Governor’s Proposals for the 2014-15 State Budget and K-12 Education Presented by School Services of California, Inc. Staff

Governor’s Proposals for the2014-15 State Budget and K-12 Education

Presented by

School Services of California, Inc. Staff

Introduction

© 2014 School Services of California, Inc.

Themes for the 2014 Budget

What a difference a year makes!

Only 14 months ago we were facing deep cuts if Proposition 30 didn’t pass

Governor Jerry Brown is proposing the greatest increase in per-student average funding since 2000-01

He takes a wrecking ball to the “wall of debt” by buying down the remaining K-14 deferrals

The Proposition 98 entitlement skyrockets even while the California economy as a whole only improves at a moderate rate

The increase in Proposition 98 creates a window of opportunity unlike any we have had before

To protect public education during the eventual downturns, the Governor proposes two rainy day funds: one for education and one for the rest of the State Budget

The Governor is proposing a continuous appropriation for the Local Control Funding Formula (LCFF)

A-1

Fiscal Prudence and Policy Implications

The state of California’s taxing structure results in significant volatility in state funding that directly impacts Proposition 98

Most of the state’s past financial problems were the result of over-exuberance during good financial years, not just the onset of bad times

Every school district in the state knows all about the importance of reserves and multiyear planning – the state, not so much

The Governor proposes setting up reserves during the good times to help smooth out any rough spots during the bad times

Sure seems to have worked for the 1,000 school districts in the state during the last recession, the worst of our time

We believe that the Governor’s Proposal is reasonable and prudent, but we expect to see push back from the Legislature – the appetite for spending is very strong


A-2

Economics Still Rule

The slow economic recovery continues . . . UCLA Anderson Forecast

Unemployment rates are falling for both the nation and California

California’s housing market, which took the biggest fall among the states during the recession, is now recovering briskly

While it has been 4½ years since the recovery started, the nation has yet to recover the jobs lost since the start of the recession

The major bell weather of optimism is the stock market – new highs signify high hopes for the future


A-3

Education Is this Governor’s Top Priority

While the state still faces significant Budget pressures for the non-Proposition 98 part of the Budget, the Administration’s attitude toward education is dramatically different this year

While public education took more than its fair share of the cuts during the recent recession, public education under this Governor is recovering at a much faster rate

The Governor understands the message the public sent in the passage of Proposition 30 – and is responding to it

Local districts will control programs for the first time in 40 years!

And the education community is more together than it has been in recent years

These factors together gives us a tremendous opportunity – we cannot let it get away!


A-4

Complete Mind Shift of Governance and Planning

Policy

Funding

Program Rules

Local Board Implementation

School Site Performance

Audits and Compliance Reviews

Old

Syst

em S

tate

of C

alifo

rnia

Compliance Model

New

Syst

em

Empowerment Model

BoardRevises Policy

Results Reported to Public

Local Board Empowers Schools

State Provides Funding

Local Board Sets Policy

Community Involvement

Focus onStudents

Student Achievement


7

A-5

Education Receives More But Our Needs Are High

Our current commitment to education is nearly last in the nation

Forty years of underfunding has created “structural deficits” in fundamental educational achievements, not just financial deficits

The energy needed to “catch up” is greater than what would be needed to “keep up”

The consequences of poor education policies and funding take time to materialize, but make no mistake, the consequences are severe

We are very encouraged by the recent actions of the Governor

But we must commit to never let our obligations to our children slide again

At Pearl Harbor, there are buildings with unrepaired bullet holes from December 7, 1941 – there is a sign on each of them “Lest We Forget”


A-6


Overview of the State Budgetand the State Economy


U.S. Economic Outlook

The U.S. economy continues to show positive growth, but most recent quarters are not only below recovery levels, they are also below normal growth rates

The latest reported quarter, Quarter 3 (Q3) 2013, is encouraging; at 4.1% it eclipses what we would look for in a “normal” quarter, about 3.5%

The economy is growing more evenly than in the past

The stock market is hitting new highs, regularly indicating optimism in the investment community

Housing markets are heating up in most areas of the country

Capital investment by business is up

Employment is improving

Consumer spending is up

The economy seems to be consolidating its hard-fought gains

B-1


U.S. Economic Outlook

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

-3.7

%

-8.9

%

-6.7

%

-0.3

%

1.4%

4.0%

2.3%

2.2% 2.6%

2.4%

0.1%

2.5%

1.3%

4.1%

3.7%

1.2%

2.8%

0.1% 1.

1%

2.5%

4.1%

U.S. Gross Domestic Product(Percent Change)

2008 20102009 2011 2012 2013

B-2


Stock Market Has RecoveredB-3

Dow Jones Industrial Average(Dow Jones Global Indexes: INDU)

Source: CNN Money


0%

5%

10%

15%

20%

25%Change in GDP*

Years into the Recovery

199114.2%

1 2 3 4

200910.0%

200114.5%

Average18.9%

198223.1%

Sluggish Growth – Comparing Recent Recoveries

How the expansion that began in 2009 compares with the first four years of other recoveries

B-4

Note: Average is for recoveries after WWII, excluding the one that started in 2009*Adjusted for inflation and the seasonsSource: Commerce DepartmentThe Wall Street Journal, December 18, 2013


Job ShortfallB-5

Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13125,000

127,000

129,000

131,000

133,000

135,000

137,000

139,000

141,000

143,000

145,000

Num

ber o

f job

s (t

hous

ands

)

Note: Congressional Budget Office estimates of the potential labor force (found here: http://cbo.gov/sites/default/files/cbofiles/attachments/43910_Key AssumptionsProjectingPotentialGDP.xls) are used to calculate the number of jobs needed to keep up with the growth in the potential labor force.Source: Author’s analysis of Bureau of Labor Statistics Current Employment Statistics public data series and Congressional Budget Office data

7.9 millionJob shortfall6.7 million

Jobs not gained

1.2 millionJobs lost

Recession has left a job shortfall of nearly 8 millionPayroll employment and the number of jobs needed to keep up with the growth in the potential labor force, 2000–2013


The California Economy

California’s economic outlook is also improving

Employment is still a problem; job growth lags the nation and California is among the five states with the highest unemployment

The unemployment rate is declining, but slower than the rest of the nation

Personal income is forecast to grow at an accelerated rate over the next couple of years, but actual performance has fallen short of past forecasts

Housing markets are heating up along the coastal areas, but inland and central valley areas are moving up more slowly

Prior to the “Great Recession,” our economy, without temporary taxes, produced General Fund revenues of just over $100 billion

For 2014-15, the Department of Finance (DOF) projects revenues of $106 billion, including $7 billion in temporary taxes from Proposition 30

The state has a Budget surplus because of past Budget reductions, economic growth, and the temporary taxes

B-6


California’s Unemployment RateB-7

Jan July Jan July Jan July Jan July Jan July Jan July Aug Oct0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

5.9%

7.3%

9.7%

11.7%12.3% 12.4% 12.1% 11.9%

11.0% 10.6%9.8%

8.7% 8.9% 8.7%

Unemployment Rate

Source: Employment Development Department, 2014

2008 2009 2010 2011 2012 2013


California’s Unemployment Rate vs. Other States

Nevada Rhode Island Michigan Illinois California6.0%

7.0%

8.0%

9.0%9.0% 9.0%

8.8% 8.7%8.5%

Highest State Unemployment Rates(November 2013)

NationalAverage

6.7%

B-8

Source: Bureau of Labor Statistics, November 2013

California – Employment Forecast

2013 2014 2015

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

1.7%

2.2%

2.0%

1.7% 1.8%

2.2%2.1%2.0%

2.7%

Employment Forecast(Percent Change)

LAO, November 2013UCLA, December 20132014-15 Governor's Budget

B-9© 2014 School Services of California, Inc.

California – Personal Income Forecast

2013 2014 2015

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2.1%

5.4% 5.5%

2.1%

5.3%5.7%

2.5%

4.6%5.0%

Personal Income(Percent Change)



Inflation Forecast

2013 2014 2015

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

1.5%1.6% 1.7%

1.5%

2.0%

2.5%

1.6%1.8%

1.9%

Inflation Forecast(Percent Change)




Forecast State Budget Surpluses

In its 2013 November State Budget Forecast, the Legislative Analyst’s Office (LAO) projected growing budget surpluses through 2019-20, reaching $9.6 billion in that year

Armed with this forecast, many lawmakers are eager to spend this surplus by establishing new programs or restoring past program cuts

The LAO’s forecast methodology, which is clearly spelled out in the report, indicates that most automatic cost-of-living adjustments (COLAs) for state programs were repealed in 2009 to cope with the budget gaps resulting from the recession

As a result, the LAO’s long-term forecast does not increase program expenditures with respect to COLAs, except where required by federal law

Proposition 98, however, is implicitly adjusted for COLAs as part of the three Tests

B-12


Adjusting State Expenditures for COLAs

Even though current law does not require COLAs for most state programs, it is unlikely that the Legislature will ignore the need for inflation adjustments for the entire six-year forecast period

The California Consumer Price Index is expected to increase about 2.5% annually through 2019-20

If this adjustment is not provided, state programs would suffer a loss of purchasing power of about 14% by the end of the decade

What happens to the forecast surplus if COLAs are provided to all state programs?

If COLAs are provided, the operating surplus falls significantly: $2.1 billion in 2014-15, peaking at $4.9 billion in 2017-18, and dropping to $2.3 billion by 2019-20

This outcome would leave little funding for new programs or the restoration of the cuts made during the recession

B-13


State Budget Surplus Assuming COLAs

2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 $-

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

$10.0

$3.2

$5.6

$8.3

$9.7 $9.6 $9.8

$2.1

$3.4

$4.9 $4.9

$3.5

$2.3

Forecast of Operating Surplus 2014-15 Through 2019-20 (In Billions)

Limited COLAsCOLAs for all programs

B-14

Source: LAO, November 2013; School Services of California, Inc., January 2014


Small Recovery Begins After Decade of Deficits

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

-$50.0

-$40.0

-$30.0

-$20.0

-$10.0

$0.0

$10.0

(Dollars in Billions)

B-15

Source: Governor’s Budget Summary, page 5


2014-15 Governor’s BudgetGeneral Fund Budget Summary (In Millions)


2013-14 2014-15

Prior-Year Balance $2,528 $4,212

Revenues and Transfers $100,147 $104,503

Total Resources $102,675 $108,715

Total Expenditures $98,463 $106,793

Fund Balance $4,212 $1,922

Budget Reserve:

Reserve for Encumbrance $955 $955

Reserve for Economic Uncertainties

$3,257 $967

Budget Stabilization Account $0 $1,591

Total Available Reserve $3,257 $2,558

Revenues and transfers increase 4.3%, while expenditures increase 8.5% in 2014-15

The Budget year provides nearly $1.6 billion the Budget Stabilization Account

The Budget proposes a nearly $1 billion reserve for economic uncertainties

Source: 2014-15 Governor’s Budget

B-16


What’s Proposed for the Rest of the Budget?

