Governor’s Proposals for the State Budget and K-12 Education

Governor’s Proposals for the 2014-15 State Budget and K-12 Education
Presented by School Services of California, Inc. Staff

Introduction

Themes for the 2014 Budget A-1 What a difference a year makes!
© 2014 School Services of California, Inc. What a difference a year makes! Only 14 months ago we were facing deep cuts if Proposition 30 didn’t pass Governor Jerry Brown is proposing the greatest increase in per-student average funding since He takes a wrecking ball to the “wall of debt” by buying down the remaining K-14 deferrals The Proposition 98 entitlement skyrockets even while the California economy as a whole only improves at a moderate rate The increase in Proposition 98 creates a window of opportunity unlike any we have had before To protect public education during the eventual downturns, the Governor proposes two rainy day funds: one for education and one for the rest of the State Budget The Governor is proposing a continuous appropriation for the Local Control Funding Formula (LCFF)

Fiscal Prudence and Policy Implications
© 2014 School Services of California, Inc. The state of California’s taxing structure results in significant volatility in state funding that directly impacts Proposition 98 Most of the state’s past financial problems were the result of over-exuberance during good financial years, not just the onset of bad times Every school district in the state knows all about the importance of reserves and multiyear planning – the state, not so much The Governor proposes setting up reserves during the good times to help smooth out any rough spots during the bad times Sure seems to have worked for the 1,000 school districts in the state during the last recession, the worst of our time We believe that the Governor’s Proposal is reasonable and prudent, but we expect to see push back from the Legislature – the appetite for spending is very strong

Economics Still Rule A-3
© 2014 School Services of California, Inc. The slow economic recovery continues UCLA Anderson Forecast Unemployment rates are falling for both the nation and California California’s housing market, which took the biggest fall among the states during the recession, is now recovering briskly While it has been 4½ years since the recovery started, the nation has yet to recover the jobs lost since the start of the recession The major bell weather of optimism is the stock market – new highs signify high hopes for the future

Education Is this Governor’s Top Priority
© 2014 School Services of California, Inc. While the state still faces significant Budget pressures for the non-Proposition 98 part of the Budget, the Administration’s attitude toward education is dramatically different this year While public education took more than its fair share of the cuts during the recent recession, public education under this Governor is recovering at a much faster rate The Governor understands the message the public sent in the passage of Proposition 30 – and is responding to it Local districts will control programs for the first time in 40 years! And the education community is more together than it has been in recent years These factors together gives us a tremendous opportunity – we cannot let it get away!

Complete Mind Shift of Governance and Planning
© 2014 School Services of California, Inc. Policy Funding Program Rules Local Board Implementation School Site Performance Audits and Compliance Reviews Old System State of California Compliance Model New System Empowerment Model Board Revises Policy Results Reported to Public Local Board Empowers Schools State Provides Funding Local Board Sets Policy Community Involvement Focus on Students Student Achievement

Education Receives More But Our Needs Are High
© 2014 School Services of California, Inc. Our current commitment to education is nearly last in the nation Forty years of underfunding has created “structural deficits” in fundamental educational achievements, not just financial deficits The energy needed to “catch up” is greater than what would be needed to “keep up” The consequences of poor education policies and funding take time to materialize, but make no mistake, the consequences are severe We are very encouraged by the recent actions of the Governor But we must commit to never let our obligations to our children slide again At Pearl Harbor, there are buildings with unrepaired bullet holes from December 7, 1941 – there is a sign on each of them “Lest We Forget”

Overview of the State Budget and the State Economy

U.S. Economic Outlook B-1 © 2014 School Services of California, Inc. The U.S. economy continues to show positive growth, but most recent quarters are not only below recovery levels, they are also below normal growth rates The latest reported quarter, Quarter 3 (Q3) 2013, is encouraging; at 4.1% it eclipses what we would look for in a “normal” quarter, about 3.5% The economy is growing more evenly than in the past The stock market is hitting new highs, regularly indicating optimism in the investment community Housing markets are heating up in most areas of the country Capital investment by business is up Employment is improving Consumer spending is up The economy seems to be consolidating its hard-fought gains

Stock Market Has Recovered
B-3 © 2014 School Services of California, Inc. Dow Jones Industrial Average (Dow Jones Global Indexes: INDU) Source: CNN Money

Sluggish Growth – Comparing Recent Recoveries
B-4 © 2014 School Services of California, Inc. How the expansion that began in 2009 compares with the first four years of other recoveries Note: Average is for recoveries after WWII, excluding the one that started in 2009 *Adjusted for inflation and the seasons Source: Commerce Department The Wall Street Journal, December 18, 2013

Recession has left a job shortfall of nearly 8 million
© 2014 School Services of California, Inc. Recession has left a job shortfall of nearly 8 million Payroll employment and the number of jobs needed to keep up with the growth in the potential labor force, 2000–2013

The California Economy
B-6 © 2014 School Services of California, Inc. California’s economic outlook is also improving Employment is still a problem; job growth lags the nation and California is among the five states with the highest unemployment The unemployment rate is declining, but slower than the rest of the nation Personal income is forecast to grow at an accelerated rate over the next couple of years, but actual performance has fallen short of past forecasts Housing markets are heating up along the coastal areas, but inland and central valley areas are moving up more slowly Prior to the “Great Recession,” our economy, without temporary taxes, produced General Fund revenues of just over $100 billion For , the Department of Finance (DOF) projects revenues of $106 billion, including $7 billion in temporary taxes from Proposition 30 The state has a Budget surplus because of past Budget reductions, economic growth, and the temporary taxes

California’s Unemployment Rate
B-7 © 2014 School Services of California, Inc. 2008 2009 2010 2011 2012 2013 Source: Employment Development Department, 2014

California’s Unemployment Rate vs. Other States
B-8 © 2014 School Services of California, Inc. Source: Bureau of Labor Statistics, November 2013

California – Employment Forecast
B-9 © 2014 School Services of California, Inc.

California – Personal Income Forecast

Forecast State Budget Surpluses
© 2014 School Services of California, Inc. In its 2013 November State Budget Forecast, the Legislative Analyst’s Office (LAO) projected growing budget surpluses through , reaching $9.6 billion in that year Armed with this forecast, many lawmakers are eager to spend this surplus by establishing new programs or restoring past program cuts The LAO’s forecast methodology, which is clearly spelled out in the report, indicates that most automatic cost-of-living adjustments (COLAs) for state programs were repealed in 2009 to cope with the budget gaps resulting from the recession As a result, the LAO’s long-term forecast does not increase program expenditures with respect to COLAs, except where required by federal law Proposition 98, however, is implicitly adjusted for COLAs as part of the three Tests

Adjusting State Expenditures for COLAs
B-13 © 2014 School Services of California, Inc. Even though current law does not require COLAs for most state programs, it is unlikely that the Legislature will ignore the need for inflation adjustments for the entire six-year forecast period The California Consumer Price Index is expected to increase about 2.5% annually through If this adjustment is not provided, state programs would suffer a loss of purchasing power of about 14% by the end of the decade What happens to the forecast surplus if COLAs are provided to all state programs? If COLAs are provided, the operating surplus falls significantly: $2.1 billion in , peaking at $4.9 billion in , and dropping to $2.3 billion by This outcome would leave little funding for new programs or the restoration of the cuts made during the recession

State Budget Surplus Assuming COLAs
© 2014 School Services of California, Inc. Source: LAO, November 2013; School Services of California, Inc., January 2014

Small Recovery Begins After Decade of Deficits
© 2014 School Services of California, Inc. Source: Governor’s Budget Summary, page 5

2014-15 Governor’s Budget General Fund Budget Summary (In Millions)
© 2013 School Services of California, Inc. Prior-Year Balance $2,528 $4,212 Revenues and Transfers $100,147 $104,503 Total Resources $102,675 $108,715 Total Expenditures $98,463 $106,793 Fund Balance $1,922 Budget Reserve: Reserve for Encumbrance $955 Reserve for Economic Uncertainties $3,257 $967 Budget Stabilization Account $0 $1,591 Total Available Reserve $2,558 Revenues and transfers increase 4.3%, while expenditures increase 8.5% in The Budget year provides nearly $1.6 billion the Budget Stabilization Account The Budget proposes a nearly $1 billion reserve for economic uncertainties Source: Governor’s Budget

What’s Proposed for the Rest of the Budget?
© 2014 School Services of California, Inc. What the Budget proposes outside of education: $670 million for expanded Medi-Cal benefits, including mental health, substance abuse disorder, adult dental, and specialized nutrition services A 5% increase in California Work Opportunity and Responsibility to Kids (CalWORKs) grants $815 million for deferred maintenance in state parks, highways and roads, K-12 schools and community colleges, state hospitals, and other facilities $850 million in “Cap and Trade” auction proceeds for programs that will reduce greenhouse gases, including $250 million for high-speed rail $1.6 billion to the “Rainy Day Fund” in addition to the $967 million reserve $1.6 billion supplemental payment to retire the Economic Recovery Bonds $142 million to UC and $177 million to CSU to avoid a fee increase

What’s Not in the Budget?
© 2014 School Services of California, Inc. What the Budget does not address: No proposal for a statewide school facilities bond No new funding to address the unfunded liability in the California State Teachers’ Retirement Systems (CalSTRS) fund No new funding to address special education shortfalls No new funding for early childhood education No payments on the prior-year state mandate credit card

California’s Investment in Education
B-19 © 2014 School Services of California, Inc. After 40 years of neglect, with each year’s funding being well below the national average, we have a lot of catching up to do Even after the turnaround began in , California is nearly last in the nation in per-student funding The Governor’s proposal for dramatically increased funding in will help us catch up But we have a long way to go and the road ahead could be a bit slippery Our economy is still fragile and vulnerable, making out-year projections volatile Just 13 months ago, absent Proposition 30, education would have faced another large cut How many of us forecast that a little more than a year later we would be seeing a 10.9% increase?

