Budget Act for 2014-15
Dear County and District Superintendents, Direct-Funded Charter School Administrators, and County Chief Business Officers:
BUDGET ACT FOR 2014–15
On June 20, 2014, the Governor signed the 2014 Budget Act and related trailer bills, putting into place a spending plan for 2014–15 and a revised spending plan for 2013–14. This letter, prepared by the California Department of Education (CDE) fiscal policy staff, provides information on the budget actions that affect kindergarten through grade twelve (K–12) education and child development programs.
Copies of this document, as well as other budget-related documents, are available on the CDE Education Budget Web page at http://www.cde.ca.gov/fg/fr/eb/. Official state budget documents are available through the California Department of Finance Web site at http://www.dof.ca.gov/.
The 2014 Budget Act reflects a continued improvement in the state’s finances. The spending plan continues to reduce the “wall of debt” the state had accumulated after years of deficits and begins to reinvest in the state’s core educational services, while also promoting savings through a rainy day fund.
The 2014–15 budget package projects General Fund (GF) resources of $109.4 billion and GF expenditures of $108 billion, with an estimated $1.4 billion reserve at the end of 2014–15. GF expenditures for K–12 education are $45.3 billion and total funding for K–12 education, including state, local and federal funds, is $76.6 billion.
Proposition 98 Changes
The budget package reflects Proposition 98 funding of $58.3 billion for K–12 and community colleges (K–14) in 2013–14, an increase of $3 billion over the 2013 Budget Act. For K–12 only, Proposition 98 funding is $51.9 billion, an increase of $2.7 billion over the 2013 Budget Act. The K–12 funding level represents funding of $8,670 per unit of K–12 average daily attendance (ADA) in 2013–14.
The budget package includes a Proposition 98 funding level of $60.9 billion for 2014–15, an increase of $2.6 billion over the 2013–14 revised budget level. For K–12 only, Proposition 98 funding is $54.2 billion, an increase of $2.3 billion over the 2013–14 revised budget level. The K–12 funding level represents funding of $9,067 per ADA in 2014–15. This represents a significant improvement in the Proposition 98 funding levels for K–12 education, when compared to the $7,006 per ADA provided in 2011–12. Major components of the budget are described below.
The budget package includes funding for a 0.85 percent cost-of-living adjustment for the Local Control Funding Formula (LCFF) and specifies categorical programs that continue to be funded outside of the LCFF, including Special Education, Child Nutrition, Foster Youth Services, and American Indian programs.
The budget package eliminates K–12 intra-year deferrals and provides $4.7 billion GF Proposition 98 to reduce K–12 inter-year deferrals, leaving a remaining deferral balance of $897 million at the end of the 2014–15 fiscal year. In addition, the budget package includes a “trigger” to pay down the remaining K–12 deferral obligations if GF revenues exceed budget projections.
Local Control Funding Formula
The Department of Finance originally projected that an eight-year phase-in period would be needed to fully fund the LCFF. The 2014 Budget Act remains on track to achieve that objective, providing $4.75 billion GF Proposition 98 to support the second year of implementation of the LCFF. The Department of Finance estimates that this increase will close 29.56 percent of the remaining gap for school districts and charter schools and will fully fund the LCFF for county offices of education (COEs).
Rainy Day Fund and Reserve Requirements
In response to California’s volatile revenue cycles, the Legislature enacted and the Governor signed Assembly Constitutional Amendment No. 1 (ACA 1), which places a measure on the November 2014 ballot to establish a new rainy day fund to replace the existing Budget Stabilization Account. If approved by voters, the measure would:
- Require deposits into the fund based on GF revenues and the portion of GF revenues attributed to capital gains taxes.
- Require paying down state debt and liabilities as the reserve accumulates, subject to limits on withdrawals.
- Limit the balance in the fund to 10 percent of GF revenues.
- Establish a Proposition 98 reserve (Public School System Stabilization Account—PSSSA). Deposits would not be made to this account until the current maintenance factor obligation is fully paid off.