What the Budget proposes outside of education:

$670 million for expanded Medi-Cal benefits, including mental health, substance abuse disorder, adult dental, and specialized nutrition services

A 5% increase in California Work Opportunity and Responsibility to Kids (CalWORKs) grants

$815 million for deferred maintenance in state parks, highways and roads, K-12 schools and community colleges, state hospitals, and other facilities

$850 million in “Cap and Trade” auction proceeds for programs that will reduce greenhouse gases, including $250 million for high-speed rail

$1.6 billion to the “Rainy Day Fund” in addition to the $967 million reserve

$1.6 billion supplemental payment to retire the Economic Recovery Bonds

$142 million to UC and $177 million to CSU to avoid a fee increase

B-17


What’s Not in the Budget?

What the Budget does not address:

No proposal for a statewide school facilities bond

No new funding to address the unfunded liability in the California State Teachers’ Retirement Systems (CalSTRS) fund

No new funding to address special education shortfalls

No new funding for early childhood education

No payments on the prior-year state mandate credit card

B-18


California’s Investment in Education

After 40 years of neglect, with each year’s funding being well below the national average, we have a lot of catching up to do

Even after the turnaround began in 2013-14, California is nearly last in the nation in per-student funding

The Governor’s proposal for dramatically increased funding in 2014-15 will help us catch up

But we have a long way to go and the road ahead could be a bit slippery

Our economy is still fragile and vulnerable, making out-year projections volatile

Just 13 months ago, absent Proposition 30, education would have faced another large cut

How many of us forecast that a little more than a year later we would be seeing a 10.9% increase?

B-19


California Invests in Education

2007-08 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 $40.0

$45.0

$50.0

$55.0

$60.0

$65.0

$70.0

$75.0

$56.6

$47.2

$58.3 $56.8

$61.6 $64.5

$67.0 $69.6

Budget Continues to Invest in Education(Proposition 98 Dollars in Billions)

Proposed Estimated

B-20

Source: Governor’s Budget Summary, page 5


Per-ADA Funding Volatility

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

-15%

-10%

-5%

0%

5%

10%

15%Per-Average Daily Attendance Revenue Change

B-21


Money Matters in Student Performance

Results of the 2013 Grades 4 and 8 Math and Reading Proficiency Scoring from the National Assessment of Educational Progress (NAEP) show that the majority of the lowest performing states with the lowest levels of proficiency in math and reading rank in the 15 states with the lowest expenditures per ADA

This includes California, Arizona, Georgia, Mississippi, Nevada,Oklahoma, Tennessee, and Texas

Conversely, the states with the highest 2013 Grades 4 and 8 Math and Reading Proficiency Scoring rank in the top 15 states with the highest per-ADA expenditures in 2011-12

This includes Connecticut, Maine, Montana, New Hampshire, New Jersey, North Dakota, Pennsylvania, Vermont, and Wyoming

B-22

Source: Education Week Quality Counts 2014 – January 9, 2014


Money Matters in Student Performance

Overall, California’s per pupil expenditures continue to lag the national average, ranking 49th in the nation in 2011-12, the most recent data comparison

California reported per pupil expenditures of $8,341, comprising about 70% of the U.S. average of $11,864

California continues to have some of the highest salaries in the U.S.; however, student enrollment to teacher is also reported as the highest in the nation in 2011-12 at 25.6:1

Other student enrollment to staff ratios continue to grow:

B-23

2009-10 2010-11

Guidance Counselors 810:1 1,016:1

Librarians 5,489:1 8,309:1

Current Expense of Education Per ADARanking of the States – 2011-12

Source: Education Week Quality Counts 2014 – January 9, 20141United States Average includes the District of Columbia


B-24

Ranking State Current Expense Per Student(Adjusted for Regional Cost Differences)

Percentage of National Average

1 Wyoming $19,534 165%

2 Alaska $17,554 148%

3 Vermont $17,388 147%

4 New York $16,835 142%

5 Maine $15,063 127%

6 New Jersey $14,920 126%

7 Rhode Island $14,794 125%

8 Connecticut $14,751 124%

9 New Hampshire $14,556 123%

10 Montana $14,489 122%

United States 1 $11,864 100.0%

49 California $8,341 70%

National Rankings: Average Teacher Salaries and Student/Teacher Ratio – 2011-12


B-25

Ranking StateAverage

Salaries of Public School

Teachers

1 New York $73,398

2 Massachusetts $71,721

3 Connecticut $69,465

4 District of Columbia $68,720

5 California $68,531

6 New Jersey $67,078

7 Maryland $63,634

8 Alaska $62,425

9 Rhode Island $62,186

10 Pennsylvania $61,934

United States $55,418

Ranking StateStudents Enrolled

Per Teacher in Public K-12 Schools

1 California 25.6

2 Utah 21.9

3 Oregon 20.2

4 Washington 19.7

5 Michigan 18.4

6 (tie) Idaho 18.2

6 (tie) Nevada 18.2

8 Arizona 18.0

9 Colorado 17.8

10 Ohio 17.3

United States 16.0

Source: NEA Rankings and Estimates 2012

California Lags the Nation© 2014 School Services of California, Inc.

B-26

California’s Schools Lag Behind Other States on a Number of Measures

California Rank

California Rest of U.S.

K-12 Spending Per Student (2011-12)* 49 $8,341 $11,364

Staffing

K-12 Students Enrolled Per Teacher (2011-12)* Last 25.6 16.0

K-12 Students Per Administrator/Official (2010-11)** N/A 1,757 766

K-12 Students Per Guidance Counselor (2010-11)** N/A 1,016 471

K-12 Students Per Librarian (2010-11)** N/A 8,309 984

Note: Number of students per administrator, guidance counselor, and librarian are based on statewide enrollment*Source: Education Week Quality Counts 2014 – January 9, 2014**Source: National Center for Education Statistics digest of Education Statistics 2012

California’s staffing ratios continue to grow, causing increased pressure on staff and students



Education is the Great Homogenizer

Opportunities for a free and appropriate public education have fueled the American dream for wave upon wave of new Americans for 200 years

Education turns tax receivers into tax payers

Education enables all citizens to participate in our democratic society

The traditional avenues for transition to work and higher education have been Regional Occupational Centers/Programs (ROC/P), Adult Education, and community colleges

All of these programs have been cut more than even the deep cuts experienced by K-12 education

As a result, many Californians may feel that the window of opportunity has passed them by

There is a direct linkage between education and earnings

We need to be sure the window of opportunity is re-opened and that it stays open

B-27


Education, Unemployment, and Wages

All

Less than high school

High school diploma

Some college (no degree)

Associate's degree

Bachelor's degree

Master's degree

Professional degree

Doctoral degree

6.8%

12.4%

8.3%

7.7%

6.2%

4.5%

3.5%

2.1%

2.5%

B-28

$815

$471

$652

$727

$785

$1,066

$1,300

$1,735

$1,624

Note: Data are for persons 25 and older. Earnings are for full-time wage and salary workers.Sources: U.S. Bureau of Labor Statistics, the College BoardThe Sacramento Bee, December 22, 2013

Those who have education beyond high school earn more, and are more likely to be employed than those with a high school diploma or less

Education Unemployment Rate, 2012 Median Weekly Earnings, 2012

The Education Budgetand Challenges Ahead


Proposition 98: How Much in 2014-15?

$61.6 billion in K-14 Proposition 98 funds are available for 2014-15

This is a $6.3 billion increase – 11.4% over the 2013-14 budgeted level

On average, $751 per ADA ongoing is K-12 education’s share

In addition, $3.3 billion more is provided in one-time funding from prior years

$1.8 billion from 2012-13

$1.5 billion from 2013-14

C-1

Proposition 98 Revenues

'07-08 '08-09 '09-10 '10-11 '11-12 '12-13 '13-14 '14-15

$56.6

$49.2

$51.7$49.7

$47.2

$56.5$55.3

$58.3$56.8

$61.6

Proposition 98 (In Billions)

Enacted Budget 2014-15 Governor's Budget


C-2

State Revenue Growth vs. Proposition 98 Growth

Proposition 98 growth or decline closely tracks changes in state revenue

As the state goes, so goes education funding


'08-09 '09-10 '10-11 '11-12 '12-13 '13-14 '14-15-20%-15%-10%-5%0%5%10%15%20%25%

Annual Percentage Change: State Revenues Compared With Proposition 98

State Revenue Proposition 98

C-3

Proposition 98 Revenues and Spending

Proposition 98 sets the minimum funding level for K-12 education and the community colleges, but . . . the Legislature and the Governor decide how to spend it


Constitutional Guarantee Statutory Programs

Prop. 98 Revenues K-14 Spending

DeferralsQEIA/ASES*

Child Nutrition

LCFF

Other Programs

Community Colleges

Special Education

* Quality Education Investment Act/After School Education and Safety Program

C-4

K-12 Proposition 98 Proposals for 2014-15© 2014 School Services of California, Inc.

$5.5 billion of one-time and ongoing Proposition 98 to fully eliminate interyear K-12 apportionment deferrals in 2014-15

$4.472 billion in additional funding for school districts and charter schools to continue implementation of the LCFF

$25.9 million to complete the implementation of the COE LCFF

$316.5 million to support Proposition 39 energy efficiency projects

$33.3 million to fund a 0.86% statutory cost-of-living adjustment (COLA) for categorical programs that remain outside of the LCFF

$74.3 million to fund projected growth in charter school ADA

$46.5 million for assessment costs associated with implementation of CCSS

$188.1 million for the Emergency Repair Program (ERP) from one-time Proposition 98 funds

C-5

The Rest of Proposition 98 – Community Colleges© 2014 School Services of California, Inc.

K-12 education shares the Proposition 98 guarantee with the California Community Colleges (CCCs)

And much like K-12, CCCs are benefitting from an upswing in the minimum guarantee:

3% growth in general purpose apportionments

Complete retirement of deferrals

Additional funding for certain student success priorities

One-time funds for deferred maintenance and instructional equipment

Unlike K-12, CCCs have not yet resolved the unwinding of temporary categorical flexibility, which expires July 1, 2015

The Governor proposes additional partial categorical flexibility in a few more programs, but the expiration date remains

CCCs are still funded through a system of base apportionments and categorical programs

C-6

K-12 Education and Community Colleges

Proposition 98$0

$10

$20

$30

$40

$50

$60

(Amount in Billions)

K-12

CCCs

10.93%

89.07%


CCCs Proposition 98 percentage share mirrors statutory requirement

C-7

Amendments to the “Rainy Day Fund”

The Governor is proposing a constitutional amendment to make major changes to the state’s “Rainy Day Fund,” which was established in 2004 through Proposition 58The amendments are intended to address revenue volatility stemming from the capital gains taxThe specific provisions include:

Establishing a Proposition 98 reserve in addition to the existing Rainy Day FundRequiring contributions to these reserves when capital gains revenues exceed 6.5% of General Fund tax revenuesEstablishing a maximum size for the Rainy Day Fund of 10% of revenues, as opposed to the 5% maximum of Proposition 58 Allowing supplemental payments to existing debt in lieu of a deposit to the Rainy Day FundLimiting withdrawals to 50% of the balance in the first year of a recession


C-8

Proposition 98 Reserve

When capital gains tax revenues exceed 6.5% of General Fund revenues, an appropriation to the Proposition 98 reserve would be made

The amount appropriated would equal Proposition 98’s share of General Fund expenditures in that year

The appropriation to the reserve would not affect the calculation of the minimum guarantee

The reserve could be no greater than 10% of the Proposition 98 guarantee

Withdrawals from the reserve would be made when growth in the guarantee was insufficient to fund workload increases, such as in a Test 3 year

The goal of this initiative is to smooth out state revenues apportioned to education and avoid program cuts during an economic downturn

The plan is to place the initiative on the November 2014 ballot for implementation commencing in 2015-16


C-9

2014-15 Local Control Funding Formula© 2014 School Services of California, Inc.

