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1 1. Gerry Shelton, Partner Susan Stuart, Partner Richard Gonzalez, Chief Facilities Advisor Jack O’Connell, Partner Kevin Gordon,

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Presentation on theme: "1 1. Gerry Shelton, Partner Susan Stuart, Partner Richard Gonzalez, Chief Facilities Advisor Jack O’Connell, Partner Kevin Gordon,"— Presentation transcript:

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2 Gerry Shelton, Partner Susan Stuart, Partner Richard Gonzalez, Chief Facilities Advisor Jack O’Connell, Partner Kevin Gordon, President and Partner Abe Hajela, Partner Barrett Snider, Partner Lee Angela Reid, Senior Legislative Advocate 2

3 Adonai Mack Legislative Advocate Dave Walrath President, Murdock, Walrath & Holmes Dennis Meyers Director of Government Relations 3

4 Workshops sponsored by: Vetted among numerous energy-oriented companies by Capitol Advisors Group on behalf of school districts Energy services company that has a genuine track record of work in the K-12 education space Direct representation of multiple lines of energy efficiency equipment & energy dashboards 4


6 Themes and Thoughts “Prudent and measured” – conservative revenue projections Focus on the “Wall of Debt” and long-term liabilities Proposed new “Rainy Day” fund Strong investment in education Five-year infrastructure plan, cap & trade, water plan Implements federal health care reform Proposes plan to address prison over-crowding 6

7 Governor’s Overall Budget Proposal $106.8 billion budget $2.5 billion reserve State General Fund expenditures: –K-1242.4% –Health20.4% –Higher Ed 11.6% –Corrections9.0% –Human Services6.5% –Natural Resources2.0% –Other8.1% 7

8 State Revenues Governor assumes about 6% growth in overall revenues –Personal Income tax 8.5% –Sales and Use tax5.0% –Corporation Tax8.9% Prop 30 revenues helping, but not permanent –Sales and Use tax expires in 2016 –Personal Income tax (on high-earners) expires in 2018 Capital Gains revenue extremely volatile –Governor wants to capture high growth in these revenues in the future 8

9 State General Fund Revenues (Billions of Dollars) 9

10 California’s Long-Term Liabilities Prop 98 Maintenance Factor$4.5 Unemployment Insurance Debt$8.8 Wall of Debt$24.9 Unfunded Retirement Liabilities$217.8 Deferred Maintenance$64.6 Unissued Bonds$33.9 Total$354.5 (all amounts shown in billions) 10

11 Plan for Paying Down the Wall of Debt As of end of2010-112012-132013-142014-15 2016-17 K-14 Inter-Year Deferrals$10.4$6.4$6.1$0.0 Economic Recovery Bonds$7.1$5.2$3.9$0.0 Loans from Special Funds$5.1$4.6$3.9$2.9 $0.0 Prior year mandate claims$4.3$4.9$5.4 $0.0 Prop 98 Settle-up$3.0$2.4 $1.8 $0.0 Borrowing from Local Gov$1.9$0.0 Deferred Medi-cal costs$1.2$2.0$1.8$1.7 $0.0 Deferral of state payroll costs$0.8$0.7$0.8 $0.0 Deferred CalPERS payments$0.5$0.4 $0.0 Borrowing from transportation funds$0.4$0.3$0.2$0.1 $0.0 Total$34.7$26.9$24.9$13.1 $0.0 (all amounts shown in billions) 11

12 K-12 EDUCATION BUDGET Governor’ Budget Proposal 2014-15 12

13 K-12 Proposal - Overview K-12 overall Prop 98 funding of $61.6 billion $5 billion in ongoing funding for categorical programs outside LCFF K ‐ 12 Deferrals - $5.6 billion to eliminate remaining inter-year funding deferrals LCFF - $4.5 billion for school district and charter implementation and $25.9 million for COE implementation COLA Increases - provides.86% increase to LCFF base grants and some remaining categorical programs Prop 39 energy efficiency - $316 million for the second of a 5-year program $46.5 million increase for state testing programs Independent study reform School facility finance - funds shifts and reform Special Education - adjustments for growth and COLA Emergency Repair Program - increase of $188.1 million (one ‐ time) 13

