Presented to:!

Los Angeles Unified School District!

Budget, Facilities, and Audit
Committee !
April 9, 2015!
Legislative Analysts Office!

Background: Governors
January Budget

1!

2015-16 General Fund Assumptions

(January 2015)

Revenue From Major State Taxes Grows

$5.7 Billion (5 Percent)!
From $105.2 billion in 2014-15 to $110.9 billion in 2015-16!

States Main Reserve Account Ends Year With

$534 Million Positive Balance!
Proposition 2 Requires State to Set Aside
$2.4
Billion!
$1.2 billion added to states secondary reserve account!
$1.2 billion used to retire outstanding state debts!
2!

Proposition 98 Minimum Guarantee

(January 2015)

Minimum Guarantee for 2014-15 Up

$2.3 Billion From Last June!
Requires state to make a one-time settle up payment!

Minimum Guarantee Increases by an

Additional $2.6 Billion in 2015-16!
$65.7 Billion Total Spending Level in 2015-16!
$47 billion from General Fund!
$18.7 billion from local property tax revenue!
3!

Proposition 98 Funding
(January 2015)
In Millions!

4!

Major K-12 Spending Proposals

(January 2015)

$4 Billion for LCFF Implementation!

Closes 32 percent of LCFF gap in 2015-16!
Overall LCFF funding increases 9 percent!

$1.1 Billion for K-12 Mandate Backlog!

Funding distributed on a per-student basis!
Funding available for local priorities!

$897 Million to Eliminate Remaining Deferrals!

5!

Revenue Update

6!

State Revenue Appears to Be Surging

2014-15 Tax Collections Running Roughly

$1 Billion Above Projections Through March!
Recent Trends Make Revenue Outlook
Especially Favorable:!
Personal income tax collections in February and
March far above projections!
Stock market remains elevated!
Major tax collection months (April and June) still
ahead!
7!

Effect on Revenue Estimates

2014-15 Revenue Likely to Be At Least a Few

Billion Higher Than Governors January
Estimates !
Increases of several billion dollars possible in both
2014-15 and 2015-16!
April and June tax collections will be key!

The Administration and the LAO Will Release

New Revenue Estimates in May!
8!

State Revenue and Proposition 98

Increases in 2014-15 Revenue Will Increase the

2014-15 Minimum Guarantee Nearly Dollar for
Dollar!
In addition, an increase in the 2014-15 minimum guarantee
generally would increase the 2015-16 minimum guarantee!

Increases in 2015-16 Revenue Will Result in

Additional Increases to the 2015-16 Minimum
Guarantee of Roughly 50 Cents for Each Dollar!
9!

Implications for State Budgeting

Outlook for Schools Especially Favorable!

Much Different Outlook for Rest of the Budget!
Little benefit from surging revenue!
Higher revenue tends to increase Proposition 2
requirements!
State might need to cut non-Proposition 98 programs
to meet Proposition 98 and Proposition 2 obligations!

10!

Implications for K-12 Spending

Increases in 2014-15 Minimum Guarantee Would

Provide Additional One-Time Funding!
Administration indicates mandate backlog a priority!

Increases in 2015-16 Minimum Guarantee Would

Provide Additional Funding!
Could accelerate LCFF implementationa $1 billion
increase could close an additional 8 percent of the gap!
Could designate for other priorities (such as facilities)!

Recommend Legislature Begin Considering How

to Allocate Additional Funding!
11!

Illustration of Possible
Revenue Scenarios

12!

Scenario 1 Modest Revenue Surge

Revenue Up $2.5 Billion in 2014-15 and

$1.25 Billion in 2015-16 ($3.75 Billion Total)!
Proposition 98 Spending Level Increases
$4.8 Billion Over Two-Year Period!
Rest of State Budget $1.8 Billion Worse Off!
Reflects higher Proposition 98 and Proposition 2
requirements !
13!

Scenario 2 Larger Revenue Surge

Revenue Up $4 Billion in 2014-15 and

$2.5 Billion in 2015-16 ($6.5 Billion Total)!
Proposition 98 Spending Level Increases
$7.3 Billion Over Two-Year Period!
Rest of State Budget $1.7 Billion Worse Off!
Reflects higher Proposition 98 and Proposition 2
requirements !
14!

Options for Addressing Budget Problem

Cuts to Non-Proposition 98 Programs!

Changes to Proposition 98 Calculations!
Changes to Proposition 2 Calculations!

15!

LAO Outyear Forecast

After 2015-16, State Revenue Projected to Grow

More Slowly As Proposition 30 Phases Out!
Less Certainty About Revenue in the Outyears!
State revenue highly volatile!
Recessions difficult to predict!
Current economic expansion has already outlasted the
average expansion since WWII!

Even a Modest Economic Slowdown Could Drop

the 2016-17 Minimum Guarantee Below the
2015-16 Level!
16!

Key Policy Issues

17!

Accountability

State Board of Education Currently Developing

Evaluation Rubrics!
Rubrics designed to assess school district strengths and
weaknesses !
Final rubrics will be adopted by October 2015!

Academic Performance Index (API) Will Not Be

Reported for 2015-16!
State Board wants to revamp API to include multiple
measures of performance that align with the eight state
priorities!
18!

Accountability Key Issues Emerging

Will the Rubrics Include Statewide Standards

to Identify Districts in Need of Assistance?!
For example, would a district be identified for
assistance if its graduation rate fell below a specific
threshold?!

Much Work Remains to Implement Changes

to API!
19!

Adult Education

Governor Proposes $500 Million for Adult

Education Regional Consortia!
School districts with an existing maintenance-of-effort
requirement would have first call on funding in
2015-16!
Each consortium would have a seven member funding
allocation committee consisting of a K-12 adult school
representative, a community college representative,
and five other local stakeholders!
20!

Adult Education Key Issues Emerging

Questions About Governance Structure!

Some local concerns about giving representatives from
outside the K-12 and community college systems direct
influence over funding allocations!

Some Policies Not Yet Developed!

The California Department of Education and the
Community College Chancellors Office did not reach
consensus on several implementation issues, including
student fees, assessments, and accountability!
21!

Early Education

Governors Budget Provides $34 Million for

4,000 Full-Day Preschool Slots Authorized
Last Year!
Budget Provides Growth and Cost-of-Living
Adjustment for State Preschool, General
Childcare, and Alternative Payment Programs!

22!

Early Education Key Issues Emerging

Will the Programs Be Expanded?!

Continued interest in expanding the programs by funding
additional slots for full-day preschool or providing other
increases!
Costs of full-day slots partially funded outside of
Proposition 98state budget has limited room!

Impact of Federal Childcare and Development

Block Grant Reauthorization!
Few details yet available, but some changes likely ahead !
23!

School Facilities

Governor Proposes to Target State Facility

Funding to Districts With Limited Local
Revenue Capacity!
Proposal is conceptual and statutory language has not
been released!
Proposal would shift state away from issuing bonds!

24!

School Facilities Emerging Issues

Ongoing Debate About Whether State Should

Continue Issuing School Facility Bonds!
Many Details About Administrations Proposal
Not Yet Available!
An LAO Alternative Proposal Would Establish
an Annual Grant Program Providing Districts
Funding on a Per-Student Basis!
25!

lao.ca.gov

26!