Budget proposes $4.5 billion for continued implementation of the Local Control Funding Formula (LCFF)

New funding is estimated to close the gap between 2013-14 funding levels and LCFF full implementation targets by 28.05%

Combined with elimination of 11.78% of the gap in 2013-14, the new formula would be over one-third of the way toward implementation in the first two years

2014-15 LCFF growth provides an average increase in per-pupil funding of 10.9%, or $751 per ADA

Individual LEA experiences will vary

C-10

LCFF – A Quick Review© 2014 School Services of California, Inc.

The LCFF makes fundamental changes to how we allocate state Proposition 98 revenues to schools

At full implementation, the LCFF will fund every student at the same base rate

The LCFF provides two weighting factors applied against the LCFF base grant

20% on behalf of each eligible student

An additional 50% for the eligible students exceeding 55% of total enrollment

Each school district receives at least as much state aid in future fiscal years as the district received in 2012-13

The LCFF continues the necessary small school funding adjustment for eligible school districts

The LCFF provides an Economic Recovery Target to assure district funding is restored to 2007-08 levels, adjusted for inflation

C-11

LCFF – Base Grant Entitlement Calculation© 2014 School Services of California, Inc.

2014-15 target entitlement calculation

Grade span per-pupil grants are increased annually for the COLA

Factors K-3 4-6 7-8 9-12

2013-14 Base Grant per ADA $6,952 $7,056 $7,266 $8,419

COLA @ 0.86% $60 $61 $62 $72

Base grants – 2014-15 $7,012 $7,117 $7,328 $8,491

C-12

T A R G E T

LCFF – K-3 CSR and CTE Adjustments© 2014 School Services of California, Inc.

K-3 CSR and 9-12 Career-Technical Education (CTE) Grade Span Adjustments are additions to the base grant

CTE is unrestricted; CSR requires progress toward maximum site average of 24 students enrolled in each class

Factors K-3 4-6 7-8 9-12

Base grants – 2013-14 $7,012 $7,117 $7,328 $8,491

Adjustment percentage 10.4% CSR - - 2.6% CTE

Adjustment amount $729 - - $221

Adjusted grant per ADA $7,741 $7,117 $7,328 $8,712

C-13

T A R G E T

LCFF – Supplemental and Concentration Grants Per ADA


Supplemental and concentration grant increases are calculated based on the percentage of total enrollment accounted for by English learners, free and reduced-price meal (FRPM) program eligible students, and foster youth

Factors K-3 4-6 7-8 9-12


20% supplemental grant $1,548 $1,423 $1,466 $1,742

50% concentration grant (for eligible students exceeding 55% of enrollment)

$3,871 $3,559 $3,664 $4,356

C-14

T A R G E T

LCFF – An Example© 2014 School Services of California, Inc.

A district with 60% eligible students would calculate the following LCFF target grants for 2014-15

Factors K-3 4-6 7-8 9-12


% Enrollment eligible (example) 60% 60% 60% 60%

60% of Supplemental $929 $854 $879 $1,045

5% of Concentration (percentage above 55%) $194 $178 $183 $218

Total 2014-15 LCFF target grant per ADA $8,864 $8,149 $8,390 $9,975

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T A R G E T

LCFF – An Example© 2014 School Services of California, Inc.

Each grade span amount is multiplied by the district’s ADA for the corresponding grade span – example district with 8,000 ADA

Factors K-3 4-6 7-8 9-12

2014-15 LCFF target grant/ADA $8,864 $8,149 $8,390 $9,975

Average daily attendance 2,500 1,850 1,250 2,400

Total – by grade span $22,160,000 $15,075,650 $10,487,500 $23,940,000

Transportation and TIIG $836,850 and $1,000,000

Total – Example District LCFF target $73,500,000

Supplemental/Concentration Share $9,075,400 (in total)

C-16

T A R G E T


Proportionality and Targeted Funds

The LCFF statutes direct the State Board of Education (SBE) to develop regulations by January 31, 2014, to require LEAs to:

Increase or improve services for eligible pupils in proportion to the increase in funds apportioned on the basis of the number and concentration of eligible pupils

LEAs are also required to include in their LCAP a description of expenditures that serve pupils eligible to generate supplemental and concentration grants

Goals, activities, and services that increase or improve support for eligible students is a local decision

The proportion of the increase in funds attributable to the number of eligible pupils enrolled is a calculation

It is important to keep this distinction in mind, and it is why we are calling supplemental and concentration grant funding targeted, rather than restricted


C-17

State Board of Education Regulations

Recently proposed SBE regulations provide a method of calculating the proportional share of LCFF dollars that are attributable to supplemental and concentration grants each year

Proportionality calculation and the Local Control and Accountability Plan (LCAP) will be taken up for a vote by the SBE on January 16, 2014

Calculation of proportional increase for supplemental and concentration grants is specific

LCAP is flexible, providing significant local control over services, activities, and plan content


C-18

An Example of Gap Funding Per ADA

$9,000

$7,900

2013-14 2014-15Funding

2014-15Target

Total Gap

$9,000 - $7,000

$2,000

$2,000x 28.05%

$561

Target 2013-14Total gap

Total gap$4.5 Billion14-15 Inc.

Supplemental and Concentration Grants

2014-15 Target Base

61

Economic Impact Aid

$7,000

$6,700

LCFF Base

$300 EIA

$1,100

$7,561

$3,787

$6,700

$300 EIA

$561$224 Supplementation and Concentration Grants$337 Base

Dol

lars

per

AD

A

$1,100-$300$800

$800x 28.05%

$224

Supp/ConcEIANet gap

Net gapClosureSupp/Conc share

LCFF Increase


C-19

LCFF – From 2013-14 to 2014-15

2013-14 base adjustments for 2014-15Remember, the share of your base that came from 2012-13 categorical funding is not adjusted for changes in ADAThe share that came from the revenue limits and the 2013-14 LCFF incremental increase is adjusted for changes in ADA

Per ADA example: 2014-15 minimum proportionality percentage (new regulation)

Determine the funding provided for eligible pupils, which equals the base year funding for EIA, other district funds for eligible pupils, and the incremental increase from supplemental and concentration grants: in the example, $300 plus $224 equals $524Calculate district base funding, which excludes funding for eligible pupils

In the example, total funding of $7,561 less the funding provided for eligible pupils of $524 equals $7,037Minimum proportionality percentage of funding for eligible pupils as a percentage of base funding equals 7.4% (= $524 ÷ 7,037)


C-20


Use of Supplemental/Concentration Grants

The proposed LCFF regulations would provide districts varying degrees of latitude in the expenditure of supplemental/concentration grant funds, depending upon the percentage of eligible studentsIf the district has unduplicated counts of the following:

Greater than 55%, then these funds may be spent on a districtwide basis, provided the district

Identifies the districtwide servicesDescribes how these services meet the district’s goals for the targeted students in the state priority areas

Less than 55%, districtwide expenditure of these funds is authorized, provided the district

Identifies the districtwide servicesDescribes how these services meet the district’s goals for the targeted students in the state priority areasDescribes how these services are the most effective use of the funds

C-21


Use of Supplemental/Concentration Grants

The proposed regulations also address school site enrollment and the authorized use of these funds

A district that has a school with an enrollment of eligible pupils in excess of 40% of the school’s total enrollment, the district may expend the targeted funds on a schoolwide basis, provided the district

Identifies the schoolwide services

Describes how these services meet the district’s goals for the targeted students in the state priority areas

A district that has a school with an enrollment of eligible pupils less than 40% of the school’s total enrollment, the district may expend the targeted funds on a schoolwide basis, provided the district

Identifies the schoolwide services

Describes how these services meet the district’s goals for the targeted students in the state priority areas

Describes how these services are the most effective use of the funds

C-22

Targeted Funds – Conclusion

2013-14 is the first transition year toward full implementation of the LCFF

Districts will not have developed and adopted their LCAP until 2014-15

Don’t be overly concerned about how funds are used, but . . .

Once regulations are adopted, your actions will have to be consistent with those requirements going forward

If your direction is wrong this year, you may need larger corrections next year

Be thoughtful about how you use new dollars for districtwide purposes, and about how you will demonstrate additional support for eligible students with those dollars that you do receive on their behalf


C-23

What Are the Distributional Impacts of the LCFF?

During the eight-year implementation phase, there are major distributional consequences of the LCFF

Once fully implemented, all districts will share equally in any new state funding provided for COLAs or enhanced funding levels

Prior to full implementation, however, there are major differences in funding increases among districts statewide

What are the distributional consequences of the LCFF?

Size of district

Percent eligible for supplemental/concentration grants

Type of district


C-24

LCFF Funding by District Size© 2014 School Services of California, Inc.

1st Quintile3-200

2nd Quintile200-770

3rd Quintile770-2,800

4th Quintile2,800-8,400

5th Quintile8,400-550,000

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

1.7%

4.0%

5.1%5.4% 5.4%

Average Percent Increase per ADA in 2013-14

1.565% (COLA)

District Size (ADA)

C-25

LCFF Funding by District Type© 2014 School Services of California, Inc.

Elementary High School Unified0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

4.11% 4.14%

4.75%

Average Percent Increase by District Type in 2013-14

1.565% (COLA)

C-26

Range of LCFF Increases© 2014 School Services of California, Inc.

1st Quintile 2nd Quintile 3rd Quintile 4th Quintile 5th Quintile0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

0.8%

3.5%

4.4%

5.5%

7.4%

District Average Percent Increase by Quintile in 2013-14

1.565% (COLA)

Lowest Increase Highest Increase

C-27

LCFF Funding and High Needs Students© 2014 School Services of California, Inc.