14 Proposition 98 Test 1 Year – GF revenues drive the guarantee Big growth in the near term, flattens quickly Growth in Prop 98 will determine LCFF implementation timeline Any spending of budget year revenues within Prop 98 for other priorities slows LCFF Conservative estimate, but no apparent manipulations Constitutional change for “Prop 98 Reserve” draws healthy skepticism 14

15 Prop 98 Changes Over Time 15

16 Proposed Constitutional Amendments Governor proposes to strengthen Prop 58 (2004) and ACA 4 (Nov 2014) Rainy Day Fund –Deposits to account when capital gains are more than 6.5% of total General Fund revenues –Doubles maximum size of fund to 10% of revenues Prop 98 reserve –Also tied to variations in capital gains 16

17 Deferrals All remaining K-14 inter-year deferrals ($6.2 billion) will be eliminated in 2014-15 $6.2 billion = $5.6 billion (K-12) + $592 million (CCC) Paid with funds from 2012-13 and 2013-14, ($3.7 billion), and from 2014-15 ($2.5 billion) Over $10.4 billion K-14 inter-year deferrals will have been paid down since June 2013; $9.5 billion of those deferrals were K-12 revenue limits Remember: deferral buy-downs are one-time revenues for LEAs Note that all intra-year deferrals ($3.5 billion) were eliminated by the close of 2012-13 17

18 Inter-Year (Cross-Year) K-12 Deferrals Funds Used Buy-down at 2013-14 Budget Act Additional Buy-down Proposed in 2014-15 Budget Act Total Total Deferrals $9,468.78 2012-13($3,655.42)($1,812.88)($5,468.30) $4,000.48 2013-14 ($242.26)($1,520.21)($1,762.47) $2,238.01 2014-15 ($2,238.01) $0.00 Total Buy Down Since June 2013($3,897.68)($5,571.10)($9,468.78) (all amounts shown in millions) 18

19 COLAs LCFF base grant (indirectly to K-3 and 9-12 Grade Span Adjustments (GSAs), and Supplemental and Concentration Grants): –1.57% for 2013-14 –.86% for 2014-15 –Affects LCFF target only Selected Categorical Programs (Special Education, Child Nutrition, Foster Youth, Adults in Correctional Facilities, and American Indian Centers and Early Childhood Education Programs) –.86% for 2014-15 19

20 LCFF Entitlement Target Entitlement Target = Base Grant + GSAs + Supplemental Grant + Concentration Grant + Add-ons Base Grant per ADA (with annual COLA) K-3 = $7,012 7-8 = $7,329 4-6 = $7,117 9-12 = $8,492 GSAs – 10.4% ($729) for K-3 and 2.6% ($221) for 9-12 20

21 LCFF Entitlement Target Supplemental Grant – additional 20% of Base Grant + GSAs for each EL, low income and foster pupil (by enrollment) Concentration Grant – additional 50% of Base Grant + GSAs for each student eligible for supplemental grant above 55% concentration threshold Add-ons – Home-to-School Transportation and Targeted Instructional Improvement Grant (TIIG) - No COLA 21

22 LCFF for 2013-14 Base Grant Supplemental Grant Concentration Grant K-3 GSA 9-12 GSA Trans. Add- on Entitlement Target TIIG Add-on Hold Harmless 2012-13 Revenue Limit 2012-13 “Included” Categoricals 2012-13 Trans. 2012-13 TIIG 11.78% of gap 2013-14 LCFF Funding ------------------------ 22

23 LCFF for 2014-15 Base Grant (with COLA) Supplemental Grant Concentration Grant K-3 GSA 9-12 GSA Trans. Add- on New Entitlement Target TIIG Add-on 2013-14 LCFF Funding (adjusted for ADA) 28% of new gap 2014-15 LCFF Funding Target in 2013-14 23

24 Goal is to restore all districts to at least 2007- 08 funding levels by leveling up LCFF “losers” ERT = undeficited revenue limit in 2012-13 + COLA (1.94%) for 2013-14 thru 2020-21 + categorical funding in 2012-13 w/o 20% flex reductions or “fair share” reductions District are transitioning toward the greater of its LCFF Entitlement Target or ERT Most districts had LCFF ET > ERT Economic Recovery Target 24

