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California School Fiscal Services

Providing comprehensive business office and consulting services to K-12 traditional schools and charters

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LCFF: Still Not the Magic Pill That Education was hoping for - Author: Ron Foretenberry

Posted on July 22, 2014 at 1:45 PM Comments comments (1167)

After attending the SSC California School Finance and Management Conference, I walked away with a renewed sense of gratitude for the “new money.” However, I was also reminded by the glaring new regulations and need for continued conservative budgeting, much to the disappointment of unions.

The following highlights will hopefully illustrate the blessings, along with the challenges, given to school finance professionals under this new LCFF funding formula.


1. Expenditures will be more of a concern than ever this year.

CALSTRS contributions go up for employers, employees and the state beginning in 2014-15.

STRS and PERS rates will double in a decade.

The biggest impact is on the employer contribution which will increase each year and represent a total increase of 4.33% by 2016-17-the 3rd year of the MYP.

Employer rates will increase from 8.25% – 19.1% over 7 years.

 

2.  Some districts are struggling with progress toward class-size requirements

Failure to meet the 24:1 average class size requirement will cause an estimated reduction in 2014-15 LCFF funding of an estimated $215.50 per K-3 ADA.

After six years of deficit spending and few salary increases, budget stress is still a major factor.

Salary demands and poor understand of the LCFF create pressure at the bargaining table.

 

3.  Reserves – A Real Game Changer

Unions have long complained about district reserve levels.

New law will cap reserve limits.

Collective bargaining will become more difficult.

 

4. LCAP is now King

For high funded districts, about 2/3 of the new dollar is targeted for improved or increased services to students.

The targeted funding can be used for across-the-board salary increases in only very limited circumstances.

If targeted funds are to be used for compensation, they have to be tied to activities that “increase or improve” services to students.

 

5. Prop 30 reminders for those who believe schools received extra funding

No new funding!

$7B transferred to the General Fund before the passage of Prop 30 was RESTORED to education.

Our “increase” was solely a restoration of funding.

Prop 30 is temporary.

Boosted revenues $7.1B in 2013-14.

Projected increase in revenues $7.4B in 2014-15.

Unless extended by taxpayers, the higher tax revenue expires as follows:

The .25% sales tax expires in the 2016-17 year.

The personal income tax expires in the 2018-19 year.

In the 2019-20 year increased funding based on temporary taxes are 0!

 

6.  Deferrals

 The Governor proposed to buy back all K-14 deferrals at a cost of $6.1B.

The Legislature reduced the deferral buy-back by $1B.

There is “TRIGGER” language in the State Budget that could allow 2013-14 and 2014-15 funds that become available to retire the remaining deferrals.

The current effort to pay down deferrals reduced the total outstanding deferrals by more than 90%.

 

 7.  Local Reserves

SB 858 requires the following in 2015-16.

 If a district adopts a budget with an ending fund balance above the minimum reserve specified by the State Board of Education, the district must:

Identify the minimum reserve level applicable to the district.

Identify the amount in excess of the minimum reserve.

Prepare a statement that substantiates the need for the excess.

 

8.  Prop 44 “Rainy Day Fund Measure”

If Prop 44 passes a new Ed Code is enacted providing that if the state makes a contribution to the Prop 98 reserve, the following year the local districts will be prohibited from having reserves in excess of two to three times the minimum recommended amount.

 

9. School Facilities

SB 854

 Labor Code Sec. 1770 requires the payment of prevailing wage to all workers employed on public works projects.

A new public works contractor registration program was established that will collect fees to fund compliance monitoring and enforcement, determine prevailing wage and public works coverage and hear enforcement appeals.

All contractors and subcontractors intending to bid or perform work on public works projects will be required to meet minimum qualifications and register online ANNUALLY for the program for a non-refundable fee of $300.

The Department of Industrial Relations will post a list of registered contractors and subcontractors on its website.

Beginning April 1, 2015, LEAs must begin using only registered contractors and subcontractors on public works projects awarded.

 

10. AB 44

Existing law specifies that any entity accepting bids for public works projects must require that any person submitting a bid or performing work include in their bid the name and location of the place of business of each subcontractor who will perform work.

