Moderate increases in Prop 98 and LCFF included as pension hikes loom

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Moderate increases in Prop 98 and LCFF included as pension hikes loom

Governor’s 2017-18 budget leaves LCFF near full implementation

Increases in pension costs looming for California schools

The official start of “budget season” came today with a proposed 2017-18 budget from Gov. Jerry Brown that, as expected, made a modest increase to the Proposition 98 guarantee. While it was anticipated that a larger investment in LCFF may be made later in the budget process, LCFF increases are also modest, leaving the formula at approximately 96 percent implementation.

Echoing the prior budget cycle, Gov. Brown repeatedly warned of a forthcoming economic downturn and urged tempered expectations on General Fund revenues. “This year’s budget will be the most difficult that we have faced since 2012; the surging tide of revenue increases that we enjoyed the past few years appears to have turned,” Gov. Brown said in a letter to the Legislature.

Click here to view the full summary of the proposed 2017-18 budget.

Key elements of the proposed 2017-18 budget

Proposition 98: The initial budget carries a Proposition 98 guarantee of $73.5 billion, an increase of $2.1 billion from 2016-17 but nearly $1 billion less than November projections from the Legislative Analyst’s Office. Per-pupil spending from Proposition 98 comes in at $10,910, an uptick of $331 per student.

LCFF: The fifth-year LCFF investment is $744 billion, a slight increase from 2016-17 but essentially maintaining the current implementation level of around 96 percent. The proposed funding level supports a COLA.

One-time funds: $287 million is added for one-time Proposition 98 discretionary funds, which would offset applicable mandate claims.

Funding shifts: To cover a reduction in the Proposition 98 guarantee from the enacted 2016 budget, the budget shifts $859 million in LCFF expenditures from June 2017 to July 2017, with a proposal to repay the deferral in 2017-18. $310 million in one-time funding is also shifted from 2015-16 to 2016-17.

Career Technical Education: The budget provides $200 million for the third year of the CTE grant program, shifting CTE programs into LCFF allocations in 2018-19.

Special education: The budget proposal references a November PPIC report that recommends aligning special education funding with the principles of LCFF, and states that the Administration intends to, “engage stakeholders throughout the spring budget process for feedback on the current special education finance system and the recommendations included in these recent evaluations.”

Facilities: With Proposition 51, the $9 billion school facilities bond winning more than 55 percent voter approval in November, Gov. Brown has also indicated that the Administration will “introduce legislation requiring facility bond expenditures to be included in the annual K‑12 Audit Guide,” and that “independent auditors will verify that local educational agencies participating in the School Facilities Program have appropriately expended state resources.” While Gov. Brown has not been supportive of Proposition 51, indications in the budget are that if these measures are enacted, the Administration indicates that it will support expenditure of Proposition 51 funds.

PERS/STRS: While the budget acknowledges the challenges posed by CalPERS recent decision to lower its discount rate (a move which CalSTRS could follow legislatively) from 7.5 to 7.0 percent, the budget does not further address the funding challenges which will be posed to schools. Prior to CalPERS’ lowering of the discount rate, the Legislative Analyst’s Office estimated that these increased costs could eat up between one-quarter to one-third of new Proposition 98 money.

Reserve cap: While calling for prudent budgeting and the building of reserves, the budget proposal does not address the issue of the school district reserve cap, which CSBA is pursuing 2017 legislation to address.

When discussing the importance of prudent budgeting, Governor Brown directed an analogy toward California’s almond growers, stating that “you’ve got to save your money, or you lose the farm.” While California’s almond growers are a vitally important part of the state’s economy, California’s schools must be able to save their money as well, lest we lose the farm. We’re growing the future.

For questions regarding the 2017-18 budget, contact the Governmental Relations Department.

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California School Boards Association | 3251 Beacon Blvd., West Sacramento, CA 95691
Phone: (800) 266-3382 | Fax: (916) 371-3407
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