25 Economic Recovery Target Approx. 230 districts had ERT > LCFF ET Approximately 96 of the 230 districts had an ERT above the 90 th percentile (more than $14,500 per ADA) and were not eligible to receive ERT payments 45 of those 96 districts receive necessary small school funding 130+ of the 230 districts had an ERT below the 90 th percentile and are receiving ERT payments to restore them to their ERT by 2020-21 ERT payments are being made in 8 equal, annual installments in addition to any LCFF “gap” funding 25

26 Stand-Alone Categoricals Proposed for Ongoing Funding (no COLA) After School Education and Safety Program ($546.9 million) State Preschool ($509 million) Child Nutrition – Breakfast Startup ($1 million) Emergency Repair Program ($188.1 million) County Office of Education Fiscal Oversight ($4.8 million) California School Information Services ($6.6 million) K-12 Internet Access ($8.3 million) State Testing Program ($128.8 million) California Partnership Academies ($21.4 million) Proposed for Ongoing Funding (includes COLA) Special education ($3.3 billion) Foster Youth Programs ($15.2 million) American Indian Education Centers and Early Childhood Education Programs ($4.5 million) Child Nutrition ($155.4 million) Proposed for One-time Funding (includes COLA) Adults in Correctional Facilities ($15 million) Proposed to be Eliminated (funding to be rolled into LCFF) Agricultural Education Incentive Program Specialized Secondary Programs 26

27 County Offices of Education $25.9 million in new funding for COE to fully meet county office of education funding targets under LCFF $4.8 million in continuing on-going funding for County Office of Education Fiscal Oversight Sharper focus in 2014-15 on new role in reviewing LCAPs and expenditure restrictions 27

28 The LCFF Funding Gap Full implementation for districts and charters will occur over many years (DOF sticking with 8-year prediction; LAO disagrees) Calculation of progress toward full implementation is critical to determining: –K-3 GSA requirements –Supplemental and concentration grant expenditure requirements 28

29 K-3 GSA Transition to school site average of 24:1 Methodology – number of pupils in grades TK-3 enrolled at the school site, divided by the number of full-time equivalent classroom teachers for grades TK-3 at the school site Identify gap between prior year average K-3 class enrollment by school site and target of 24:1 Note: 2012-13 does not remain the base year. 2013-14 averages are used to determine 2014-15 class size reduction requirement. Any year in which you make more progress than the minimum requirement effectively accelerates the transition to 24:1 Close K-3 class size gap in proportion to progress toward closing LCFF entitlement gap (2013-14 progress was 11.78%; 2014-15 progress proposed by Governor is about 28%) Can locally negotiate alternative ratios Not waivable by State Board of Education 29

30 Supplemental and Concentration Grants LEAs must “increase or improve services” for grant generating students “in proportion to the increase in funds apportioned on the basis of the number and concentration” of those students SBE regulations - January 16, 2014 30

31 LCFF Spending Rules – the Basics Theory – At full LCFF implementation, base grants pay for core program and supplemental/concentration grants are for increased or improved services for EL, low-income and foster youth Methodology – Calculate 2013-14 base year spending for grant generating students, apply a formula that calculates proportional increases in spending or results (increased or improved services) for EL, low-income and foster youth for each subsequent year as LEAs narrow the gap to full LCFF funding 31

32 LCFF Spending Rules – the Basics Practice – Level of spending calculated for 2013-14 will have a significant impact on the year-to-year rate of increased or improved services for grant generating students Caution – you must think about some defendable metric if choose to demonstrate “increased or improved” services by means other than expenditures 32

33 “Proportionality” Tied to Closing “Funding Gap” The base year for upcoming LCAPs is 2013-14, not 2012-13 Gap funding percentage will drive the proportionality percentage The estimated closure of the “gap” for 2014-15 is NOT 11.8% (LCFF increase for 2013-14) The closure of the gap for 2014-15 will be known in the final budget and may be closer to 28% Creates significant challenges for the LCAP development process outlined in the SBE regulations 33

34 SBE Regulations: Step-by-Step Seven steps: 1.Determine total revenue from supplemental and concentration grants at full LCFF funding 2.Determine prior year expenditures of additional (beyond core?) support for EL, low-income and foster youth (for 2013-14 must be at least equal to 2012-13 EIA funding) 3.Calculate the gap between prior year spending and target revenue at full implementation (Step 1 minus Step 2) 34