The budget package modifies current law as it relates to ending fund balances for school districts. First, beginning in 2015–16, a school district that proposes to adopt or revise a budget that includes an ending fund balance that is two to three times higher than the state’s minimum recommended reserve for economic uncertainties must substantiate the need for the higher balance.
Second, in a year immediately following a PSSSA deposit, a school district’s adopted or revised budget may not contain an ending fund balance higher than two to three times higher than the state’s minimum recommended reserve for economic uncertainties, depending on the school district’s ADA. A county superintendent may waive the prohibition, pursuant to specified conditions, for up to two consecutive years within a three-year period.
The budget package changes some of the administrative procedures associated with Independent Study (IS) programs. Specifically:
- The duration of the IS program agreement may be up to one school year. Previous law limited program agreements to one semester.
- A signed agreement may be maintained on file electronically.
- School districts, COEs, and charter schools (local educational agencies—LEAs) are no longer required to sign and date pupil work products when assessing the time value of pupil work products for apportionment purposes.
Beginning in 2015–16 the budget package also authorizes LEAs to offer independent study courses to K–12 pupils if certain conditions are met, including:
- The LEA must annually certify that courses are of the same rigor and educational quality as a classroom-based equivalent course. The educational minutes and number of course credits for each course must be consistent with that of an equivalent classroom-based course.
- Courses must be taught under the general supervision of certificated employees who hold the appropriate subject matter credential, meet the federal requirements for a highly qualified teacher, and are employed by an LEA in which the pupil is enrolled or by an LEA that has a memorandum of understanding with the LEA in which the pupil is enrolled.
- Teacher-student audio or visual communication to assess whether the student is making satisfactory educational progress cannot be less than twice per calendar month.
- The LEA must maintain pupil-to-teacher ratios equivalent to those of classroom-based courses for the applicable grade span, unless an alternative ratio is agreed to through collective bargaining.
Career Pathways Trust Program
The budget package includes $250 million in one-time GF Proposition 98 resources to support a second cohort of competitive grants. The Career Pathways Trust was initially authorized in the 2013 Budget Act and provides grant awards to improve career technical programs and linkages between employers, schools, and community colleges.
Mandates and Common Core
The budget package provides $400.5 million in one-time funds to be allocated on a per ADA basis to LEAs. The funds would first satisfy any outstanding K–12 education mandate claims. Language in the budget expresses legislative intent for LEAs to prioritize the use of the funds for activities related to the implementation of Common Core State Standards including professional development, instructional materials, and technology infrastructure.
In addition, the budget adds four newly approved mandates to the $218.2 million Mandate Block Grant:
- Charter Schools IV
- Parental Involvement Programs
- Public Contracts
- Uniform Complaint Procedures
The budget plan does not provide additional funding for these programs.
Child Development/Early Education
The budget begins to restore the cuts that have been made to early learning programs over the past several years, with a total of $150 million GF Proposition 98 for California State Preschool (CSPP) and $100 million GF for General Child Care and Alternative Payment Programs.
California State Preschool Program
The budget package provides:
- $29 million GF Proposition 98 for 7,500 part-day slots effective July 1, 2014.
- $38 million GF for 7,500 General Child Care wrap-around slots for the CSPP effective July 1, 2014.
- $1 million GF Proposition 98 for 4,000 part-day CSPP slots effective June 15, 2015.
- $2 million GF for 4,000 General Child Care wrap-around slots for the CSPP effective June 15, 2015.
- $10 million GF Proposition 98 for transfer into the Child Care Facilities Revolving Fund to be used for renovation or repair of existing LEA facilities, or for new relocatable child care facilities for lease to LEAs that provide CSPP.
- $25 million GF Proposition 98 for professional learning. Specifics on how these dollars will be administered will be determined in future legislation. These funds are available for expenditure over a three year period.
- $50 million GF Proposition 98 for Quality Rating and Improvement System (QRIS) block grants. These funds are to be allocated to local consortia, which must allocate the funds to CSPP contracting agencies, for support of local early learning quality rating and improvement systems.
- $25 million GF Proposition 98 to increase the part-day standard reimbursement rate by 5 percent, from $21.22 to $22.81.
