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.