Proposition 30 raises the income tax on single earnings over $250,000 (or $500,000 for couples) for seven years. It also increases State sales taxes by ¼ cent for four years. It is estimated that the new taxes will raise $6 to $7 million annually.

It is expected that the details of how these new funds will be allocated will be released in January as part of the Governor’s budget first budget proposal for the 2013-2014 fiscal year.

To view the November 13, 2012 Budget presentation to the Board of Education, click here.

Since the 2008-2009 school year, public education has experienced unprecedented funding reductions and apportionment deferrals. In EGUSD, this has translated into $110 million in cuts over four years. After years of cuts, California schools now rank 47th out of 50 states in per-pupil spending.

In EGUSD these reductions have meant: increased class sizes; delayed textbook adoptions; reduced district-wide supply budgets; reduced elementary workbook allocation to curriculum; discontinued funding of the Math Engineering Science Achievement (MESA) program; the elimination of school site computer support technicians; the reduction of district-level administrative assistants; the reduction of grounds maintenance; the reduction of research and evaluation; the reduction of fiscal services; the reduction of secondary counseling services; the reduction of school clerks; the elimination of secondary library technicians; the reduction of elementary library technicians; the reduction of interscholastic athletic programs (including male and female freshman sports); the reduction of elementary, middle and high school vice principals; the reduction of Resources Specialist Program and Learning Center paraprofessionals by 50% in special education; the reduction of clerical staff at the district office; furlough days in 2009-2010, 2010-2011 and 2011-2012; and salary rollbacks in 2010-2011 and 2011-2012.

The Elk Grove Unified School Board is committed to making policy and financial decisions that enable the school district to provide quality educational programs and services to school-age children living in the district’s 320 square miles. The 2012 state budget is currently predicated on voter approval of Proposition 30 in November 2012, without which schools will receive $5.4 billion in mid-year trigger funding reductions ($441 per student) that will result in additional cuts in services and programs to students.

EGUSD Resolution No. 10 states “BE IT RESOLVED that the Elk Grove Unified School District proudly supports California School Boards Association (CSBA) in urging the legislature to work with CSBA and other education leaders to identify long-term adequate funding solutions for public schools; and BE IT FURTHER RESOLVED that this body, the Elk Grove Unified School District, supports the passage of Proposition 30 because it provides needed revenue to public schools and will specifically benefit the district for the reasons described herein.”

Click here to view the entire resolution.

The Governor’s Budget includes a ballot initiative to temporarily increase state income tax and state sales tax, subject to voter approval in November 2012.  Should this tax initiative pass, there would be an increase to the sales tax by ¼ percent until the end of 2016 and an increase to personal income tax for the state’s top earners by up to 3 percent until the end of 2019.  These temporary taxes would generate $8.5 billion in new revenues annually to the state.

If this ballot initiative is approved by voters, K-14 Proposition 98 adjustments will result in flat funding.  If the ballot initiative is NOT approved by voters, the Governor’s proposal includes trigger cuts to close the budget deficit.  Of the proposed trigger cuts, 91 percent of the reductions would be for K-14 education. For school districts this equates to about $441 less per annual Average Daily Attendance (ADA).

The Governor’s release of the May budget also reflects changes to his proposed weighted student formula.  These changes include, but are not limited to, increasing the base revenue limit funding level from $4,920 to $5,421; extending the phase-in period to seven years; adding a hold-harmless clause for the 2012-2013 school year only; adding grade-span adjustments; and adjusting its implementation as subject to the passage of the Governor’s tax measure.

Mandate reform is another area outlined in the Governor’s May revise.  The proposal includes a  block grant incentive program that would be distributed per ADA; the elimination of the existing mandate claiming process; and repealing half of the current mandated costs which includes the six highest mandated costs items.   Finally, the May revision proposes the elimination of the transitional kindergarten program requirements.

The legislature must send a budget to the Governor by the end of June.

There will be no additional reductions for classified staff for the coming 2012-2013 school year. Please note that for those certificated and classified employees who are annually released pending confirmation of grant and categorical funding, this process will remain in place.   EGUSD’s intent is to reinstate these positions once the district has been notified that the funding is secure for 2012-2013.

In addition, the 2012-2013 budget has been built to reflect that all furlough days and salary rollbacks will end for all employees as of July 1, 2012. Those staff members who are scheduled to move forward on the salary/column schedule will do so in accordance with negotiated agreements.

An overview of the projected 2012-2013 certificated staffing is as follows:

• Staffing ratios in 7-12 will remain the same as this year
• Counselors will remain at the current staffing level (66 FTE)
• Librarians will remain at the current staffing level (19 FTE)
• Class sizes in K-3 will be 28:1
• Class sizes in 4-6 will be 26:1
• Computer resource teachers will remain in place

As indicated above, this year’s budget is further complicated by a projected loss of enrollment of about 385 students for the 2012-2013 school year.  This is the combined result of the uncertainty that surrounds transitional kindergarten and a decline in enrollment as the result of the state economy and the housing market.

