The State is constitutionally responsible for the CalSTRS program – but Brown proposes to pass almost all the costs of fixing it to school districts and teachers, Some new thinking to identify children-in-poverty, The move to bring all 4-year olds into a universal pre-K program is ignored+unfunded.
ALSO SEE: 4LAKids - some of the news that doesn't fit: First impressions: THE GOVERNOR’S MAY REVISE BUDGET + May Revision Budget Document http://bit.ly/RSw0X5
Gov. Brown points to a chart showing the possible insolvency of the CalSTRS pension fund for teachers and administrators in 30 years unless the state, teachers and school districts contribute more money to wipe out the $74 billion deficit. Source: Webcast of Brown’s press conference.
May 13th, 2014 :: Gov. Jerry Brown is predicting that the state will take in $2.4 billion more in revenue in 2014-15 than initially estimated, but highly expectant education leaders won’t get a piece of it to implement the Common Core state standards or make a down payment for universal preschool. They can count on the double-digit spending increase that the governor proposed in January – but not much more.
Instead, consistent with his philosophy of fiscal restraint and a commitment to pay down long-term debts, Brown is proposing in the revised May budget to make a down payment on the $74 billion shortfall in the pension program for teachers and administrators, the California State Teachers Retirement System, or CalSTRS. His proposed 30-year payment plan, subject to negotiation with the Legislature, would cost an additional $5 billion per year by the time it’s fully phased in over seven years. The bulk of it – $3.7 billion annually – would be the burden of school districts, potentially eating away between one-seventh or more of the increased funding they had expected under the Local Control Funding Formula (see Department of Finance summary of budget revision, starting on page 66).
In a press conference Tuesday, Brown made clear the state cannot duck this responsibility. Meeting pension obligations to teachers is part of what it costs to educate kids, Brown said, and must be paid for.
“The key point that is sometimes hard to grasp is that this is what it takes to educate our kids,” he said. “To get what they need, they need teachers. Teachers get what they need by having a pension. The pension has to be paid for.”
In January, Brown proposed that his administration and the Legislature spend next year negotiating a CalSTRS deal and then start funding it. But now he is proposing to start with the fiscal year that begins July 1, with an initial $450 million toward the unfunded liability. The state’s portion would be $73 million, with teachers paying $40 million more out of their salaries and districts kicking in about $337 million – equal to about a half of 1 percent of the projected $61 billion in Proposition 98 funding next year. Proposition 98, the primary source of funding for K-12 schools and community colleges, determines annual funding based on increases in enrollment and per capita state income or state revenue.
Jack Ehnes, chief executive officer of CalSTRS, said that closing the funding gap “can be resolved through gradual and predictable contribution increases, and the sooner those increases begin, the less risk to the state. Clearly, state policymakers understand this urgency, and … we are encouraged that a funding plan will be enacted this year.”
CalSTRS’ defined benefit program for its 860,000 members is funded through contributions fromthe state, employers (school districts) and employees, and returns on investments. CalSTRS lost about 40 percent of the value of its investments when the stock market plunged in 2008. Though the $183 billion value has now returned to where it was, the pension program is only about two-thirds funded to meet projected pension payouts over the next 30 years.
Contributions are determined as a percentage of employees’ pay. Teachers and administrators currently pay 8 percent of their salaries into the defined benefit program; the state pays 3 percent and districts 8.25 percent. Once fully phased in over three years, teachers would pay 10.25 percent of salaries and the state would pay 6.3 percent. Districts’ share, under Brown’s plan, would soar to 19.1 percent of employees’ pay, paid for out of Proposition 98 funding. The phase-in for districts would be seven years.
Assemblyman Rob Bonta, D-Oakland, chair of the Assembly Public Employees, Retirement and Social Security Committee, which is tackling the pension fund issue, called Brown’s proposal “a reasonable plan and a strong sign of progress” that is consistent with his committee’s principles of shared responsibility among contributors. “No one said it would be easy,” said Bonta, who plans a hearing soon to review the plan.
Dennis Meyers, Assistant Executive Director of the California School Boards Association, agreed with Bonta, calling the proposed pension contribution increases “daunting” at a time when school districts are recovering from the recession and phasing in the new funding system. He said his organization would take a hard look at Brown’s pension cost-sharing formula.
Little change in Prop. 98 funding
In January, Brown proposed a near-record increase in Proposition 98 spending. That won’t change much, even with an additional surge in overall state revenue, because of the complex way that Proposition 98 funding is calculated and retroactively adjusted. More than half of the new state revenue will fund a rush in enrollment in Medi-Cal, the federal and state subsidized health care program for low-income families that was expanded under the federal Affordable Care Act.
For K-12 schools and community colleges, there will be $242 million more available under Prop. 98 than in January, but nearly all of that will be eaten up by increased enrollments (see Department of Finance summary of budget revision, starting on page 15).
The January state budget included a $10.5 billion increase in K-12 and community college spending. Brown is proposing to split the new money between one-time expenditures and more dollars for ongoing spending.
