Report on the Governor s May Revision To the Proposed 2012/13 State Budget May 29, 2012

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1 Report on the Governor s May Revision To the Proposed 2012/13 State Budget May 29, 2012 Presenter Julie A. Chapin, Associate Superintendent, Business Services

2 Themes for the May Revision It s all about the economics Revenues are improving at a much slower rate than expected in January Immense pressure on the State Budget and competition for limited resources The revised Budget has a lot of moving parts again this year Bottom line: Best case is flat funding for education and maybe a lot worse In January, the Governor s tax initiative was expected to fill the revenue gap In May, revenues have fallen, and, if the initiative passes, it fills only half the gap Education policy, expectations for student performance, and funding for schools are not aligned Today s funding level may be our new reality for the foreseeable future

3 The May Revision The May Revision first recognizes that January s projected $9.2 billion State Budget shortfall has grown to $15.7 billion in May Even if the Governor s tax measure passes in November, there will still be a significant State Budget problem As a result, the Governor proposes: More cuts to the non-proposition 98 side of the Budget More manipulations to reduce Proposition 98 actual funding But, in the end, planned K-12 funding is much like the January proposal Flat funding if the taxes pass Big cuts if they don t will not be a good year for education funding And failure of the taxes would make it a disaster

4 The Governor s Major Proposals Temporary taxes More reliance on temporary taxes than ever Cash deferrals Deferrals are the balancer; Proposition 98 gains disappear by reducing deferrals Redevelopment agencies (RDA) State counts RDA money as property taxes, offsetting General Fund costs Weighted Student Formula (WSF) Grade span adjustments and additional revised add-ons Flexibility proposals Still alive no changes from January Transitional Kindergarten (TK) Governor reduces savings estimate, but still proposes elimination of the mandate

5 No New Funding for Schools Despite claims of: $6 billion more for schools! 16% increase for schools! Your district, your schools, your classrooms do not get one more dime whether the Governor s taxes pass or not! Our gain is the absence of yet another cut The public is confused The state says Proposition 98 is growing But local schools are making massive cuts and affirming layoffs The state has not provided a single new dollar to local schools since

6 Risks to the Revised Budget Proposal Even if the Legislature adopts the Governor s May Revision as proposed, the State Budget would face huge risks in Voter approval of the Governor s tax initiative is uncertain at best The measure has yet to qualify for the November ballot While more than one million signatures have been submitted, more than 800,000 must be found valid in order for the initiative to be placed on the ballot The latest poll found that about 54% of those surveyed supported the measure, a slim margin at this stage of the campaign A competing measure sponsored by Molly Munger and the Parent Teacher Association (PTA) could confuse voters and draw support away from the Governor s initative The Facebook IPO could fall short of expectations, resulting in a loss of General Fund tax revenue

7 Revenue Limits for For , the May Revision recognizes the statutory cost-of-living adjustment (COLA) of 3.24% District Type % (actual) Statutory COLA % (actual) Elementary $137 $203 High School $164 $243 Unified $143 $212 The May Revision fully funds ADA growth of $169 million in for school districts and county offices of education The deficit factor to eliminate the statutory COLA and provide flat funding in is %, after restoration of the one-time reductions in

8 The revenue limit after the deficit, but before the midyear cuts is $5,244 per ADA Funded Revenue Limit vs May Revision for the Average Unified District $6,535 $6,747 $1,291 $1, % deficit % deficit The amount received after the one-time midyear cuts is $5,189 per ADA The midyear cuts are to be restored in , resulting in flat funding Budget Act After Midyear Cuts Midyear Trigger Cuts $13 Revenue Limit $42 Transportation $5,189 Funded Base Revenue Limit $5,244 Funded Base Revenue Limit May Revision

9 Dollars Per ADA Funding Per ADA Actual vs. Statutory Level Average Unified District $6,747 $6,700 $6,411 $6,392 $6,535 $6,150 Loss of COLA $5,821 $5,700 $5,821 $5,668 $5,244 Loss of baseline dollars $5,244 $5,189 $4,981 $4,789 $4, Loss due to midyear cut Projected Statutory COLA Flat Funding Actual Funding Midyear Cut

10 What Is the Cut If the Taxes Fail? SSC has been recommending $455 per ADA as a planning factor if the taxes fail $370 as a revenue limit cut from January $85 for 100% loss of transportation funding The DOF announced an estimate of $398, but then revised its deficit factor We believe the change in deficit factor will increase district exposure to a total of about $440 to $445 per ADA For now, districts that plan for $441 should be safe If the DOF revises its estimate, we will revise and report our new estimate May Revision proposes school district authorization to reduce school year by up to a total of 15 days over the and school years

11 What Should We Plan For? If the Governor s tax initiative passes: Plan for the WSF to move forward with phase-in beginning in Have a plan to reverse planned budget cuts and restore flat funding in your district Remember, under this plan you get no new dollars, but you do not take another cut If the Governor s tax initiative fails: Plan to make a $441 per-ada cut on an ongoing basis The WSF will not move ahead Hold on to reserves without the taxes, we expect the Governor to propose another cut in January 2013 to address the structural deficit If the PTA/Munger initiative passes, be prepared to implement at schools Clearly articulate the problems that face your district and the solutions you have in mind to address them keep your options open