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Budget Highlights 2011-12

Budget Highlights 2011-12. CAEAA Annual Conference Long Beach January 28, 2011 Teri Burns, School Innovations & Advocacy. Budget Themes. Acknowledges K-12 Sacrifices - taking the “brunt” of cuts over the last several years Balance – Cuts & Revenue

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Budget Highlights 2011-12

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  1. BudgetHighlights 2011-12 CAEAA Annual Conference Long Beach January 28, 2011 Teri Burns, School Innovations & Advocacy

  2. Budget Themes Acknowledges K-12 Sacrifices - taking the “brunt” of cuts over the last several years Balance – Cuts & Revenue Something for everyone to hate - Billions in deep cuts to all programs, even K-12 not spared Dramatic, complex realignment is a centerpiece to the overall plan Local control and flexibility are “in” Linkage to special election & tax revenue - leaves K-12 and all state funded programs hanging until June

  3. Initial Thoughts • Effort to minimize school cuts to this extent would not have been predicted by anyone • Extreme caution continues to be an important approach for local school agencies. There will be nothing certain about this budget until the fate of a ballot measure is determined - first in the Legislature and second at a statewide election • School funding is the key to voter sentiment – Gov. chooses not to slash schools as an election strategy. $1.7 billion deferral served as fiscal insulation to much deeper cuts 877.954.4357 • www.sia-us.com

  4. Economic Outlook

  5. Economic Outlook • California is 18 months into an economic recovery that is painfully slow • For California, income and job growth will likely be modest for the foreseeable future • Personal income is projected to grow 3.8 percent in 2011, 4.0 percent in 2012, and 5.1 percent in 2013 • This is a definite improvement from the 2.4 percent decline suffered in 2009, but weak compared to the 5.1 percent average annual growth rate achieved from 1989 to 2009 877.954.4357 • www.sia-us.com

  6. Source: Department of Finance 877.954.4357 • www.sia-us.com

  7. Personal Income in California Declined in 2009 Source: Legislative Analyst’s Office 877.954.4357 • www.sia-us.com

  8. Budget Basics

  9. Where do State General Funds come from? Source: Legislative Analyst Office 2011-12 877.954.4357 • www.sia-us.com

  10. Recession Devastated State Revenues Percent Reduction in Baseline Revenues November 2010 Estimates Compared to January 2008 Estimates Source: Legislative Analyst’s Office 877.954.4357 • www.sia-us.com

  11. Where do State General Funds go? Source: Legislative Analyst Office 2011-12 877.954.4357 • www.sia-us.com

  12. Education Funding 2009-10 Inflation-Adjusted Dollars Source: Legislative Analyst’s Office 877.954.4357 • www.sia-us.com

  13. Source: Department of Finance 877.954.4357 • www.sia-us.com

  14. 877.954.4357 • www.sia-us.com

  15. Source: EdSource 877.954.4357 • www.sia-us.com

  16. Governor’s 2011-12 Proposal

  17. The Budget Gap $25.4 Billion Problem $ 8.2 Billion Current Year $17.2 Billion Budget Year $25.4 Billion +$ 1.0 Billion Reserve • Revised from $28 Billion due to different Economic forecast and lower debt service costs anticipated from the lack of a Spring bond sale. 877.954.4357 • www.sia-us.com

  18. The State Faces an Enormous Budget Problem Source: Department of Finance 877.954.4357 • www.sia-us.com

  19. Budget Takes A Balanced Approach Source: Department of Finance 877.954.4357 • www.sia-us.com

  20. MAJOR REVENUE PROPOSALS: GENERAL FUND Dollars in Millions 877.954.4357 • www.sia-us.com

  21. Major Revenue Proposal: Local Revenue Fund Dollars in Millions Other Special Fund Revenues that Offset General Fund Costs 877.954.4357 • www.sia-us.com

  22. Major Cuts Are Necessary to Reduce Spending Source: Department of Finance 877.954.4357 • www.sia-us.com

  23. With Proposed Solutions, Budget Balances In Each Future Year Source: Department of Finance 877.954.4357 • www.sia-us.com

