June 27, 2020

CASH Alert – New Budget Update and Analysis

CASH Alert – Budget Update
June 26, 2020

Today, the Assembly approved the bills that form the core of the State Budget and K-12 education funding. The Senate has approved some of these bills, and will approve the remainder on Monday. We know this is the final budget deal because the Assembly has recessed.

While initially favoring different approaches to the economic shortfall brought on by COVID-19 and the statewide stay-at-home order, Governor Newsom and legislative leaders reached a compromise. The overall solution to the budget shortfall is a combination of cuts, deferrals and new revenue. The following is a summary of the budget deal as it affects school facilities and overall educational operations. The budget and trailer bills approved today will be sent to the Governor for his approval.

Facilities

  • Full-Day Kindergarten Facilities— Eliminates $300 million in one-time funding appropriated in the 2019-20 Budget Act through the Office of Public School Construction.
    Allows proceeds from the sale of surplus LEA-owned facilities to be used for general fund purposes through July 1, 2024.
  • $50 Million Community Energy Resiliency– LEAs expressly included. Can be used for solar and energy storage projects.
  • Eliminates State Board of education (SBE) review of LEA Joint Use Occupancy agreements.
  • Proposition 51 Bond Sale Schedule– not addressed, which we take to mean the Administration remains committed to its $1.5 billion per year bond sale and apportionment schedule.

K-12 Operations Overview

The final agreement adopts the approach favored by the Governor to largely make cuts now, and to trigger them off if the federal government provides another $14 billion in economic aid. If the State receives federal aid in an amount between $2 billion and $14 billion, the Budget calls for proportional cuts across a list of areas which includes K-12 and the California Community Colleges. The revised deadline to “trigger off” the cuts is October 15, 2020.

Education operations was spared a 10 percent cut to the Local Control Funding Formula (LCFF), but was also denied a 2.31 percent Cost of Living Adjustment (COLA) increase.

Deferrals— The Budget defers $3.428 billion in ongoing funding from the 2020-21 budget year to the 2021-22 budget year while creating authority for up to $300 million in deferral hardship funds for local education agencies (LEAs) that cannot afford deferrals in 2019-20 and 2020-21. If the state does not receive increased federal funding by October 15, 2020, $5.7 billion in additional deferrals to K-12 are authorized for 2020-21.

COVID-19 Closure Costs— Allocates $5.3 billion in discretionary state and federal funds for one-time COVID closure impacts on schools and children, to address learning loss, including:

  • $1.5 billion to all LEAs based upon special education enrollment;
  • $2.9 billion to all LEAs based upon LCFF Supplemental and Concentration Grant formula;
  • $979 million to all LEAs based on LCFF grant formula.

Discretionary COVID-19 Relief— Allocates $7 billion in discretionary state and federal funds for one-time COVID-19 relief grants.

Pensions— Specifies that state pension payments on behalf of LEAs in 2020-21 are not considered LEA General Fund for Routine Restricted Maintenance Account requirement purposes under Ed. Code 17070.75.

Meal Reimbursements— Appropriates $112.2 million from the ESSER Fund for LEA school meal reimbursements during summer break and COVID school closures at a rate of up to 75 cents per meal while allowing state reimbursement funds from 2019-20 to be used for disaster relief for LEAs who did or attempted to serve student meals during the school closure period.

The Budget includes a controversial prohibition of layoffs by school districts in Fiscal Year 2020-21 of certificated employees, and of a permanent or probationary classified employee that either holds classification in or is assigned to positions in nutrition, transportation, or custodial services.