California Invests in Education
B-20 © 2014 School Services of California, Inc. Source: Governor’s Budget Summary, page 5

Per-ADA Funding Volatility

Money Matters in Student Performance
B-22 © 2014 School Services of California, Inc. Results of the 2013 Grades 4 and 8 Math and Reading Proficiency Scoring from the National Assessment of Educational Progress (NAEP) show that the majority of the lowest performing states with the lowest levels of proficiency in math and reading rank in the 15 states with the lowest expenditures per ADA This includes California, Arizona, Georgia, Mississippi, Nevada, Oklahoma, Tennessee, and Texas Conversely, the states with the highest 2013 Grades 4 and 8 Math and Reading Proficiency Scoring rank in the top 15 states with the highest per-ADA expenditures in This includes Connecticut, Maine, Montana, New Hampshire, New Jersey, North Dakota, Pennsylvania, Vermont, and Wyoming Source: Education Week Quality Counts 2014 – January 9, 2014

Money Matters in Student Performance
B-23 © 2014 School Services of California, Inc. Overall, California’s per pupil expenditures continue to lag the national average, ranking 49th in the nation in , the most recent data comparison California reported per pupil expenditures of $8,341, comprising about 70% of the U.S. average of $11,864 California continues to have some of the highest salaries in the U.S.; however, student enrollment to teacher is also reported as the highest in the nation in at 25.6:1 Other student enrollment to staff ratios continue to grow: Guidance Counselors 810:1 1,016:1 Librarians 5,489:1 8,309:1

Current Expense of Education Per ADA Ranking of the States – 2011-12
B-24 © 2014 School Services of California, Inc. Ranking State Current Expense Per Student (Adjusted for Regional Cost Differences) Percentage of National Average 1 Wyoming $19,534 165% 2 Alaska $17,554 148% 3 Vermont $17,388 147% 4 New York $16,835 142% 5 Maine $15,063 127% 6 New Jersey $14,920 126% 7 Rhode Island $14,794 125% 8 Connecticut $14,751 124% 9 New Hampshire $14,556 123% 10 Montana $14,489 122% United States 1 $11,864 100.0% 49 California $8,341 70% Source: Education Week Quality Counts 2014 – January 9, United States Average includes the District of Columbia

National Rankings: Average Teacher Salaries and Student/Teacher Ratio – 2011-12
B-25 © 2014 School Services of California, Inc. Ranking State Average Salaries of Public School Teachers 1 New York $73,398 2 Massachusetts $71,721 3 Connecticut $69,465 4 District of Columbia $68,720 5 California $68,531 6 New Jersey $67,078 7 Maryland $63,634 8 Alaska $62,425 9 Rhode Island $62,186 10 Pennsylvania $61,934 United States $55,418 Ranking State Students Enrolled Per Teacher in Public K-12 Schools 1 California 25.6 2 Utah 21.9 3 Oregon 20.2 4 Washington 19.7 5 Michigan 18.4 6 (tie) Idaho 18.2 Nevada 8 Arizona 18.0 9 Colorado 17.8 10 Ohio 17.3 United States 16.0 Source: NEA Rankings and Estimates 2012

California Lags the Nation
B-26 © 2014 School Services of California, Inc. California’s staffing ratios continue to grow, causing increased pressure on staff and students California’s Schools Lag Behind Other States on a Number of Measures California Rank California Rest of U.S. K-12 Spending Per Student ( )* 49 $8,341 $11,364 Staffing K-12 Students Enrolled Per Teacher ( )* Last 25.6 16.0 K-12 Students Per Administrator/Official ( )** N/A 1,757 766 K-12 Students Per Guidance Counselor ( )** 1,016 471 K-12 Students Per Librarian ( )** 8,309 984 Note: Number of students per administrator, guidance counselor, and librarian are based on statewide enrollment *Source: Education Week Quality Counts 2014 – January 9, 2014 **Source: National Center for Education Statistics digest of Education Statistics 2012

Education is the Great Homogenizer
B-27 © 2014 School Services of California, Inc. Opportunities for a free and appropriate public education have fueled the American dream for wave upon wave of new Americans for 200 years Education turns tax receivers into tax payers Education enables all citizens to participate in our democratic society The traditional avenues for transition to work and higher education have been Regional Occupational Centers/Programs (ROC/P), Adult Education, and community colleges All of these programs have been cut more than even the deep cuts experienced by K-12 education As a result, many Californians may feel that the window of opportunity has passed them by There is a direct linkage between education and earnings We need to be sure the window of opportunity is re-opened and that it stays open

Education, Unemployment, and Wages
B-28 © 2014 School Services of California, Inc. Those who have education beyond high school earn more, and are more likely to be employed than those with a high school diploma or less Education Unemployment Rate, 2012 Median Weekly Earnings, 2012 Note: Data are for persons 25 and older. Earnings are for full-time wage and salary workers. Sources: U.S. Bureau of Labor Statistics, the College Board The Sacramento Bee, December 22, 2013

The Education Budget and Challenges Ahead

Proposition 98: How Much in 2014-15?
© 2014 School Services of California, Inc. $61.6 billion in K-14 Proposition 98 funds are available for This is a $6.3 billion increase – 11.4% over the budgeted level On average, $751 per ADA ongoing is K-12 education’s share In addition, $3.3 billion more is provided in one-time funding from prior years $1.8 billion from $1.5 billion from

State Revenue Growth vs. Proposition 98 Growth
C-3 © 2014 School Services of California, Inc. Proposition 98 growth or decline closely tracks changes in state revenue As the state goes, so goes education funding

Proposition 98 Revenues and Spending
C-4 © 2014 School Services of California, Inc. Proposition 98 sets the minimum funding level for K-12 education and the community colleges, but the Legislature and the Governor decide how to spend it * Quality Education Investment Act/After School Education and Safety Program

K-12 Proposition 98 Proposals for 2014-15
C-5 © 2014 School Services of California, Inc. $5.5 billion of one-time and ongoing Proposition 98 to fully eliminate interyear K-12 apportionment deferrals in $4.472 billion in additional funding for school districts and charter schools to continue implementation of the LCFF $25.9 million to complete the implementation of the COE LCFF $316.5 million to support Proposition 39 energy efficiency projects $33.3 million to fund a 0.86% statutory cost-of-living adjustment (COLA) for categorical programs that remain outside of the LCFF $74.3 million to fund projected growth in charter school ADA $46.5 million for assessment costs associated with implementation of CCSS $188.1 million for the Emergency Repair Program (ERP) from one-time Proposition 98 funds

The Rest of Proposition 98 – Community Colleges
© 2014 School Services of California, Inc. K-12 education shares the Proposition 98 guarantee with the California Community Colleges (CCCs) And much like K-12, CCCs are benefitting from an upswing in the minimum guarantee: 3% growth in general purpose apportionments Complete retirement of deferrals Additional funding for certain student success priorities One-time funds for deferred maintenance and instructional equipment Unlike K-12, CCCs have not yet resolved the unwinding of temporary categorical flexibility, which expires July 1, 2015 The Governor proposes additional partial categorical flexibility in a few more programs, but the expiration date remains CCCs are still funded through a system of base apportionments and categorical programs

K-12 Education and Community Colleges
© 2014 School Services of California, Inc. CCCs Proposition 98 percentage share mirrors statutory requirement

Amendments to the “Rainy Day Fund”
C-8 © 2014 School Services of California, Inc. The Governor is proposing a constitutional amendment to make major changes to the state’s “Rainy Day Fund,” which was established in through Proposition 58 The amendments are intended to address revenue volatility stemming from the capital gains tax The specific provisions include: Establishing a Proposition 98 reserve in addition to the existing Rainy Day Fund Requiring contributions to these reserves when capital gains revenues exceed 6.5% of General Fund tax revenues Establishing a maximum size for the Rainy Day Fund of 10% of revenues, as opposed to the 5% maximum of Proposition 58 Allowing supplemental payments to existing debt in lieu of a deposit to the Rainy Day Fund Limiting withdrawals to 50% of the balance in the first year of a recession

Proposition 98 Reserve C-9
© 2014 School Services of California, Inc. When capital gains tax revenues exceed 6.5% of General Fund revenues, an appropriation to the Proposition 98 reserve would be made The amount appropriated would equal Proposition 98’s share of General Fund expenditures in that year The appropriation to the reserve would not affect the calculation of the minimum guarantee The reserve could be no greater than 10% of the Proposition 98 guarantee Withdrawals from the reserve would be made when growth in the guarantee was insufficient to fund workload increases, such as in a Test 3 year The goal of this initiative is to smooth out state revenues apportioned to education and avoid program cuts during an economic downturn The plan is to place the initiative on the November 2014 ballot for implementation commencing in

2014-15 Local Control Funding Formula
© 2014 School Services of California, Inc. Budget proposes $4.5 billion for continued implementation of the Local Control Funding Formula (LCFF) New funding is estimated to close the gap between funding levels and LCFF full implementation targets by 28.05% Combined with elimination of 11.78% of the gap in , the new formula would be over one-third of the way toward implementation in the first two years LCFF growth provides an average increase in per-pupil funding of 10.9%, or $751 per ADA Individual LEA experiences will vary

LCFF – A Quick Review C-11 © 2014 School Services of California, Inc. The LCFF makes fundamental changes to how we allocate state Proposition 98 revenues to schools At full implementation, the LCFF will fund every student at the same base rate The LCFF provides two weighting factors applied against the LCFF base grant 20% on behalf of each eligible student An additional 50% for the eligible students exceeding 55% of total enrollment Each school district receives at least as much state aid in future fiscal years as the district received in The LCFF continues the necessary small school funding adjustment for eligible school districts The LCFF provides an Economic Recovery Target to assure district funding is restored to levels, adjusted for inflation

LCFF – Base Grant Entitlement Calculation
© 2014 School Services of California, Inc. target entitlement calculation Grade span per-pupil grants are increased annually for the COLA Factors K-3 4-6 7-8 9-12 Base Grant per ADA $6,952 $7,056 $7,266 $8,419 0.86% $60 $61 $62 $72 Base grants – $7,012 $7,117 $7,328 $8,491 T A R G E T

LCFF – K-3 CSR and CTE Adjustments
© 2014 School Services of California, Inc. K-3 CSR and 9-12 Career-Technical Education (CTE) Grade Span Adjustments are additions to the base grant CTE is unrestricted; CSR requires progress toward maximum site average of 24 students enrolled in each class Factors K-3 4-6 7-8 9-12 Base grants – $7,012 $7,117 $7,328 $8,491 Adjustment percentage 10.4% CSR - 2.6% CTE Adjustment amount $729 $221 Adjusted grant per ADA $7,741 $8,712 T A R G E T