Effective July 1, 2014, AB 44 requires the inclusion of the California contractor license number for each subcontractor.

LEAs should ensure that the new requirement is included in their bid documents and that any bids submitted after July 1st include this additional information.

 

CONCLUSION

So as one can see by the new funding paradigm, there comes with it increased scrutiny, accountability, regulations and a renewed call for careful and conservative budgeting moving forward.

 

3 key budget moves favor teacher- not student- needs

Posted on July 19, 2014 at 3:20 PM Comments comments (1676)

If you don't already have edsource.org bookmarked, be sure to add it to your professional development library.  They are always great at providing robust discussions and analysis of educational issues.  Here's a recent example that I just know many of you will appreciate! 

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3 key budget moves favor teacher – not student – needs

Credit: Courtesy of John Affeldt

With increased revenues in the state’s coffers, there are many things to like in the budget signed by Gov. Jerry Brown, but three key developments are setting off alarms for education advocates and community groups who supported the landmark Local Control Funding Formula reform. With each of them, the governor seems to be shaping or restricting the newfound flexibility in the funding formula in ways that principally benefit teachers’ interests and not the high-needs students supposedly at the heart of the reform.

First came the lightning bolt in the May revision of the budget, in which Brown proposed to address the state’s $74 billion unfunded liability in the California State Teachers Retirement System primarily on the backs of school districts. There is no question that the CalSTRS issue needs to be addressed and that failing to do so only makes matters more expensive down the road. But Brown’s solution is to increase the annual contributions from the state and teachers somewhat – and from districts a whole lot. The state’s responsibility and share of the burden vis-à-vis districts should be roughly reversed, with Sacramento instead carrying 70 percent of the load and districts only 20 percent. But rather than propose a plan to raise state revenues for the CalSTRS paydown, Brown wants districts to shoulder the bulk of that burden – with the existing inadequate level of school funding. This only worsens the consequences for kids. Districts use K-12 Proposition 98 funds to pay their CalSTRS share; the state’s contribution is from the General Fund. Thus, under the governor’s district-centric solution, there will be fewer Prop. 98 dollars statewide and fewer dollars from the Local Control Funding Formula on the ground for districts to use for programs and services for students.

Restricting districts’ reserves

Then at the 11th hour came another shocker. In conference committee, Brown inserted a statewide maximum on districts’ budget reserves, the size of which teacher and classified unions have long grumbled about. Now, when the state has a good year or two economically and puts money into its rainy day fund, districts will be forced to spend down their own local rainy day reserves. This might make sense if the state were guaranteeing its fund would fully cover district shortfalls should the economy go south or if the state guaranteed adequate annual funding for schools, but neither is the case. As such, it is folly to undercut local districts’ ability to plan prudently. For every good year that brings rainy day investments, subsequent economic downturns will surely follow. Hundreds of districts were negatively qualified by county offices of education during the recent downturn, and more than a few were close to insolvency. The ability to shore up reserves kept most districts afloat and served students well.

The Brown administration, with union support, slipped in this significant new restriction on local spending without any public hearings or debate or time for thoughtful consideration. With it in place, stores of local rainy day funds around the state will eventually be funneled straight onto the bargaining table in one chaotic swoop. Some funds will go toward temporary new programs and services (only to be eliminated via cuts and layoffs when school funding next takes a hit); other dollars will inevitably flow right into permanent salary increases. In many cases there will be too many new dollars coming too suddenly for districts to absorb into new programs and/or to withstand the bargaining pressure. The result will be better paid staff, but not necessarily new or better services for high-needs students as promised by the Local Control Funding Formula. Either way, when the bad times come, not having the local reserves to keep things afloat will lead to even more calamitous cuts and layoffs, ill serving the neediest students, who typically suffer the most when the cuts come.

For a governor who promised increased local decision-making under a new regime of “subsidiarity,” Brown just contradicted himself with two whoppers…

Limiting transparency

To punctuate the trifecta, near the close of budget negotiations the administration, with CTA’s urging, quietly removed a provision in the budget trailer bill to increase transparency around how supplemental and concentration dollars for high-needs students are spent by districts. The proposal to modify the state’s school accounting codes was advanced by civil rights advocates and community groups in an effort to increase the transparency for locals and policymakers on how this grand LCFF experiment is playing out for the students it is intended to serve. Both houses in the Legislature included language on transparency in their budget versions. The proposal would not have converted any LCFF funds into restricted dollars like the old categoricals nor reduced any flexibility in how LCFF dollars are spent. It merely would have shown, in broad categories, how supplemental and concentration dollars were being spent. Before the conference committee could even consider the proposal, the administration had it removed.