Brown would use the bulk of the money to pay off the remaining $6 billion in late payments to school districts, known as deferrals. Paying that off will clear the decks of that portion of what Brown calls the state’s “wall of debt.” It will also free up cash for districts while eliminating loans that some districts – disproportionately those serving low-income students – had to take out.
The remaining $4.5 billion would fund districts’ operating budgets under the Local Control Funding Formula – more than double the $2.1 billion increase this year. In a January analysis, the non-partisan Legislative Analyst’s Office estimated that overall per-student spending would rise about 10 percent, from $7,936 per student in the current fiscal year to $8,724 in 2014-15. Under the formula, which distributes extra money based on enrollments of English learners, foster youth and low-income students, the percentage increases would vary significantly among districts, however.
Josephine Lucey, a school board member from Cupertino and president of the California School Boards Association, said,“We are pleased with the continued commitment and investment in the Local Control Funding Formula … so school district and county leaders and board members can invest in programs to achieve academic success.”
Other education leaders vowed to take the case to the Legislature for additional money for Common Core and an expansion of transitional kindergarten, an extra year of kindergarten for some 4-year-olds.
“While we are pleased to see progress toward implementing the Local Control Funding Formula, we are disappointed to see the governor did not include additional funding for implementation of new content standards, and will urge him and the Legislature to reconsider,” Valerie Cuevas, interim executive director of The Education Trust-West, said in a statement.
Senate President Pro Tem Darrell Steinberg, D-Sacramento, had made a $1 billion expansion of preschool his top priority but, so far, has come away empty-handed. Brown, in a press conference, said that the state has increased Proposition 98 funding substantially for kindergarten through community college. Adding a 16th year of education, he said, would require shifting money from the other 15 years.
- Brown’s proposal to fully fund CalSTRS’ defined benefit program (see page 66), May 2014
- Summary of changes to K-12 funding under the May state budget revision (starting page 15), May 2014
- Summary of K-12 spending in proposed state budget in January 2014
- Overview of 2014-15 state budget, Legislative Analyst’s Office, February 2014
- EdSource article on CalSTRS suggestions for fixing unfunded liability, February 2014
- CalSTRS statement on Brown’s pension fund fix, May 2014
- CalSTRS summary report to members, June 2013
- How CalSTRS’ liability grew over a decade, article in Calpensions by Ed Mendel, February 2014
Noting that the state has not restored $1 billion in cuts to child-care and development programs since 2008, Deborah Kong, president of Early Edge California, a nonprofit that supports an expansion of the state’s early childhood services, said, “The governor and Legislature have a historic opportunity to make California a leader in education in these crucial weeks of the budget discussions. We urge them to make the wise investment in our future by making early learning a top priority.”
The May revision does include some new and expanded education programs:
- $27 million to expand the capacity of the K‑12 High Speed Network, which provides Internet service to county offices of education and school districts. There will be grants for districts that need the most help preparing for the computer-based Common Core tests next spring.
- $50 million to boost career-training programs at community colleges to help expand course offerings and purchase new equipment. The money comes on the heels of $250 million provided this year for the Career Pathways Trust, a state grant program that will fund partnerships between K-12 and community colleges for career technical education. Community college officials cheered the funding proposal, which they said would restore past cuts. Yet other advocates were disappointed there wasn’t additional funding for career technical programs at the K-12 level.
John Fensterwald covers education policy. Contact him at firstname.lastname@example.org and follow him on Twitter @jfenster. Sign up here for a no-cost online subscription to EdSource Today for reports from the largest education reporting team in California.
An Oakland student enjoys a snack at school. Eligibility for the National School Lunch Program is key to the new formula for funding education. Photo credit: EdSourceToday/ Jane Meredith Adams
May 13th, 2014 :: In his May budget revision, Gov. Jerry Brown on Tuesday proposed a change that will allow school districts to more broadly define who is eligible for a free or reduced-price meal and, by association, who is identified as low-income and eligible to receive extra state education funds. The proposal would affect more than 1 million students who fall into a gray area of free lunch eligibility.
While the new Local Control Funding Formularequires school districts to count low-income students annually, and ties funding to the tally, Brown’s proposal would allow a subset of schools with large numbers of low-income students to count them only once every four years. Instead of individual student data, schools where more than 80 percent of students qualify for free and reduced-price meals would be allowed to submit a group percentage of low-income students. The proposal would allow the schools to continue the system they have used for years, although it requires that districts be diligent about verifying student family income levels every four years.
Brown’s proposal would give districts what they have sought: greater flexibility and less paperwork.These 1,500 high-poverty schools operate under Provision 2 of the National School Lunch Program, which frees schools with high concentrations of low-income students from conducting the time-consuming and costly process of verifying income eligibility for free or reduced price meals every year. Instead, these schools collect a “base year” of income eligibility data every four years, although schools can obtain extensions and in some cases the data have become quite stale, according to the state. In exchange for being relieved of paperwork, the schools provide free meals to every student, with districts paying the difference between the qualified percentage and 100 percent.
But with hundreds of millions of dollars for low-income students on the line under the new funding system, the California Department of Education said it needed current student data. Districts with large populations of low-income students, led by Los Angeles Unified and Fresno Unified, have protested vociferously for the past nine months, even as they have collected the necessaryinformation.