LCFF – Supplemental and Concentration Grants Per ADA
© 2014 School Services of California, Inc. Supplemental and concentration grant increases are calculated based on the percentage of total enrollment accounted for by English learners, free and reduced-price meal (FRPM) program eligible students, and foster youth Factors K-3 4-6 7-8 9-12 Adjusted grant per ADA $7,741 $7,117 $7,328 $8,712 20% supplemental grant $1,548 $1,423 $1,466 $1,742 50% concentration grant (for eligible students exceeding 55% of enrollment) $3,871 $3,559 $3,664 $4,356 T A R G E T

T A R G E T LCFF – An Example C-15
© 2014 School Services of California, Inc. A district with 60% eligible students would calculate the following LCFF target grants for Factors K-3 4-6 7-8 9-12 Adjusted grant per ADA $7,741 $7,117 $7,328 $8,712 % Enrollment eligible (example) 60% 60% of Supplemental $929 $854 $879 $1,045 5% of Concentration (percentage above 55%) $194 $178 $183 $218 Total LCFF target grant per ADA $8,864 $8,149 $8,390 $9,975 T A R G E T

T A R G E T LCFF – An Example C-16
© 2014 School Services of California, Inc. Each grade span amount is multiplied by the district’s ADA for the corresponding grade span – example district with 8,000 ADA Factors K-3 4-6 7-8 9-12 LCFF target grant/ADA $8,864 $8,149 $8,390 $9,975 Average daily attendance 2,500 1,850 1,250 2,400 Total – by grade span $22,160,000 $15,075,650 $10,487,500 $23,940,000 Transportation and TIIG $836,850 and $1,000,000 Total – Example District LCFF target $73,500,000 Supplemental/ Concentration Share $9,075,400 (in total) T A R G E T

Proportionality and Targeted Funds
C-17 © 2014 School Services of California, Inc. The LCFF statutes direct the State Board of Education (SBE) to develop regulations by January 31, 2014, to require LEAs to: Increase or improve services for eligible pupils in proportion to the increase in funds apportioned on the basis of the number and concentration of eligible pupils LEAs are also required to include in their LCAP a description of expenditures that serve pupils eligible to generate supplemental and concentration grants Goals, activities, and services that increase or improve support for eligible students is a local decision The proportion of the increase in funds attributable to the number of eligible pupils enrolled is a calculation It is important to keep this distinction in mind, and it is why we are calling supplemental and concentration grant funding targeted, rather than restricted

State Board of Education Regulations
© 2014 School Services of California, Inc. Recently proposed SBE regulations provide a method of calculating the proportional share of LCFF dollars that are attributable to supplemental and concentration grants each year Proportionality calculation and the Local Control and Accountability Plan (LCAP) will be taken up for a vote by the SBE on January 16, 2014 Calculation of proportional increase for supplemental and concentration grants is specific LCAP is flexible, providing significant local control over services, activities, and plan content

An Example of Gap Funding Per ADA
C-19 © 2014 School Services of California, Inc. Total Gap $9,000 - $7,000 $2,000 x 28.05% $561 Target Total gap $4.5 Billion 14-15 Inc. $9,000 $7,900 $1,100 Dollars per ADA $7,561 $3,787 $6,700 $300 EIA $561 $224 Supplementation and Concentration Grants $337 Base $7,000 $6,700 LCFF Base $300 EIA $1,100 -$300 $800 x 28.05% $224 Supp/Conc EIA Net gap Closure Supp/Conc share Funding Target Economic Impact Aid LCFF Increase Supplemental and Concentration Grants Target Base

LCFF – From to C-20 © 2014 School Services of California, Inc. base adjustments for Remember, the share of your base that came from categorical funding is not adjusted for changes in ADA The share that came from the revenue limits and the LCFF incremental increase is adjusted for changes in ADA Per ADA example: minimum proportionality percentage (new regulation) Determine the funding provided for eligible pupils, which equals the base year funding for EIA, other district funds for eligible pupils, and the incremental increase from supplemental and concentration grants: in the example, $300 plus $224 equals $524 Calculate district base funding, which excludes funding for eligible pupils In the example, total funding of $7,561 less the funding provided for eligible pupils of $524 equals $7,037 Minimum proportionality percentage of funding for eligible pupils as a percentage of base funding equals 7.4% (= $524 ÷ 7,037)

Use of Supplemental/Concentration Grants
© 2014 School Services of California, Inc. The proposed LCFF regulations would provide districts varying degrees of latitude in the expenditure of supplemental/concentration grant funds, depending upon the percentage of eligible students If the district has unduplicated counts of the following: Greater than 55%, then these funds may be spent on a districtwide basis, provided the district Identifies the districtwide services Describes how these services meet the district’s goals for the targeted students in the state priority areas Less than 55%, districtwide expenditure of these funds is authorized, provided the district Describes how these services are the most effective use of the funds

Use of Supplemental/Concentration Grants
© 2014 School Services of California, Inc. The proposed regulations also address school site enrollment and the authorized use of these funds A district that has a school with an enrollment of eligible pupils in excess of 40% of the school’s total enrollment, the district may expend the targeted funds on a schoolwide basis, provided the district Identifies the schoolwide services Describes how these services meet the district’s goals for the targeted students in the state priority areas A district that has a school with an enrollment of eligible pupils less than 40% of the school’s total enrollment, the district may expend the targeted funds on a schoolwide basis, provided the district Describes how these services are the most effective use of the funds

Targeted Funds – Conclusion
© 2014 School Services of California, Inc. is the first transition year toward full implementation of the LCFF Districts will not have developed and adopted their LCAP until Don’t be overly concerned about how funds are used, but . . . Once regulations are adopted, your actions will have to be consistent with those requirements going forward If your direction is wrong this year, you may need larger corrections next year Be thoughtful about how you use new dollars for districtwide purposes, and about how you will demonstrate additional support for eligible students with those dollars that you do receive on their behalf

What Are the Distributional Impacts of the LCFF?
© 2014 School Services of California, Inc. During the eight-year implementation phase, there are major distributional consequences of the LCFF Once fully implemented, all districts will share equally in any new state funding provided for COLAs or enhanced funding levels Prior to full implementation, however, there are major differences in funding increases among districts statewide What are the distributional consequences of the LCFF? Size of district Percent eligible for supplemental/concentration grants Type of district

LCFF Funding by District Size
© 2014 School Services of California, Inc. 1.565% (COLA) District Size (ADA)

LCFF Funding by District Type
© 2014 School Services of California, Inc. 1.565% (COLA)

Range of LCFF Increases
© 2014 School Services of California, Inc. 1.565% (COLA) Lowest Increase Highest Increase

LCFF Funding and High Needs Students
© 2014 School Services of California, Inc.

Policy Conclusions for LCFF
© 2014 School Services of California, Inc. Increased funding is targeted to districts with the highest percentage of eligible students The 200 districts with the greatest percentage of eligible students received more than twice the increase of the 200 districts with the fewest eligible students The new funding model aggressively pursues the differential funding rates The 200 districts with the smallest increases in averaged a 0.8% gain, with 89 districts experiencing no gain at all The 200 districts experiencing the greatest gain averaged a 7.4% increase in , a nine-fold gain over the bottom quintile

Policy Conclusions for LCFF
© 2014 School Services of California, Inc. Small districts experience little gain under LCFF, most likely because of prior-year funding received under the necessary small schools adjustment and pre-existing revenue limit differentials Otherwise, the new model is neutral with respect to both district size and district type The long-term implications of the LCFF are profound At full implementation, districts with the greatest concentrations of eligible students will have about 20% more funding per ADA than the average district Districts with the lowest concentration of eligible students will have about 6% less funding per ADA than the average district

Apportionment Deferrals
C-31 © 2014 School Services of California, Inc. The Governor’s Budget proposes to fully extinguish the remaining $6.1 billion in K-14 apportionment deferrals in ($5.5 billion for K-12 education and $593 million for the community colleges) This proposal accelerates last year’s plan to eliminate the deferrals in Commencing in , the “5-5-9” apportionment schedule (i.e., 5% paid in July, 5% paid in August, and 9% paid in each of the following 10 months) will finally be implemented Funding is provided from both one-time and ongoing revenues $1.8 billion in one-time funds from $1.5 billion in one-time funds from $2.7 billion from ongoing revenues in At the peak of the state’s fiscal woes, approximately 45% of the state aid owed to LEAs was deferred to the following year

LCFF “Categorical Programs” and the COLA
© 2014 School Services of California, Inc. The LCFF includes funding from more than 40 former categorical programs, including Tier III and Economic Impact Aid Transportation and Targeted Instructional Improvement Grants (TIIG) are now part of the formula, but are not adjusted for COLAs nor are they adjusted for workload changes The LCFF base grant targets, and implicitly all of the categorical programs folded into the LCFF, are adjusted for an estimated 0.86% COLA for However, the actual amount received by districts is dependent upon The district’s demographic profile, which determines eligibility for supplemental and concentration grants and current base funding level State funding provided for LCFF Agricultural Vocational Education and Specialized Secondary Program funding are proposed to be folded into the LCFF calculation

COLA for Categorical Programs Outside of the LCFF
© 2014 School Services of California, Inc. For , categorical programs outside of the LCFF will receive an estimated 0.86% COLA, an increase of $33.3 million These programs include: Special Education Foster Youth American Indian Education Centers American Indian Early Childhood Education Programs Child Nutrition Adults in Correctional Facilities

Greater Certainty With a Continuous Appropriation
© 2014 School Services of California, Inc. Under revenue limits, state law provided for a continuous appropriation to remove this key source of district funding from annual Budget negotiations Absent legislation amending the revenue limit statutes, the continuous appropriation provided the authority for state payments to districts regardless of whether an approved State Budget was in place The Legislature, however, has enacted Budget Trailer Bills that have suspended the statutory COLA and imposed cuts to the revenue limit The Governor’s Budget proposes to establish a continuous appropriation for the LCFF to provide greater certainty to districts, similar to revenue limits The annual minimum appropriation for LCFF will be based on a fixed percentage of any new funds provided by the growth in Proposition 98 This percentage has yet to be determined

County Office of Education
© 2014 School Services of California, Inc. LCFF funding of COEs is similar to the funding for school districts The two-part formula includes: Per-ADA funding to support students attending community schools and juvenile court schools Unrestricted funding for general county office operations, distributed based on the total number of school districts in the county and the total ADA of all students in the county Counties will receive a base grant per ADA for students served in alternative schools and community schools And targeted supplemental grants for English learners and low-income students, comparable to the LCFF for school districts Like school district and charter school funding, increases would occur over time to reach the funding target Under the Governor’s Proposal, the COE LCFF is fully implemented by the end of

Adult Education C-36 © 2014 School Services of California, Inc. The Governor does not propose any changes to the Budget agreement for Adult Education Programs LEAs must maintain at least the same level of Adult Education expenditures in both and The Governor indicates his “intention to make an investment in Adult Education programs (including programs provided in county jails) through a single categorical program” beginning No details are provided, but the Governor indicates he intends to work jointly with the California Department of Education and Community Colleges Chancellor's Office to “complete the adult education consortia plans, while working with the Legislature to ensure that any legislation pertaining to adult education aligns with and supports the planning process currently underway, and provides consistent guidance to K-12 and community college districts.”

