Wednesday, August 13, 2014


by Kimberly Beltran | SI&A Cabinet Report :: The Essential Resource for Superintendents and the Cabinet

August 13, 2014  ::  (Calif.) A coalition of some of the state’s most influential education groups is rallying opposition to a Constitutional amendment placed on the November ballot by the Legislature that would require the state to reconstruct a rainy day fund for use in lean budget years.

Proposition 2 – the Rainy Day Budget Stabilization Act – would also establish a separate rainy day fund for schools by diverting a percentage of tax dollars earmarked for education into the new Public School System Stabilization Account, or PSSSA.

“In our judgment, this proposal is fiscally irresponsible, is inconsistent with the principle of subsidiarity that serves as the foundation of the Local Control Funding Formula, and discounts the critical role that prudent budget reserves play in the ability of school districts to maintain fiscal solvency,” Jeff Vaca, spokesman for the California Association of School Business Officials, said in a statement issued by the group last week.

CASBO and several other education groups, including those representing school board members and administrators, were unsuccessful in lobbying the Legislature to remove provisions in the rainy day measure affecting school funding.

School leaders are concerned, they say, because Proposition 2 creates a state reserve for K-12 schools and community colleges by withholding education funds to which they are already entitled under Proposition 98, also a  Constitutional amendment approved in 1998. The proposed withholding would come, the advocacy groups argue, at a time when California class sizes are the highest in the nation and the state is ranked 50th in adjusted per-pupil spending for K-12 education.

Proposition 2 would also result in a statutory cap on reserve fund levels that districts can maintain in some future years – language, they say, that was tucked into a last-minute budget trailer bill in June with no public discourse.

Also, because a series of events must occur before money can be deposited into the education rainy day fund, advocates worry that hard times could hit again before there is any money in the account.

According to an article posted by the Association of California School Administrators, working with CASBO to defeat Proposition 2, the reserve cap is a “one-size-fits-all” measure that “flies in the face” of Brown’s often repeated principle of subsidiarity – the idea that local leaders should make financial decisions based on what works best for their communities.

“The irony is not lost that at the same time politicians are asking for voter approval of an adequate state budget reserve, they are tying the hands of school district leaders in building their own reserves,” the ACSA statement reads.

The Proposition 98 Reserve fund, would be funded by a transfer of capital gains-related tax revenues in excess of eight percent of general fund revenues. Funds would be appropriated from the account when state support for K-14 education exceeds the allocation of general fund revenues, allocated property taxes and other available resources.

If approved, the proposition – known previously as Proposition 44 but renamed on Monday – would  alter current requirements for the state’s existing reserve fund, the Budget Stabilization Account by, among other things:

  • Requiring the controller to deposit annually into the BSA: (a) 1.5 percent of general fund revenues and (b) an amount equal to revenues derived from capital gains-related taxes in situations where such tax revenues are in excess of eight percent of general fund revenues. Deposits to the BSA would begin by no later than Oct. 1, 2015. Deposits would be made until the BSA balance reaches an amount equal to 10 percent of general fund revenues.
  • Requiring that from the 2015-2016 fiscal year until the 2029-2030 fiscal year, 50 percent of the revenues that would have otherwise been deposited into the BSA must be used to pay for fiscal obligations, such as budgetary loans and unfunded state-level pensions plans. Starting with the 2030-2031 fiscal year, up to 50 percent of revenues that would have otherwise been deposited into the BSA may be used to pay specified fiscal obligations.
  • Permitting the legislature to suspend or reduce deposits to the BSA and withdraw for appropriation from the BSA upon the governor declaring a budget emergency.

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