Proposition 2’s New Reserve for K-14 Education Is Unlikely to Have Impact, Though Local School Districts’ Reserves May Be Affected

October 19, 2014

This is the fourth in a series of blog posts highlighting key components of the CBP’s analysis of Proposition 2, which will appear on the November 4, 2014 statewide ballot.

As we have blogged about recently, setting aside funds in good economic times to help meet the challenges that arise during economic downturns is a sound budgeting practice — and one California voters supported when they approved Proposition 58 in 2004. Proposition 2, a constitutional amendment placed on the November 4, 2014 ballot by the Legislature, would rewrite the rules governing deposits into and withdrawals from the state’s existing Budget Stabilization Account (BSA) — and, as we explained last week, would require the state to pay down “budgetary debt” for the next 15 years.

Proposition 2 also would create a new state-level budget reserve for schools and community colleges called the Public School System Stabilization Account (PSSSA). However, our recent analysis explains that because deposits into the PSSSA would only happen under limited circumstances, they would be unlikely to occur until at least 2020-21, and in most years thereafter. Without deposits into the PSSSA, this new reserve would not have dollars to provide to schools and community colleges during an economic downturn. As a result, Proposition 2’s impact on state funding for K-14 education would likely be negligible.

While deposits into a new state-level reserve for schools and community colleges would be unlikely for many years under Proposition 2, much attention has focused on a provision of a new state law — Senate Bill 858  — that would take effect if voters approve the ballot measure. The provision in SB 858 could limit the amount that K-12 school districts are allowed to keep in their local school district budget reserves. However, this cap would only take effect in a year after a transfer is made to the new PSSSA, which means school districts would not likely be required to limit their local budget reserves until at least 2021-22. SB 858, which would not apply to community colleges, could place a limit on most local school district reserves between 3 percent and 10 percent of a district’s annual spending. Unlike the provisions contained in Proposition 2 itself, which would be placed into the state Constitution, the Legislature could revise or repeal this cap on local school district reserves with a simple majority vote. Moreover, county offices of education could exempt school districts from the cap on local budget reserves for up to two consecutive years.

The focus on local K-12 district budget reserves as part of the debate around Proposition 2 is understandable. Schools suffered significant cuts in state support as revenues plummeted during and in the aftermath of the Great Recession. Some school districts were able to buffer these cuts with dollars they had saved in their local budgets. Despite the likelihood that the cap on local budget reserves would not take effect until at least 2021-22, some school districts may spend down their local reserves to bring them closer to the cap in the new law. To the extent this occurred, local districts would have fewer dollars available for economic uncertainties, such as tough budget years.

As is often the case, voters may find it difficult to sort through all of the issues raised by a ballot measure as complex as Proposition 2. But one thing is clear: Voters should not expect Proposition 2 to solve the problem that drops in state revenue mean for K-14 education funding.

— Jonathan Kaplan

A Sucker’s Bet: Lottery Provides Pennies Per Dollar Spent by California’s Schools

April 1, 2010

A few days ago, we asked readers to submit their favorite urban legend about the state budget. One reader submitted one of our favorites: “The lottery will fix schools’ funding problems.” This budget myth was born after voters passed the California State Lottery Act in 1984. Highway billboards tout the cumulative amount California schools have received from the lottery, but lottery dollars have always provided a small percentage of annual public school funding. In fact, since 1995-96 less than 2 percent of the dollars spent by California’s K-12 schools each year have come from lottery revenues.

Recently passed legislation awaiting the Governor’s signature aims to increase the amount of funding education receives from the lottery. However, even if lottery sales had tripled in 2007-08, schools would have received less than 5 cents from the lottery for every dollar they spent. Urban legends aside, the lottery will continue to be a sucker’s bet for those who wish to support public schools whether Californians buy more lottery tickets or not.

— Jonathan Kaplan

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Plummeting Private School Enrollment May Increase Strains on Public Schools

December 11, 2009

What does the recent drop in California’s K-12 private school enrollment mean for the state’s public schools? Private school enrollment fell by 5.0 percent in 2008-09, the largest year-to-year decline since at least the early 1990s. This precipitous decline is likely due, at least in part, to the economic downturn, as some families opt for public instead of private schools in order to cut costs. However, last year’s decrease in private school enrollment is also part of a longer-term trend, which may reflect an endorsement of the state’s public schools. The number of private school students in California decreased in seven of the past eight years, falling by a total of more than 112,000 — a 17.3 percent decline. In contrast, more than 200,000 additional students enrolled in California public schools during the same time period — an increase of 3.3 percent.

The strains on California’s public schools have increased due to the state’s budget crisis. In July, California cut 2008-09 funding for K-12 education programs covered by the Proposition 98 guarantee by 16.6 percent compared to the funding level enacted in September of 2008. In addition to these cuts, the Legislature allowed school districts to increase class sizes while retaining most of the funding provided by the state’s K-3 class size reduction program. As a result, many public school classes are larger this year in part due to school districts reducing teaching staffs to cut costs. An increase of even a few students per classroom will add to public schools’ workload as they attempt to achieve the state’s high academic standards with fewer resources.

— Jonathan Kaplan

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Schools Suffer the Budget Blues

August 27, 2009

As students prepare to kiss summer goodbye and head back to the classroom, it is worth pondering what the current round of budget cuts means for California’s schools. Previous CBP blog posts have examined the impact on children’s health and social service programs, and our budget summaries document the cuts that touch all areas of state services from parks to criminal justice. How do big numbers – such as the $16.1 billion of reductions in the July budget agreement or the $8.6 billion in 2008-09 cuts to public schools – translate at the local level?

As enacted in September 2008, the 2008-09 Budget established a funding level of $51.6 billion for K-12 education programs covered by the Proposition 98 funding guarantee. The February budget agreement reduced 2008-09 school funding to $44.7 billion and the recent July budget agreement further reduced K-12 education funding to $43.1 billion. The September budget translated into a per pupil funding level of $8,726. The July budget reductions cut this amount to $7,243 – 17.0 percent less than the level established by the September Budget Act – or nearly $45,000 less for a classroom of 30 students.

The American Recovery and Reinvestment Act (ARRA) will lessen the impact of recent cuts to education funding but it doesn’t come anywhere near making California’s schools whole. Reductions to 2008-09 school funding made by the February and July 2009 budget agreements were more than twice the amount of ARRA payments to California’s schools last year. Moreover, cuts to 2009-10 school funding included in the recent budget agreements exceed remaining ARRA payments to California by at least $1.5 billion. Therefore, despite substantial infusion of federal funds, schools will have fewer resources with which to educate California’s students this back-to-school season.

— Jonathan Kaplan

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