Special Education C-37 © 2014 School Services of California, Inc. The Governor’s proposed State Budget for special education provides $31.6 million to pay for a 0.86% COLA Estimated COLA is $4.39 per ADA No other major changes are proposed, but separate from the Governor’s Proposed Budget, a Special Education Task Force co-chaired by SBE member Carl Cohn, and Fred Weintraub, Los Angeles Unified School District federal court-appointed independent special education monitor, has been established An appointed 32-member task force is focusing on identifying the state’s vision and mission for students with disabilities and the development of specific goals in the following areas: Teacher preparation, credentialing, and professional development Education delivery models Assessment and accountability Early learning Fiscal issues

Charter Schools C-38 © 2014 School Services of California, Inc. The Governor’s Proposal includes an increase of $74.3 million to support charter school ADA growth The Proposal continues to include charter schools in the LCFF Charter schools are eligible for supplemental and concentration grants that may be used for any educational purpose A charter school’s eligibility for a concentration grant may not be greater than the percent eligible for the school district in which the charter school resides

Child Care C-39 © 2014 School Services of California, Inc. The Governor’s Budget proposes $115 million to fund a three-year Parent/Child Engagement Demonstration pilot program to serve 2,000 families in six counties Will involve low-income families who face multiple barriers of entry into the workforce, cannot access licensed child care, or who fall into CalWORKs sanction status Goal is to get children into stable, licensed child care, and provide parenting, life skills, and work readiness training to parents that will move them to self-sufficiency Stage 2 Child Care is increased by $6.3 million to reflect an increased cost per case of eligible beneficiaries and a slight decrease in caseload Base budget: $364.1 million

Child Care C-40 © 2014 School Services of California, Inc. Stage 3 Child Care is increased by $2.8 million to reflect an increased cost per case of eligible beneficiaries and a slight decrease in caseload Base budget: $185.8 million Child Care and Development Funds will see a net decrease of $9.1 million in federal funds in to reflect a reduction of available carryover funds ($3.2 million) and a decrease of $5.9 million to the base grant Total federal funding is $555.6 million

Independent Study Proposal
C-41 © 2014 School Services of California, Inc. To eliminate many administrative challenges of nonclassroom-based independent study programs, the Governor proposes legislation to streamline and expand the instructional opportunities for independent study Goal is to stabilize and increase student attendance for students at risk of dropping out or transferring to other private institutions The new proposed process will require that independent study courses meet requirements commensurate to their classroom-based equivalent courses, including: The same rigor and educational quality Equivalent total educational minutes Maintenance of classroom-based equivalent pupil-to-teacher ratios unless an alternative ratio is collectively bargained Holding at least one meeting per week between the student and teacher to verify that the student is working toward course completion Not earning more than one unit of ADA for participating students

Common Core and Student Assessments
© 2014 School Services of California, Inc. No proposed increase to the money received by LEAs – $1.25 billion in one-time funds – provided in the 2013 Budget Act for implementation of the Common Core State Standards To be used for professional development, technology, and instructional materials during and The Governor’s Budget proposes an additional $46.5 million to implement Chapter 489, Statutes of 2013 (AB 484), which established a revised student assessment system that is aligned to the new state standards These funds will be used at the state level for assessment development

Federal Programs C-43 © 2014 School Services of California, Inc. A recent agreement reached in Congress provides schools relief from sequestration cuts to education The Bipartisan Budget Act (BBA) restored a large portion of the sequester cuts At a minimum, there will be no additional cuts to federal education programs below current funding levels The House and Senate are finalizing 2014 spending levels through the traditional appropriations process Since federal education programs are forward funded, this impacts California’s education budget in

Federal Programs C-44 © 2014 School Services of California, Inc. The relatively flat spending level agreement reached in the BBA will require lawmakers to choose which programs to fund The major national education organizations are advocating for the majority of the funds to go to the formula programs such as Title I and Special Education Not to competitive programs, such as Race to the Top or new programs, such as the President’s budget proposal to expand preschool Also looming is the expiration of the debt ceiling limit, which must be resolved by February to allow additional federal borrowing to fund the higher spending levels authorized in the agreement Absent a deal on the debt ceiling, federal spending could not be sustained and any budget compromise would, at that point, become moot

Local Control Accountability Plan

The Local Control and Accountability Plan
© 2014 School Services of California, Inc. This section will focus on the Local Control and Accountability Plan (LCAP) and will cover the what, the how, and the when of plan development The statutory requirements How we develop the plan and engage stakeholders A sample timeline for development and adoption An abbreviated timeline for the current year We’ll also talk about . . . The role of the Superintendent and Board The impact of the LCAP on negotiations Next Steps – SBE Rulemaking and Regulatory Process

Shift Happens! D-2 © 2014 School Services of California, Inc. The LCFF is as much about equity and justice for our neediest students as it is about subsidiarity The wide gap in student achievement that now exists threatens our future The LCFF is designed to close the achievement gap by providing additional funds to support improved student outcomes and accountability The LCFF shifts the state away from a system of rule compliance, measured by audits and enforced through penalties, to a system of accountability based upon local needs, measured by progress toward annual goals, and explicitly linked to the LEA’s budget We are no longer implementing the state’s plan for eligible students – we must develop a plan locally that achieves improved results This will require that we think and plan differently

Our Old Paradigm Focused on Input
3 4 1 2 © 2014 School Services of California, Inc. What are we allowed to use it for? How do we comply with state law? Program Decisions What are the audit requirements and penalties? How much money do we have?

A New Way of Thinking D-4 © 2014 School Services of California, Inc. The new system requires us to think first about outcomes No longer are you limited by what you can afford to do in a single year – start thinking about what you could accomplish in three years What are our expectations for students? What programs and services are achieving desired results? What are our achievement goals and what must we do to improve the conditions of learning, increase engagement, and improve school climate? What can we accomplish in three years? How will we measure our progress? Based on the resources available, what actions and activities will we implement next year? Program Decisions

LCAP Requirements D-5 © 2014 School Services of California, Inc. The LCFF accountability system requires that LEAs develop a three-year LCAP and annually update it The LCAP must Identify goals based on state priorities for all students, “numerically significant subgroups”, students with disabilities, and eligible students List annual actions that the LEA will implement in accomplishing the goal Describe expenditures in support of the annual actions and where they can be found in the LEA’s budget The LCAP is intended to be a comprehensive plan School site plans and the Single Plan for Student Achievement must align with the LCAP The LCAP may reference and describe actions and expenditures of other plans

LCAP Requirements D-6 © 2014 School Services of California, Inc. Draft LCFF spending regulations were presented to the SBE on November 7, 2013, along with a conceptual framework for the LCAP Following the November SBE meeting, the SBE reached out to stakeholder groups for feedback The SBE revised regulations incorporating many of the recommendations from the field The revised LCFF spending regulations and the LCAP template have been submitted for SBE approval The SBE will take action on January 16, 2014, to approve the emergency regulations and commence the rulemaking process for the final regulations The SBE-proposed LCFF spending regulations require LEAs to increase or improve services for eligible pupils in proportion to the increase in the funds apportioned to supplemental and concentration grants and to demonstrate proportionality in the LCAP

Where and How Do We Start?
© 2014 School Services of California, Inc. The LCAP will require that you show evidence of a needs assessment Data, both quantitative and qualitative, will inform your plan goals Remember to think big – you are not limited to what you can accomplish in a single year – what do you hope to accomplish in three years? The LCAP template being presented to the SBE provides a roadmap for planning

Three Categories for Planning Purposes
D-8 © 2014 School Services of California, Inc. The proposed LCAP template groups the eight state priorities into three categories for planning purposes Initial LCAP planning requires the collection of data you will use to inform plan goals and actions, and precedes the engagement of stakeholders in plan development 1 3 2 Conditions of Learning Pupil Outcomes Engagement

What Does the Data Tell Us About the Conditions of Learning?
© 2014 School Services of California, Inc. The first planning category groups together the following state priorities: Priority 1 – Basic Conditions Priority 2 – Implementation of State Standards Priority 7 – Course Access Focus planning on assessing to what extent: Teachers are qualified and appropriately assigned School facilities are in good repair Students have access to standards-aligned materials and are receiving instruction that is aligned with state-adopted content and performance standards Students are enrolled in a broad course of study 1 Conditions of Learning For County Offices Only: Assess the coordination of instruction of expelled students and services to foster youth (Priorities 9 and 10)

What Does the Data Tell Us About Pupil Outcomes?
© 2014 School Services of California, Inc. Planning would focus on assessing: Performance on standardized tests Percentage of students who are college and career ready English learner reclassification rate Pass rate on advanced placement exams Student outcomes in all core curriculum areas 2 The second planning category groups together the following state priorities: Priority 4 – Pupil Achievement Priority 8 – Other Pupil Outcomes Pupil Outcomes

What Does the Data Tell Us About Student and Parent Engagement?
© 2014 School Services of California, Inc. The third planning category groups together the following state priorities: Priority 3 – Parent Involvement Priority 5 – Pupil Engagement Priority 6 – School Climate Focus planning on measuring: Parent involvement in decision making and the degree to which you promote the participation of parents of eligible pupils School attendance rates including chronic absenteeism Dropout and graduation rates Suspension and expulsion rates The degree to which students feel safe and connected to school 3 Engagement