1st Quintile0%-29%

2nd Quintile29%-50%

3rd Quintile50%-66%

4th Quintile66%-82%

5th Quintile82%-100%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

3.0%3.4%

3.8%

4.9%

6.4%

Average Percent Increase by Percent Eligible for Supplemental/Concentration Grants

1.565% (COLA)

C-28

Policy Conclusions for LCFF

Increased funding is targeted to districts with the highest percentage of eligible students

The 200 districts with the greatest percentage of eligible students received more than twice the increase of the 200 districts with the fewest eligible students

The new funding model aggressively pursues the differential funding rates

The 200 districts with the smallest increases in 2013-14 averaged a 0.8% gain, with 89 districts experiencing no gain at all

The 200 districts experiencing the greatest gain averaged a 7.4% increase in 2013-14, a nine-fold gain over the bottom quintile


C-29

Policy Conclusions for LCFF

Small districts experience little gain under LCFF, most likely because ofprior-year funding received under the necessary small schools adjustmentand pre-existing revenue limit differentials

Otherwise, the new model is neutral with respect to both district size and district type

The long-term implications of the LCFF are profound

At full implementation, districts with the greatest concentrations of eligible students will have about 20% more funding per ADA than the average district

Districts with the lowest concentration of eligible students will have about 6% less funding per ADA than the average district


C-30

Apportionment Deferrals

The Governor’s Budget proposes to fully extinguish the remaining $6.1 billion in K-14 apportionment deferrals in 2014-15 ($5.5 billion for K-12 education and $593 million for the community colleges)

This proposal accelerates last year’s plan to eliminate the deferrals in 2016-17

Commencing in 2014-15, the “5-5-9” apportionment schedule (i.e., 5% paid in July, 5% paid in August, and 9% paid in each of the following 10 months) will finally be implemented

Funding is provided from both one-time and ongoing revenues

$1.8 billion in one-time funds from 2012-13

$1.5 billion in one-time funds from 2013-14

$2.7 billion from ongoing revenues in 2014-15

At the peak of the state’s fiscal woes, approximately 45% of the state aid owed to LEAs was deferred to the following year


C-31

LCFF “Categorical Programs” and the COLA

The LCFF includes funding from more than 40 former categorical programs, including Tier III and Economic Impact Aid

Transportation and Targeted Instructional Improvement Grants (TIIG) are now part of the formula, but are not adjusted for COLAs nor are they adjusted for workload changes

The LCFF base grant targets, and implicitly all of the categorical programs folded into the LCFF, are adjusted for an estimated 0.86% COLA for 2014-15

However, the actual amount received by districts is dependent upon

The district’s demographic profile, which determines eligibility for supplemental and concentration grants and current base funding level

State funding provided for LCFF

Agricultural Vocational Education and Specialized Secondary Program funding are proposed to be folded into the LCFF calculation


C-32

COLA for Categorical Programs Outside of the LCFF

For 2014-15, categorical programs outside of the LCFF will receive an estimated 0.86% COLA, an increase of $33.3 million

These programs include:

Special Education

Foster Youth

American Indian Education Centers

American Indian Early Childhood Education Programs

Child Nutrition

Adults in Correctional Facilities


C-33

Greater Certainty With a Continuous Appropriation

Under revenue limits, state law provided for a continuous appropriation to remove this key source of district funding from annual Budget negotiations

Absent legislation amending the revenue limit statutes, the continuous appropriation provided the authority for state payments to districts regardless of whether an approved State Budget was in place

The Legislature, however, has enacted Budget Trailer Bills that have suspended the statutory COLA and imposed cuts to the revenue limit

The Governor’s Budget proposes to establish a continuous appropriation for the LCFF to provide greater certainty to districts, similar to revenue limits

The annual minimum appropriation for LCFF will be based on a fixed percentage of any new funds provided by the growth in Proposition 98

This percentage has yet to be determined


C-34

County Office of Education

LCFF funding of COEs is similar to the funding for school districts

The two-part formula includes:

Per-ADA funding to support students attending community schools and juvenile court schools

Unrestricted funding for general county office operations, distributed based on the total number of school districts in the county and the total ADA of all students in the county

Counties will receive a base grant per ADA for students served in alternative schools and community schools

And targeted supplemental grants for English learners and low-income students, comparable to the LCFF for school districts

Like school district and charter school funding, increases would occur over time to reach the funding target

Under the Governor’s Proposal, the COE LCFF is fully implemented by the end of 2014-15


C-35

Adult Education

The Governor does not propose any changes to the 2013-14 Budget agreement for Adult Education Programs

LEAs must maintain at least the same level of Adult Education expenditures in both 2013-14 and 2014-15

The Governor indicates his “intention to make an investment in Adult Education programs (including programs provided in county jails) through a single categorical program” beginning 2015-16

No details are provided, but the Governor indicates he intends to work jointly with the California Department of Education and Community Colleges Chancellor's Office to “complete the adult education consortia plans, while working with the Legislature to ensure that any legislation pertaining to adult education aligns with and supports the planning process currently underway, and provides consistent guidance to K-12 and community college districts.”


C-36

Special Education

The Governor’s proposed 2014-15 State Budget for special education provides $31.6 million to pay for a 0.86% COLA

Estimated COLA is $4.39 per ADANo other major changes are proposed, but separate from the Governor’s Proposed Budget, a Special Education Task Force co-chaired by SBE member Carl Cohn, and Fred Weintraub, Los Angeles Unified School District federal court-appointed independent special education monitor, has been established

An appointed 32-member task force is focusing on identifying the state’s vision and mission for students with disabilities and the development of specific goals in the following areas:

Teacher preparation, credentialing, and professional developmentEducation delivery modelsAssessment and accountabilityEarly learningFiscal issues


C-37

Charter Schools

The Governor’s Proposal includes an increase of $74.3 million to support charter school ADA growth

The Proposal continues to include charter schools in the LCFF

Charter schools are eligible for supplemental and concentration grants that may be used for any educational purpose

A charter school’s eligibility for a concentration grant may not be greater than the percent eligible for the school district in which the charter school resides


C-38

Child Care

The Governor’s Budget proposes $115 million to fund a three-year Parent/Child Engagement Demonstration pilot program to serve 2,000 families in six counties

Will involve low-income families who face multiple barriers of entry into the workforce, cannot access licensed child care, or who fall into CalWORKs sanction status

Goal is to get children into stable, licensed child care, and provide parenting, life skills, and work readiness training to parents that will move them to self-sufficiency

Stage 2 Child Care is increased by $6.3 million to reflect an increasedcost per case of eligible beneficiaries and a slight decrease in caseload

Base budget: $364.1 million


C-39

Child Care

Stage 3 Child Care is increased by $2.8 million to reflect an increased cost per case of eligible beneficiaries and a slight decrease in caseload

Base budget: $185.8 million

Child Care and Development Funds will see a net decrease of $9.1 million in federal funds in 2014-15 to reflect a reduction of available carryover funds ($3.2 million) and a decrease of $5.9 million to the base grant

Total federal funding is $555.6 million


C-40

Independent Study Proposal

To eliminate many administrative challenges of nonclassroom-based independent study programs, the Governor proposes legislation to streamline and expand the instructional opportunities for independent study

Goal is to stabilize and increase student attendance for students at risk of dropping out or transferring to other private institutions

The new proposed process will require that independent study courses meet requirements commensurate to their classroom-based equivalent courses, including:

The same rigor and educational qualityEquivalent total educational minutesMaintenance of classroom-based equivalent pupil-to-teacher ratios unless an alternative ratio is collectively bargainedHolding at least one meeting per week between the student and teacher to verify that the student is working toward course completionNot earning more than one unit of ADA for participating students


C-41

Common Core and Student Assessments

No proposed increase to the money received by LEAs – $1.25 billion inone-time funds – provided in the 2013 Budget Act for implementation of the Common Core State Standards

To be used for professional development, technology, and instructional materials during 2013-14 and 2014-15

The Governor’s Budget proposes an additional $46.5 million to implement Chapter 489, Statutes of 2013 (AB 484), which established a revised student assessment system that is aligned to the new state standards

These funds will be used at the state level for assessment development


C-42

Federal Programs

A recent agreement reached in Congress provides schools relief from sequestration cuts to education

The Bipartisan Budget Act (BBA) restored a large portion of the sequester cuts

At a minimum, there will be no additional cuts to federal education programs below current funding levels

The House and Senate are finalizing 2014 spending levels through the traditional appropriations process

Since federal education programs are forward funded, this impacts California’s education budget in 2014-15


C-43

Federal Programs

The relatively flat spending level agreement reached in the BBA will require lawmakers to choose which programs to fund

The major national education organizations are advocating for the majority of the funds to go to the formula programs such as Title I and Special Education

Not to competitive programs, such as Race to the Top or new programs, such as the President’s budget proposal to expand preschool

Also looming is the expiration of the debt ceiling limit, which must be resolved by February to allow additional federal borrowing to fund the higher spending levels authorized in the agreement

Absent a deal on the debt ceiling, federal spending could not be sustained and any budget compromise would, at that point, become moot


C-44

Local Control Accountability Plan

The Local Control and Accountability Plan

This section will focus on the Local Control and Accountability Plan (LCAP) and will cover the what, the how, and the when of plan development

The statutory requirements

How we develop the plan and engage stakeholders

A sample timeline for development and adoption

An abbreviated timeline for the current year

We’ll also talk about . . .

The role of the Superintendent and Board

The impact of the LCAP on negotiations

Next Steps – SBE Rulemaking and Regulatory Process


D-1

Shift Happens!

The LCFF is as much about equity and justice for our neediest students as it is about subsidiarity

The wide gap in student achievement that now exists threatens our future

The LCFF is designed to close the achievement gap by providing additional funds to support improved student outcomes and accountability

The LCFF shifts the state away from a system of rule compliance, measured by audits and enforced through penalties, to a system of accountability based upon local needs, measured by progress toward annual goals, and explicitly linked to the LEA’s budget

We are no longer implementing the state’s plan for eligible students – we must develop a plan locally that achieves improved results

This will require that we think and plan differently


D-2

Our Old Paradigm Focused on Input

3

4

1

2

How do we comply with state law?

How much money do we have?

What are the audit requirements and

penalties?

What are we allowed to use

it for?

Program Decisions

D-3© 2014 School Services of California, Inc.

What are our expectations for

students?

What programs and services are

achieving desired results?

What are our achievement goals and what must we do to improve the

conditions of learning, increase engagement, and improve school

climate?

What can we accomplish in three years?

How will we measure our progress?

Based on the resources available,

what actions and activities

will we implement next year?

A New Way of Thinking

The new system requires us to think first about outcomes

No longer are you limited by what you can afford to do in a single year – start thinking about what you could accomplish in three years

Program Decisions

D-4© 2014 School Services of California, Inc.

