State of the State Budget 2012-13 Governor’s January Proposal

1. State of the State Budget2012-13 Governor’s January Proposal Presented by Angela Su, CTA NODD School Finance http://dl.dropbox.com/u/29390328/Issues12-13statebudget.pptx Link available until January 24, 2011 January 2012

2. www.dof.ca.gov

3. Proposition 98The Constitutional Guarantee Compared to Actual Funding California Teachers Association

4. How We Got Here California Teachers Association

5. It’s the Economy… • Housing Bubble Burst • Financial Market Meltdown • The Great Recession • Sluggish state and national recovery • Very slow job growth (public sector losses offset private sector gains) California Teachers Association

6. It’s the Economy… • The Economy is the sum total of human work • The organization of money and resources in a country, region, or community • Everyone participates in it • The purpose of the economy is to meet the needs of people California Teachers Association

7. …and the Economy is Political Whose “needs” get met in the current economy? The existing structure….. Enables a few to make lots more money Enables those few to pay less taxes Has not created, and in fact has reduced, the number of ‘middle class’ jobs (good wages and benefits) Has caused wages to stagnate California Teachers Association

8. The Truth About The Economy California Teachers Association

9. California Teachers Association

10. Corporate Profits, Personal Income & Median Wages California Teachers Association

11. Who Pays Taxes in CA Has Changed Over Time LAO, Historical State Revenues

12. California Teachers Association

13. California Teachers Association

14. CA K-12 Education Funding Sources

16. CA Per Pupil Funding Rank Has Fallen Revenue Limits Prop 13 Ed Week

17. Where is “Here”? Overview of the 2012-13 State Education Budget

18. NEW MONEY, or NOT? Proposition 98 increase of $4.9 billion • $2.4 billion deferral repayment = no program funding increase (deferrals borrow from next year’s P98 funding) • $2.5 billion “credit” for a deferral whose creation was avoided (if program funding was increased to meet P98 min, a deferral would have to be made… I couldn’t make this stuff up) • Transportation eliminated ($491 million statewide program funding cut) California Teachers Association

19. Governor’s Tax Initiative • Increase income tax rates on wealthy (2012 - 2016) • 1% rate increase married incomes $500,000 - $600,000 • 1.5% rate increase incomes $601,000 - $1 million • 2% rate increase incomes over $1 million • Increase the state’s sales tax rate by 0.5% points (2013 - 2016)

20. 2011-12 BudgetIn Review • K-12 Districts 2.237% COLA, but Funded 0% • Deficit factor = 19.754%, w/ mid-year cut 19.96% • Flat funding from 2010-11, except 0.25% mid-year cut (about $13/ADA) COLA $ Elem $137 HS $164 Unif $143

21. 2012-13 PROPOSED COLA & Revenue Limit • K-12 Districts 3.17% COLA, but Funded 0%, sort of • Deficit factor = 21.666% • Deficit factor from DOF doesn’t zero out COLA • Avg Increase $37/ADA (0.71%) from funded 2011-12 & $51/ADA (0.97%) increase from trigger cut funded BRL • Believe Gov intended flat funding from 2011-12 COLA $ Elem $198 HS $238 Unif $207

22. 2012-13 K-12 Revenue Limits DOF Deficit (21.666%) creates a slight increase in the BRL year-over-year (with or without the mid-year BRL cut in 2011-12). It is unlikely this increase will be realized in the final state budget and most LEAs will likely budget a 0% COLA.

23. 2012-13 PROPOSED COE COLA & Revenue Limit • County Offices 3.17% COLA, Funded 0% • Deficit factor = 22.497% • Flat funding from 2011-12

24. Growth • Statewide increase of K-12 ADA 0.36% • Individual District & COE Growth Funded, but with deficit applied

25. Basic Aid (Excess Tax) • For 2011-12 and beyond, SB 70 continues the Basic Aid “Fair Share” cut to categoricals but at the rate of 8.92% (of entitlement using the RL formula) – • Cut is scheduled to continue each year until the 2008-09 & 2009-10 RL cuts are restored • intent of legislature, although will be implemented annually with legislation • Look for trailer legislation

26. Tier 1 After School Programs AVID (Proposed Elimination) Child Development Child Nutrition Economic Impact Aid + ELL Home-To-School Transportation (Proposed Elimination) K-3 Class Size Reduction QEIA Special Education Categorical Programs: Tier 1 • No 2012-13 Cuts • COLA = 0% • Historically “Protected Programs” • CSR internal flexibility

27. Categorical Programs: Tier 2 • No 2012-13 Cuts • COLA = 0% • No Categorical Flexibility Tier 2 Adults in Correctional Facilities K-12 Internet Access Ag-Voc Ed Partnership Academies Apprentice Program Student Assessment Testing Charter School Facilities Grant Year Round Schools (final year $ to Charter Facilities, then eliminated) Foster Youth Programs

28. Categorical Programs: Tier 3

29. Categorical Programs: Tier 3 • No 2012-13 Cuts • COLA = 0% • Categorical Flexibility for • “any educational purpose” • Flexibility for 2008-09 to 2014-15 • Public Hearing – new requirement (AB 189, effective Jan 1, 2012. • Must meet before budget adoption & identify program to be closed

30. Fiscal Flexibility Current Law

31. Fiscal Flexibility Current Law

32. PROPOSED Weighted Student Funding Formula • Provide significant & permanent flexibility • most state categoricals & revenue limit $ • weighted factors considering costs of educating specific student populations • phased in over five years • coupled with accountability measures • basis for evaluating & rewarding schools • include the current quantitative, test‑based accountability measures & locally developed assessments & qualitative measures of schools.