So We Have the Data, Now What?
© 2014 School Services of California, Inc. The proposed LCAP template is comprised of three sections and includes a description of each section, provides instructions, and lists guiding questions to facilitate completion of the template based on the data collected Once you’ve conducted your needs assessment, it is time to engage stakeholders You’ll be required to show evidence of stakeholder engagement in the first section of the LCAP 1 3 2 Stakeholder Engagement Goals and Progress Indicators Actions, Services, and Expenditures

Stakeholder Engagement
LCAP Section 1 D-13 © 2014 School Services of California, Inc. 1 Meaningful engagement of parents, students, and other stakeholders is not only important but it is a statutory requirement LEAs will have to demonstrate evidence of stakeholder engagement, describe how stakeholders were involved, and what impact that engagement had on development of the plan A few guiding questions from the proposed template: “What information was made available to stakeholders and used by the LEA to inform the LCAP goal setting process?” “In the annual update, how has the involvement of stakeholders supported improved outcomes for pupils related to the state priorities?” Stakeholder Engagement

Goals and Progress Indicators
LCAP Section 2 D-14 © 2014 School Services of California, Inc. Section 2 must describe the LEA’s goals for the term of the plan The annual update must include a review of progress based on an identified metric (qualitative or quantitative) Goals must address each state priority area and any additional local priorities A few guiding questions from the proposed template: “What are the LEA’s goals to address the conditions of learning, pupil outcomes, and parent and pupil engagement?” “What data/metrics were considered in developing goals to address each state or local priority and to review progress toward goals in the annual update?” 2 Goals and Progress Indicators

Actions, Services, and Expenditures
LCAP Section 3 D-15 © 2014 School Services of California, Inc. Identify annual actions to meet the goals in Section 2 and describe expenditures to implement the action In describing actions and expenditures that will serve eligible pupils, identify whether they are for school-, district-, county-, or charter-wide purposes This section has four subsections Annual actions and expenditures related to the goals for all pupils Annual actions and expenditures provided to eligible pupils above what was provided to all students Describe how the LEA is expending supplemental and concentration grant funds for any school-, district-, county-, or charter-wide purpose and how they are the most effective use of funds Demonstrate proportionality 3 Actions, Services, and Expenditures

LCAP Planning D-16 © 2014 School Services of California, Inc. So you know where to start – gather data and assess your needs based on the three planning areas provided for in the proposed LCAP template – it is a good roadmap And you know what is expected in terms of the plan For those of you with unlimited time and who welcome the opportunity to develop another plan related to student achievement, this should be a cinch If you don’t have unlimited time, you need to think strategically and the next step is identifying who needs to be involved in the development of the plan, their level of engagement, and then mapping out a timeline You will not need to engage all stakeholders at the same level, or at the same stage of the planning process – again, be strategic Who will you involve in your needs assessment? Who will you consult in developing your goals? Who will you need to keep informed and offer opportunities for input?

Levels of Engagement in LCAP Development
© 2014 School Services of California, Inc. Think about what the statute requires Also think about other groups that may have a high level of interest or influence on the final decision makers – the governance team You may not be required to engage them, but you’d be smart to do so We would identify three levels of engagement Involve Who will you involve in developing a draft plan based on your needs assessment? Consult Who will you consult in developing your goals? Inform Who will you need to keep informed and offer opportunities for input? 1 2 3

Levels of Engagement as Required by Statute
© 2014 School Services of California, Inc. 4 3 2 1 Adoption of the plan: Adopted concurrent with the LEA’s budget Submitted to COE for approval Posted on district website COE posts LCAP for each district/school or a link to the LCAP Opportunity for public input: Notice of the opportunity to submit written comment Public hearing The superintendent must respond in writing to comments received Present for review and comment to: Parent advisory committee English learner parent advisory committee The superintendent must respond in writing to comments received Consultation with: Teachers Principals School personnel Pupils Local bargaining units

Adopting and Updating the LCAP
© 2014 School Services of California, Inc. Level of Engagement INVOLVE Remember you need to start with your needs assessment We believe that the collection of data and identification of needs is the responsibility of the leaders of the district and must precede this level of engagement Promise to Stakeholders We will work with you to ensure that your concerns are reflected in the goals and actions of the LCAP Methods of Engagement Forums and workshops 1 Consultation with: Teachers Principals School personnel Pupils Local bargaining units

© 2014 School Services of California, Inc. Level of Engagement CONSULT Promise to Stakeholders We will keep you informed, listen to and acknowledge concerns, and provide feedback on how your input has influenced the LCAP goals and actions Methods of Engagement Surveys Focus groups Public meetings Develop draft plan in advance of this level of engagement 2 Present for review and comment to: Parent advisory committee English learner parent advisory committee The superintendent must respond in writing to comments received

© 2014 School Services of California, Inc. Level of Engagement INFORM Promise to Stakeholders We will keep you informed and provide you an opportunity to comment on our plan Methods of Engagement Fact Sheets Newsletters Notices regarding comment period Notice of Public Hearing 3 Opportunity for public input: Notice of the opportunity to submit written comment Public hearing The superintendent must respond in writing to comments received

Developing a Timeline for LCAP Development
© 2014 School Services of California, Inc. Now you know where to start, what is expected in terms of the plan, and how to engage stakeholders in a meaningful way So what does a timeline look like for a typical year and what do you do now if you haven’t started planning? First let’s take a look at a normal year We believe the planning, developing, implementing, and reviewing progress will be a continuous and ongoing 12-month process

A 12-month Planning and Adoption Process
© 2014 School Services of California, Inc. Jul - Oct Nov - Jan Feb - Mar Apr - Jun Assess and Engage Draft and Consult Inform and Respond Decide and Implement Conduct needs assessment and involve parents, community members, students, staff, and bargaining units in a discussion of goals. Identify goals, actions, and metrics. Once the Governor’s January Budget is released, you can begin thinking about the resources you may have available. Consult with parent groups, advisory committees, and other interested stakeholders. Inform advisory groups and other interested stakeholders of the proposed plan. Respond to input and comments. Finalize the plan following the Governor’s May Revision. Hold public meetings on the LCAP and district budget. Respond to any public comments and adopt the LCAP and budget at a subsequent meeting.

A Sample Timeline for the Current Year
D-24 © 2014 School Services of California, Inc. Begin needs assessment now! By March 15 Complete your LCAP draft May – June Commence public comment period and hold public hearing 1 2 3 4 5 6 By February 15 Involve parents, school personnel, pupils and bargaining groups in plan development By April 15 Inform parent advisory groups and other stakeholders and respond in writing to comments By June 30 Adopt LCAP and LEA budget

The Role of the Superintendent
© 2014 School Services of California, Inc. The Superintendent is given a heavy responsibility to be the conductor of the LCAP development process The Superintendent is charged with ensuring that the obligation to consult with employee organizations and to facilitate a response to comments by community groups is met Additionally, the Superintendent is charged with recommending specific strategies to the Board and implementing those that are adopted The Superintendent leads the Cabinet in analyzing student performance and selecting appropriate interventions The quality and integrity of the development process are the domain of the Superintendent The Superintendent and Cabinet provide the professional expertise to implement the plan and to assess results and recommend revisions

The Role of the Board D-26 © 2014 School Services of California, Inc. The Board represents the visions and values of the community and has final accountability for the performance of students and the financial solvency of the district The Board sets the direction for the development of the LCAP Through the use of study sessions and open meetings, the Board hears and evaluates input from the administration, the community, and all stakeholders The Board conducts public hearings in accordance with the law Qualitative decisions about priorities are the domain of the Board The Board assesses performance annually and approves amendments to the plan Ultimately, the Board gives final approval to both the LCAP and the district budget, and ensures that they are consistent and represent the community interest

Impact of LCAP on Negotiations
D-27 © 2014 School Services of California, Inc. We cannot overemphasize the importance of management and labor groups using the mandatory consultation obligation as a bridge to collaborative negotiations The district cannot include commitments in the LCAP that are within the scope of bargaining but have not yet been negotiated But the district can include strategies and goals within the scope of bargaining if it is clear they will not be implemented until the conclusion of the bargaining process – even to the point of impasse if necessary We, therefore, believe that best practices dictate that the district define deficient areas in student achievement and collaborate with bargaining units on solutions No one knows what our students need better than our professional teachers who are with our students every day And we have the data to define the areas where our students need additional service

D-28 © 2014 School Services of California, Inc. The consultation period needs to be formal and data-driven We have an eight-year LCFF implementation period, a three-year plan, and defined actions for the first budget year We do not have to do everything the first year, but we need to set the stage for continuous improvement What does our assessment data tell us about what we need to address first? It may be appropriate to address gateway skills like elementary reading and math to build a foundation for the future But in other districts, parent involvement, teacher preparation, or facilities may need to be addressed first Many of the eight LCAP focus areas specified by the state are tightly inter-related and implementation of one strategy may help other areas The planning categories in the proposed template will help you keep an eye on alignment

D-29 © 2014 School Services of California, Inc. District preparation for consultation meetings Do not go to the meeting with nothing but blue sky and dreams! Develop a carefully crafted agenda Work with Cabinet to assess needs in each of the eight plan areas and develop data to support why those specific areas need to be addressed in the early years of the LCAP – recognize that some things will have to wait until later years Offer the bargaining units an opportunity to provide input into the areas to be addressed Jointly develop specific strategies to address each of the deficit areas

D-30 © 2014 School Services of California, Inc. Include discussion of personnel and compensation impacts Time and payment for professional development, extra time, and higher levels of professional preparation are all within the scope of negotiations Discuss planned use of CCSS funding to enhance professional development Discuss how your planned strategies will affect numbers of staff, duties of staff, and compensation of staff Be sure the LCAP includes an explanation of how any particular expenditure “increases and improves” education – every expenditure of supplemental or concentration grant funding requires that we establish this nexus If there ever was a time for quality collaboration, it is now – don’t let this opportunity pass

