1. Budget and School Funding Update
Fourth District PTA
Sacramento Safari 2019
February 25, 2019

2. Trends in Funding, Enrollment, and Spending

3. K-12 Funding Per Student Is Rising

4. Funding Increases Under Local Control Funding Formula Have Varied
Increase Per Student for 50 Largest Districts, to

5. Statewide Enrollment Projected to Decline for the Foreseeable Future
Annual Percent Change

6. Enrollment Trends Vary by Region
Enrollment Change, to

7. Variation in Enrollment Across State’s Largest Districts
Change From to

8. Most School Spending Is for Instruction
District Spending by Activity

9. Districts Are Reducing Student-Teacher Ratios

10. Districts Increasing Teacher Salaries, Spending More on Health Benefits
Average Per Full-Time Teacher

11. Pension Costs

12. Background on Pensions
Teachers and Other School Employees Receive Pensions When They Retire
Each retiree's pension is determined by final salary, years of service, and age at retirement.
Pensions Are Funded by School Districts, Teachers, and the State

13. Addressing Pension Shortfalls
Pension Systems Have “Unfunded Liabilities”
Payments into the pension systems have not been large enough to cover the benefits earned to date.
Unfunded liabilities are $107 billion for teachers’ pension system and $24 billion for other school employees.
State Enacted Funding Plan in 2014
Increased contributions from teachers, districts, and the state over a seven-year period.
Contributions for non-teaching employees also rising.

14. Funding Plan Adopted to Put Pension System on a Sustainable Path
Assets as Percent of Accrued Liabilities

15. Implications for Districts
District Contribution Rates Are Increasing
Before the funding plan, district pension costs were equal to 8.25 percent of each teacher’s salary.
Under current law, district costs are set to reach 19.1 percent of each teacher’s salary by
Rates for non-teaching employees also are rising.

16. District Pension Costs Are Rising
Annual District Contributions (In Billions)

17. The Governor’s Budget

18. Revenue Growth Projected for 2019-20
General Fund Revenue, Dollars in Billions
Change
Amount
Percent
Personal Income Tax
$97.7
$100.5
$2.8
2.9%
Sales Tax
26.2
27.4
1.2
4.5%
Corporation Tax
12.3
13.1
0.8
6.4%
Other Revenue
4.7
5.1
0.3
6.8%
Total Revenues
$141.0
$146.1
$5.1
3.6%

19. Governor’s Proposed Allocation of $20.6 Billion Surplus

20. Key Features of Governor’s Budget
Allocates $9.7 Billion for Debts and Liabilities
A little less than half to eliminate recession-era borrowing and accounting shifts.
Just under one-third to pay down pension liabilities associated with state employees.
About one-quarter to pay pension liabilities associated with school districts.
Adds $3 Billion to State Reserves
Total state reserves would be $18.5 billion.

21. Relatively Large Increases Proposed for Universities, Early Education System
Increases for the Universities
$300 million (7.6 percent) CSU and $540 million (6.9 percent) for UC.
One-Time Early Education Initiatives
$750 million for facility grants to encourage districts to convert part-day kindergarten programs to full-day programs.
$500 million for child care facilities and workforce education.
Other Notable Increases
Housing and homelessness.
Disaster response and recovery.
Earned Income Tax Credit.

22. Assessing the Governor’s Budget
Prudent Mix of One-Time and Ongoing Spending
Proposed budget makes progress toward addressing debts and liabilities, improving the state’s long-term position.
Increase in ongoing spending generally consistent with the level we think the budget can support.
Broader Issues to Consider
Building additional reserves remains important because state revenue could drop sharply during a recession.
State faces some other risks—for example, wildfires and other disasters are becoming more frequent and costly.

23. Proposals Affecting K-12 Education

24. Overview of Governor’s K-12 Proposals
$2.2 Billion to Cover a Cost-of-Living Adjustment (COLA)
Statutory COLA rate estimated at 3.46 percent.
Applies to Local Control Funding Formula and several other K-12 programs.
$577 Million for Special Education Grants

25. Governor Proposes Paying for Some District Pension Costs in 2019-20 and 2020-21
Proposes $700 Million in Pension Cost Relief
Consists of $350 million/year in and
Costs Would Still Increase, But More Slowly
Required district contribution for teachers currently is 16.3 percent of salary.
Rate would grow to 18.1 percent of salary (instead of 19.1 percent) by

26. Assessing the Governor’s Proposals
Strengths
Estimate of the COLA rate seems reasonable.
Governor allocates most new funding to the Local Control Funding Formula and other existing programs, which provides continuity for district as they develop their budgets and academic plans.
Weaknesses
Budget for schools includes very little one-time funding, which exposes ongoing programs to more risk if the state enters an economic downturn.

27. Special Education

28. Background on Special Education
Federal Law Sets Forth District Responsibilities
Identify students with disabilities.
Provide specialized support to help those students access their education.
Districts Spent Roughly $13 Billion Providing Special Education Services in
Examples of services include individual therapy, specialized academic instruction, and behavioral support.

29. Special Education Funded From Several Sources

30. Allocation of State Funding for Special Education
Current Funding System Is Complex
State allocates its share of funding through nearly a dozen different programs.
Districts Receive Most Funding Based on Their Total Enrollment
Not based on how many students have disabilities.
Eliminates incentive to “over-identify” students for services.
Per-pupil funding rates vary across the state, largely for historical reasons.

31. Share of Total K-12 Enrollment
A Growing Share of California Students Receive Special Education Services
Share of Total K-12 Enrollment
Most students have relatively mild disabilities, but most growth is among those with severe disabilities.
No consensus on reasons for increase:
Better diagnostics (includes reclassification of disabilities plus more students disabilities). Ex., new DSM in 2013.
Parental risk (older parent ages).
Some parts not explained. Not vaccines.
Increase applies across the board, applies to most districts, most states, and even international. California may be more rapid than others.

32. Governor Proposes New Grants for Special Education
Grants Would Total $577 Million Statewide
$390 million ongoing ( and subsequent years).
$187 million one time ( only).
Grants would be on top of existing funding.
Two Criteria to Receive Funding
District enrollment is more than 55 percent English learners and low-income students.
District has above-average share of students with disabilities.

33. Potential Uses of Grant Funding
Districts Encouraged to Use Funding for School Readiness and Early Intervention Services
These are services for young children that are intended to reduce the need for special education services later on.
Legal Requirement Is Much Less Restrictive
Districts could use funds for a wide variety of purposes, including to cover their existing special education costs.

34. Concerns With Governor’s Proposal
Adds New Complexity to a Complex System
Creates another state special education program on top of nearly a dozen other funding streams.
Creates Poor Incentives
Districts that succeed in reducing the number of students requiring special education services would receive less funding than other districts.
Leaves Existing Funding Inequities in Place
Current variations in special education funding would remain.

35. Recommend Rejecting Governor’s Special Education Proposal
State Has Better Options to Achieve Its Special Education Objectives
Equalize Existing Funding Rates
Equalizing existing special education funding rates (up to the 90th percentile) would cost $333 million.
Fund Preschool Special Education
If interested in promoting school readiness and early intervention, state could create a program specifically targeted toward preschool special education.