Capitol Advisors has compiled a quick review and analysis of the Governor’s Budget Proposal. According to Abe, Hajela, a partner at Capitol Advisors, "The 2016-17 proposed budget provides continued good news for schools while Governor Jerry Brown sticks with his theme of fiscal restraint." The key areas of the proposed budget impacting education are:
Planning for the Next Recession – For the past few years, Governor Brown has consistently noted that California has a terrible record of maintaining balanced budgets. He often observes that over the last 30 years balanced budgets or surpluses are quickly followed by huge deficits. Today he took that concern one step further, noting that California’s economic recovery has already lasted longer than the historical average length for economic recoveries, and strongly suggesting we are due for another recession. In fact, he asked the Department of Finance to model a recession of “average magnitude” for 2017-18, and that recession model shows a possible cumulative revenue loss of $55 billion by 2019-20. Of course, this is only one economic model and it is also possible that California is in the middle of a recovery that is more stable and long-term than the historical average.
The bottom-line is that the Governor wants to continue to restrain spending and increase budget reserves, and these dire economic predictions support his proposal to add about $3.5 billion to the Rainy Day Fund in 2016-17. This proposal seeks to transfer $2 billion more to the Budget Stabilization Account (BSA) than what is required under Proposition 2, and would bring the BSA total to just over $8 billion. While this Governor has a history of getting most of what he wants during budget negotiations, expect some Democrats in the Legislature to push for spending some or all of that additional $2 billion on other priorities.
Continued Growth in K-12 Spending and LCFF Implementation – The Governor estimates that the Proposition 98 guarantee for 2016-17 will be $71.6 billion, which he compares to the pre-recession guarantee of $56.6 billion in 2007-08 and the deep recession-guarantee of $47.3 billion in 2011-12. The increase in the guarantee for 2016-17 is sufficient to provide a fourth year investment of about $2.8 billion for LCFF implementation. Department of Finance calculates that this funding will eliminate about 49% of the remaining LCFF funding gap, and when combined with the roughly $12.8 billion provided over the prior three years, will bring total LCFF implementation to about 95%. The budget proposal also provides a very modest $1.7 million increase to the county office of education LCFF to cover COLA and ADA adjustments.
One-Time Discretionary Funding – Upward adjustments of the Prop. 98 Guarantee in 2014-15 and 2015-16 allow the Governor to again propose an allocation of fully flexible, one-time funding to school districts, county offices and charter schools. The amount proposed for 2016-17 is $1.2 billion, and builds on the $3.6 billion provided over the last two budgets. Note that all of these funds count toward offsetting any mandate reimbursement claims filed by the LEAs receiving the funds.
School Facilities – The Governor continues to cite “deficiencies” with the existing school facilities program and emphasizes the need for a new state program that is less complex and focuses on districts that have less local capacity to build or modernize schools. He observes that the $9 billion bond proposed for November 2016 does not reform the existing program but, in response to a question at his press conference this morning, did not state that he is currently opposed to that measure. The budget proposal, however, makes fairly clear that he intends to work with the Legislature and stakeholders to provide some sort of alternative to the November school bond measure.
Early Education Block Grant – The Administration proposes to consolidate Prop. 98 funding for the State Preschool Program, transitional kindergarten, and the Preschool Quality Rating and Improvement System Grant into a $1.6 billion Early Education Block Grant. The Governor suggests that the block grant will provide greater local flexibility to address community needs and focus on the most at-risk children. The proposal does not include many specifics, but promises further detail by the May Revision. Many legislators, including Speaker of the Assembly Anthony Rendon, have stated that expanding early education opportunities is their top priority. Stay tuned.
Career Technical Education – The Governor proposes to continue the commitment made in the 2015 Budget Act to provide $900 million in one-time funding over three years for competitive matching grants to support high-quality CTE programs. Funding for 2016-17 will be $300 million.
Proposition 39 Energy Efficiency – The budget proposes $365.4 million to support school district, county office, and charter school energy efficiency projects in 2016-17. This is an increase of about $50 million over what was provided last year.
Cost-of-Living Adjustments (COLA) – The COLA is calculated at 0.47%, and the budget proposal includes $22.9 million to provide COLAs to categorical programs that remain outside of the LCFF, including Special Education, Child Nutrition, Foster Youth, Preschool, American Indian Education Centers, and the American Indian Early Childhood Education Program.
Proposition 30 Extension? – While the 2016-17 budget proposal does not address the expiration of the Prop. 30 temporary taxes, the Governor was directly asked if he continues to oppose an extension. The Governor did not state unequivocal opposition but suggested that he had a problem with language in a November 2016 measure that would extend the high-income earner tax increases through to 2031. The concern he stated is that the revenue from those high-income earner tax increases would be exempt from the Prop. 2 Rainy Day calculations starting in 2019, a result he opposes. Interestingly, the Governor does note that the expiration of the Prop. 30 temporary tax revenues is one of the reasons why the State’s long-term fiscal outlook is precarious.
This will continue to be an issue of great concern to education stakeholders and others, along with the question of whether it makes sense to place both a Prop. 30 extension and a state school bond on the same November 2016 ballot.
Capitol Advisors is CAPSES' contract lobbying and consulting firm that works under the direction of CAPSES Governmental Affairs Committee and implements advocacy efforts to impact proposed federal and state legislation and other public policies on behalf of member private special education schools and agencies and the special education students and families they serve. Check our website frequently for an analysis of the budget proposal and the response from the legislature.