Regular Regulatory Process: LCFF Spending Requirements and LCAP Template
© 2014 School Services of California, Inc. Adoption of proposed regulations (January 16, 2014) 45-day comment period opens Public hearing held (March 17, 2014) SBE and California Department of Education (CDE) consider comments received If there are no changes to regulations, comments are addressed, and regulations are approved and submitted to the Office of Administrative Law (OAL) If substantial and significant related changes are made to proposed regulations, an additional 15-day public comment period is opened Then, if no major or substantial changes, comments are addressed and regulations are approved and submitted to the OAL If major changes are made, a new 45-day comment period opens and an additional public hearing may be held at the conclusion of the period

Emergency Regulatory Process: LCFF Spending Requirements and LCAP Template
© 2014 School Services of California, Inc. 1 3 2 Approval of Finding of Emergency and Emergency Regulations by SBE SBE submits Finding of Emergency and Regulations to OAL OAL has ten calendar days to approve Emergency Regulations Public comment can be submitted for first five calendar days OAL approves Emergency Regulations (In effect for days) To become permanent, regulations must go through regular rulemaking process

Local Agency Operations and the Budget

Overview E-1 Temporary Flexibility – Current Law Planning for 2014-15
© 2014 School Services of California, Inc. Temporary Flexibility – Current Law Planning for Pension and Health Care Reform Operational Efficiencies Negotiations

Temporary Flexibility – Current Law
© 2014 School Services of California, Inc. There are no proposed changes to the temporary flexibility expiration dates This flexibility will expire in 2015 and 2016 Expires E.C. Description of Flexibility June 30, 2015 1240.3 Standards-aligned instructional materials sufficiency (Williams compliance) – suspends required textbook adoptions Routine restricted set-aside reduced to zero (except as necessary for Williams compliance) Reduction of school year by up to five days and/or equivalent in instructional minutes (effective starting ) Suspension of instructional materials adoption requirement Advice: Plan to offer a school year of 180 days in your district’s multiyear projection. Local agreements may require more work calendar days. Bring routine restricted back to 3%. January 1, 2016 Sale of surplus property to benefit General Fund (with significant requirements) Advice: Review E.C to ensure that the district is able to meet all of the requirements of this flexibility related to the restriction of state facilities funding.

Managing Volatile Projections
© 2014 School Services of California, Inc. Multiyear projections (MYP) are required by AB 1200 (Chapter 1213/1991) and AB 2756 (Chapter 52/2004) Multiyear financial planning is a sound business practice that all well-run organizations do regardless of any legal requirements But it is very challenging to prepare meaningful MYPs in this environment This year’s State Budget Proposal includes significant education funding changes and, again, LEAs need to build the MYP based on the best information available The two best ways to deal with volatility are conservative revenue estimates and higher reserves

The SSC Dartboard E-4 © 2014 School Services of California, Inc. The first and last sections of the SSC Dartboard continue to contain the planning factors users have seen in the past But the actual planning section is no longer applicable to each district in the same way; therefore, we link our SSC Dartboard to the SSC LCFF Simulator® for the district-specific calculations Districts that use the SSC Dartboard and the SSC LCFF Simulator® in the manner intended will find that they can easily obtain an updated projection whenever there is a change in: The amount of money the state provides in the current year The revenue or COLA forecasts for the out years The LCFF distribution formula Any district that did not elect to use the SSC Dartboard would need to develop its own unique planning factors

SSC Financial Planning Dartboard
E-5 © 2014 School Services of California, Inc. Factor LCFF Planning Factors SSC LCFF Simulator® Statutory COLA 1.565% 0.86% 2.20% 2.40% 2.60% 2.70% California Consumer Price Index 2.00% 2.80% Ten-year Treasuries 2.90% 3.20% 3.40% 3.50% 3.70% Reserves State Reserve Requirement District ADA Range Reserve Plan The greater of 5% or $50,000 0 to 300 SSC recommends one year’s increment of planned revenue growth The greater of 4% or $50,000 301 to 1,000 3% 1,001 to 30,000 2% 30,001 to 400,000 1% 400,001 and higher

Multiyear Projections for the 2014-15 Budget
© 2014 School Services of California, Inc. LCFF Target $8,990 $9,066 $9,264 $9,484 Estimated DOF Projection $6,650 $7,327 $7,688 $7,859* SSC Recommends $7,484 $7,654 Net Change per ADA $313 $677 $157 $170 Net Percent Change 4.93% 10.18% 2.14% 2.27% *In the absence of a current projection for from the DOF, the purchasing power increase—the same as “SSC recommends”—is used

Unrestricted Fund Balance – Statewide Averages
© 2014 School Services of California, Inc. Unrestricted General Fund Balance Plus Fund 17 Special Reserve as a Percent of the Total General Fund Unified School Districts 15.44% Elementary School Districts 23.75% High School Districts 19.79% Source: CDE state-certified data

Education Protection Act 2014-15
© 2014 School Services of California, Inc. Revenues generated from Proposition 30 will continue to be accounted for in a separate Object Code and received on a quarterly basis The Budget Proposal estimates $7.3 billion or 11.8% of K-14 funding to be distributed on a quarterly basis LEAs are required to do the following with the EPA funds: Discuss the use of funds in an open public meeting Not use the funds for salaries and benefits for administrators and other administrative costs Report the amounts received and their use on the LEA’s website We recommend you continue to monitor the use of these funds to ensure your district’s compliance with the Proposition 30 requirements

Apportionment Deferrals and Cash Flow
© 2014 School Services of California, Inc. We’ve heard the good news that under the Budget Proposal all deferrals would be eliminated This is welcome news in the education community However, because this is a proposal, LEAs need to ensure they continue to manage cash flow and have a plan in place for borrowing should the proposal not be fully realized LEAs should: Continue to prepare cash flow projections based on current law with deferrals Project cash flow for more than one fiscal year 18 months to 24 months out

Apportionment Deferrals and Cash Flow
© 2014 School Services of California, Inc. Meet and discuss external borrowing needs with financial advisors Work with them to develop a timeline that takes into account the possibility that an LEA may not need to borrow as much or at all once the State Budget is enacted Try to develop options that allow you to eliminate or reduce the amount of borrowing after the final State Budget is enacted This will reduce or eliminate borrowing costs

School Facilities Issues – Sale of Surplus Property
© 2014 School Services of California, Inc. As part of the State Budget Act, flexibility to use the proceeds from the sale of surplus property for one-time General Fund expenses was extended through January 1, 2016 Keep in mind the following: The proceeds are one-time resources and may not resolve an ongoing budget problem Unless you have a local General Obligation Bond, this may be the only source you have for capital facilities expenditures Use your facilities master plan to identify future facilities needs – be sure you will not be second guessed later

School Facilities Issues – Sale of Surplus Property
© 2014 School Services of California, Inc. Current law requires local educational agencies (LEAs) to give charter schools first right to surplus property if the property is declared surplus after July 1, 2012 The law was amended with approval of the State Budget: Applies only to charter schools having projections of at least 80 units of in-district ADA for the following fiscal year; and Districts are not required to offer the property to charter schools on or after July 1, 2016, unless the law is extended again Remember, the current procedural requirements for the sale of surplus property, including the findings and notices required under the Education Code and Government Code, remain in place

School Facilities Issues – Deferred Maintenance
© 2014 School Services of California, Inc. The Deferred Maintenance program is now permanently part of the LCFF base grant Funds may be used for any educational purpose No local contribution is required to receive the funds LEAs should: Evaluate deferred maintenance needs Include deferred maintenance and other capital facilities needs in the context of the entire budget Remember that we need safe, clean, and functional school facilities in order to support the learning environment Compliance requirements do not cease to exist when the state eliminates the categorical program Williams Settlement Program Improvement status/requirements

School Facilities Issues – Routine Restricted Maintenance
© 2014 School Services of California, Inc. The Governor’s Budget Proposal does not change the minimum contribution requirement for routine maintenance Though the budget flexibility that reduced or waived the minimum requirement has been in place since , this flexibility expires at the end of , and the 3% Routine Restricted Maintenance contribution requirement returns for Keep in mind . . . Priority 1 of the LCAP requires that school facilities be maintained in good repair as defined in the Education Code

School Facilities Issues – Routine Restricted Maintenance
© 2014 School Services of California, Inc. Currently, the majority of expenditures in this area are for: Classified salaries and benefits Materials and supplies to repair and maintain facilities Again, LEAs must consider the needs of the agency when planning General Fund expenditures We recommend LEAs establish staffing allocations and an expenditure budget for this critical function

School Facilities Issues – Emergency Repair Program
© 2014 School Services of California, Inc. The Governor’s proposed Budget dedicates $188.1 million of one-time Proposition 98 dollars to the Emergency Repair Program (ERP) Funds will provide grants for reimbursement of the cost of repairing or replacing building systems that pose a health and safety risk As of January 2013, the State Allocation Board (SAB) apportioned $338.4 million for funded projects and approved an additional $459.5 million for unfunded projects ERP applications are no longer being accepted by the Office of Public School Construction (OPSC)

School Facilities Issues – Proposition 39
© 2014 School Services of California, Inc. Funding for education was increased as a result of the passage of Proposition 39 – California Clean Energy Jobs Act The Governor proposes to allocate an additional $363 million in $316 million to K-12 school districts and $39 million to community colleges for energy efficiency project grants $5 million to the California Conservation Corps for continued technical assistance to K-12 school districts $3 million to Workforce Investment Board for continued implementation of the job-training program

School Facilities Issues – Proposition 39
© 2014 School Services of California, Inc. This is a restricted program that has specific compliance and reporting components The State Superintendent of Public Instruction (SPI) began releasing energy audit and planning funds in November 2013 Energy expenditure plans are now being accepted, and award allocations will begin in February 2013 All funds must be encumbered by June 30, 2018, and projects must be completed by June 30, 2020

School Facilities Issues – State Allocation Board
© 2014 School Services of California, Inc. Currently, there is no remaining bond authority in the School Facility Program (SFP) for new construction or modernization The Governor proposes transferring $211 million of remaining SFP bond authority currently allocated to specialized programs (i.e., Seismic Mitigation, Career-Technical Education, High Performance Incentive Grant, and Overcrowding Relief Grant) to the new construction and modernization programs This transfer will allow some school districts currently awaiting funds to move forward with construction of new classrooms and modernization