  24. Looking Cheap – Being Cheap • Governor’s transition and inaugural • Eliminating 48,000 cell phones • Cutting back on cars and trucks • Reducing his security detail – walks through Oakland • Cutting Governor’s office budget by 25 percent • Eliminating the Office of the Secretary of Education and Office of Inspector General for ARRA 877.954.4357 • www.sia-us.com

  25. Key Education Components • Maintains programmatic funding at 2010-11 levels • Deferrals of K-12 funding increased to total of nearly $9 billion annually • $1.7 billion payment essentially vanishes with deferral shell game • All existing flexibility provisions extended two years • $2 billion estimated drop in Prop 98 funding and corresponding cut in budget averted by proposed extension of temporary taxes subject to voter approval • No funding for 1.67 percent COLA amounting to a loss of $964.5 million in funding this coming year • Enrollment growth funding provided at $81.4 for 2010-11 and $357.5 million for 2011-12 • Backfill of Schwarzenegger vetoes • Ongoing mandate funding returns with $89.9 million in 2011-12 budget 877.954.4357 • www.sia-us.com

  26. Proposition 98

  27. Prop 98 – The Basics • Prop 98 sets a minimum funding guarantee for K-14 education • Prop 98 does not guarantee what programs are to be funded Prop 98 can be suspended by a two-thirds vote of the Legislature See Resource Section for additional explanation of Proposition 98 877.954.4357 • www.sia-us.com

  28. Proposition 98 • Governor’s proposed extension of temporary taxes sustains Prop 98 in 2011-12 at higher level than LAO forecast. Schools stay nearly even with funding to be received in 2010-11 at $49.3 billion • Budget assumes $2 billion for K-12 if voters approve extension • Governor indicates that schools would lose $2 billion and Prop. 98 suspension might be necessary if voters reject measures 877.954.4357 • www.sia-us.com

  29. Under Current Law, Proposition 98 Funding Would Decline in 2011-22 Source: Department of Finance 877.954.4357 • www.sia-us.com

  30. Maintaining Existing Taxes Helps Stabilize K-12 Education Funding Source: Department of Finance 877.954.4357 • www.sia-us.com

  31. Maintenance Factor • Like 2008-09, Maintenance Factor (MF) issue raised again for 2011-12 – Test 1 Impact • Brown Likely to validate MF obligation in Test 1 and reject Schwarzenegger approach • 2010-11 - $9.9 Billion (adjusted for PCPI) • 2011-12 - $1.8 Billion • Total MF Balance - $11.7 billion 877.954.4357 • www.sia-us.com

  32. Source: EdSource 877.954.4357 • www.sia-us.com

  33. The Special Election • Two ballot measures being proposed • Extension of existing temporary taxes for five years • A measure that would authorize use of $1 billion in Proposition 10 funds to fund Medi‑Cal services for children through age five • Gov’s key message: neither raises nor lowers taxes from where we are today • Major campaign will received the public support of major political players across California on both sides 877.954.4357 • www.sia-us.com

  34. The Special Election • Action on a ballot measures required by the Legislature and Governor by March, 2011 • Must secure two-thirds vote to place a measure on the ballot. Governor would not discuss rumored majority vote approach • Governor calls for all spending cuts and planned revenues to be concluded prior to special election • Points to 2009 early budget action with follow up budget work in the summer as example of his intentions this year • Post election budget act would conform final action with voter intent 877.954.4357 • www.sia-us.com

  35. Revenue Limits and Other Impacts

  36. COLA • COLA Adjustment = 1.67% • Deficit factor for 2011-12 is increased to offset COLA: • School Districts 19.608% • County Offices of Education 19.892% 877.954.4357 • www.sia-us.com

  37. Categorical Funding • COLA not applied • “Tier III” flexibility extended two years; through 2014-15 • K-3 CSR revised penalty structure extended two years; through 2013-14 877.954.4357 • www.sia-us.com

