA will provide, if Trump's administration kills it, which is an option on their table, our kids will be left with no funding, no support. When LCFF was first unveiled, advocates and families of students with disabilities protested that those of most need were left out of the formula. Local school districts have put together their LCFF committees with much … Read More

    Students with disabilities completely overlooked in LCFF and this budget. Claiming that IDEA will provide, if Trump’s administration kills it, which is an option on their table, our kids will be left with no funding, no support.

    When LCFF was first unveiled, advocates and families of students with disabilities protested that those of most need were left out of the formula. Local school districts have put together their LCFF committees with much interference from outside organizations that have their own interests at the forefront and election of reps was mismanaged and confused in some areas of LAUSD as reported by some attending the original meetings.

    LCFF does not include all students of need and leaves out those most vulnerable. These things always end up with political agendas and fail the children.