Key Trailer Bills

School Finance, Instruction, and Accountability Act of 2020-21 School Year (SB 98)

  • Hold Harmless— Provides a hold-harmless provision for the purpose of calculating apportionment for the 2020-21 fiscal year.
  • ADA— The DOE shall use ADA from 2019-20 as reported from July 1, 2019 to February 29,2020, except for new charter schools beginning instruction in 2020-21.
  • In-Person Instruction— LEAs are expected to offer in-person instruction to the greatest extent possible and permits distance learning for purposes of attendance.
  • Instructional Day Requirements— Retains instructional day requirements but allows, through a combination of in-person and distance learning instruction, minimum-day instructional minute requirements while exempting LEAs from minimum instructional minute requirements for physical education.
  • Instructional Minutes— Defined instructional minutes for in-person instruction as time under the immediate supervision of a certified employee of the LEA and for distance learning based on the time value of assignments as determined and certified by a certificated employee of the LEA, or a combination of both types.
  • Distance Learning Requirements— Distance learning may be provided on an LEA-wide or schoolwide basis pursuant to an order or guidance from a state or local public health officer, and for pupils who are medically fragile, at-risk from in-person instruction, or quarantining due to exposure to COVID-19. Instructional requirements are defined specific to the access and content of instruction, supports for students with exceptional needs, English learning students, students in foster care, experiencing homelessness or in need of mental health supports. Daily interaction with students in distance learning is defined and LEAs are required to provide access to nutrition programs.
  • Attendance— Defines in-person and distance learning participation for purposes of attendance: An LEA must document daily student participation when providing distance learning and keep weekly engagement records. LEAs shall continue to report absences for purposes of reporting chronic absenteeism. LEAs shall develop tiered re-engagement strategies for students who do not participate and shall regularly engage with parents or guardians regarding academic progress. Requirements shall be included in the audit guide.
  • Penalties— Defines fiscal penalties for LEAs that do not meet the instructional day requirements or the attendance related requirements.
  • Charter Schools— Continues the 2019-20 policy that requires charter schools offering distance learning are not required to request a material revision to the charter and will not be considered a non-classroom-based charter.
  • LCAP— Replaces the annual LCAP requirement with a Learning Continuity and Attendance Plan, with public stakeholder engagement, to outline the LEA’s compliance with these provisions, including student participation and attendance reporting, device accessibility and instruction. Requires the CDE and SBE to create a template for this plan by August 1, 2020.

SB 111 (Committee on Budget and Fiscal Review) Public Employment and Retirement Trailer Bill—

CalSTRS

  • Employer Contributions in 2020-21— Revises the apportioned payment paid in advanced on behalf of employers to the Teachers’ Retirement Fund Defined Benefit Program (CalSTRS) for the 2020-21 fiscal year that reduces the employer contribution by 2.95 percentage points set through Teachers’ Retirement Law.
  • Employer Contributions in 2021-22— Authorizes an additional apportionment resulting in school employers contributing 2.18 percentage points less in 2021-22 than that percentage set by the Teachers’ Retirement Board under AB 1469.
  • State Contribution— Requires the state appropriation percentage set by the Teachers’ Retirement Board for 2020-21 to eliminate the unfunded actuarial obligation and prohibits the TRB from increasing or decreasing the percentage for 2020-21 while specifying these provisions do not prevent payments toward the unfunded actuarial obligation from being made from other sources.

CalPERS

Employer Contributions— Revises the General Fund appropriation to the Public Employee’s Retirement Fund for payments related to school employer contributions by:

  • Increasing the apportionment for advance payments for school employer contributions for 2020-21 to $430 million;
  • Repeals the apportionment of $660 million for the unfunded liabilities for specified school employers;
  • Authorizes $330 million to be apportioned for advanced payments of required school employer contributions for 2021-22.
  • State Employee Furloughs— Requires a plan to be adopted that would furlough all state employees two workdays per month.

SB 100 (Committee on Budget and Fiscal Review) I-Bank Trailer Bill—

  • Revolving Loan Fund— Establishes a Climate Catalyst Revolving Loan Fund at the Infrastructure and Economic Development Bank to receive funds from non-state governmental entities and private sources to make loans for climate catalyst projects that help to meet the state’s climate goals.

 

Nancy Chaires Espinoza, Legislative Advocate