  38. Mandates – Reimbursement • Proposes $80 million for current K-12 mandate reimbursement claims • Described as “ongoing” funding at same level as provided in 2010-11 • Renewed commitment to on-going funding by governor • Mandates suspended in 2010-11 Budget remain suspended through 2012-13 under current law 877.954.4357 • www.sia-us.com

  39. Big Changes for Child Care • 2010-11 Stage 3 Veto delayed by courts • Legislature funded until Dec with one-time funds • Working to fund the Jan-March gap with one-time funds • Stage 3 funded April-June 2011 - new rules start early for them • New Rules kick in for all child care programs for 2011-2012 877.954.4357 • www.sia-us.com

  40. Child Care Funding Total 2010-11 $2.3 billion Total 2011-12 $1.6 billion Expected to serve 45,000 fewer children 877.954.4357 • www.sia-us.com

  41. Child Care Rule Changes 2011-12 • Eliminate services for 11 and 12-year-olds • Reduce eligibility to 60% of the State Median Income • Reduce the level of subsidies across the board • Restore one-time excess contract reserves to programs from last year: General Child Care, State Preschool, Migrant Child Care and Allowance for Handicapped 877.954.4357 • www.sia-us.com

  42. Local Government Realignment • Governor proposes to “untangle the knot” of state and local responsibilities • Main goal is to reduce duplication and create efficiencies at the local level • To be phased-in over three years • Will affect roughly $10 billion in wide array of current services 877.954.4357 • www.sia-us.com

  43. Realignment – Phase 1 • Affects public safety programs • Fire and emergency response activities • Court security • Vehicle license fee public safety • Local jurisdiction for lower-level parole violators • Realign adult parole to the counties • Realign remaining juvenile justice programs • Mental health services • Substance abuse treatment • Foster care and child welfare services 877.954.4357 • www.sia-us.com

  44. Realignment – Phase 1 funding • Assumes two sources of funding • Voters extend current tax rates for five years (June) • Legislature amends Prop 63 (2/3 vote) to fund some mental health services – rather than state general fund (March) 877.954.4357 • www.sia-us.com

  45. Realignment – Phase 2 • Proposal linked to implementation of national health care reform • Local governments are better suited to provide services (California Children’s Services and In-home Supportive Services, CalWORKs, food stamp administration, and child support) • Eliminate state investment in Redevelopment Agencies • Create new option for funding local redevelopment with Constitutional amendment to raise local revenue with 55% vote 877.954.4357 • www.sia-us.com

  46. Realignment – Phase 2 • Legislation would phase out existing redevelopment agencies beginning in 2011-12 • Current contracts would be honored, but no new contracts could be made • 2011-12 – funds freed up for GF budget relief • 2012-13 – $900 million freed up for local priorities (with similar amount going to education) 877.954.4357 • www.sia-us.com

  47. Realignment – Questions • County line barriers to moving funds around the state • Redevelopment winners and losers? Equity issues 877.954.4357 • www.sia-us.com

  48. EXTENSIVE USE OF REDEVELOPMENT BY LOCAL AGENCIES IN SOME COUNTIES • If a city or county creates a redevelopment project area to address urban blight, its redevelopment agency receives the future growth in property taxes from the area. (Absent redevelopment, schools and other local agencies receive these tax revenues) • Redevelopment projects range from 2 acres to over 46,000 acres. Some agencies have placed so much property under redevelopment that as much as one–fifth of their countywide assessed property value is under redevelopment • Statewide, redevelopment agencies receive 12 percent of property taxes paid by property owners, but this percentage varies significantly at the local level. The City of Fontana’s redevelopment agency receives more than 75 percent of property taxes paid in the city • ` 877.954.4357 • www.sia-us.com

  49. Use of Redevelopment in Some Counties Source: Legislative Analyst’s Office 877.954.4357 • www.sia-us.com

  50. New State Board of Education • Brown appoints establishes majority control of the eleven member State Board of Education by appointing seven new members • Originally Appoints former State Superintendent Bill Honig • Decades old legal troubles lead to Honig’s decision to withdraw his name 877.954.4357 • www.sia-us.com

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