33. Special Education • 0% COLA on state/local share • $12.3 million for growth • Est. $465 per unit of growth ADA

34. Mandated Cost Reimbursement • $178 million for Mandate Block Grant • Plan to eliminate almost half of all current K‑14 mandates (needs legislation) • Plan to create incentives for schools to continue to comply with remaining previously mandated activities

35. Transitional Kindergarten • $223.7 million • Requirement that schools provide transitional kindergarten in 2012-13 ELIMINATED

36. Unemployment Insurance • Increase of $21.8 million • fully fund the additional costs of unemployment insurance for local school districts and county offices of education.

37. Charter Schools Streamline and Expand Financial Support for Charter Schools • $50.3 million increase charter school categorical programs for growth • Enhance Charter School Funding • Invest in Charter School Facilities • Improve Charter School Working Capital • http://www.ebudget.ca.gov/pdf/BudgetSummary/Kthru12Education.pdf

38. Federal Stimulus/Ed Jobs2010-11 • Last 10% of SFSF now allocated to LEA’s • “Education Jobs” $1.2 billion to CA • Over 90% of the final allocation already distributed to LEA’s • http://www.cde.ca.gov/fg/fo/r14/edjobfunds10result.asp • may be used only for Compensation, benefits and other expenses, such as support services, necessary to retain existing employees, to recall or rehire former employees, and to hire new employees, in order to provide early childhood, elementary, or secondary educational and related services where those employees provide school-level educational and related services. Not in 2012-13

39. Community Colleges 2012-13 • 0% COLA • No growth • 0% COLA for categorical funding, but proposes to consolidate funding for nearly all categorical programs and allow use of the funds for any purpose • Administration to review the recommendations of the forthcoming Student Success Task Force report for inclusion in the May Revision • Ongoing deferrals same as 2011-12 except $209 million to be repaid in 2012-13 • New Mandate block grant ($12.5 million new $) consistent with his K-12 mandate proposal, would eliminate nearly half of existing mandates and would make remaining mandates optional • Funding contingent on CCC ‘s continuing to meet the requirements of mandates that are not eliminated

40. Mid-Year Cut Trigger If the Governor’s Tax Initiative does not pass in November 2012, the following education cuts will occur on January 1, 2013: • $4.8 billion from K-14 • $2.3 billion to not repay deferral • $2.6 billion real program cut (6% RL reduction or $387/ADA – cost of about 3 weeks instruction) • $200 million University of California • $200 million California State University

41. How Do We Fix our Education Funding Problem?

42. Our Union’s Funding Goals for Education • Adequate • Amount of per pupil funding needed to provide all students the opportunity for academic success • CTA goal of the top quartile of the 50 states* • Equitable • Promotes fairness by funding schools and colleges to meet the individual needs of all students* • CTA believes in compliance with the Serrano decision to achieve equalization of educational opportunities* • Stable & Reliable • Avoid “bubbles and “crashes” *California Teachers Association 2011-12 Organizational Handbook, Policies

43. Funding Initiate Criteria Based on tax fairness – a progressive tax system – to ensure everyone is paying their fair share and to and bring stability to our funding issues Include funding for Pre-K through higher education and other essential public services Generate at least $8 billion Broad coalition support Winnable

44. Beyond Proposition 98 Although Proposition 98 has established K-14 education funding as a priority in the state budget, it is clearly not enough to fund an adequate education for California’s children. Proposition 98 does not include the CSU & UC systems, therefore portions of higher education do not have a constitutional priority position in the state budget. Since Proposition 98, we’ve dropped from 30th to 47th in per pupil spending.

45. School Funding (2009 Averages) Quality Counts 2012 & www.cde.ca.gov

46. How to Increase Funding • Bigger piece of the pie - Improve the relative priority in the state budget • Proposition 98 (Been there, done that) • CSU & UC systems not included • Other important state programs, including social services may be just as important for student success • Grow the Pie • Expand the revenue base • Economic development • Expanding who pays taxes or what items/services are taxed • Increase tax rates • Closing Loopholes

47. Possible Tax Solutions… Return top Income Tax brackets to 11% ($4B) Return VLF to 2% ($2B -$4B) Broaden Sales Tax ($2B+) Oil Severance Tax @ 9.9% ($1B+) Close Corp Prop Tax Loopholes ($2B+) Increase Alcohol & Tobacco Taxes ($2.4B) Eliminate Corp Tax Loopholes from 2009-10 Budget Agreement ($1.7B+) Others? (Nov 2012)

48. Current Initiatives • The Schools & Local Public Safety Protection Act of 2012 (Gov, $4.8 - $6.9 B annually) • Our Children, Our Future Local School Funding Act (Advancement Project – Molly Munger, $10 B annually) • Raise Income tax 0.4% to 2.2% based on income • 1st 4 yrs 60% to K-12, 10% ECE, 30% reduce state debt after, 85% to K-12, 15% ECE • Funds must be used at school sites not district • Prohibits use for personnel salary increases beyond what was in place Novemeber1, 2012 • Considerable reporting requirements

49. Current Initiatives • Millionaires Tax to Restore Funding for Education and Essential Services Act of 2012 (Courage Campaign & CFT, $6 B) • Raise income tax 3% on incomes > $1 M to $2 M, 5% over $2 M • 3/5 to education, 2/5 to local gov’t for public safety and infrastructure • 60% for education, 25% children & senior services, 10% public safety, 4.9% roads & bridges, 0.1% admin

50. Current Initiatives • Protect Homeowners and Close Corporate Tax Loopholes Act ($4.5 B, $2 B inc Prop 98) • assess commercial property @ market value • 90% of revenue to General Fund • remaining 10% would be distributed among cities, counties, special districts, school districts, and community college districts as under current law • doubles the homeowner's property tax exemption as well as the renter's tax credit and exempts from taxation the first $1 million of value of business personal property