LCAP Requirements

The LCFF accountability system requires that LEAs develop a three-year LCAP and annually update it

The LCAP must

Identify goals based on state priorities for all students, “numerically significant subgroups”, students with disabilities, and eligible students

List annual actions that the LEA will implement in accomplishing the goal

Describe expenditures in support of the annual actions and where they can be found in the LEA’s budget

The LCAP is intended to be a comprehensive plan

School site plans and the Single Plan for Student Achievement must align with the LCAP

The LCAP may reference and describe actions and expenditures of other plans


D-5

LCAP Requirements

Draft LCFF spending regulations were presented to the SBE on November 7, 2013, along with a conceptual framework for the LCAP

Following the November SBE meeting, the SBE reached out to stakeholder groups for feedback

The SBE revised regulations incorporating many of the recommendations from the field

The revised LCFF spending regulations and the LCAP template have been submitted for SBE approval

The SBE will take action on January 16, 2014, to approve the emergency regulations and commence the rulemaking process for the final regulations

The SBE-proposed LCFF spending regulations require LEAs to increase or improve services for eligible pupils in proportion to the increase in the funds apportioned to supplemental and concentration grants and to demonstrate proportionality in the LCAP


D-6

Where and How Do We Start?

The LCAP will require that you show evidence of a needs assessment

Data, both quantitative and qualitative, will inform your plan goals

Remember to think big – you are not limited to what you can accomplish in a single year – what do you hope to accomplish in three years?

The LCAP template being presented to the SBE provides a roadmap for planning


D-7

Three Categories for Planning Purposes

The proposed LCAP template groups the eight state priorities into three categories for planning purposes

Initial LCAP planning requires the collection of data you will use to inform plan goals and actions, and precedes the engagement of stakeholders in plan development

1 2 3

Conditions of Learning

Pupil Outcomes Engagement


D-8

What Does the Data Tell Us About the Conditions of Learning?

1

Conditions of Learning

The first planning category groups together the following state priorities:

Priority 1 – Basic Conditions

Priority 2 – Implementation of State Standards

Priority 7 – Course Access

Focus planning on assessing to what extent:

Teachers are qualified and appropriately assigned

School facilities are in good repair

Students have access to standards-aligned materials and are receiving instruction that is aligned with state-adopted content and performance standards

Students are enrolled in a broad course of study

For County Offices Only:Assess the coordination of instruction of expelled students and services to foster youth (Priorities 9 and 10)


D-9

What Does the Data Tell Us About Pupil Outcomes?

2

Pupil Outcomes

The second planning category groups together the following state priorities:

Priority 4 – Pupil Achievement

Priority 8 – Other Pupil Outcomes

Planning would focus on assessing:

Performance on standardized tests

Percentage of students who are college and career ready

English learner reclassification rate

Pass rate on advanced placement exams

Student outcomes in all core curriculum areas


D-10

What Does the Data Tell Us About Student and Parent Engagement?

3

Engagement

The third planning category groups together the following state priorities:

Priority 3 – Parent InvolvementPriority 5 – Pupil EngagementPriority 6 – School Climate

Focus planning on measuring: Parent involvement in decision making and the degree to which you promote the participation of parents of eligible pupils School attendance rates including chronic absenteeismDropout and graduation ratesSuspension and expulsion ratesThe degree to which students feel safe and connected to school


D-11

So We Have the Data, Now What?

1 2 3

Stakeholder Engagement

Goals and Progress Indicators

Actions, Services, and Expenditures


The proposed LCAP template is comprised of three sections and includes a description of each section, provides instructions, and lists guiding questions to facilitate completion of the template based on the data collected

Once you’ve conducted your needs assessment, it is time to engage stakeholdersYou’ll be required to show evidence of stakeholder engagement in the first section of the LCAP

D-12

LCAP Section 1

1

Stakeholder Engagement

Meaningful engagement of parents, students, and other stakeholders is not only important but it is a statutory requirement

LEAs will have to demonstrate evidence of stakeholder engagement, describe how stakeholders were involved, and what impact that engagement had on development of the plan

A few guiding questions from the proposed template:

“What information was made available to stakeholders and used by the LEA to inform the LCAP

goal setting process?”

“In the annual update, how has the involvement of stakeholders supported improved outcomes for

pupils related to the state priorities?”


D-13

LCAP Section 2

2

Goals and Progress Indicators

Section 2 must describe the LEA’s goals for the term of the plan

The annual update must include a review of progress based on an identified metric (qualitative or quantitative)

Goals must address each state priority area and any additional local priorities

A few guiding questions from the proposed template:

“What are the LEA’s goals to address the conditions

of learning, pupil outcomes, and parent and

pupil engagement?”

“What data/metrics were considered in developing

goals to address each state or local priority and to review progress toward

goals in the annual update?”


D-14

LCAP Section 3

3

Actions, Services, and Expenditures

Identify annual actions to meet the goals in Section 2 and describe expenditures to implement the action

In describing actions and expenditures that will serve eligible pupils, identify whether they are for school-, district-, county-, or charter-wide purposes

This section has four subsections

A. Annual actions and expenditures related to the goals for all pupils

B. Annual actions and expenditures provided to eligible pupils above what was provided to all students

C. Describe how the LEA is expending supplemental and concentration grant funds for any school-, district-, county-, or charter-wide purpose and how they are the most effective use of funds

D. Demonstrate proportionality


D-15

LCAP Planning

So you know where to start – gather data and assess your needs based on the three planning areas provided for in the proposed LCAP template – it is a good roadmap And you know what is expected in terms of the plan

For those of you with unlimited time and who welcome the opportunity to develop another plan related to student achievement, this should be a cinch

If you don’t have unlimited time, you need to think strategically and the next step is identifying who needs to be involved in the development of the plan, their level of engagement, and then mapping out a timelineYou will not need to engage all stakeholders at the same level, or at the same stage of the planning process – again, be strategic

Who will you involve in your needs assessment?Who will you consult in developing your goals?Who will you need to keep informed and offer opportunities for input?


D-16

Levels of Engagement in LCAP Development

Think about what the statute requires

Also think about other groups that may have a high level of interest or influence on the final decision makers – the governance team

You may not be required to engage them, but you’d be smart to do so

We would identify three levels of engagement


1 2 3

InvolveWho will you involve in developing a draft plan based on your needs

assessment?

ConsultWho will you consult in developing your

goals?

InformWho will you need to keep informed and

offer opportunities for input?

D-17

Levels of Engagement as Required by Statute

12

34

Consultation with:TeachersPrincipalsSchool personnelPupilsLocal bargaining units

Present for review and comment to:

Parent advisory committeeEnglish learner parent advisory committeeThe superintendent must respond in writing to comments received

Opportunity for public input:

Notice of the opportunity to submit written commentPublic hearing The superintendent must respond in writing to comments received

Adoption of the plan:Adopted concurrent with the LEA’s budgetSubmitted to COE for approvalPosted on district websiteCOE posts LCAP for each district/school or a link to the LCAP


D-18

Adopting and Updating the LCAP

1

Consultation with:TeachersPrincipalsSchool personnelPupilsLocal bargaining units

Level of Engagement

INVOLVE

Remember you need to start with your needs assessment

We believe that the collection of data and identification of needs is the responsibility of the leaders of the district and must precede this level of engagement

Promise to Stakeholders

We will work with you to ensure that your concerns are reflected in the goals and actions of the LCAP

Methods of Engagement

Forums and workshops


D-19


2

Present for review and comment to:

Parent advisory committeeEnglish learner parent advisory committeeThe superintendent must respond in writing to comments received

Level of Engagement

CONSULT


We will keep you informed, listen to and acknowledge concerns, and provide feedback on how your input has influenced the LCAP goals and actions


Surveys

Focus groups

Public meetings

Develop draft plan in advance of this level of engagement


D-20


3

Opportunity for public input:

Notice of the opportunity to submit written commentPublic hearing The superintendent must respond in writing to comments received

Level of Engagement

INFORM


We will keep you informed and provide you an opportunity to comment on our plan


Fact Sheets

Newsletters

Notices regarding comment period

Notice of Public Hearing


D-21

Developing a Timeline for LCAP Development

Now you know where to start, what is expected in terms of the plan, and how to engage stakeholders in a meaningful way

So what does a timeline look like for a typical year and what do you do now if you haven’t started planning?

First let’s take a look at a normal year

We believe the planning, developing, implementing, and reviewing progress will be a continuous and ongoing 12-month process


D-22

A 12-month Planning and Adoption Process© 2014 School Services of California, Inc.

Assess and

Engage

Draft and

Consult

Inform and

Respond

Decide and

Implement

Jul - Oct Nov - Jan Feb - Mar Apr - Jun

Conduct needs assessment and involve parents,

community members,

students, staff, and bargaining

units in a discussion of

goals.

Identify goals, actions, and metrics. Once the Governor’s January

Budget is released, you can begin thinking about the resources you may have available. Consult

with parent groups, advisory committees, and

other interested stakeholders.

Inform advisory groups and other

interested stakeholders of the

proposed plan. Respond to input and comments.

Finalize the plan following the

Governor’s May Revision. Hold public meetings on the LCAP

and district budget.Respond to any public comments and adopt

the LCAP and budget at a subsequent meeting.

D-23

A Sample Timeline for the Current Year

1 2 3 4 5 6

Begin needs assessment

now!

By March 15

Complete your LCAP draft

May – June

Commence public comment period and hold public hearing

By February 15

Involve parents, school personnel,

pupils and bargaining groups in plan development

By April 15

Inform parent advisory groups

and other stakeholders and respond in writing

to comments

By June 30

Adopt LCAP and LEA budget


D-24

The Role of the Superintendent

The Superintendent is given a heavy responsibility to be the conductor of the LCAP development process

The Superintendent is charged with ensuring that the obligation to consult with employee organizations and to facilitate a response to comments by community groups is met

Additionally, the Superintendent is charged with recommending specific strategies to the Board and implementing those that are adopted

The Superintendent leads the Cabinet in analyzing student performance and selecting appropriate interventions

The quality and integrity of the development process are the domain of the Superintendent

The Superintendent and Cabinet provide the professional expertise to implement the plan and to assess results and recommend revisions


D-25

The Role of the Board

The Board represents the visions and values of the community and has final accountability for the performance of students and the financial solvency of the district

The Board sets the direction for the development of the LCAP

Through the use of study sessions and open meetings, the Board hears and evaluates input from the administration, the community, and all stakeholders

The Board conducts public hearings in accordance with the law

Qualitative decisions about priorities are the domain of the Board

The Board assesses performance annually and approves amendments to the plan

Ultimately, the Board gives final approval to both the LCAP and the district budget, and ensures that they are consistent and represent the community interest


D-26

Impact of LCAP on Negotiations

We cannot overemphasize the importance of management and labor groups using the mandatory consultation obligation as a bridge to collaborative negotiations

The district cannot include commitments in the LCAP that are within the scope of bargaining but have not yet been negotiatedBut the district can include strategies and goals within the scope of bargaining if it is clear they will not be implemented until the conclusion of the bargaining process – even to the point of impasse if necessary

We, therefore, believe that best practices dictate that the district define deficient areas in student achievement and collaborate with bargaining units on solutions

No one knows what our students need better than our professional teachers who are with our students every dayAnd we have the data to define the areas where our students need additional service


D-27


The consultation period needs to be formal and data-drivenWe have an eight-year LCFF implementation period, a three-year plan, and defined actions for the first budget yearWe do not have to do everything the first year, but we need to set the stage for continuous improvementWhat does our assessment data tell us about what we need to address first?

