‘The good, the bad and the ugly’: The budget saga continues 7/31/09

State Budget Update from CSBA (Ca School Boards Assoc): In what can perhaps be considered the understatement of the year, while line-item vetoing an additional $489 million out of a budget that had already cut billions, Gov. Arnold Schwarzenegger referred to the budget as “the good, the bad and the ugly.” The governor managed to eliminate the $156 million deficit in the budget the Legislature sent to him and create a $500 million reserve. This included cutting an extra $489 million, borrowing $50 million from one of the state’s special funds and realizing $117 million in savings from money not spent in the last fiscal year. The line item vetoes for education were relatively minor; they include eliminating duplicative funding for special education transportation and funding for the Curriculum Commission, which is not necessary as there will not be any instructional materials adoptions for the next four years. Health and welfare programs didn’t fare as well; they incurred a further cut of $50 million to the Healthy Families program that provides low- or no-cost insurance to children who don’t qualify for Medi-Cal. Budget update, round 2 As the saying goes, time heals all wounds; in the case of the state budget, however, time also means the opportunity to actually read the bills the Legislature approved during marathon legislative sessions July 23-24. This provides us the chance to expand upon issues we reported on immediately following the action by the Legislature, as well as to include additional provisions. Deferrals and apportionments An additional deferral of $1.7 billion from 2009-10 into 2010-11 was approved in order to further reduce the Proposition 98 base in 2009-10. This means that payments local educational agencies were expecting to receive beginning in April and May 2010 will be deferred into August. This brings the amount of K-12 inter-year deferrals to $5.7 billion. Further, a change to the apportionment schedule was also approved that provides for 5 percent of all funding owed to schools to go out in July and August and 9 percent for each of the remaining 10 months. This significantly alters how payments go out to schools. AB 1200 reserve Our budget update from July 24 noted that the reserve requirement for economic uncertainty under AB 1200 was lowered to one-third of the usual requirement. It is important to note that this applies only to 2009-10, and in 2010-11 school districts must make progress toward returning to the required reserve level. In 2011-12, that level must be fully restored. Shorter school year As has been previously noted, the ability to reduce the school year will require districts to negotiate with their employees; however, another challenge has so far largely escaped notice. Beyond contract issues, the proposal raises other legal issues. In 1992, the California Supreme Court held that a district’s closure of schools violated students’ fundamental right to basic equality in public education. While this case concerned the closure of the Richmond Unified School District (now West Contra Costa Unified School District) six weeks early because of a lack of funds, it is possible that, despite the legislative authority, similar equity issues could be raised if one school district offers 175 days of instruction and a neighboring district offers 180 days. Districts seeking to reduce instruction should proceed cautiously and consult with their legal counsel. It’s also become evident that the authorization for local educational agencies to subtract five days from the school year may do nothing more than give the Legislature and governor the ability to say they provided flexibility without actually dealing with the consequences for students—who need more time in the classroom, not less, to meet the high standards expected of them. Unallocated categoricals The budget included taking back $1.6 billion from categorical programs that reportedly had not yet been sent out to education entities. This comprised approximately 50 categorical programs, including many that are in the budget’s Tier 3 level that gives LEAs flexibility, such as grade 7-12 counseling, professional development, and block grants for arts and music and school safety. Other programs that had “unallocated” balances “recaptured,” such as special education, child development and after-school funding, are outside of the flexibility pool of programs. It is important to remember that this “recapture” is part of a scheme that involves withholding the payment for these programs that was counted toward 2008-09 funding in order to reduce the Proposition 98 base by $1.6 billion, then providing the funding back to the same entities and finally withholding a per-student amount of approximately $250 from district and county office of education revenue limits in 2009-10. Home-to-School Transportation The budget approved in February didn’t include a cut to Home-to-School Transportation; however, the program didn’t fare as well in this round. A 20 percent cut to the program was approved, which is the same as cuts to other categoricals. Additionally, all funding for school transportation from the Public Transportation Account and Mass Transportation Fund—accounting for 65 percent of the total funding—was eliminated, and the program is once again being funded entirely from Proposition 98. This shift resulted in less funding being available within Proposition 98 for other needs. QEIA There remains a great deal of uncertainty around the funding shifts for the Quality Education and Investment Act program, which was created as a result of the CTA v. Schwarzenegger lawsuit over the level of funding owed to schools in 2004-05. Funding for the program comes entirely from the state’s general fund and is outside of Proposition 98. In an effort to save the