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Legislative Analyst’s Office

Presented to:

April 9, 2015

Los Angeles Unified School District

Budget, Facilities, and AuditCommittee


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Background: Governor’s

January Budget


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! 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

! State’s Main Reserve Account Ends Year With$534 Million Positive Balance

! Proposition 2 Requires State to Set Aside $2.4Billion • $1.2 billion added to state’s secondary reserve account

• $1.2 billion used to retire outstanding state debts

2015-16 General Fund Assumptions

(January 2015)

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! 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 anAdditional $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

Proposition 98 Minimum Guarantee

(January 2015)

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Proposition 98 Funding

(January 2015)

In Millions

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! $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

Major K-12 Spending Proposals

(January 2015)

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Revenue Update


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! 2014-15 Tax Collections Running Roughly

$1 Billion Above Projections Through March

! Recent Trends Make Revenue OutlookEspecially Favorable: • Personal income tax collections in February and

March far above projections

• Stock market remains elevated

• Major tax collection months (April and June) stillahead

State Revenue Appears to Be Surging

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! 2014-15 Revenue Likely to Be At Least a Few

Billion Higher Than Governor’s JanuaryEstimates• 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 ReleaseNew Revenue Estimates in May

Effect on Revenue Estimates

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! Increases in 2014-15 Revenue Will Increase the

2014-15 Minimum Guarantee Nearly Dollar forDollar • 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 inAdditional Increases to the 2015-16 MinimumGuarantee of Roughly 50 Cents for Each Dollar

State Revenue and Proposition 98

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! Outlook for Schools Especially Favorable

!

Much Different Outlook for Rest of the Budget

•

Little benefit from surging revenue

• Higher revenue tends to increase Proposition 2requirements

•

State might need to cut non-Proposition 98 programsto meet Proposition 98 and Proposition 2 obligations

Implications for State Budgeting

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! Increases in 2014-15 Minimum Guarantee Would

Provide Additional One-Time Funding

•

Administration indicates mandate backlog a priority

! Increases in 2015-16 Minimum Guarantee WouldProvide Additional Funding • Could accelerate LCFF implementation—a $1 billion

increase could close an additional 8 percent of the “gap”

• Could designate for other priorities (such as facilities)

! Recommend Legislature Begin Considering Howto Allocate Additional Funding

Implications for K-12 Spending

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12

Illustration of Possible

Revenue Scenarios


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! 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 2requirements

Scenario 1 – Modest Revenue Surge

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! 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 2requirements

Scenario 2 – Larger Revenue Surge

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! Cuts to Non-Proposition 98 Programs

!

Changes to Proposition 98 Calculations

! Changes to Proposition 2 Calculations

Options for Addressing Budget Problem

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Key Policy Issues


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! State Board of Education Currently DevelopingEvaluation Rubrics •

Rubrics designed to assess school district strengths andweaknesses

•

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 multiplemeasures of performance that align with the eight statepriorities

Accountability

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! Will the Rubrics Include Statewide Standards

to Identify Districts in Need of Assistance?

• For example, would a district be identified forassistance if its graduation rate fell below a specificthreshold?

!

Much Work Remains to Implement Changesto API

Accountability – Key Issues Emerging

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! Governor Proposes $500 Million for Adult

Education Regional Consortia

• School districts with an existing maintenance-of-effortrequirement would have first call on funding in2015-16

• Each consortium would have a seven member funding

allocation committee consisting of a K-12 adult schoolrepresentative, a community college representative,and five other local stakeholders

Adult Education

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! Questions About Governance Structure

•

Some local concerns about giving representatives fromoutside the K-12 and community college systems directinfluence over funding allocations

! Some Policies Not Yet Developed

•

The California Department of Education and theCommunity College Chancellor’s Office did not reachconsensus on several implementation issues, includingstudent fees, assessments, and accountability

Adult Education – Key Issues Emerging

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! Governor’s Budget Provides $34 Million for

4,000 Full-Day Preschool Slots AuthorizedLast Year

! Budget Provides Growth and Cost-of-LivingAdjustment for State Preschool, General

Childcare, and Alternative Payment Programs

Early Education

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! Will the Programs Be Expanded?

•

Continued interest in expanding the programs by fundingadditional slots for full-day preschool or providing otherincreases

• Costs of full-day slots partially funded outside ofProposition 98—state budget has limited room

! Impact of Federal Childcare and DevelopmentBlock Grant Reauthorization

•

Few details yet available, but some changes likely ahead

Early Education – Key Issues Emerging

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! Governor Proposes to Target State Facility

Funding to Districts With Limited LocalRevenue Capacity

• Proposal is conceptual and statutory language has notbeen released

•

Proposal would shift state away from issuing bonds

School Facilities

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! Ongoing Debate About Whether State Should

Continue Issuing School Facility Bonds

! Many Details About Administration’s ProposalNot Yet Available

! An LAO Alternative Proposal Would Establishan Annual Grant Program Providing DistrictsFunding on a Per-Student Basis

School Facilities – Emerging Issues

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