35 SBE Regulations: Step-by-Step 4.Estimate the increase in supplemental and concentration grant funding for the LCAP year (multiply the gap figure in Step 3 by the DOF calculated LCFF gap reduction percentage - 28% for 2014-15 based on January Proposal) 5.Calculate total supplemental and concentration grant funds for LCAP year - add LCAP year increase (Step 4) to the prior year expenditure (Step 3) 6.Calculate base funding in the LCAP year (total 2014-15 LCFF funding minus Step 5) 7.Calculate minimum proportionality percentage by dividing LCAP year supplemental/concentration grant funds (Step 5) by LCAP year base grant funds (Step 6) 35

36 District-wide Use of Funds Districts eligible for concentration grant funds (over 55% threshold) may demonstrate increased or improved services by using funds on districtwide basis, but must: –Identify in the LCAP services provided on a district- wide basis –Describe how those services are directed toward meeting LCAP goals for unduplicated pupils Districts under 55% threshold may still use funds on a district-wide basis, but in addition to above must: –Describe how district-wide services are the “most effective” use of these funds to meet LCAP goals for unduplicated pupils 36

37 School-wide Use of Funds Districts may expend funds on a school-wide basis if unduplicated pupils exceed 40% of a school’s total enrollment, but must: –Identify in the LCAP those services being provided on a school-wide basis –Describe how those services are directed toward meeting LCAP goals for unduplicated pupils For schools under 40% threshold funds may still be used on a school-wide basis, but in addition to above must: –Describe how school-wide services are the “most effective” use of these funds to meet LCAP goals for unduplicated pupils 37

38 County-wide or Charter-wide Use of Funds No threshold, can use funds on county-wide or charter-wide basis requires the COE or charter, but must: –Identify in the LCAP those services being provided on a county-wide or charter-wide basis –Describe how those services are directed toward meeting LCAP goals for unduplicated pupils 38

39 LCAP Timeline January 31, 2014 –SBE regulations on use of supplemental/concentration grant funds March 31, 2014 –SBE template for LCAPs July 1, 2014 –LEAs must adopt LCAPs for 2014-15 July 1, 2015 –LEAs must update LCAPs for 2015-16 October 1, 2015 –SBE evaluation rubrics 39

40 LCAPs – State Priorities 1)Compliance with Williams criteria – instructional materials, teacher assignments and credentials, facilities 2)Implementation of SBE adopted academic content standards, including programs and services for ELs to access the common core and ELD standards 3)Parental involvement 4)Pupil Achievement – statewide assessments, API, completion of A-G requirements, CTE sequences and AP courses, EL progress toward proficiency, college preparation (Early Assessment Program) 40

41 LCAPs – State Priorities (cont.) 5)Pupil engagement – attendance, dropout and graduation rates 6)School climate – suspension and expulsion rates, etc. 7)Access, including for subgroup, to a broad course of study in specified subject areas 8)Pupil outcomes in specified subject areas Two additional priorities for COEs: 9)Services for expelled students 10)Regional services for foster youth 41

42 SBE LCAP Template SBE Draft Template - see SBE January Agenda Item 20, Attachment 3: 201401.asp 201401.asp Groups state priorities under three broad categories: –Conditions of Learning (1, 2, 7, 9 and 10) –Pupil Outcomes (4 and 8) –Engagement (3, 5 and 6) 42

43 SBE LCAP Template SBE provides “guiding questions” related to LCAP engagement process and for each of the three broad state priority categories Template includes fields for goals, metrics, applicable subgroups, three year plan for goals, actions and expenditures, etc. Note: Actions and expenditures may apply to more than one state priority and more than one goal – LCAP with expenditures is not the same thing as a budget 43

44 LCAP - Community Engagement Prior to adopting LCAP and budget you must: Present LCAP to parent advisory committee Present LCAP to EL parent advisory committee if LEA enrolls 50 or more ELs equaling at least 15% of total enrollment Notify public of opportunity to submit written comments on draft LCAP Public hearing to present draft LCAP and opportunity for public comment Public hearing to adopt LCAP and budget 44