It may be appropriate to address gateway skills like elementary reading and math to build a foundation for the futureBut in other districts, parent involvement, teacher preparation, or facilities may need to be addressed firstMany of the eight LCAP focus areas specified by the state are tightly inter-related and implementation of one strategy may help other areas

The planning categories in the proposed template will help you keep an eye on alignment


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District preparation for consultation meetings

Do not go to the meeting with nothing but blue sky and dreams!

Develop a carefully crafted agenda

Work with Cabinet to assess needs in each of the eight plan areas and develop data to support why those specific areas need to be addressed in the early years of the LCAP – recognize that some things will have to wait until later years

Offer the bargaining units an opportunity to provide input into the areas to be addressed

Jointly develop specific strategies to address each of the deficit areas


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Include discussion of personnel and compensation impacts

Time and payment for professional development, extra time, and higher levels of professional preparation are all within the scope of negotiations

Discuss planned use of CCSS funding to enhance professional development

Discuss how your planned strategies will affect numbers of staff, duties of staff, and compensation of staff

Be sure the LCAP includes an explanation of how any particular expenditure “increases and improves” education – every expenditure of supplemental or concentration grant funding requires that we establish this nexus

If there ever was a time for quality collaboration, it is now – don’t let this opportunity pass


D-30

Regular Regulatory Process: LCFF Spending Requirements and LCAP Template

Adoption of proposed regulations (January 16, 2014)45-day comment period opens

Public hearing held (March 17, 2014)SBE and California Department of Education (CDE) consider comments received

If there are no changes to regulations, comments are addressed, and regulations are approved and submitted to the Office of Administrative Law (OAL)If substantial and significant related changes are made to proposed regulations, an additional 15-day public comment period is opened

Then, if no major or substantial changes, comments are addressed and regulations are approved and submitted to the OAL

If major changes are made, a new 45-day comment period opens and an additional public hearing may be held at the conclusion of the period

Then, if no major or substantial changes, comments are addressed and regulations are approved and submitted to the OAL


D-31

Emergency Regulatory Process: LCFF Spending Requirements and LCAP Template


1 2 3

Approval of Finding of

Emergency and Emergency

Regulations by SBE

SBE submits Finding of Emergency and

Regulations to OAL

OAL has ten calendar days to

approve Emergency

Regulations

Public comment can be submitted for first five

calendar days

OAL approves Emergency Regulations

(In effect for

180 days)

To become permanent, regulations must go

through regular rulemaking process

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Local Agency Operationsand the Budget


Overview

Temporary Flexibility – Current Law

Planning for 2014-15

Pension and Health Care Reform

Operational Efficiencies

Negotiations

E-1


Temporary Flexibility – Current Law

There are no proposed changes to the temporary flexibility expiration dates

This flexibility will expire in 2015 and 2016

Expires E.C. Description of Flexibility

June 30, 2015

1240.3 Standards-aligned instructional materials sufficiency (Williams compliance) – suspends required textbook adoptions

17070.766 Routine restricted set-aside reduced to zero (except as necessary for Williams compliance)

46201.2 Reduction of school year by up to five days and/or equivalent in instructional minutes (effective starting 2009-10)

60200.7 Suspension of instructional materials adoption requirement

Advice: Plan to offer a school year of 180 days in your district’s multiyear projection. Local agreements may require more work calendar days. Bring routine restricted back to 3%.

January 1, 2016 17463.7 Sale of surplus property to benefit General Fund (with significant requirements)

Advice: Review E.C. 17463.7 to ensure that the district is able to meet all of the requirements of this flexibility related to the restriction of state facilities funding.

E-2

Managing Volatile Projections

Multiyear projections (MYP) are required by AB 1200 (Chapter 1213/1991) and AB 2756 (Chapter 52/2004)

Multiyear financial planning is a sound business practice that allwell-run organizations do regardless of any legal requirements

But it is very challenging to prepare meaningful MYPs in this environment

This year’s State Budget Proposal includes significant education funding changes and, again, LEAs need to build the MYP based on the best information available

The two best ways to deal with volatility are conservative revenue estimates and higher reserves


E-3

The SSC Dartboard

The first and last sections of the SSC Dartboard continue to contain the planning factors users have seen in the past

But the actual planning section is no longer applicable to each district in the same way; therefore, we link our SSC Dartboard to the SSC LCFF Simulator® for the district-specific calculations

Districts that use the SSC Dartboard and the SSC LCFF Simulator® in the manner intended will find that they can easily obtain an updated projection whenever there is a change in:

The amount of money the state provides in the current year

The revenue or COLA forecasts for the out years

The LCFF distribution formula

Any district that did not elect to use the SSC Dartboard would need to develop its own unique planning factors


E-4


SSC Financial Planning Dartboard

Factor 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

LCFF Planning Factors SSC LCFF Simulator

SSC LCFF Simulator

SSC LCFF Simulator

SSC LCFF Simulator

SSC LCFF Simulator

SSC LCFF Simulator

Statutory COLA 1.565% 0.86% 2.20% 2.40% 2.60% 2.70%

California Consumer Price Index 2.00% 2.20% 2.40% 2.70% 2.80% 2.60%

Ten-year Treasuries 2.90% 3.20% 3.40% 3.50% 3.70% 3.50%

Reserves

State Reserve Requirement District ADA Range Reserve Plan

The greater of 5% or $50,000 0 to 300

SSC recommends one year’s increment

of planned revenue growth

The greater of 4% or $50,000 301 to 1,000

3% 1,001 to 30,000

2% 30,001 to 400,000

1% 400,001 and higher

E-5

Multiyear Projections for the 2014-15 Budget

2013-14 2014-15 2015-16 2016-17$6,000

$6,500

$7,000

$7,500

$8,000

Chart Title

SSC Recommends

DOF Forecast

DOF Forecast


2013-14 2014-15 2015-16 2016-17LCFF Target $8,990 $9,066 $9,264 $9,484Estimated DOF Projection $6,650 $7,327 $7,688 $7,859*SSC Recommends $6,650 $7,327 $7,484 $7,654Net Change per ADA $313 $677 $157 $170Net Percent Change 4.93% 10.18% 2.14% 2.27%

*In the absence of a current projection for 2016-17 from the DOF, the purchasing power increase—the same as “SSC recommends”—is used

E-6

Unrestricted Fund Balance – Statewide Averages

2011-12 Unrestricted General Fund Balance Plus Fund 17 Special Reserve as a Percent of the Total General Fund

Unified School Districts 15.44%Elementary School Districts 23.75%High School Districts 19.79%

Source: CDE state-certified data


E-7


Education Protection Act 2014-15

Revenues generated from Proposition 30 will continue to be accounted for in a separate Object Code and received on a quarterly basis

The Budget Proposal estimates $7.3 billion or 11.8% of K-14 funding to be distributed on a quarterly basis

LEAs are required to do the following with the EPA funds:

Discuss the use of funds in an open public meeting

Not use the funds for salaries and benefits for administrators and other administrative costs

Report the amounts received and their use on the LEA’s website

We recommend you continue to monitor the use of these funds to ensure your district’s compliance with the Proposition 30 requirements

E-8



Apportionment Deferrals and Cash Flow

We’ve heard the good news that under the Budget Proposal all deferrals would be eliminated

This is welcome news in the education community

However, because this is a proposal, LEAs need to ensure they continue to manage cash flow and have a plan in place for borrowing should the proposal not be fully realized

LEAs should:

Continue to prepare cash flow projections based on current law with deferrals

Project cash flow for more than one fiscal year

18 months to 24 months out

E-9


Apportionment Deferrals and Cash Flow

Meet and discuss external borrowing needs with financial advisors

Work with them to develop a timeline that takes into account the possibility that an LEA may not need to borrow as much or at all once the State Budget is enacted

Try to develop options that allow you to eliminate or reduce the amount of borrowing after the final State Budget is enacted

This will reduce or eliminate borrowing costs

E-10


School Facilities Issues – Sale of Surplus Property

As part of the 2013-14 State Budget Act, flexibility to use the proceeds from the sale of surplus property for one-time General Fund expenses was extended through January 1, 2016

Keep in mind the following:

The proceeds are one-time resources and may not resolve an ongoing budget problem

Unless you have a local General Obligation Bond, this may be the only source you have for capital facilities expenditures

Use your facilities master plan to identify future facilities needs – be sure you will not be second guessed later

E-11

School Facilities Issues – Sale of Surplus Property

Current law requires local educational agencies (LEAs) to give charter schools first right to surplus property if the property is declared surplus after July 1, 2012

The law was amended with approval of the 2013-14 State Budget:

Applies only to charter schools having projections of at least 80 units of in-district ADA for the following fiscal year; and

Districts are not required to offer the property to charter schools on or after July 1, 2016, unless the law is extended again

Remember, the current procedural requirements for the sale of surplus property, including the findings and notices required under the Education Code and Government Code, remain in place


E-12

School Facilities Issues – Deferred Maintenance

The Deferred Maintenance program is now permanently part of the LCFF base grant

Funds may be used for any educational purpose

No local contribution is required to receive the funds

LEAs should:

Evaluate deferred maintenance needs

Include deferred maintenance and other capital facilities needs in the context of the entire budget

Remember that we need safe, clean, and functional school facilities in order to support the learning environment

Compliance requirements do not cease to exist when the state eliminates the categorical program

Williams Settlement

Program Improvement status/requirements


E-13

School Facilities Issues – Routine Restricted Maintenance

The Governor’s Budget Proposal does not change the minimum contribution requirement for routine maintenance

Though the budget flexibility that reduced or waived the minimum requirement has been in place since 2008-09, this flexibility expires at the end of 2014-15, and the 3% Routine Restricted Maintenance contribution requirement returns for 2015-16

Keep in mind . . .

