LAO forecasts rocketing state revenues will provide $102.7 billion for Proposition 98
The state Legislative Analyst’s Office is projecting a double-digit increase in billions of dollars and percentages in 2022-23 in education funding under Proposition 98. That’s the formula that determines the minimum funding allocation for K-14 schools.
Schools and community colleges can expect an additional $20 billion in 2022-23, which will follow a record level of funding this year. Even the usually restrained LAO calls this good fortune “extraordinary.”
School consultant Kevin Gordon, president of Capital Advisors Group, said he hopes Newsom and legislators will use the extra funding to raise base funding for the Local Control Funding Formula, the source of districts’ general spending, beyond the usual cost-of-living increases.
Legislators could also use extra funding to ease the transition back to funding based on a district’s average daily attendance, Gordon said. This year and last year, districts have been protected from drops in attendance due to the pandemic and other enrollment declines. District officials have been urging the Legislature to provide a “hold-harmless” funding protection for at least one more year.
Three factors will temper the windfall, however:
- Pension costs: The Legislature reduced community colleges’ and school districts’ increased payments to CalSTRS and CalPERS by $3 billion over the past three years. But that is due to end, and the LAO expects combined contributions to the two pension funds for teachers and classified workers to rise by $1.6 billion next year.
- Higher COLA: The LAO is also projecting a 5.35% cost of living increase next year, the highest rate of inflation in 15 years. Legislators usually factor that into increases in funding for the Local Control Funding Formula, the source of districts’ general funding, as well as funding for special education and other programs.
- Enrollment declines: The LAO predicts that the K-12 average daily attendance this year will drop 3%, or 170,000 students, from pre-pandemic levels to 5.9 million students. It will drop an additional 170,000 students by 2025-26, but this will be offset by the addition of 230,000 children in transitional kindergarten, a new grade for 4-year-olds that state is phasing in over several years.