45 Budget Aligned to LCAP For 2014-15, and each subsequent year, the LCAP must be adopted before the LEA adopts its budget The county superintendent, or SPI, shall disapprove a budget that does not include the expenditures necessary to implement the LCAP 45

46 Evaluation and Technical Assistance SBE to adopt LCAP evaluation rubrics by October 1, 2015 that: –Assist LEAs in evaluating strengths and weaknesses and areas needing improvement –Assist county superintendents or the SPI to identify LEAs in need of technical assistance –Assist the SPI to identify LEAs for which intervention is warranted California Collaborative for Educational Excellence (CCEE) - CCEE to provide technical assistance to LEAs to meet the state priorities identified in each LCAP 46

47 Oversight and Intervention LCAPs submitted to county superintendent (the SPI for COEs) for review, and shall be approved if: –LCAP adheres to SBE template, and –The budget includes expenditures sufficient to implement the specific actions identified in the LCAP If LCAP is not approved, or if the LEA requests technical assistance, the county superintendent (or SPI) may: –Assist in identifying strengths or weaknesses related to the state priorities –Assign an academic expert or team to assist in implementing effective programs and improving student outcomes –Assign the CCEE to provide advice and assistance 47

48 Oversight and Intervention The SPI is authorized to intervene if both of the following criteria are met: The LEA did not improve outcomes for three or more pupil subgroups (ethnic, socio-economically disadvantaged, ELs, special needs, foster youth) with respect to more than one state priority for three out of four years, AND The CCEE has provided assistance and submits findings of failure to implement recommendations or persistent inadequate performance 48


50 Funding for Common Core 2013-14 budget provided $1.25 billion in one-time funds Expect debate over additional funding Distributed based upon prior year enrollment (approx. $200 per pupil) Went to school districts, COEs, charter schools May be used for professional development, instructional materials, and technology enhancement LEAs must spend by the end of 2014-15 Funds subject to annual audit LEAs must: –Create plan for use of funds, describe and adopt at a public meeting –By July 1, 2015, report detailed expenditure information to CDE 50

51 Assessments $46.5 million increase (total $128.8 million) proposed for 2014-15 Comprehensive changes - AB 484 (Bonilla) and SB 247 (Liu) –Multi-year transition to the new system –Elimination of mandatory STAR CSTs – available as option –Replacement of Grade 2 summative test with diagnostic test –Commitment to Smarter Balanced Assessments going forward - Field testing in spring 2014 and live testing in spring 2015 –Science and CAPA testing continues until new tests available –Formative tools and interim assessments for ELA and mathematics in grades K–12 to be developed –No change to non-STAR tests (exit exam, CELDT, Phys. Fitness) for now –SPI required to recommend additional tests in history-social science, technology, visual and performing arts, and other subjects by March 2016 51

52 Adult Education 2013-14 budget provided $25 million for two-year planning grants to regional consortia of community colleges and school districts Plans will be complete in 2015 Administration intends to propose additional funds in 2015-16 for Adult Education Would include county jails (through categorical program) 52

53 CTE/ROCPs Agricultural Incentive Grant and Supplemental Secondary Grant programs eliminated - funding rolled into LCFF California Partnership Academies program remains stand-alone categorical, but receives no COLA 2-year prohibition on redirection of ROCP JPA funds and 2-year MOE requirement on ROCP expenditures remain for 2014-15 $250 million (2013-14) career pathways funding in process JPAs, county offices, districts, and ROCPs working on a solution to “squeeze” put on ROCP offerings 53

54 Independent Study Administration thinks current process for funding Independent Study is “overly burdensome” on LEAs Proposes legislation to “streamline and expand” instructional opportunities available under this process Has implications for: –The ability of LEAs to generate ADA –Appropriate instructional strategies for students 54

55 State School Facilities Bond Governor proposes 2014 Five-Year Infrastructure Plan 2014 state school bond? –Includes “consideration of what role, if any, the state should play in the future of school facilities funding” –Concerned about growing debt service and reliance on debt financing –Says future system should be easy to understand, simpler bureaucratically, use better incentives, rely more on local funds, count state funds within Prop 98, not a first-come/first-served basis, less focused on standardized definitions 55