Mind you, the state has acknowledged, without concern, that many local districts are tracking these dollars with local accounting codes. Apparently, the objection is to the statewide aggregation of data and its potential effect on policy. As CTA told the conference committee in opposing the effort: “That aggregated analysis will misrepresent what is truly happening at local districts and will result in the same kind of statewide, data driven critique that the LCFF sought to reverse.”

So now that we value local control, we no longer can analyze aggregated data and respond appropriately? Could it be that the CTA and the governor don’t want it easily known that the bulk of supplemental and concentration dollars are flowing to higher benefit and salary costs (aided by the new CalSTRS fix and the local reserve cap) and not necessarily to new staff and higher services for high-needs students?

For a governor who promised increased local decision-making under a new regime of “subsidiarity,” Brown just contradicted himself with two whoppers: a new state mandate to spend limited funds on CalSTRS and a new prohibition on local fiscal planning. It’s true that most teachers deserve raises, just as most high-needs students deserve greater services to succeed with the new Common Core standards. But we trusted Brown that funding formula distributions would be decided locally, through the LCFF process – not precluded through CalSTRS mandates, funneled predominantly into salaries, and hidden from view.

It’s as if the administration has forgotten that LCFF was passed and carries legitimacy precisely because so many stakeholders came together – not just the unions, but also many districts and superintendents and civil rights and grassroots organizations representing parents, students and community advocates. These late-breaking, insider maneuvers risk undermining the consensus support for the new law. To restore that delicate consensus, a new conversation on how to adequately fund our schools (including the CalSTRS obligation) should begin; more immediately, the reserve cap should be removed and the transparency reporting provision reinserted. And going forward, these late-dropping, ground-shifting surprises have to be avoided.

•••

John Affeldt is Managing Attorney at Public Advocates Inc., a nonprofit law firm and advocacy organization. He has been recognized by California Lawyer Magazine as a California Attorney of the Year.

 

 

Legislature passes budget and the bullet train is alive again!

Posted on June 14, 2014 at 9:15 AM Comments comments (1260)

Yesterday, California lawmakers approved a 156 billion dollar state budget. It now goes to Governor Brown to approve and he has until the end of the month to move it forward or exercise his veto power.

As always, there were some interesting funding priorities. On a statewide level, the now infamous bullet train is alive again with a quarter of the budget or $68 million dollar devoted to the project. Now that is one expensive piece of transportation!

From an educational perspective, Brown made the controversial move to limit how much money a school district or charter can keep in its reserve account. This decision will surely result in much scrutiny from school business officials. As we all well know, the minimum economic uncertainty has never reported to be enough to negate any true emergency. Brown's response is that schools won't need to save a much cash since the state will have its own rainy day fund.

O.k, USC graduates...we know better...... First of all, we have just spent the last 5-7 years arranging for cash borrowing so that our districts and charters could survive the multitude to cash deferrals. In fact, we are all still dealing with this next month as we patiently wait for our April, May and June payment to arrive in July. We have struggled and struggled to manage our cash as the state passed on their cash problems to school districts to manage. Now we get to depend on the state's rainy day fund?

Second, the state is claiming it has a rainy day fund so there is really no reason for a school district to increase it reserves. Does this mean that when districts or charters need to access this rainy day fund that we can avoid the 20-30 years of consequences that occur with a state takeover? We know this is certainly not the case.

Last, while it is important that we steer clear of the politics inherent in the business office, we still have to weigh all of the facts. The California Teachers Assn. spent $4.7 million to help elect Brown in 2010 and donated nearly $290,000 to lawmakers, mostly Democrats, for this year's campaigns. This clearly raises the question "Is this a nod to the CTA to assist in making more funds available for compensation increases?"

 

Let me know your thoughts! Happy Monday.


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