Legislative Update: Higher Prop 98 guarantee projected for May; CDE announces Small School District Assistance Initiative
The nonpartisan Legislative Analyst’s Office reaffirmed its November budget projections and continues to predict that state revenues in the May revision will significantly outpace the revenue estimates used by Gov. Jerry Brown in the initial 2017-18 budget proposal. In a briefing session held earlier this week, the LAO noted that data on January tax collections are outpacing the projections it made in November.
Click here to download the latest LAO projections on Proposition 98, pension costs, Proposition 51 facilities money and other topics.
Click here to view the Education Coalition position letter on the 2017-18 budget proposal.
LAO estimates put the increases in revenues from the January proposal to the May revision as high as $4 billion. If those estimates are correct, this could mean an increase of as much as $1.5 billion over the current minimum guarantee of $73.5 billion.
While the LAO’s projections are encouraging, it is important to note that:
1) The Governor may opt not to use the higher revenue estimates and continue to err on the side of caution by using more conservative revenue estimates in the revision, and
2) An increase in the Proposition 98 means that the proposed adjustments to prior year Proposition 98 guarantees would be less likely, but it does not guarantee that they will not happen. If higher revenue estimates are used, the proposed deferral of June 2017 payments to July 2017 would likely not be necessary, but adjustments of prior year guarantees ($379 million in 2015-16 and $506 million in 2016-17) may not be altered by a higher guarantee.
The LAO also devotes attention to the increases in PERS and STRS costs in the report. A case is made that LCFF funding growth in the current and two prior budget years outpaces the rise in pension costs – however, the report also details the heavier increases looming in 2017-18 and in out-years, and estimates that, “the average district would have to redirect some of its existing resources to cover the pension-related costs in excess of its LCFF increases.”
The governor’s LCFF investment of $744 million essentially “treads water,” keeping LCFF at 96 percent of full funding and essentially covers only a 1.48 percent cost-of-living adjustment.
The LAO also addresses the facilities issue, with EdSource also reporting last week that state intends to issue the first round of Proposition 51 money in the fall, once the Governor’s calls for tighter accountability measures in facilities spending are addressed – this will likely happen through budget trailer bill language in June. School districts should not expect to see facilities money available until at least July, and likely later in the year.
Last week, Superintendent of Public Instruction Tom Torlakson announced the formation of the “Small School District Assistance Initiative,” designed to help small and rural districts apply for school bond funds. CSBA will report additional details on this initiative as they become available.