56 School Facilities Consolidation of Programs Transfers $211 million from existing bond authority from the CTE, Seismic, High Performance and Overcrowded Relief Grant Programs to the New Construction and Modernization Programs Emergency Repair Program (ERP) Dedicates $188.1 million of one-time Prop 98 General Fund to pay down the remaining $459.5 million obligation for the ERP, which was part of the Williams settlement 56

57 Proposition 39 Second year of five-year funding for K-14 energy efficiency $363 million of energy efficiency funds in 2014 ‐ 15: –$316 million to K ‐ 12 –$39 million to community colleges –$5 million to the California Conservation Corps for continued technical assistance to K ‐ 12 LEAs –$3 million to the Workforce Investment Board for continued implementation of the job ‐ training program No additional funding proposed for revolving loans under the Energy Conservation Assistance Act ($28 million in 2013 ‐ 14) 57

58 Proposition 39 Consideration for small LEAs: $15,000 minimum grant for small LEAs of 100 ADA or less $50,000 minimum grant for ADA between 101 and 1,000 $100,000 minimum grant for ADA between 1,001 and 1,999 2 ‐ year advance on allocation available for districts with ADA 1,000 or less - August 1st Application to CDE 58

59 Proposition 39 California Energy Commission (CEC) developing Energy Expenditure Handbook –Provides step-by-step directions for submitting applications to the CEC Application for Prop 39 funding includes: –Energy Expenditure Plan - Forms A and B –Utility Data Release Authorization Form CEC are developing calculators for LEAs to conduct estimated energy savings calculations necessary for the application 59

60 Proposition 39 CEC has developed a Project Criteria Summary that includes: –Intent to focus on energy efficiency & demand reduction first –Requirement for projects to be cost-effective –Requirement that contracts have specific project details (i.e. energy calculations, specifications, & costs) LEAs must submit annual online financial reports “Alternative energy generation projects and other innovative energy projects may be considered only if the LEA can document on their annual expenditure report that all other cost effective energy efficiency projects are already installed or have committed installation contracts.” 60

61 Child Nutrition COLA funded at.86% LCFF reporting for Provision 2 and 3 schools continues to be an issue –Reporting allowed until March 21, 2014, but under-reporting still a concern Stakeholder Ad Hoc Group in conversation with CDE to improve clarity and communication regarding state and federal nutrition regulations and the use of cafeteria funds Child Nutrition Breakfast Start-up Funds still in the budget, but no COLA The chicken “plumping” bill is back! AB 682 (Calderon) 61

62 Child Care and Preschool Notably, no proposal from Governor to fund TK for all four-year olds –Speaker and Pro Tem both have proposals Proposes demonstration pilot project to improve outcomes for 2,000 CalWORKs families (six counties over three years providing licensed subsidized childcare and other services) 62

63 Mandates County Office of Education  $28 per K-8 ADA  $56 per 9-12 ADA  $1 per countywide ADA School District  $28 per K-8 ADA  $56 per 9-12 ADA Charter School  $14 per K-8 ADA  $42 per 9-12 ADA It’s a new world Annual decision No reimbursements paid in 2014-15 for filed claims Block grant now costing state as much as previous program Preparing for potential audit risk – regular program and MBG 63

64 OTHER ISSUES 2014 Policy and Budget 64

65 Parcel Taxes Dems control 2/3 needed to place Constitutional Amendment on ballot Lowering vote threshold from 2/3 to 55% Election year politics likely to delay conversation Polling trending down Assembly working on alternative to allow school boards to levy different types of taxes If Dems retain 2/3 in both houses after November, likely to revisit quickly 65

66 Politics of 2014 It’s an even-numbered year – election year Governor’s platform is written Fiscal house in order Ambitious infrastructure & environmental agenda Education –Torlakson opposition well funded –Dems maintenance of 2/3 majority in both houses Ballot Measures –Teacher initiatives –Prohibit funding deferrals –Transgender referendum –Rainy Day Fund – Prop 98 in or out –Pension reform –Triple flip reversal (triple back flip) Water bond? School bond? Local revenues? Legislative leadership change in State Senate and Assembly 66

67 Thank You We will send you this PowerPoint Please feel free to use the content as you wish Questions? Please contact Kristie Rucker at, or (916) 557- 9745 Please let us know what you think 67

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