12.03.09: LAO Predicts Negative COLA
By David Walrath
For the first time since the adoption of the current Cost-of-Living Adjustment (COLA) formula, school districts and county offices of education are facing a negative COLA that could be almost 1.0 percent. The current formula (in Education Code Section 42238.1) is based on the Implicit Price Deflator for state and local government purchasing goods and services for the United States, as published by the United State Department of Commerce. Because state and local governments have experienced significant revenue losses and because goods and services have become less expensive, the effect from the formula is a probable negative COLA. The Legislative Analyst's Office estimated a -0.35 of one percent. The Small School Districts' Association predicted a -1.0 percent.
If there is a negative COLA, the Legislature has the option to “spend the savings” by reducing the revenue limit and categorical aid deficits, reducing deferrals, or to leave the deficits and deferrals and spend the savings on new programs in an election year.