© 2014 School Services of California, Inc. The last statewide school facilities bond was approved by the voters in 2006 The Governor proposes continuing the dialogue on the future of school facilities funding, including “what role, if any, the state should play in the future of school facilities funding” While two bills, Senate Bill (SB) 45 (Corbett, D-San Leandro) and AB 41 (Buchanan, D-San Ramon), to place a statewide education facilities bond on the 2014 ballot were introduced in 2013, neither was approved However, the Legislature still has time to pass a bill this year The Governor noted that any future school facility program should be easy to understand and provide school districts with local control and fiscal incentives

© 2014 School Services of California, Inc. The SAB Program Review Subcommittee has spent the last year reviewing the SFP and discussing areas that could be improved should a future school facility bond program be established Consensus was reached that there is a need for a new school facility bond to fund new construction and modernization projects OPSC staff has developed estimates of new construction and modernization funding needs New construction – estimates ranging from $5.9 to $12.3 billion Modernization – estimate $4.7 billion The Subcommittee’s report will be finalized and presented to the full SAB at its meeting in January 2014

Local Bonds Pass at Record Rates
© 2014 School Services of California, Inc. In November 2012, more than $14 billion in local bonds were on the ballot More than $12 billion passed Local funding, not state funding, is now the primary source of school facility funding Types of Elections Total Elections on Ballot Pass Fail Passage Rate Dollar Value of Voter-Approved Measures (in Millions) Two-Thirds General Obligation (GO) Bonds 2 1 50% $40.0 55% GO Bonds 100 81 19 81% $12,525.6 55% School Facility Improvement District (SFID) GO Bonds 4 100% $227.1 Total 106 86 20 $12,792.7

Mandated Programs E-23 © 2014 School Services of California, Inc. The Budget Proposal continues to support mandate reform but makes no changes to the funding level or to the list of state mandates included in the Mandate Block Grant (MBG) In , school districts and charter schools opting-in to the MBG received the funds in November 2013 The apportionment, totaling $206.4 million, was made from funds provided by Item of the Budget Act of 2013 (Chapter 20/2013) The apportionment paid 100% of each LEA’s MBG entitlement for fiscal year

Mandated Programs E-24 © 2014 School Services of California, Inc. The Administration recognizes the $4 billion liability in unfunded K-12 mandates And intends to pay down the obligation over the next few years with completion by the end of To date, there’s no repayment plan in place No funds are included in the Budget Proposal to reduce the debt

Mandated Programs E-25 © 2014 School Services of California, Inc. LEAs that opt in to the MBG can plan for the rates in all three years of the multiyear projection (MYP) The rationale for a higher rate for the 9-12 grade span is due to the inclusion of the Graduation Requirements mandate within the MBG We recommend LEAs weigh the benefits of receiving money now versus an unfunded receivable with no time-certain reimbursement Grade Span School Districts Charter Schools COEs K-8 $28 $14 $29 9-12 $56 $42 $57

Transportation in E-26 © 2014 School Services of California, Inc. Under current law, LEAs that operate transportation programs will receive the funding as an add-on to the LCFF, with the following requirement: Maintenance of effort: LEAs must expend no less than the amount expended for Home-to-School Transportation in The maintenance of effort is the lesser of: Actual transportation expenditures, or Amount of transportation revenue* received in Direct-funded Home-to-School Transportation joint powers authorities (JPAs) will continue to receive direct funding in *Pupil Transportation Entitlement: Home to School, Special Education, COE Bus Replacement

Transportation in E-27 © 2014 School Services of California, Inc. LEAs should plan for and consider the following: Review transportation routes to determine if services can be further streamlined Consider other local transportation options, including cost sharing options that reduce the share your agency is currently paying Analyze special education transportation policies and ensure individualized education program (IEP) teams are aware of the policies Do not provide transportation if it is not necessary Discuss consequences if transportation is not provided or if fees are assessed/increased If your LEA opts to assess fees, put systems in place to make it easy for parents/guardians to make payments such as through PayPal, a drop box, etc.

K-3 Grade Span Adjustment
© 2014 School Services of California, Inc. Under current law, the K-3 Grade Span Adjustment (GSA) (formerly known as K-3 Class-Size Reduction) is a 10.4% adjustment to the LCFF base grant This percentage is added to the base grant to support lowering class sizes in grades kindergarten through 3 As a condition of apportionment, districts must ensure all school site average class enrollment ratios meet the target ratio of 24:1 Unless a collectively bargained alternative ratio is agreed to by the school district and bargaining unit For , districts must demonstrate progress toward reducing the gap between their school site average K-3 class size and the 24:1 target by 28% Caution: A district’s failure to meet the required progress at one school site would result in the loss of all K-3 GSA funds districtwide The penalty will likely be out of proportion to the error

K-3 Grade Span Adjustment
© 2014 School Services of California, Inc. Districts should keep in mind the following with the K-3 GSA: If school sites already have a site ratio of 24:1 or less, they must permanently maintain the 24:1 ratio to be eligible for K-3 GSA funds Class-size waivers (for E.C ) granted by the SBE will not excuse districts from the K-3 GSA 24:1 school site requirement We anticipate in the coming months that instructions will be established in the Audit Guide to ensure compliance

K-3 GSA – Sample Calculation
© 2013 School Services of California, Inc. Example of school site calculation for relative progress for school year, based on 28% revenue increase toward full implementation of LCFF Sample Calculation for K-3 GSA School Site Progress average class enrollment for school site: XYZ Elementary School (Grades K-3, inclusive) 28.4:1* Target for K-3 CSR at LCFF full implementation, 24:1 Difference 4.4 Progress required in (28%) 4.4 x .28 = 1.2 Average class enrollment target progress for for XYZ Elementary School 28.4 – 1.2 = 27.2:1 * Average class enrollment for school site after the first year of the LCFF

LCFF and Provisions 1, 2, and 3
E-31 © 2014 School Services of California, Inc. On a yearly basis, school districts distribute meal applications to parents to make determinations of eligibility for FRPMs under the National School Lunch Program (NSLP) and the School Breakfast Program (SBP) The paperwork and administrative burden associated with the meal counting, claiming, and eligibility are demanding Especially for those districts with large FRPM populations Congress offers three special assistance alternatives for LEAs known as Provision 1, Provision 2, and Provision 3 to help reduce paperwork and administrative burden at the local level

E-32 © 2014 School Services of California, Inc. Special Assistance Alternatives Frequency of Student Eligibility Determination Provision 1 Every 2 consecutive school years Provision 2 Every 4 years, including the base year Provision 3 Every 4 years, excluding the base year The table displays the three Special Assistance Alternatives and how often each alternative determines the students’ eligibility for FRPMs

E-33 © 2014 School Services of California, Inc. Unfortunately, the relief from the administrative burden provided by the Special Assistance Alternatives creates a challenge for the school districts under the LCFF LCFF provides concentration and supplemental funding to school districts for FRPM students on an annual basis Districts are prohibited from collecting eligibility determinations through the NSLP application for its Provision 1, 2, and 3 schools on an annual basis CDE has offered school districts an optional Alternative Income form The form enables the district to determine the FRPM status of the students attending the Provision 1, 2, and 3 schools during the period when they are precluded from verifying eligibility The sample Alternative Income form is located at

E-34 © 2014 School Services of California, Inc. Remember, the CDE’s Alternative Income form is just that – it’s an alternative If your district has already established an effective method to determine the eligibility status of the students in these particular schools, by all means, use it The goal is to ensure your district’s accuracy of the students entered into California Longitudinal Pupil Achievement Data System (CALPADS) For the LCFF, FRPM-eligible students are those students enrolled on the Fall Census Day, the first Wednesday in October The certification deadline was December 13, 2013 The amendment window is December 14, 2013, to February 7, 2014 In , the CDE will allow LEAs that have one or more schools with Provision 2 or 3 status under the NSLP to extend the CALPADS Fall 1 amendment window to March 21, 2014

State Board of Education Update
© 2014 School Services of California, Inc. SBE has been front and center this past year in shaping the implementation of the LCFF and at the January 15 and 16, 2014, SBE meeting the following is on the agenda: Approval of the emergency regulations for LCFF spending requirements and the LCAP template Also on the agenda: the approval of the regular rulemaking process for the final regulations for the LCFF spending requirements and LCAP template Approval of the emergency regulations and commencement of the final rulemaking process for the new assessment system replacing the Standardized Testing and Reporting (STAR) assessments, the California Assessment of Student Performance and Progress (CAASPP) To immediately implement the changes for the school year

State Board of Education Update
© 2014 School Services of California, Inc. At this same meeting, a public hearing will be held on the 2014 Mathematics Adoption of Instructional Materials Instructional Quality Commission will be recommending mathematics programs for adoption Remember, an LEA is not required to use the SBE-adopted instructional materials and may use other instructional materials if they are aligned with the academic content standards (AB 1246 [Chapter 668/2012]) Mathematics instructional materials must be aligned to the Common Core academic content standards If an LEA chooses to use instructional materials not adopted by the SBE, the LEA shall ensure that a majority of the participants of any review process conducted by the LEA are classroom teachers who are assigned to the subject area or grade level of the materials

CalSTRS E-37 © 2014 School Services of California, Inc. California State Teachers’ Retirement System (CalSTRS) developed a plan to audit a sampling of LEAs Audits have resulted in determinations that certain positions designated by governing boards as certificated do not qualify and should be designated as classified Therefore, these positions do not belong in the CalSTRS membership Incumbents in these positions who did not complete an election form to stay in CalSTRS membership within 60 days of assuming the position are exposed And, therefore, are at risk of losing their service credit

CalSTRS E-38 CalSTRS is providing an amnesty period for these members
© 2014 School Services of California, Inc. CalSTRS is providing an amnesty period for these members File the election form with justification by May 23, 2014 The CalSTRS Circular went to employers So employers need to initiate the process for members that may be affected Go to for Fiscal Report article, “CalSTRS Members Face Retirement Uncertainty,” “CalSTRS Presents a Solution!”, and CalSTRS’ Employer Information Circular article, “Right of Retirement Systems Election When Changing Positions”

CalSTRS E-39 © 2014 School Services of California, Inc. The Governor acknowledges the $80.4 billion shortfall within the CalSTRS basic retirement plan Assets may be exhausted in 30 years Would cost more than $4.5 billion per year to resolve right now Bad news does not get better with age – this will grow if not addressed Three ways to fix it: Reduce benefits: difficult given legal protections Already in place for new hires starting January 1, 2013 Increase earnings: means taking more risk with investment portfolio Increase contributions: most likely solution