Priority 1 of the LCAP requires that school facilities be maintained in good repair as defined in the Education Code


E-14

School Facilities Issues – Routine Restricted Maintenance

Currently, the majority of expenditures in this area are for:

Classified salaries and benefits

Materials and supplies to repair and maintain facilities

Again, LEAs must consider the needs of the agency when planning General Fund expenditures

We recommend LEAs establish staffing allocations and an expenditure budget for this critical function


E-15

School Facilities Issues – Emergency Repair Program

The Governor’s proposed Budget dedicates $188.1 million of one-time Proposition 98 dollars to the Emergency Repair Program (ERP)

Funds will provide grants for reimbursement of the cost of repairing or replacing building systems that pose a health and safety risk

As of January 2013, the State Allocation Board (SAB) apportioned $338.4 million for funded projects and approved an additional $459.5 million for unfunded projects

ERP applications are no longer being accepted by the Office of Public School Construction (OPSC)


E-16

School Facilities Issues – Proposition 39

Funding for education was increased as a result of the passage of Proposition 39 – California Clean Energy Jobs Act

The Governor proposes to allocate an additional $363 million in 2014-15

$316 million to K-12 school districts and $39 million to community colleges for energy efficiency project grants

$5 million to the California Conservation Corps for continued technical assistance to K-12 school districts

$3 million to Workforce Investment Board for continued implementation of the job-training program


E-17

School Facilities Issues – Proposition 39

This is a restricted program that has specific compliance and reporting components

The State Superintendent of Public Instruction (SPI) began releasing energy audit and planning funds in November 2013

Energy expenditure plans are now being accepted, and award allocations will begin in February 2013

All funds must be encumbered by June 30, 2018, and projects must be completed by June 30, 2020


E-18

School Facilities Issues – State Allocation Board

Currently, there is no remaining bond authority in the School Facility Program (SFP) for new construction or modernization

The Governor proposes transferring $211 million of remaining SFP bond authority currently allocated to specialized programs (i.e., Seismic Mitigation, Career-Technical Education, High Performance Incentive Grant, and Overcrowding Relief Grant) to the new construction and modernization programs

This transfer will allow some school districts currently awaiting funds to move forward with construction of new classrooms and modernization


E-19


The last statewide school facilities bond was approved by the voters in 2006

The Governor proposes continuing the dialogue on the future of school facilities funding, including “what role, if any, the state should play in the future of school facilities funding”

While two bills, Senate Bill (SB) 45 (Corbett, D-San Leandro) and AB 41 (Buchanan, D-San Ramon), to place a statewide education facilities bond on the 2014 ballot were introduced in 2013, neither was approved

However, the Legislature still has time to pass a bill this year

The Governor noted that any future school facility program should be easy to understand and provide school districts with local control and fiscal incentives


E-20


The SAB Program Review Subcommittee has spent the last year reviewing the SFP and discussing areas that could be improved should a future school facility bond program be established

Consensus was reached that there is a need for a new school facility bond to fund new construction and modernization projects

OPSC staff has developed estimates of new construction and modernization funding needs

New construction – estimates ranging from $5.9 to $12.3 billion

Modernization – estimate $4.7 billion

The Subcommittee’s report will be finalized and presented to the full SAB at its meeting in January 2014


E-21


Local Bonds Pass at Record Rates

In November 2012, more than $14 billion in local bonds were on the ballot

More than $12 billion passed

Local funding, not state funding, is now the primary source of school facility funding

Types of ElectionsTotal

Elections on Ballot

Pass Fail Passage Rate

Dollar Value of Voter-Approved

Measures(in Millions)

Two-Thirds General Obligation (GO) Bonds 2 1 1 50% $40.0

55% GO Bonds 100 81 19 81% $12,525.6

55% School Facility Improvement District (SFID) GO Bonds

4 4 0 100% $227.1

Total 106 86 20 81% $12,792.7

E-22


Mandated Programs

The Budget Proposal continues to support mandate reform but makes no changes to the funding level or to the list of state mandates included in the Mandate Block Grant (MBG)

In 2013-14, school districts and charter schools opting-in to the MBG received the funds in November 2013

The apportionment, totaling $206.4 million, was made from funds provided by Item 6110-296-0001 of the Budget Act of 2013 (Chapter 20/2013)

The apportionment paid 100% of each LEA’s MBG entitlement for fiscal year 2013-14

E-23


Mandated Programs

The Administration recognizes the $4 billion liability in unfunded K-12 mandates

And intends to pay down the obligation over the next few years with completion by the end of 2017-18

To date, there’s no repayment plan in place

No funds are included in the 2014-15 Budget Proposal to reduce the debt

E-24


Mandated Programs

LEAs that opt in to the MBG can plan for the rates in all three years of the multiyear projection (MYP)

The rationale for a higher rate for the 9-12 grade span is due to the inclusion of the Graduation Requirements mandate within the MBG

We recommend LEAs weigh the benefits of receiving money now versus an unfunded receivable with no time-certain reimbursement

Grade Span School Districts Charter Schools COEs

K-8 $28 $14 $29

9-12 $56 $42 $57

E-25


Transportation in 2014-15

Under current law, LEAs that operate transportation programs will receive the funding as an add-on to the LCFF, with the following requirement:

Maintenance of effort: LEAs must expend no less than the amount expended for Home-to-School Transportation in 2012-13

The maintenance of effort is the lesser of:

Actual 2012-13 transportation expenditures, or

Amount of transportation revenue* received in 2013-14

Direct-funded Home-to-School Transportation joint powers authorities (JPAs) will continue to receive direct funding in 2014-15

*Pupil Transportation Entitlement: Home to School, Special Education, COE Bus Replacement

E-26


Transportation in 2014-15

LEAs should plan for and consider the following:

Review transportation routes to determine if services can be further streamlined

Consider other local transportation options, including cost sharing options that reduce the share your agency is currently paying

Analyze special education transportation policies and ensure individualized education program (IEP) teams are aware of the policies

Do not provide transportation if it is not necessary

Discuss consequences if transportation is not provided or if fees are assessed/increased

If your LEA opts to assess fees, put systems in place to make it easy for parents/guardians to make payments such as through PayPal, a drop box, etc.

E-27


K-3 Grade Span Adjustment

Under current law, the K-3 Grade Span Adjustment (GSA) (formerly known as K-3 Class-Size Reduction) is a 10.4% adjustment to the LCFF base grant

This percentage is added to the base grant to support lowering class sizes in grades kindergarten through 3

As a condition of apportionment, districts must ensure all school site average class enrollment ratios meet the target ratio of 24:1

Unless a collectively bargained alternative ratio is agreed to by the school district and bargaining unit

For 2014-15, districts must demonstrate progress toward reducing the gap between their 2013-14 school site average K-3 class size and the 24:1 target by 28%

Caution: A district’s failure to meet the required progress at one school site would result in the loss of all K-3 GSA funds districtwide

The penalty will likely be out of proportion to the error

E-28


K-3 Grade Span Adjustment

Districts should keep in mind the following with the K-3 GSA:

If school sites already have a site ratio of 24:1 or less, they must permanently maintain the 24:1 ratio to be eligible for K-3 GSA funds

Class-size waivers (for E.C. 41376-41378) granted by the SBE will not excuse districts from the K-3 GSA 24:1 school site requirement

We anticipate in the coming months that instructions will be established in the Audit Guide to ensure compliance

E-29

K-3 GSA – Sample Calculation

Example of school site calculation for relative progress for 2014-15 school year, based on 28% revenue increase toward full implementation of LCFF


Sample Calculation for K-3 GSA School Site Progress 2014-15 2013-14 average class enrollment for school site: XYZ Elementary School (Grades K-3, inclusive) 28.4:1*Target for K-3 CSR at LCFF full implementation, 2020-21 24:1Difference 4.4 Progress required in 2014-15 (28%) 4.4 x .28 = 1.2Average class enrollment target progress for 2014-15 for XYZ Elementary School

28.4 – 1.2 = 27.2:1

* Average class enrollment for school site after the first year of the LCFF

E-30

LCFF and Provisions 1, 2, and 3

On a yearly basis, school districts distribute meal applications to parents to make determinations of eligibility for FRPMs under the National School Lunch Program (NSLP) and the School Breakfast Program (SBP)

The paperwork and administrative burden associated with the meal counting, claiming, and eligibility are demanding

Especially for those districts with large FRPM populations

Congress offers three special assistance alternatives for LEAs known as Provision 1, Provision 2, and Provision 3 to help reduce paperwork and administrative burden at the local level


E-31


Special Assistance Alternatives

Frequency of StudentEligibility Determination

Provision 1 Every 2 consecutive school years

Provision 2 Every 4 years, including the base year

Provision 3 Every 4 years, excluding the base year


The table displays the three Special Assistance Alternatives and how often each alternative determines the students’ eligibility for FRPMs

E-32


Unfortunately, the relief from the administrative burden provided by the Special Assistance Alternatives creates a challenge for the school districts under the LCFF

LCFF provides concentration and supplemental funding to school districts for FRPM students on an annual basis

Districts are prohibited from collecting eligibility determinations through the NSLP application for its Provision 1, 2, and 3 schools on an annual basis

CDE has offered school districts an optional Alternative Income form

The form enables the district to determine the FRPM status of the students attending the Provision 1, 2, and 3 schools during the period when they are precluded from verifying eligibility

The sample Alternative Income form is located at http://csis.fcmat.org/Pages/Tools-Samples-Links.aspx


E-33



Remember, the CDE’s Alternative Income form is just that – it’s an alternative

If your district has already established an effective method to determine the eligibility status of the students in these particular schools, by all means, use it

The goal is to ensure your district’s accuracy of the students entered into California Longitudinal Pupil Achievement Data System (CALPADS)

For the LCFF, FRPM-eligible students are those students enrolled on the Fall Census Day, the first Wednesday in October

The certification deadline was December 13, 2013

The amendment window is December 14, 2013, to February 7, 2014

In 2013-14, the CDE will allow LEAs that have one or more schools with Provision 2 or 3 status under the NSLP to extend the CALPADS Fall 1 amendment window to March 21, 2014

E-34


State Board of Education Update

SBE has been front and center this past year in shaping the implementation of the LCFF and at the January 15 and 16, 2014, SBE meeting the following is on the agenda:

Approval of the emergency regulations for LCFF spending requirements and the LCAP template

Also on the agenda: the approval of the regular rulemaking process for the final regulations for the LCFF spending requirements and LCAP template

Approval of the emergency regulations and commencement of the final rulemaking process for the new assessment system replacing the Standardized Testing and Reporting (STAR) assessments, the California Assessment of Student Performance and Progress (CAASPP)

To immediately implement the changes for the 2013-14 school year

E-35


State Board of Education Update

At this same meeting, a public hearing will be held on the 2014 Mathematics Adoption of Instructional Materials

Instructional Quality Commission will be recommending mathematics programs for adoption

Remember, an LEA is not required to use the SBE-adopted instructional materials and may use other instructional materials if they are aligned with the academic content standards (AB 1246 [Chapter 668/2012])

Mathematics instructional materials must be aligned to the Common Core academic content standards

If an LEA chooses to use instructional materials not adopted by the SBE, the LEA shall ensure that a majority of the participants of any review process conducted by the LEA are classroom teachers who are assigned to the subject area or grade level of the materials

E-36

CalSTRS

California State Teachers’ Retirement System (CalSTRS) developed a plan to audit a sampling of LEAs

Audits have resulted in determinations that certain positions designated by governing boards as certificated do not qualify and should be designated as classified

Therefore, these positions do not belong in the CalSTRS membership

Incumbents in these positions who did not complete an election form to stay in CalSTRS membership within 60 days of assuming the position are exposed

And, therefore, are at risk of losing their service credit


E-37

CalSTRS

CalSTRS is providing an amnesty period for these members

File the election form with justification by May 23, 2014

The CalSTRS Circular went to employers

So employers need to initiate the process for members that may be affected


Go to www.sscal.com/govbud.cfm for Fiscal Report article, “CalSTRS Members Face Retirement Uncertainty,” “CalSTRS Presents a Solution!”, and CalSTRS’ Employer Information Circular article, “Right of Retirement Systems Election When Changing Positions”

