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Governor's Budget for 2013-14

Letter Head: Tom Torlakson, State Superintendent of Public Instruction, California Department of Education

February 26, 2013

Dear County and District Superintendents, Direct-Funded Charter School Administrators, and County Chief Business Officers:

GOVERNOR’S BUDGET FOR 2013-14

On January 10, 2013, Governor Edmund G. Brown Jr. released his proposed budget for the 2013–14 fiscal year. This letter, prepared by the California Department of Education (CDE), provides information on the Governor’s proposals that affect K–12 education and child development programs.

Copies of this document, as well as other budget-related documents, are available through the CDE Education Budget Web page at http://www.cde.ca.gov/fg/fr/eb/. Official state budget documents, including proposed trailer bill language, are available through the Department of Finance Web site at http://www.dof.ca.gov. The budget bills are Assembly Bill (AB) 73 and Senate Bill (SB) 65.

Overview

The 2013–14 Governor’s Budget reflects a significant improvement in the state’s finances due to the economic recovery and voter approval in the November 2012 election of temporary increases in sales and use tax and personal income tax (Proposition 30) as well as increased corporate income taxes for multistate businesses (Proposition 39). The Governor’s budget summary document indicates that economic recovery has begun and provides a plan to reduce the “wall of debt” the state has accumulated after years of deficits.

For the first time since 2008–09, the state does not face a multi-billion-dollar deficit. The Governor’s budget projects General Fund (GF) revenues and transfers of $98.5 billion and proposes $97.7 billion in GF expenditures. These budget figures include an estimated $1 billion reserve and would result in an $851 million operating surplus at the end of 2013–14. Including all fund sources, the spending plan proposes $138.6 billion in GF and special fund expenditures, up 4.5 percent from 2012–13.

Proposition 98 Changes

For 2012–13, the Governor’s Budget estimates the minimum funding level for kindergarten through grade twelve (K–12) education and community colleges under Proposition 98 to be $53.5 billion. Various changes in average daily attendance (ADA) and other factors have resulted in an over-appropriation of $162.8 million in 2012–13. To align the expenditures with the Proposition 98 amount, the budget proposes to reclassify $162.8 million in appropriations as meeting the Quality Education Investment Act funding obligation.

For 2013–14, the Governor’s Budget proposes Proposition 98 funding at $56.2 billion ($49.7 billion K–12), an increase of $2.7 billion ($2.1 billion K–12), or 5 percent, over the 2012–13 revised funding level. An additional $2.1 billion is available for K–12 schools because funds for deferral paydowns in 2012–13 are freed up for ongoing expenditures. Major components of the increased funding for K–12 schools in 2013–14 include:

  • Paydown of deferrals: $1.8 billion

  • Implementation of a new Local Control Funding Formula (LCFF): $1.6 billion

  • Implementation of Proposition 39, the California Clean Energy Jobs Act: $400.5 million

  • Increase in funding for the mandates block grant to reflect the addition of two programs: $100 million

Proposition 98 funding under the budget proposal would be $8,304 per ADA, up from $7,967 in 2012–13. Including all funding sources, excluding bond funds, the total proposed 2013–14 funding would be $11,742 per ADA, up from $11,455 in 2012–13.

Proposition 30: Schools and Local Public Safety Protection Act

With the passage of Proposition 30, schools were spared billions of dollars of mid-year 2012–13 trigger cuts. The measure imposes a temporary (four-year) 0.25 percent increase in the state sales tax and a temporary (seven-year) increase on annual earnings over $250,000 and guarantees that local governments will receive tax revenues for responsibilities transferred to them in 2011.

Proposition 39: California Clean Energy Jobs Act

The budget estimates that Proposition 39 will increase GF revenues by $900 million in 2013–14 and that the Proposition 98 minimum funding level will increase by $526 million. Under the measure, $450 million of the revenues generated in 2013–14 will be transferred into a special fund for energy efficient projects. All of these funds are proposed to be allocated to K–12 schools ($400.5 million) based on ADA and community colleges ($49.5 million) based on full-time equivalent students.

Local Control Funding Formula

The Governor’s Budget proposes to replace the current K–12 finance system with a new LCFF. For school districts and charter schools, the proposal creates base, supplemental, and concentration grants in place of most existing K–12 funding streams, including revenue limits and most state categorical programs.

The base grant varies by grade span. According to the proposal, the average base grant, when fully phased in, will be equal to the current average undeficited school district revenue limit. The base grant funds may be used for any local educational priority.