CalSTRS E-40 © 2014 School Services of California, Inc. CalSTRS contribution rates and benefit levels are set in statute Legislation is required to change the rates The Governor proposes to work with stakeholders on a “plan of shared responsibility” to achieve a fully funded system within 30 years He also states that: Employers should anticipate absorbing much of any increased contribution requirement The state’s role as a contributor should be evaluated The funding plan will be included in his Budget Proposal Employers need to brace themselves for increased CalSTRS contribution requirements in multiyear financial planning

CalPERS E-41 © 2014 School Services of California, Inc. The employer contribution to the California Public Employees’ Retirement System (CalPERS) for is % “Classic” members pay 7.00% New members (hired on or after January 1, 2013) pay 6.00% The CalPERS retirement plan is 75.5% funded The CalPERS Board has changed the asset smoothing and amortization methods to improve the funded status We can expect to see significant contribution rate increases in the future CalPERS Board will set the employer rate for in May Stay tuned for estimates of rates in the out years

Affordable Care Act E-42 Implementing the employer shared responsibility provisions of the Affordable Care Act (ACA) means providing health coverage: To all employees working 30 hours per week or more Or Draconian penalties apply That is of minimum value and is affordable Or penalties apply – although less punitive See detail in regulations referred to below To ensure that all eligible employees are offered coverage: Determine the standard measurement, administrative, and stability periods Implement a system of tracking and reporting employee hours of service Please visit for IRS Notice and IRS Regulation

Affordable Care Act E-43 Determine whether coverage is of minimum value and affordable If not, weigh the cost of providing affordable minimum value coverage against the potential penalties All of this is effective in 2015 So, employers should be measuring employee hours right now Many employers may want to implement early, during plan renewal in 2014 Work with your broker or carrier to decide Work with employees and governing boards to increase their understanding of the ACA and its impact on your agency and its employees Evaluate your workforce and determine the potential financial impact of the implementation of these ACA requirements Tools are available to help with this analysis

Gaining Operational Efficiency
© 2014 School Services of California, Inc. Now is a good time to take stock of noninstructional operations – finance, facilities, transportation, etc. – to see where your agency lies in the aftermath of this last era of cuts What is budgeted for vendor service contracts? What are your current staffing levels? What are the service levels being provided to the rest of your agency? For example, how long do work orders stay unaddressed? What are the contributions to routine maintenance, food services, and transportation?

© 2014 School Services of California, Inc. The LCFF implementation changes things considerably No more funding earmarked for deferred maintenance A new maintenance-of-effort requirement for transportation Virtually all resources are available to improve student outcomes More efficient operations mean more resources can be directed toward instruction

© 2014 School Services of California, Inc. An example: custodial workload – square footage per custodian Over 500 different measures of operational efficiency – key performance indicators – are now available to California school districts through the ActPoint® KPI Performance Management System check it out! Summary of Results 1st Quartile 45,009 sq ft to 30,357 sq ft 2nd Quartile 29,125 sq ft to 25,806 sq ft Median 25,012 sq ft 3rd Quartile 24,217 sq ft to 17,877 sq ft 4th Quartile 17,857 sq ft to 9,710 sq ft Source: ActPoint® KPI Performance Management System,

Collective Bargaining Issues
© 2014 School Services of California, Inc. This will likely be a very challenging year for collective bargaining There are too many issues, many new concepts, and very little time The typical District will be negotiating most of the following issues: Restoration of past concessions The effects of pension reform Potential compensation increases Professional development related to Common Core The effects of the Affordable Care Act Class-size reduction progress Maintenance of Adult Education and Regional Occupational Program programs All of this on top of the time and energy needed to develop the LCAP We suggest that you set aside plenty of time to prepare and conduct purposeful negotiations

Restoration of Concessions
© 2014 School Services of California, Inc. Given the revenue gains in and the extraordinarily high level of funding proposed for through LCFF, most districts will be able to do something in terms of compensation increases and/or restoration of concessions But not all districts will be able to do more Districts with heavy declining enrollment, low reserves and high levels of deficit spending may be asking for concessions, even as neighboring districts are giving raises Districts with low numbers of LCFF-eligible students may find that step and column movement, health and welfare benefit cost increases, and deficit spending consume all new monies Every district will have a different level of revenue and capacity for addressing compensation For most districts, restoration of concessions will be a top priority

How Much Money is Available?
© 2014 School Services of California, Inc. “You got 11%; you owe me 11%” will not work! Districts receive LCFF dollars for the base grant, the supplemental grant, and the concentration grant The increase in the base grant is generated by all students and is available for expenditure for any legal purpose – good money for negotiations The supplemental and concentration grants are dedicated to “increasing and improving services” for the students who generate the funding If the parties plan to use supplemental or concentration grant funding for any purpose, they must answer the question, “why is this expenditure the most effective use of funds?” So, the parties need to be sure that the LCAP establishes a nexus between the use of funds for compensation and “increased and improved” services Our updated SSC LCFF Simulator® clearly shows the amount of the base grant increase vs. the total increase – use that as a starting point

How Do We Show a Nexus to Student Services?
© 2014 School Services of California, Inc. Services to students are clearly “increased and improved” if you: Extend the number of instructional minutes and the teacher workday Add teachers for supplementary programs or to reduce class sizes Add stipends or special columns on the salary schedule for teachers who improve their qualifications to serve eligible students Increase beginning teacher salaries to attract particularly well-qualified teachers An across the board salary increase might meet the test under the right circumstances, and provided the LCAP details the rationale for raising compensation, but this is not automatic For a District with a low number of eligible students, the supplemental money will need to be narrowly targeted to services for those students The key is the LCAP; it must support the expenditure of supplemental and concentration grant funding

Getting Started E-51 © 2014 School Services of California, Inc. We suggest both parties review the contract carefully and mark articles which must be negotiated this year Sunshined proposals should open all of the appropriate articles and specify what changes are proposed The parties need to spend extra time learning how the new funding system works, understanding new pension rules, and how health care reform will impact the district and its employees We recommend you allow time to exchange more information than was needed in the past Over the past five very difficult years we have seen high numbers of Districts going through the impasse and factfinding process But one of the highest years on record was 2001; a year when funding increased more than 10% Careful preparation and respectful attitudes will be needed this year

The Road Ahead

The Road Ahead F-1 © 2014 School Services of California, Inc. Education wins big again this year due to an improving economy, the temporary taxes, and past program cuts The average increase for K-12 school districts will be 10.9%, or approximately $751 per student This is the second year that the Governor proposes that the lion’s share of new revenues be committed to education, to the exclusion of other major segments of the State Budget The Legislature will have a lot to say about the Governor’s priorities and whether or not they agree with him The Governor’s Budget Proposals do not mark the end of the Budget cycle – they mark the beginning

Enacting the State Budget – CliffsNotes™ Version
While the process is complicated and covers six months, here’s the CliffsNotes™ version January 10 February Early Spring Governor introduces State Budget Proposal Budget Bill introduced in both houses shortly thereafter Budget Trailer Bills are released, providing critical details to the January proposal Budget Subcommittees examine specific details of the Proposal Some policy decisions made, most delayed until May Revision

© 2014 School Services of California, Inc. Following the Governor’s May Revision, which provides an update to the Governor’s Proposal based on new revenue figures and stakeholder feedback, the subcommittees independently finish their work Subcommittees report to their respective Assembly or Senate Budget Committee, which approves their version of a State Budget In “normal” years, a Budget Conference Committee is established to hash out the differences between the two houses Assembly Version Senate Version CONFERENCE COMMITTEE COMPROMISE

© 2014 School Services of California, Inc. Behind the scenes, legislative leaders and the Governor negotiate the “big ticket” items, such as revenue assumptions and overall spending level, the corresponding Proposition 98 minimum guarantee, and any particular policy priorities Last year, a final big ticket item was the details of the LCFF This year, Transitional Kindergarten (TK) may be a sticking point Once agreement is reached, the final version of the State Budget is drafted into a main Budget Bill and corresponding trailer bills, addressing various specific aspects of the Budget To continue to receive their pay, members of the Legislature must approve the State Budget by June 15, which they have done the past two years!

Other Proposals Will Emerge
F-6 © 2014 School Services of California, Inc. Democrats and Republicans will want to lay their claim to revenues generated by an improving economy The only major education proposal introduced to date would expand TK Although not included in the Governor’s Proposal, TK for all four-year-olds is shaping up to be a hot topic in 2014 Introduced this fall in the Assembly Democratic Caucus’s “Blueprint for a Responsible Budget”

Other Proposals Will Emerge
F-7 © 2014 School Services of California, Inc. Echoed by Senate President pro Tempore Darrell Steinberg (D-Sacramento) as a State Budget priority and introduced as SB 837 (Steinberg, et al.): Implementation would begin in , rolling out in a similar fashion to current TK implementation and fully implemented by Class sizes no larger than 20, with each class having a teacher and an associate teacher TK students would earn two-thirds of the K-3 base grant and grade span adjustment Senator Steinberg estimates SB 837 would cost nearly $1 billion ongoing once fully implemented While this is the only major education proposal to date, other proposals are likely to emerge

The Road Ahead F-8 Our past financial problems have stemmed from over-exuberance in good times – not just the onset of bad times It is important for us to look at the prospects for stability that underpin the Governor’s proposals A rollercoaster that can take us up quickly can take us down just as quickly unless there is a safety net

Final Thoughts F-9 © 2014 School Services of California, Inc. It is important to know how much more funding we stand to receive next year It is equally important to understand the state’s requirements related to the expenditure of those funds The days of categorical program compliance and implementing the state’s plan for our neediest students are in the rearview mirror The road ahead is paved with challenge and opportunity – but who best to decide what is needed locally than the dedicated board members, teachers, administrators, classified employees, and parents committed to ensuring a brighter and more hopeful future for our students and our state We are likely to hit a few unexpected bumps along the way as the journey towards local accountability unfolds We stand witness to the rebirth of our school finance system Let history also show that was the year California began to close the achievement gap and started its march toward equity for its children!

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Governor’s Proposals for the State Budget and K-12 Education

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Governor’s Proposals for the State Budget and K-12 Education

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