E-38

http://www.sscal.com/govbud.cfm

CalSTRS

The Governor acknowledges the $80.4 billion shortfall within the CalSTRS basic retirement plan

Assets may be exhausted in 30 years

Would cost more than $4.5 billion per year to resolve right now

Bad news does not get better with age – this will grow if not addressed

Three ways to fix it:

Reduce benefits: difficult given legal protections

Already in place for new hires starting January 1, 2013

Increase earnings: means taking more risk with investment portfolio

Increase contributions: most likely solution


E-39

CalSTRS

CalSTRS contribution rates and benefit levels are set in statute

Legislation is required to change the rates

The Governor proposes to work with stakeholders on a “plan of shared responsibility” to achieve a fully funded system within 30 years

He also states that:

Employers should anticipate absorbing much of any increased contribution requirement

The state’s role as a contributor should be evaluated

The funding plan will be included in his 2015-16 Budget Proposal

Employers need to brace themselves for increased CalSTRS contribution requirements in multiyear financial planning


E-40

CalPERS

The employer contribution to the California Public Employees’ Retirement System (CalPERS) for 2013-14 is 11.442%

“Classic” members pay 7.00%

New members (hired on or after January 1, 2013) pay 6.00%

The CalPERS retirement plan is 75.5% funded

The CalPERS Board has changed the asset smoothing and amortization methods to improve the funded status

We can expect to see significant contribution rate increases in the future

CalPERS Board will set the employer rate for 2014-15 in May

Stay tuned for estimates of rates in the out years


E-41

Affordable Care Act

Implementing the employer shared responsibility provisions of the Affordable Care Act (ACA) means providing health coverage:

To all employees working 30 hours per week or more

Or Draconian penalties apply

That is of minimum value and is affordable

Or penalties apply – although less punitive

See detail in regulations referred to below

To ensure that all eligible employees are offered coverage:

Determine the standard measurement, administrative, and stability periods

Implement a system of tracking and reporting employee hours of service

Please visit www.sscal.com/govbud.cfm for IRS Notice 2013-42 and IRS Regulation 138006-12

E-42

http://www.sscal.com/govbud.cfm

Affordable Care Act

Determine whether coverage is of minimum value and affordable

If not, weigh the cost of providing affordable minimum value coverage against the potential penalties

All of this is effective in 2015

So, employers should be measuring employee hours right now

Many employers may want to implement early, during plan renewal in 2014

Work with your broker or carrier to decide

Work with employees and governing boards to increase their understanding of the ACA and its impact on your agency and its employees

Evaluate your workforce and determine the potential financial impact of the implementation of these ACA requirements

Tools are available to help with this analysis

E-43

Gaining Operational Efficiency

Now is a good time to take stock of noninstructional operations – finance, facilities, transportation, etc. – to see where your agency lies in the aftermath of this last era of cuts

What is budgeted for vendor service contracts?

What are your current staffing levels?

What are the service levels being provided to the rest of your agency?

For example, how long do work orders stay unaddressed?

What are the contributions to routine maintenance, food services, and transportation?


E-44


The LCFF implementation changes things considerably

No more funding earmarked for deferred maintenance

A new maintenance-of-effort requirement for transportation

Virtually all resources are available to improve student outcomes

More efficient operations mean more resources can be directed toward instruction


E-45


An example: custodial workload – square footage per custodian

Over 500 different measures of operational efficiency – key performance indicators – are now available to California school districts through the ActPoint® KPI Performance Management System . . . check it out!


Source: ActPoint® KPI Performance Management System, www.actpoint.com/ca

Summary of Results

1st Quartile 45,009 sq ft to 30,357 sq ft

2nd Quartile 29,125 sq ft to 25,806 sq ft

Median 25,012 sq ft

3rd Quartile 24,217 sq ft to 17,877 sq ft

4th Quartile 17,857 sq ft to 9,710 sq ft

E-46


Collective Bargaining Issues

This will likely be a very challenging year for collective bargainingThere are too many issues, many new concepts, and very little time

The typical District will be negotiating most of the following issues:Restoration of past concessions The effects of pension reformPotential compensation increasesProfessional development related to Common CoreThe effects of the Affordable Care ActClass-size reduction progressMaintenance of Adult Education and Regional Occupational Program programs

All of this on top of the time and energy needed to develop the LCAPWe suggest that you set aside plenty of time to prepare and conduct purposeful negotiations

E-47


Restoration of Concessions

Given the revenue gains in 2013-14 and the extraordinarily high level of funding proposed for 2014-15 through LCFF, most districts will be able to do something in terms of compensation increases and/or restoration of concessions

But not all districts will be able to do more

Districts with heavy declining enrollment, low reserves and high levels of deficit spending may be asking for concessions, even as neighboring districts are giving raises

Districts with low numbers of LCFF-eligible students may find that step and column movement, health and welfare benefit cost increases, and deficit spending consume all new monies

Every district will have a different level of revenue and capacity for addressing compensation

For most districts, restoration of concessions will be a top priority

E-48


How Much Money is Available?

“You got 11%; you owe me 11%” will not work!

Districts receive LCFF dollars for the base grant, the supplemental grant, and the concentration grant

The increase in the base grant is generated by all students and is available for expenditure for any legal purpose – good money for negotiations

The supplemental and concentration grants are dedicated to “increasing and improving services” for the students who generate the funding

If the parties plan to use supplemental or concentration grant funding for any purpose, they must answer the question, “why is this expenditure the most effective use of funds?”

So, the parties need to be sure that the LCAP establishes a nexus between the use of funds for compensation and “increased and improved” services

Our updated SSC LCFF Simulator® clearly shows the amount of the base grant increase vs. the total increase – use that as a starting point

E-49


How Do We Show a Nexus to Student Services?

Services to students are clearly “increased and improved” if you:

Extend the number of instructional minutes and the teacher workday

Add teachers for supplementary programs or to reduce class sizes

Add stipends or special columns on the salary schedule for teachers who improve their qualifications to serve eligible students

Increase beginning teacher salaries to attract particularly well-qualified teachers

An across the board salary increase might meet the test under the right circumstances, and provided the LCAP details the rationale for raising compensation, but this is not automatic

For a District with a low number of eligible students, the supplemental money will need to be narrowly targeted to services for those students

The key is the LCAP; it must support the expenditure of supplemental and concentration grant funding

E-50


Getting Started

We suggest both parties review the contract carefully and mark articles which must be negotiated this year

Sunshined proposals should open all of the appropriate articles and specify what changes are proposed

The parties need to spend extra time learning how the new funding system works, understanding new pension rules, and how health care reform will impact the district and its employees

We recommend you allow time to exchange more information than was needed in the past

Over the past five very difficult years we have seen high numbers of Districts going through the impasse and factfinding process

But one of the highest years on record was 2001; a year when funding increased more than 10%

Careful preparation and respectful attitudes will be needed this year

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The Road Ahead


The Road Ahead

Education wins big again this year due to an improving economy, the temporary taxes, and past program cuts

The average increase for K-12 school districts will be 10.9%, or approximately $751 per student

This is the second year that the Governor proposes that the lion’s share of new revenues be committed to education, to the exclusion of other major segments of the State Budget

The Legislature will have a lot to say about the Governor’s priorities and whether or not they agree with him

The Governor’s Budget Proposals do not mark the end of the Budget cycle –they mark the beginning

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Enacting the State Budget – The Official ProcessF-2

SAUSAGE PRODUCTION

Enacting the State Budget – CliffsNotes™ Version

While the process is complicated and covers six months, here’s the CliffsNotes™ version

Governor introduces State Budget Proposal

Budget Bill introduced in both houses shortly thereafter

January 10 February Early Spring

Budget Trailer Bills are released, providing critical details to the January proposal

Budget Subcommittees examine specific details of the Proposal

Some policy decisions made, most delayed until May Revision

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Following the Governor’s May Revision, which provides an update to the Governor’s Proposal based on new revenue figures and stakeholder feedback, the subcommittees independently finish their work

Subcommittees report to their respective Assembly or Senate Budget Committee, which approves their version of a State Budget

In “normal” years, a Budget Conference Committee is established to hash out the differences between the two houses

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ASSEMBLY VERSION

SENATE VERSION

CONFERENCE COMMITTEE COMPROMISE



Behind the scenes, legislative leaders and the Governor negotiate the “big ticket” items, such as revenue assumptions and overall spending level, the corresponding Proposition 98 minimum guarantee, and any particular policy priorities

Last year, a final big ticket item was the details of the LCFF

This year, Transitional Kindergarten (TK) may be a sticking point

Once agreement is reached, the final version of the State Budget is drafted into a main Budget Bill and corresponding trailer bills, addressing various specific aspects of the Budget

To continue to receive their pay, members of the Legislature must approve the State Budget by June 15, which they have done the past two years!

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Other Proposals Will Emerge

Democrats and Republicans will want to lay their claim to revenues generated by an improving economy

The only major education proposal introduced to date would expand TK

Although not included in the Governor’s Proposal, TK for all four-year-olds is shaping up to be a hot topic in 2014

Introduced this fall in the Assembly Democratic Caucus’s “Blueprint for a Responsible Budget”

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Other Proposals Will Emerge

Echoed by Senate President pro Tempore Darrell Steinberg (D-Sacramento) as a State Budget priority and introduced as SB 837 (Steinberg, et al.):

Implementation would begin in 2015-16, rolling out in a similar fashion to current TK implementation and fully implemented by 2019-20

Class sizes no larger than 20, with each class having a teacher and an associate teacher

TK students would earn two-thirds of the K-3 base grant and grade span adjustment

Senator Steinberg estimates SB 837 would cost nearly $1 billion ongoing once fully implemented

While this is the only major education proposal to date, other proposals are likely to emerge

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The Road Ahead

Our past financial problems have stemmed from over-exuberance in good times – not just the onset of bad times

It is important for us to look at the prospects for stability that underpin the Governor’s proposals

A rollercoaster that can take us up quickly can take us down just asquickly unless there is a safety net

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Final Thoughts

It is important to know how much more funding we stand to receive next year

It is equally important to understand the state’s requirements related to the expenditure of those funds

The days of categorical program compliance and implementing the state’s plan for our neediest students are in the rearview mirror

The road ahead is paved with challenge and opportunity – but who best to decide what is needed locally than the dedicated board members, teachers, administrators, classified employees, and parents committed to ensuring a brighter and more hopeful future for our students and our state

We are likely to hit a few unexpected bumps along the way as the journey towards local accountability unfolds

We stand witness to the rebirth of our school finance system

Let history also show that 2014-15 was the year California began to close the achievement gap and started its march toward equity for its children!

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Thanks you

Documents

Governor’s Proposals for the 2014-15 State Budget and K-12 Education Presented by School Services of California, Inc. Staff