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Education Desk: June 10, 2015

The central new business on the May 28 Santa Clara Unified school board agenda was Mark Allgire’s overview of the state’s May budget revision.

Budget Revisions: The Good News …

Last month Gov. Jerry Brown unveiled the May budget revision proposal (the last time for adjusting the state budget this fiscal year), which increases some school funding, but not in some important areas with long-term impact.

While others have been singing, “We’re in the money” ever since Sacramento’s boosted school funding last year – last September, Trustee Christopher Stampolis called it “a heckuva lot more money” that the board needed to “expeditiously agendize” spending – at the May 28 board meeting Asst. Superintendent Business Services Mark Alligire’s focus wasn’t feel-good news. Instead it was, as it has consistently been, that the party isn’t going to last forever, or even the next five years.

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The good news is that schools will get $6.1 billion more over the next three years to accelerate phase-in of the Local Control Funding Formula (currently forecast to be at 100 percent in 2020-21) and return state funding to the percentage earmarked by 1998’s Prop 98.

Sacramento will also spend $60 million more on special education, and $150 million on incentive grants for career and technical education (CTE). Brown has also proposed a one-time $601 increase in the state’s per-student (ADA, average daily attendance) payments, which would come to $1,352 per student for the coming year. But it’s just a proposal right now. “You came make your own decision about how this comes out of the legislature,” Allgire observed drily.

The other piece of good news is that the conditions for the cap on school district reserves (passed by the legislature as part of this year’s state budget) weren’t met. Therefore, the cap won’t be in effect at least through the 2015-16 school year.

…And The Bad

The budget revision doesn’t provide any money for some critical needs, Allgire said. There’s no additional money for school facilities, technology needed for the new testing regimen, K-3 class size reduction (called K-3 Grade Span Adjustment), and employer contributions to the California State Teachers Retirement System (CalSTRS) and the California Public Employee Retirement System (CalPERS).

The May revision also cuts $6.7 million from the energy efficiency appropriation, because the change in corporate income tax calculation that was supposed to net the state $1 billion more – the Prop 39 “single-sales-factor” approved by voters in 2012 – has delivered less than expected.

Despite the current rosy education budget picture, Allgire stressed that there are reasons for long-term caution. The devil, as always, is in the details of complicated education funding legislation, much of which has its origin in ballot propositions passed by voters.

First, the Prop 98 windfall will end.

Prop 98 ostensibly guarantees 40 percent of all state revenue growth for education. However, the state can use three different formulas for calculating that, based on state revenue growth. Plus, the legislature can suspend Prop 98 with a two-thirds vote. In other words, changing state revenues mean 40 percent is an aspiration – not really a guarantee.

Prop 98 also includes a “maintenance factor” that accelerates school funding after a suspension; as happened during the recent state budget crisis. When full funding is restored – and money cut in past years won’t be repaid, Allgire noted – schools will go back to getting 40 percent of new state revenue, not the 90 percent it’s currently getting, Allgire explained.

That means Prop 98 will only deliver a small increase in annual school funding, 2 to 4 percent.

Prop 98 funding comes from shifting property taxes from counties, special districts and Basic Aid school districts – districts whose 40 percent share of property tax revenue exceeds the state’s per-student funding level (revenue limit). These are called “educational revenue augmentation funds” (ERAF), or “fair share” payments, currently 9 percent of the revenue limit amount. The money generally doesn’t come from the state’s general fund.

Another problem on the horizon is the law the legislature passed last year limiting districts’ financial reserves.

Although the cap won’t be effective this year, it could take effect a lot sooner than its proponents claimed; as soon as 2016-17 if state revenues continue to grow as they have; leaving districts, especially basic aid districts like SCUSD, with little cushion against California’s characteristically boom and bust economy. Unless it’s repealed, it’s only a matter of time before the cap takes effect, said Allgire.

Then there’s 2012’s Prop 30.

Prop 30’s sales and income taxes will expire between 2016 and 2018 – $3 million in district revenue, Allgire told the board. There’s no indication that Sacramento politicians will go to bat for increasing the state tax rates – especially when Prop 30 was sold to voters as temporary.

The big time bomb, however, is an explosion in pension costs. By 2020-21, the district’s contributions are forecast to nearly double and take 25 percent of all new funding, said Allgire. That adds up to $4.5 billion shifted from salaries and benefits to retirement costs.

New Appropriations

Allocating one-time Prop 98 windfall and the RDA dissolution windfall, SCUSD approved roughly $1.5 million for grounds equipment ($350,000), musical instruments ($500,000), and transportation equipment ($630,000). Of the total appropriations, roughly $1 million will come from Prop 98 maintenance factor, and the remaining $500,000 from the one-time RDA dissolution windfall.

The board also approved 8 percent hourly pay rate increases for Adult Education Supervisors.

The rest of the five-hour meeting – in the frigidly cold boardroom, where those with the foresight to bring coats were wearing them – was consumed by topics that aren’t new for the district: Continued complaints about San Jose’s Trammell Crow industrial development across the street from George Mayne School, dispute about SCUSD’s power to change the votes of San Jose City Council Members, and criticism of SCUSD plans for a $350,000 renovation over the summer. Two other encore subjects were dissatisfaction with candidates for a parcel tax oversight committee, and with construction contracts with non-union companies.

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