Supplemental grants, equal to 35 percent of the base rate, would be generated based on the proportion of pupils who are English learners (ELs), eligible for free or reduced-price meals (FRPM), and/or in foster care (unduplicated count). Concentration grants, equal to 35 percent of the base rate, would be provided for each eligible student above a 50 percent threshold. Supplemental and concentration grants would be available for any educational purpose that “substantially benefits” the students generating the funding.

Additional funding would be provided to the K–3 and 9–12 grade spans. The K–3 adjustment would be provided to support K–3 class size reduction (CSR) at a ratio of 24:1 unless a collectively bargained alternative is agreed to by the school district. As a condition of the receipt of these funds, school districts would be required to demonstrate progress toward maintaining a ratio of 24:1 until the LCFF is fully implemented. The funding for this adjustment would be equivalent to 11.23 percent of the K–3 base grant. A funding adjustment would also be provided for grades 9–12, at an amount equal to 2.8 percent of the 9–12 base grant, for career technical education (CTE). The proposed LCFF trailer bill contains language requiring school districts, as part of new local control and accountability plans, to identify how LCFF funds will be used to increase the percentage of students who have successfully completed CTE programs.

A summary of the base funding and supplemental and concentration grants, with adjustments for K–3 CSR and CTE, is shown in Figure 1.

Figure 1 LCFF Grade Span Funding

Grade Span Base Grant K–3 CSR and CTE Adjustments Supplemental Grant: 35% (unduplicated FRPM, EL, Foster Youth) Concentration Grant: 35% (unduplicated FRPM, EL, Foster Youth exceeding 50%)
K–3
$6,342
$712.21
$2,219.70
$2,219.70
4–6
$6,437
N/A
$2,252.95
$2,252.95
7–8
$6,628
N/A
$2,319.80
$2,319.80
9–12
$7,680
$215.04
$2,688.00
$2,688.00

Funding for the current Targeted Instructional Improvement Block Grant Program and Home-to-School Transportation programs would be distributed as permanent add-ons to the LCFF allocations for each school district currently receiving these funds. School districts would have flexibility to use these funds for any purpose.

County offices of education would receive LCFF funding through a two-part formula with funding for oversight responsibilities and instructional activities. The oversight responsibilities would be funded through a county office of education operations grant, with amounts based on (1) a minimum grant per county; (2) the number of school districts in the county; and (3) the ADA in the county attributable to school districts, charter schools, and schools operated by the county superintendent.

A summary of county funding for oversight responsibilities is shown in Figure 2.

Figure 2 County Oversight Funding

Per county
$655,920
Per school district
$109,320
Per ADA for ADA up to 30,000
$70
Per ADA for ADA between 30,000 and 60,000
$60
Per ADA for ADA between 60,000 and 140,000
$50
Per ADA for ADA over 140,000
$40

The instructional activities of county offices of education would be funded depending on the category of pupil served. Certain pupils served by county offices (on probation, probation referred, and expelled) would receive an alternative education grant consisting of a base grant of $11,045; supplemental grants equal to 35 percent of the base rate for unduplicated counts of pupils who are ELs, FRPM eligible, and/or in foster care; and concentration grants, equal to 35 percent of the base rate, for each eligible pupil above a 50 percent threshold.

Juvenile court school pupils would be funded with a base grant of $11,045, supplemental grants equal to 35 percent of the base grant, and concentration grants equal to 17.5 percent of the base grant. (In other words, all juvenile court school pupils would be deemed eligible for supplemental grants.)

Other pupils served by county offices of education would be funded based on funding of their home school district.

The budget proposes a “hold harmless” approach to implementation of the LCFF. School districts, charter schools, and county offices of education whose current funding exceeds their LCFF funding targets would retain the higher level of funds, while districts whose current funding is below their LCFF targets would receive increased funding each year as funds become available until the LCFF is fully implemented. The budget projects that target LCFF funding levels would be fully phased in over the next 7 to 10 years.

Accountability

As part of the LCFF proposal, the Governor’s Budget proposes that school districts, county offices of education, and direct-funded charter schools produce and adopt a local control and accountability plan that aligns with the entity’s annual budget and spending plan. Among other requirements outlined in the proposed LCFF trailer bill, plans for school districts and county offices of education must identify how state funding received through the new funding formula will be used, among other things, to:

  • Improve basic conditions for student achievement such as sufficient textbooks and instructional materials, safe and clean school facilities, and qualified teachers.

  • Implement programs that increase the Academic Performance Index scores of pupil subgroups.
  • Improve basic conditions for student achievement such as sufficient textbooks and instructional materials, safe and clean school facilities, and qualified teachers.

  • Implement programs that increase the Academic Performance Index scores of pupil subgroups.

  • Implement programs or instruction that benefit FRPM-eligible students, ELs, foster youth, and students attending juvenile court schools.

  • Implement Common Core State Standards.