general fund the $450 million cost of the program this year, a swap of funding will occur that basically results in the revenue limits of QEIA districts being reduced by the amount of funding they receive from QEIA. The program was also extended by one year, to 2014-15, to ensure the full amount owed under the settlement will be paid by the state. The budget trailer bill also includes a provision that calls for QEIA districts to be eligible to apply to the CDE to receive Federal Title I and school improvement grants. This provides the false reassurance that the cut to QEIA-district revenue limits can be backfilled by federal dollars. However, a number of questions remain: Would this be allowed under federal rules, or does it violate prohibitions against using federal funds to supplant state funds? There will be more to come on this in the coming weeks; however, it may not help QEIA districts that are faced with a difficult choice: Should they reduce general-purpose funding in hopes of having it replaced by restricted federal funds, or should they back out of QEIA entirely, without the ability to re-enter at some point in the future? Instructional materials As noted in previous updates, suspension of the requirement to purchase instructional materials within 24 months of adoption by the State Board of Education was increased from two years to four years until 2012-13 to coincide with the flexibility previously provided for categorical programs. Therefore, districts are not required to purchase the textbooks adopted by the SBE for mathematics in 2007 and for reading-language arts in 2008 by the start of the 2010-11 school year. Further, the State Board is prohibited from adopting any new instructional materials during that same time; that results in a shift in the adoption cycle, with State Board adoptions beginning again after July 1, 2013. Districts are still required to have “sufficient” instructional materials and to hold a public hearing on the “sufficiency” of materials. However, between 2008-09 and 2012-13, the definition of “sufficiency” has been modified to include those textbooks or instructional materials that are standards-aligned and that were adopted prior to July 1, 2008, by the State Board for grades K-8, or that were adopted by local boards by that date for grades 9-12. This definition of “sufficiency” also applies to Williams inspections conducted by a county office of education. Flexibility for districts in Corrective Action or Program Improvement The revised budget also includes a provision specifying that a school, district, county office or charter school that has been identified for Program Improvement under the federal No Child Left Behind Act, or that has received federal corrective action sanctions from the State Board of Education, cannot be prohibited from using the flexibility provided for categorical programs in Tier 3. Further, the budget trailer bill says the California Department of Education and State Board cannot identify which funds are used to implement the sanctions and corrective actions, thus giving districts greater determination over which funds are used. Suspension of the CAHSEE for special education students The Legislature and governor also exempted special education students from the requirement to pass the California High School Exit Exam in order to receive a high school diploma until the State Board of Education makes a determination that alternative means to demonstrate the same level of academic achievement required for passage of the exam are not feasible or that the alternative means are implemented. Existing law, enacted last fall, requires the State Board to adopt regulations regarding these alternative means by Oct. 1, 2010, for those sections of the exam that they find it feasible to do so, although it doesn’t require the alternative means to take effect immediately. The language approved in the budget specifies that this exemption applies to students with an Individualized Education Program or Section 504 plan that indicates the student is scheduled to receive a high school diploma, and that the pupil has satisfied or will satisfy all other graduation requirements to receive a diploma after July 1, 2009. It also specifies that an IEP or 504 plan cannot be adopted by a district for the sole purpose of exempting a student from the requirement to pass the CAHSEE. Students eligible for the exemption are still required to take the exam in 10th grade as part of the grade 10 census for state compliance with No Child Left Behind. Note, this “exemption” does not affect the law regarding “waivers” of the CAHSEE whereby a student with disabilities who has taken the exam with modifications and has achieved a certain score may request that the local governing board waive the requirement to pass CAHSEE in order to receive a diploma. $60 billion in ‘solutions’ In acting on the budget, the governor noted that the February and July budgets provide $60 billion in solutions toward closing the state’s budget deficit. For education, these solutions—combined with the cuts approved in September—have meant a total of $12.5 billion in reductions to schools with an additional reduction of $4.5 billion in deferrals that are meant to reduce the Proposition 98 base. The $12.5 billion reduction includes $7.5 billion in programmatic cuts, meaning direct reductions to district and county office revenue limits and categorical programs and an additional $5 billion for the loss of a cost-of-living adjustment; that is an astounding reduction of $2,100 per student! Related link: Additional information on the actions taken to revise the 2008-09 and 2009-10 budgets can be found @ http://www.csba.org/EducationIssues/EducationIssues/SchoolsInvestment.aspx California School Boards Association 3100 Beacon Blvd, West Sacramento, CA 95691 Phone – 800.266.3382 | Fax – 916.371.3407