Ruth F. Quinto, chief financial officer of Fresno Unified, said last fall that the new data collection was unnecessary, given an abundance of federal and state data documenting poverty through thecensus, unemployment rates and enrollment in state food stamp programs.
Los Angeles Unified Superintendent John Deasy said that families were wary of filling out forms they’d never seen before, and according to the rules of the free lunch program, the schools couldn’t require that forms be returned for students to receive free meals. Deasy charged that requiring new forms from the low-income families was inconsistent with the spirit and the letter of the new funding formula, which the governor has described as a push toward equity for needy students.
But still, districts pulled together alternative income verification forms and launched widespread campaigns to collect information from families. Fresno Unified gave away tickets to the Fresno Fair to encourage families to return forms and sent teams of parents door-to-door. Oakland Unified handed out 1,400 tickets to Raiders games to reward schools that collected high numbers of forms.
After months of conversations with districts, school lunch advocates and the California School Boards Association, Gov. Brown proposed the changes in the May revision of his spending plan for 2014-15.
Deasy expressed gratitude that the governor had responded to districts’ complaints. “I want to thank Gov. Jerry Brown for listening to our concerns about streamlining processes under the new Local Control Funding Formula,” he said in a statement. “His proposed changes should help mitigate the burdensome process for collecting alternative forms to verify income eligibility, so that we can focus more attention on teaching and learning.”
Brown’s proposed changes would also allow the districts to throw out their 2013-14 count of high-needs students, if the count for 2014-15 is higher.
Tia Shimada at California Food Policy Advocates said the proposed changes would encourage schools to continue to participate in programs that serve all students free meals, while still being able to provide necessary data for the funding formula. The proposed changes are “a step in the right direction,” she said.
- National School Lunch and Breakfast Programs, Provision 2 Guidance, U.S. Department of Agriculture
- Assembly Bill 97, School finance law, 2013
Transitional kindergarten expansion omitted in Gov. Brown's revised budget
By Sharon Noguchi, San Jose Mercury News | http://bit.ly/1iV5Blr
5/13/2014 11:10:20 AM PDT / UPDATED: 05/14/2014 03:49:20 PM PDT :: SACRAMENTO -- Gov. Jerry Brown's revised budget omits funding for Democrats' top priority this year: expanding transitional kindergarten, the public school program to ready 4-year-olds for the rigors of elementary school.
With rosy revenue projections, Brown would focus education dollars on repaying money the state borrowed from school districts during the Great Recession and on shoring up the teachers' pension system.
California's spending on pre-kindergarten to 12th grade would jump 8.4 percent, from $70 billion this school year to $75.9 billion in 2014-15 -- even as enrollment is expected to decline slightly, by 0.1 percent. Of that total, more than $45 billion would come from the state's general fund, with federal revenues, local property taxes and Lottery proceeds contributing most of the rest.
Brown's revised budget released Tuesday proposes accelerating the repayment schedule of $6.2 billion owed to schools, so that it all would be repaid by the end of the 2014-15 school year. The state had borrowed the money by deferring payments it owed school districts.
Brown also proposes dramatic increases in contributions toward the California State Teachers' Retirement System, which is only 67 percent funded and is projected to run out of money to pay teacher pensions. The governor would have teachers, school districts and the state increase their contributions to CalSTRS by a combined $450 million in the first year. The added contributions would increase annually and reach $5 billion, or 35.7 percent of teacher payroll. If enacted, it would eliminate CalSTRS's unfunded liability in about 30 years.
The governor's plan projects district contributions rising from 8.25 percent to 19.1 percent of teacher salaries.
"That's a huge change," said Stephen McMahon, chief business officer of the San Jose Unified School District. If enacted, he said, "it will depress salaries and put compensation toward CalSTRS instead. It will be that much harder to recruit teachers."
Instead, he said officials should also consider pension benefits, reining in pension spiking and other changes to control costs. He said, "I think it's got to be a balanced approach."
In a written statement, CalSTRS Chief Executive Officer Jack Ehnes applauded the governor's pension proposal.
The omission of new transitional kindergarten funding dismayed boosters of public preschool. Still, Deborah Kong, head of the preschool and child-care advocacy group Early Edge California, said, "We're confident something significant is going to happen in this budget," through legislative negotiations. She cited recent polls showing Californians' support for transitional kindergarten, the program currently offered to 4-year-olds who just miss the cutoff date for enrolling in kindergarten.
For next school year, the state will spend $685 million on the program to serve about one-quarter of the state's 4-year-olds. Legislative Democrats have proposed expanding the program to cover all 4-year-olds.
Other highlights of Brown's education budget include:
Allocating $26.7 million for schools to assess their Internet and network needs and to provide high-speed connections. That network is key to schools participating in the state's all-electronic annual standardized testing. But the sum is a little more than one-fiftieth of the amount that the state allocated last year for schools to put into place the new Common Core state standards, which change what and how students learn and how they're tested. Allowing schools to count students from poor families only once every three or four years, making it easier for school districts to qualify for supplemental funding to teach low-income students. Making it easier for schools to offer independent study using computers on campus.