San Diego Convention Center CBO20 LCFF Budgeting and Planning March 30 – April 2, 2015 San Diego Convention Center CBO20 LCFF Budgeting and Planning Presented by: Robert Miyashiro, Vice President Sheila Vickers, Vice President Michael Ricketts, Associate Vice President

© 2015 School Services of California, Inc. How much of the purchasing power lost during the recession has been restored through the Local Control Funding Formula (LCFF)?

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© 2015 School Services of California, Inc. 4 Must all LCFF funds (base, supplemental, and concentration grants) be identified in the Local Control and Accountability Plan (LCAP), or --- are we only required to document the use of supplemental and concentration grant funds?

Supplemental/Concentration Grant Funds © 2015 School Services of California, Inc. 5 Supplemental/Concentration Grant Funds Regulations make it clear that the LCAP must describe how supplemental and concentration grant funds are being used to support increased and/or improved services to eligible students Also, the LCAP must describe actions and services for all students, so base grant expenditures should be specified as necessary in support of these actions and services But there is no requirement to account for all base grant funds – in fact, base grant funds are required to support other operational purposes

© 2015 School Services of California, Inc. 6 What are the long-term implications of the Proposition 98 minimum funding guarantee for achieving the LCFF target by 2020-21 and reaching funding “adequacy?”

Long-Term Proposition 98 and LCFF © 2015 School Services of California, Inc. 7 Long-Term Proposition 98 and LCFF Over the long term, Proposition 98 is funded based on Test 2 – per capita personal income change Over the last two decades, per capita personal income has averaged about 3.8% annually; inflation outlook is about 2.3% While the early years of LCFF have seen huge increases in gap funding ($2.1 billion in 2013-14; $4.7 billion in 2014-15; $4 billion proposed for 2015-16), these increases will taper off “Adequate” funding for K-12 education will be ever elusive under Proposition 98

© 2015 School Services of California, Inc. 8 The LCFF is a distributional, rather than adequacy-based, formula. How is it changing funding statewide?

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© 2015 School Services of California, Inc. 13 Can supplemental and concentration grant revenues be used to fund increased expenses in our special education program?

© 2015 School Services of California, Inc. 14 Special Education Yes, to the extent that the supplemental/concentration grant funds are generated by special education students Those that are also in the unduplicated count Remember – the funds must be used to increase or improve services, so they must be used in a supplemental way

© 2015 School Services of California, Inc. How do LCFF cost-of-living adjustments (COLAs) compare with the cost increases districts will likely face?

© 2015 School Services of California, Inc. 16 LCFF and COLAs During the implementation phase, the LCFF does not provide COLAs in the same manner as under revenue limits Base grants, which support general district operations, account for about half of the proposed $4 billion increase in 2015-16, or about $330 per ADA Statutory COLAs are forecast to average 2.3% through 2018-19 By 2018-19, the Department of Finance (DOF) projects that LCFF gap funding will be $976 million, which equates to a base grant increase of about $80 per ADA

© 2015 School Services of California, Inc. 17 If the memorandum of understanding with our teachers’ union for an alternate class-size maximum for grades Transitional Kindergarten (TK) through 3 expires, what is our requirement for class size under the progression to 24:1?

Requirement for Class Size © 2015 School Services of California, Inc. 18 Requirement for Class Size In the absence of a precedent, to minimize the risk of your districts losing the grade span adjustment (GSA) funds We recommend this conservative approach: Plan for making progress to the point that you would have been required to all along without a collectively bargained agreement Start with actual average class sizes in 2012-13 Calculate the progress toward 24:1 required each year since 2012-13 Reduce class sizes to that level

© 2015 School Services of California, Inc. 19 What happens if Proposition 30 taxes expire and a recession hits? What should we be prepared for?

Proposition 30 Expiration and LCFF © 2015 School Services of California, Inc. 20 Proposition 30 Expiration and LCFF Proposition 30 provides about $8 billion in additional General Fund revenue, but the sales tax rate expires in 2016 and the high bracket income tax rate expires in 2018 The revenue loss will squeeze Proposition 98 funding The DOF projects declining increases in LCFF gap funding from $4.7 billion in 2014-15 to under $1 billion in 2018-19, but no recession ITR Economics forecasts a recession in 2019 With a recession, gap funding could be zero

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