- $15 million GF Proposition 98 to backfill fee revenue lost as a result of repeal of the family fee for part-day preschool.
Finally, the budget allows CSPP providers to retain an additional 10 percent in their reserve funds for purposes of professional learning for CSPP staff.
The budget package aligns the transitional kindergarten curriculum to the California Preschool Learning Foundations that were developed by the CDE, and phases in new requirements for transitional kindergarten teachers. After July 1, 2015, new transitional kindergarten teachers will be required to have a credential from the Commission on Teacher Credentialing and by August 2020 have one of the following:
- 24 units in early childhood education or child development or both.
- Professional experience in a classroom setting with preschool-age children that is comparable to the 24 units of education (as determined by an LEA).
- A child development permit issued by the Commission on Teacher Credentialing.
General Child Care and Alternative Payment Programs
The budget package provides:
- $4 million GF for 500 Alternative Payment slots.
- $13 million GF for 1,000 General Child Care slots.
- $24 million GF to increase the standard reimbursement rate by 5 percent, increasing the full-day rate from $34.38 per day to $36.10 per day.
- $12.8 million GF, effective January 1, 2015, to increase the regional market rate ceiling to the 85th percentile of the 2009 market rate survey and then deficit the amount by 13 percent. The budget includes “hold-harmless” language, so that in the event the new Regional Market Rate would result in a decrease in the reimbursement rate in any particular county, then the reimbursement rate ceilings as determined by the 2005 survey would still apply.
High Speed Network
The budget provides $26.7 million in one-time funds to support network connectivity infrastructure grants and completion of a report on network connectivity infrastructure to be prepared by the K–12 High-Speed Network in consultation with the CDE and the State Board of Education. Priority for grants would go to the LEAs that are unable to administer computer-based assessments at the school site.
Due to lower-than-anticipated revenues, the budget reduces Proposition 39 allocations from $363 million in the Governor’s Budget to $316.5 million ($279 million for K–12 grants and $37.5 million to community college districts). Additionally, the budget continues to fund the Energy Conservation Assistance Act revolving loan program with $28 million set aside for that purpose.
The budget includes language that shifts the remaining fund balance from incentive grants used to promote designs and materials used in high-performance schools and the Career Technical Facilities Program to other specified purposes, including new construction and modernization of school facilities and seismic repair, reconstruction, or replacement. This provision takes effect on January 1, 2015. In addition, the Office of Public School Construction is required to complete a report regarding efforts to streamline and speed up the award of seismic mitigation funds.
The budget also includes $188.1 million for the Emergency Repair Program to provide grants or reimbursements to LEAs for repairs or replacement of building systems.
California State Teachers Retirement System
The budget package begins to address the California State Teachers Retirement System (CalSTRS) current unfunded liability. Absent corrective action, CalSTRS was projected to exhaust pension resources in 33 years. The budget package increases pension contributions from all three entities currently responsible for CalSTRS contributions: the state, LEAs, and teachers. New contributions in the first year are modest, totaling about $275 million. The contributions will increase in subsequent years, reaching more than $5 billion annually. Total contributions will rise from 19.3 percent of teacher payroll to 35.7 percent of teacher payroll. The increased contributions are projected to eliminate the unfunded liability by 2046.
Budget and Trailer Bills
The Budget Act and trailer bills are as follows:
- Budget Act: SB 852, Chapter 25, signed June 20, 2014
- Education omnibus trailer bill: SB 858, Chapter 32, signed June 20, 2014 LCFF: SB 859, Chapter 33, signed June 20, 2014
- Facilities: SB 869, Chapter 39, signed June 20, 2014
- Higher education: SB 860, Chapter 34, signed June 20, 2014
- CalSTRS, AB 1469, Chapter 47, signed June 24, 2014
If you have any questions regarding the 2014–15 budget package, please contact the Government Affairs Division by phone at 916-319-0821.
You may also contact Carol Bingham, Senior Fiscal Policy Advisor, Fiscal Policy Office, by e-mail at email@example.com. [Note: the preceding contact information is no longer valid.]