With regard to the required budget process, the Sacramento County Office of Education is mandating that school districts submit a three-year budget projection that reflects the failure of the Governor’s tax initiative. Should the tax initiative fail, districts will face a $370 per ADA reduction, plus an additional $87 per ADA loss due to the state’s elimination of transportation funding. If the tax measure passes, EGUSD will be in a much better place but will still incur an $87 per ADA loss in funding due to the elimination of state transportation revenue. With either a pass or fail election scenario, the district will still have to address an ongoing structural deficit the size of which, will hopefully be tempered by a positive outcome of the November election. In order to reduce the impact of state cuts to public education, the district’s large budget deficit and the increased cost of health care, the district is continuing to seek negotiated solutions with each of the district’s bargaining groups. Following the outcome of the election and the resulting Governor’s 2013 January budget proposal, the district will review the new information and revise our 2013-2014 budget based on the information provided at that time.

EGUSD staff are tracking the tax initiatives that may be on the ballot in November. There is much speculation right now regarding the watering down effect that multiple initiatives may have on an election’s outcome. As more information becomes available, EGUSD will continue to update staff and our community through the district’s Budget Watch webpage.

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.

Despite these cuts, EGUSD will not reduce staff, shorten the school year, or reduce student transportation service below current levels for this school year.  Budgeted funds will be reallocated to address mid-year cuts.

At the January 3, 2012 Board Meeting, Rich Fagan, associate superintendent of Finance and School Support, gave the following presentation to the Board.

January 3, 2012 Budget Update

Click here to view the Budget Update Presentation to the Board of Education on December 6, 2011

Based on the language in the final state budget, there are three fiscal benchmarks related to the trigger cuts:

1. Should revenues be less than $1 billion short, no mid-year cuts will be made.
2. Should the revenue forecasts be more than $1 billion, but less than $2 billion below the estimate for the 2011-12 state budget, midyear cuts of up to $601 million will be implemented, including a 4 percent, $23 million cut to child care, a $30 million reduction in community college funding, and a $10 per unit increase to community college enrollment fees in the summer of 2012.
3. Should the forecasts fall $2 billion or more short, then additional reductions of up to $1.5 billion (4 percent) in school district revenue limits, $248 million in home-to-school transportation, and $72 million to community colleges are triggered.

In writing this piece of legislation, the legislators suggested that one way for school districts to implement these reductions would be to shorten the current 2011-2012 school year by seven school days.  EGUSD will not pursue a reduction of the 2011-2012 school year.

For more information, click below:

California Legislative Analyst’s Office November 16, 2011 Report
2012-2013 Budget: California’s Fiscal Outlook

Sac Bee: Analyst puts California’s deficit at nearly $13 billion

Top Ed: Big mid-year hit for Prop 98 likely

L.A. Times: Deeper cuts to state budget expected

The district’s budget projections for 2012-2013 currently include $34.2 million in reductions adopted by the Board of Education last March.  This year about $8 million of these reductions were implemented. Of the remaining $26.2 in cuts that are included in the district’s projections, $22 million need to be negotiated.  Should the district be unable to realize the $22 million in cuts, the projections demonstrate that the district could be negative by $1 million at the end of 2012-2013 and negative by $70 million by the end of 2013-2014.

Fagan also shared with the Board that the district’s enrollment declined by 369 students based on the numbers reported on October 5, 2011 to the California Basic Educational Data System (CBEDS).

2011-2012 Preliminary 1st Interim Financial Status Report

However, even if these “triggers” aren’t realized, public education finance continues to face the impacts of an uncertain U.S. and California economies.   In looking towards the future, school finance expert Ron Bennett, of School Services of California, Inc. pointed to a number of underlying economic issues in a report published on October 28, 2011. Since 2009, U.S. and California economic forecasts have been over-optimistic.  So too were the projections upon which the Governor’s 2011 May Revise and the 2011-2012 State Budget were based on.  Housing and a California unemployment rate of 12 percent continues to impact the state’s recovery.

“Whether the ‘triggers’ get pulled or not, the state will be facing another economic crisis as it tries to balance the 2012-2013 budget,” Bennett stated.  “The ‘triggers’ which are by statute one-time cuts, could easily portend a lower revenue picture for not only 2011-2012, but 2012-2013 as well.”

Based on revenues alone, Bennett estimated the state’s shortfall for 2012-2013 to be between $4 and $8 billion.   However, when increased state expenditures such as the Department of Corrections and services for distressed families are included, the state could anticipate a “budget shortfall of $10 to $15 billion in January, whether the ‘triggers’ get pulled or not.”

According to School Services of California, if education receives 40 percent of the cuts needed for the state’s budget shortfall, K-14 schools will face a possible $4 to $6 billion in reductions in 2013-2013 or $680 to $1,000 reduction per student.

For EGUSD that could mean between $40 to $59 million in reductions.

“As a result, we continue to urge education agencies to plan to have reduced resources for the foreseeable future. Holding on to reserves, cutting costs, being conservative and negotiating employee concessions will be as important next year as it has been for the past four years,” Bennett stated.

“Despite the urging of the Legislature in AB 114 to spend dollars you don’t have, most districts have exercised restraint and are still solvent. The next unplanned cut could change that. So our advice is to continue to stay the course, be guided by your multiyear projections, and be ready for continued budget stress whether the “triggers” are pulled or not,” he said.

In a presentation to the Board of Education on November 1, 2011, Rich Fagan, associate superintendent of finance and school support, shared Bennett’s report with the Board.