On January 5, 2012, Governor Jerry Brown released a budget proposal that includes the passage of his proposed November tax initiative that he hopes would generate $6.9 billion in additional revenue for the state.   The January budget also includes a restructuring of the state’s funding model for K-12 education.

Like last year, the Governor’s January proposal once again forces school districts to build two budgets – one based on the passage of the taxes – the other without the revenues generated from the taxes.  Unlike last year’s proposal, which depended on a June election, this proposal hinges on a November election – five months into the school district’s fiscal year.  Similar to last year, the Governor proposes to implement midyear trigger cuts should the initiative fail.  Impacting budget planning further is the uncertainty regarding the legislature’s support for the Governor’s proposal, the redistribution of categorical funds and the change in the revenue formulas for schools, the reduction of mandates and the funding for the new Transitional Kindergarten program.  It should also be noted that the independent Legislative Analyst’s Office released a report on the Governor’s budget proposal that suggests that his budget is overly optimistic, by about $2.1 billion.

The Sacramento County Office of Education, which must approve EGUSD’s budget, has told school districts to build their multi-year budget projections based on the worst case scenario which is the failure of the tax initiative.   At a recent School Services of California conference, Sue Burr, Executive Director of the State Board of Education, told districts that they should “plan for the best and prepare for the worst” in case the tax initiative fails and trigger cuts are enacted.

Hence, EGUSD’s financial planning will address the failure of the taxes, which translates into a $370 per student reduction, or $22 million.  In addition, EGUSD will have to account for the elimination of transportation funding, which could be up to $80 per student, or $4.8 million in additional reductions in 2012-2013.  Along with these state budget characteristics, EGUSD will need to include the impact of anticipated declining enrollment in the next school year.

As mentioned above, the Governor’s budget proposal also includes major changes to the way in which school districts are funded.  One of these changes involves creating a weighted student funding formula by consolidating most categorical programs and shifting these dollars into the revenue limit.  This change would be phased in over a five year period, beginning in 2012-2013.   This is still a topic of discussion within education circles and the legislature.

The Elk Grove Unified School District is analyzing the impact of the Governor’s budget proposal on the district’s finances.  More information will be posted on Budget Watch in the coming weeks.