01.06.09: Budget Update
By David Walrath
The Governor’s State Budget 2008-09 mid-year changes and proposed 2009-10 education funding essentially cuts the September approved budget program funding by $2.0 billion in 2008-09 and $3.1 billion in 2009-10.
The reductions to the 2008-09 base are approximately $2.0 billion in combined revenue limit and categorical aid cuts. The $1.1 billion additional 2009-10 cuts come from the proposed school year reduction from 180 to 175 days. No COLA is proposed for 2008-09 or 2009-10.
The following are the major K-12 flexibility and policy adjustments:
Flexibility
These proposals are accompanied by a comprehensive package of flexibility proposals intended to help schools minimize impacts to essential classroom instruction including:
- Authorizing Local Education Agencies (LEAs) to transfer any categorical allocations received to their general fund for any purpose, without dollar limitation. In order to utilize this flexibility, LEAs would be required to sunshine those decisions in public hearings.
- Reducing required contributions into restricted routine maintenance accounts from three percent of an LEA’s general fund expenditures to one percent in current and budget year.
- Eliminating Deferred Maintenance Program matching requirements of one-half of one percent of revenue limit funding.
- Reducing budget reserve requirements in half for at least the current and budget years.
- Utilizing prior-year, restricted fund reserves, with certain limitations, for any purpose in the current year.
The major General Fund policy adjustments for K-12 entities are as follows:
- A cost avoidance of $2.5 billion for statutory and discretionary cost-of-living adjustments for K-12 education programs.
- A decrease of $1.5 billion to school district and county office of education revenue limits.
- A decrease of $1.1 billion commensurate with allowing school districts to reduce the school year by five days.
- A decrease of $398.5 million to reflect the use of an identical amount of Public Transportation Account and Mass Transportation Fund for the Home-to-School Transportation program.
- Cost avoidance of $150 million due to prepayment of Proposition 98 mandate claims settle-up funding.
- A decrease of $114.2 million to eliminate the High Priority Schools Grant Program.
- A decrease of $1 million for the National Board Certification Incentive Program.
- An increase of $891.6 million to replace the allocation of State Lottery revenues.
- An increase of $65 million to fund Special Education Behavior Intervention plans.
- A net increase of $13.4 million for K-12 mandates. The Administration proposes to suspend all education mandates with the exception of:
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- An increase of $6.3 million for mandated costs related to interdistrict and intradistrict transfers.
- An increase of $7.1 million for mandated costs related to the California High School Exit Exam.
- An increase of $5.1 million to replace one-time federal funding included in the 2008 Budget Act to fund State Special School instructional costs.
- Continuation of the comprehensive flexibilities described for 2008-09.
The Economy
The outlook for the national economy is for negative growth in 2009, weak growth in 2010, and good growth in 2011:
- Real GDP is projected to fall 1.1 percent in 2009, and grow 1.7 percent in 2010 and 2.9 percent in 2011, as compared to the 1.3-percent growth in 2008.
- Non-farm payroll employment is forecast to fall by 1.5 percent in 2009, and grow 0.1 percent in 2010 and 1.3 percent in 2011, as compared to a decline of 0.1 percent in 2008.
The outlook for the California economy is also for negative growth in 2009 followed by weak growth in 2010, and better growth in 2011:
- Personal income is projected to grow 2 percent in 2009, 2.1 percent in 2010, and 4.6 percent in 2011, as compared to 3.7 percent in 2008.
- Non-farm payroll employment is forecast to fall by 1.6 percent in 2009 and 0.5 percent in 2010, and grow 1.4 percent in 2011, as compared to a 0.6-percent decline in 2008.
School Enrollment
School enrollment growth rates turned negative in 2005 and are expected to continue to decline through 2010, at which point they are expected to turn positive. There was a slight jump in school enrollment in Fall 2006, but this was due to a change in reporting rather than an actual increase in school enrollment.