  • Improve progress toward college and career readiness.

  • Improve high school graduation rates.
Flexibility

The Governor’s budget proposes to make permanent current flexibility provisions that do the following:

  • Eliminate minimum contribution requirements for routine maintenance.

  • Eliminate the requirement to set aside funds for deferred maintenance.

  • Allow school districts to use the proceeds from the sale of any real and personal surplus property for any one-time general fund purposes.
Charter Schools

The Governor’s Budget proposes to shift administration of the Charter School Facility Grant ($92 million) and Charter School Revolving Loan programs ($12.4 million) from the CDE to the California School Finance Authority.

The budget proposes to modify the SB 740 funding determination process for non-classroom-based charter schools by requiring charter schools to undergo funding determinations only in the first and third years of operation rather than after two years of operation and periodically thereafter. A charter school would be required to submit a funding determination after its third year of operation in specific situations, including (1) the charter school receives a notice of intent to revoke the charter; (2) the charter school receives a “notice to cure” for financial issues; (3) the charter receives a significant audit exception related to its apportionment; or (4) the charter initiates a request to increase its current funding level.

Additionally, the budget proposes to expand eligibility for the Charter School Facility Grant Program to non-classroom-based charter schools. It also proposes to extend, for an additional five years, the current requirement that school districts offer first right of refusal for identified surplus property and facilities to charter schools before selling those assets to other entities or disposing of them.

Adult Education and Apprenticeship Programs

The Governor’s Budget proposes to shift responsibility for adult education to the California Community Colleges (CCC). The proposal provides an increase in CCC funding of $300 million to support the program. The existing K–12 funding in the adult education item ($634.8 million, flexible funding) would be consolidated into the LCFF. School districts currently receiving this funding will not lose it; instead, it will become part of the school district’s “hold harmless” funding level.

Additionally, the budget proposes to shift $15.7 million for apprenticeship programs to the CCC.

Special Education

The Governor’s budget proposes to eliminate integration of federal funds in the state’s AB 602 calculation. Federal funds will continue to be allocated based on the federal funding formulas. State funds would be allocated based on the state’s AB 602 methodology without adjustments based on federal funding levels. The budget also proposes to fold allocations for program specialists/regionalized services and small special education local plan areas into the main AB 602 formula.

The budget includes $354.3 million from the GF and $69 million in federal funds for mental health services to be allocated based on ADA.

The budget also proposes to consolidate multiple categorical programs into three combined programs for low incidence disabilities, Workability, and personnel development.

Finally, the budget provides a cost-of-living adjustment of 1.65 percent for special education and growth funding of $3.6 million.

Mandates Block Grant

The budget proposes an increase of $100 million to the mandates block grant to support costs associated with the Graduation Requirements and Behavioral Intervention Plans (BIP) mandates. The budget proposes revisions to the BIP mandate requirements that would eliminate a portion of the costs of this mandate.

Child Development

The budget proposes $1.3 billion in funding for child development programs ($763.2 million non-Proposition 98 GF and $546.5 million federal funds). The proposal also includes $480.8 million Proposition 98 GF for State Preschool and assumes an additional $3.6 million will be available for State Preschool from the collection of family fees. The Governor also proposes that the California Department of Social Services convene a stakeholder workgroup to assess opportunities for streamlining child care delivery and other improvements.

Technology-based Instruction

The budget proposes statutory changes to enable school districts to offer asynchronous online courses through an “outcome-focused” independent study agreement, thereby holding schools accountable for student achievement. Students under the asynchronous online program would be required to demonstrate “satisfactory educational progress” using measures such as applicable statewide accountability measures and assessments, the completion of assignments and required labs, or other indicators that the student is working on assignments and learning required concepts as determined by the supervising certificated employee.

“Technology-based asynchronous instruction” is defined in the budget proposal as a class or course in which the student and the certificated employee who is providing instruction may be online at different times.

What’s Next?

The Governor’s Budget proposal contains significant education reform proposals that will undoubtedly be the subject of debate and discussions throughout the spring. The deadline for final legislative action on the budget is June 15. The budget takes effect on July 1, 2013.

If you have any questions regarding the 2013–14 Governor’s Budget, please contact the Government Affairs Division by phone at 916-324-4728. You may also contact Carol Bingham, Senior Fiscal Policy Advisor, Fiscal Policy Office, by e-mail at cbingham@cde.ca.gov.

Sincerely,

Tom Torlakson

TT:cb
2013-01472

NOTICE: The guidance in this letter is not binding on local educational agencies or other entities. Except for the statutes, regulations, and court decisions that are referenced herein, this letter is exemplary, and compliance with it is not mandatory. (See Education Code Section 33308.5.)

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