SSDA Responds to Legislative Analyst’s Recommendations
By David Walrath
The Small School Districts’ Association (SSDA) has reviewed the Legislative Analyst’s Office (LAO) response to the Governor’s 2008-09 State Budget proposal and makes the following recommendations regarding the LAO response:
Suspension of Proposition 98
SSDA opposes any suspension of Proposition 98. If the state cannot afford to fund fully the Proposition 98 guarantee, then SSDA recommends the state underappropriate the guarantee to create a deferral of those payments until the state’s economy improves. A suspension is an absolute cut to education funding while an underappropriation is simply a deferral of payments that are constitutionally required.
SSDA supports and recommends that the Legislature securitize two
percentage points of the lottery administration revenues.
SSDA believes that 15-20 years securitization would provide
approximately $500 million. This SSDA alternative would
provide these funds to school districts as an equal amount per
average daily attendance. This allocation would make it
easier for school districts to operate if there is an
underappropriation of Proposition 98 funds.
Revenue Limit and Categorical Program Cost-of-Living Adjustment (COLA)
SSDA supports developing an alternative COLA for the revenue limit and categorical aid programs. SSDA believes that instructional materials should have its own inflation index, as should home-to-school transportation. However, SSDA does not support making index changes without comprehensive review of school finance allocations. In a comprehensive review of school funding adequacy and allocations, the inflation index being used for COLAs would be an appropriate discussion and should be considered to ensure there is adequate funding to maintain the purchasing power of the new funding allocations.
Special Education Funding
SSDA supports the LAO recommendation to ensure that there is sufficient state funding for special education maintenance of effort. The recommendation would avoid significant cost transfers to maintain special education local funding requirements. SSDA also believes that if there are additional funds which become available, priority should be given to full funding special education cost increases.
Categorical Program Consolidation
SSDA supports the categorical and revenue limit base funding consolidations proposed by the LAO. While SSDA has some questions regarding specific programs within specific consolidated block grants, we support the concept and hope it can be enacted as part of the 2008-09 State Budget discussions.
Flexibility
SSDA urges the Legislature to provide greater fiscal flexibility to school districts. Specifically, we recommend the Legislature reduce the required contribution to the major maintenance account from the current law 3 percent to 2 percent in 2008-09; with an increase in 2009-10 to 2.5 percent; and finally, full restoration of the contribution in 2010-11 at the 3 percent level.
SSDA recommends that the state not adopt new instructional materials in either 2008-09 or 2009-10. This would allow school districts to use their general fund revenues for current operating expenses rather than supplement the Instructional Materials fund for new materials.
SSDA also requests flexibility in the use of net ending balances and general fund transfers. SSDA requests the ability to transfer categorical program net ending balances into the general fund for the purpose of meeting general fund cash flow costs that school districts will be facing because of the rescheduling of the advanced apportionment from July to September to meet state cash flow concerns. SSDA believes that some portion of the net ending balance of categoricals should be available; however, SSDA believes that special education, instructional materials, economic impact aid and restricted facility account balances should be excluded from the transfer provisions.
SSDA also recommends that school districts be allowed an additional year of interfund transfer authority without having to repay the fund from which the transfer amount was received. For example, under current law a school district can transfer funds from a restricted account into a general fund account provided that by the end of the fiscal year on June 30 the school district repays the amount that had been borrowed. SSDA requests that borrowing which occurs during 2008-09 not be required to be repaid until June 30, 2010. SSDA also recommends that this be a one-time provision in recognition of the cash flow problems school districts will be facing during 2008-09.
State Teachers’ Retirement System (STRS)
SSDA supports the LAO recommendation to reject the Governor’s January State Budget proposals on the Supplemental Benefit Maintenance Account.
SSDA does not support the LAO recommendation to restructure the state and local requirement regarding the provision of retirement benefits. SSDA does not believe school districts should be primarily responsible for the provision of retirement benefits for their certificated employees.
Small school districts do not have the financial background in order to achieve the same types of investment returns that can be made by larger school districts and by the state. Consequently, funding for retirement benefits would be a greater cost for small school districts.
Small school districts also would be faced with the same problem that local governments were faced with when safety employees were given the authorization to have better retirement benefits under SB 400. The effect was once the approved benefit was provided by one local government all the local governments in the surrounding area had to provide the same benefit in order to recruit and retain safety officers.
SSDA is concerned the same situation would occur in STRS retirement benefits if school districts became responsible for providing retirement benefits. There would be a ratcheting up of vested benefits which is contrary to the recommendations being made by the Governor’s Public Employees Post-Employment Benefits Commission.
~Dave Walrath
