EADM 284 State Budget Summary

Major Changes From May Revision 2 © 2016 School Services of California, Inc. Item May Revision 2016-17 State Budget LCFF Gap Funding 54.84% or $2.98 billion 54.18% or $2.94 billion One-time Discretionary Funds for 2016-17 $1.41 billion or $237 per ADA* $1.28 billion or $214 per ADA College Readiness No specific proposal $200 million Preschool 8,877 full-day slots, $100 million (over 4 years) Classified Teacher Program $20 million *Average Daily Attendance (ADA)

Proposition 98 Minimum Guarantee 3 Proposition 98 Minimum Guarantee Once again, the Legislature has adopted the Governor’s May Revision estimates for Proposition 98 funding 2014-15: $67.2 billion 2015-16: $69.1 billion 2016-17: $71.9 billion © 2016 School Services of California, Inc.

Proposition 98 Minimum Guarantee 4 © 2016 School Services of California, Inc. The differences between the Legislative Analyst’s Office (LAO) and Administration estimates comes down to assumptions LAO assumes: Higher state revenues Higher local property tax revenues Source: LAO – 2016-17 Budget: Analysis of the Proposition 98 May Revision Budget Package, May 16, 2016, Page 4

2016-17 Local Control Funding Formula 5 2016-17 Local Control Funding Formula The Budget Act appropriates $2.942 billion for continued implementation of the LCFF New funding is estimated to close the gap between 2015-16 funding levels and LCFF full implementation targets by 54.18% 87% of the gap closed in the first four years Reaching to almost 96% of target funding No cost-of-living adjustment (COLA) in 2016-17 on the LCFF base grant targets 2016-17 LCFF growth provides an average increase of about $500 per ADA, divided 50/50 between base and supplemental funding Remember that individual results will vary widely © 2016 School Services of California, Inc.

2016-17 LCFF Target Funding Factors 14 No COLA for 2016-17 keeps base grant rates at 2015-16 levels Grade K-3 – 10.4% increase for smaller average class enrollments Grades 9-12 – 2.6% increase provided for Career Technical Education Grade Span 2016-17 Base Grant Per ADA GSA* 2016-17 Adjusted Grants K-3 (10.4%) $7,083 $737 $7,820 4-6 $7,189 – 7-8 $7,403 9-12 (2.6%) $8,578 $223 $8,801 © 2016 School Services of California, Inc. *Grade Span Adjustment (GSA)

2016-17 LCFF Target Funding Factors Supplemental and concentration grants, based on the Unduplicated Pupil Percentage (UPP), are also unchanged from 2015-16 because no COLA is applied to the LCFF base grants Grade Span 2016-17 Adjusted Grants Per ADA 20% Supplemental Grant – Total UPP 50% Concentration Grant – UPP Above 55% K-3 $7,820 $1,564 $3,910 4-6 $7,189 $1,438 $3,595 7-8 $7,403 $1,481 $3,702 9-12 $8,801 $1,760 $4,401 © 2016 School Services of California, Inc.

Headwinds 8 LCFF is now almost 96% fully funded Since 2012-13, rapid restoration of and growth in Proposition 98, as well as slow or no ADA growth, has fueled LCFF implementation The “last mile” may be the hardest Proposition 30 of 2012 expires, slowing Proposition 98 growth COLAs are projected to be low over the next few years – in the range of 1% to 3% The boom years of Proposition 98 growth may be over Maintenance factor, generated during lean years, has been significantly paid down and was the primary driver of accelerated annual increases © 2016 School Services of California, Inc.

9 Headwinds © 2016 School Services of California, Inc.

10 Impact of Proposition 30 3 © 2016 School Services of California, Inc.

What Happens With Proposition 30 Expiration? 11 What Happens With Proposition 30 Expiration? EPA funds are 12% of school revenues What happens if the temporary Proposition 30 tax surcharge on high-income earners isn’t extended? Current law requires the state General Fund to backfill losses in EPA What does the revenue pie look like after EPA tax revenues expire? State share of education revenues goes up The Department of Finance estimates for LCFF implementation already incorporate the impact of the loss of EPA revenues No additional adjustments for loss of the EPA revenues are needed for budget forecasts If the income tax surcharge is extended, then additional revenues may become available through the Proposition 98 minimum guarantee © 2016 School Services of California, Inc.

What Happens With Proposition 30 Expiration? 12 What Happens With Proposition 30 Expiration? 3 © 2016 School Services of California, Inc.

One-Time Discretionary Funds 13 One-Time Discretionary Funds The 2016-17 Budget Act contains $1.28 billion in one-time discretionary funds distributed on the basis of 2015-16 Second Principal Apportionment ADA, or approximately $214 per ADA These funds are available for any purpose established by the local board As in prior years, these funds offset outstanding mandate claims on a dollar-for-dollar basis for those districts with claims Claims deemed to have been paid by these funds are subject to audit by the State Controller’s Office (SCO) If the SCO audit disallows a claim, the district would not remit the amount disallowed; the disallowance reduces other outstanding claims © 2016 School Services of California, Inc.