Fourth District PTAAdvocacy Roundtable

Presented by

Ron BennettPresident and CEO

2Funding Per ADA – Actual vs. Statutory Level

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13$4,700

$5,700

$6,700

$5,821

$6,150

$6,411 $6,392

$6,535

$6,742

$5,668

$4,981

$5,244 $5,231

$5,281

Average Unified District

Projected Statutory COLA Flat Funding Actual Funding Midyear Cut

Dolla

rs P

er A

DA

Loss of baseline dol-lars

Loss of COLA

Loss due to midyear cut

$4,911

3Money Matters in Student Performance

Test Scores vs. Dollars Per Student

Highest Performing States

Lowest Performing States

Maine New Jersey Rhode Island Vermont Wyoming

California Arizona Nevada Idaho Mississippi

$23,000

$6,700

$8,700

$16,000

$22,000

$0

4California’s Education Spending Continues to Lag

1969

-70

1971

-72

1973

-74

1975

-76

1977

-78

1979

-80

1981

-82

1983

-84

1985

-86

1987

-88

1989

-90

1991

-92

1993

-94

1995

-96

1997

-98

1999

-00

2001

-02

2003

-04

2005

-06

2007

-08

2009

-10-$3,000

-$2,600

-$2,200

-$1,800

-$1,400

-$1,000

-$600

-$200

$200

$600

California’s K-12 Spending Per Student Lags BehindThat of the Rest of the U.S. More Than at Any Time in 40 Years

Calif

orni

a’s

Spen

ding

Per

Stu

dent

Min

us S

pend

ing

Per S

tude

nt in

the

Rest

of U

.S.

* 2010-11 data estimatedNote: Rest of U.S. excludes the District of ColumbiaSource: National Education Association

-$2,856 (est.) per student loss in 2010-11

National Average

5California’s Spending Lags the Nation

California’s Schools Lag Behind Other States on a Number of Measures

California Rank California Rest of U.S.

K-12 Spending Per Student (2009-10)* 44 $8,826 $11,372

K-12 Spending as a Percentage of Personal Income (2008-09)* 46 3.28% 4.25%

Number of K-12 Students Per Teacher (2009-10)* 50 21.3 13.8

Number of K-12 Students Per Administrator (2007-08) 46 358 216

Number of K-12 Students Per Guidance Counselor (2007-08) 49 809 440

Number of K-12 Students Per Librarian (2007-08) 50 5,038 809

*2008-09 and 2009-10 data are estimated.Note: “California Rank” and “Rest of U.S.” exclude the District of Columbia. Spending per student and number of students per teacher are based on Average Daily Attendance (ADA). Number of students per administrator, guidance counselor, and librarian are based on statewide enrollment.Source: National Education Association, National Center for Education Statistics, and U.S. Bureau of Economic Analysis

6Historic IDEA Funding

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

% Unfunded % Funded

Perc

ent o

f Per

Pup

il Ex

pend

iture

s Fu

nded

Source: Digest of Education Statistics 2010, National Center for Education Statistics

Governor Brown’s Budget Revenues vs. LAO Forecast

Governor Brown’s Budget assumes revenues and transfers of $95.4 billion in 2012-13, a 7.7% increase

The LAO forecasts a two-year shortfall of $6.5 billion,including $2 billion in additional tax revenues relatedto the Facebook initial public offering

$3.0 billion attributable to 2011-12;$3.5 billion to 2012-13

The LAO forecast assumes passage ofGovernor Brown’s original tax proposal

7

Reasons for the LAO’s Pessimism

Economic Outlook

The LAO forecasts stronger U.S. and California economic growth thanthe DOF

Revenue Forecast

The LAO disagrees with the DOF’s assumption about capital gains income; the DOF is too optimistic

Average home price appreciation for 2002-2006 was 18% annually; 2012-2015 forecast of 1.2%

Capital gains income between 2002-2006 of $88 billion annually; $90 billion a year forecast by the DOF for 2012-2015

Recent shortfalls have been attributed to weak capital gains income

8

Competing Tax Initiatives

Governor Brown’s Budget assumes passage of $6.9 billion in new taxes, but other measures could be on the ballot

Conventional wisdom says that if more than one tax initiative is on the ballot, they all fail

What’s in play?

Governor Brown’s initiative – ½ cent sales tax and higher income tax rates for $250,000 and above

California Federation of Teacher’s (CFT) millionaires tax

Molly Munger/Parent Teacher Association’s broad based income tax

Latest entry: Governor Brown’s compromise with CFT

¼ sales tax and higher income tax rates at $250,000 and above

9

How Do the Tax Initiatives Compare?

Governor/CFT Compromise Proposal Governor’s Proposal CFT “Millionaires Tax” Munger Education/ECE

What is taxed?

10.3% $250,000 to $300,00011.3% $300,000 to $500,000

12.3% Over $500,000

Increases the sales tax rate by a quarter cent

10.3 % $500,000 to $600,00010.8 % $600,000 to $1 million

11.3 % Over $1 million

Increases the sales tax rate by one-half cent

3% $1 million and $2 million

5 % Over $2 million

Rate increase would range from 0.4% on taxable incomes between $14,632 and $34,692 and 2.2 % on taxable incomes over $3,402,994.

Estimated 2012-13 Revenues (DOF est.) $7.9 billion $6.9 billion $9.5 billion $5.5 billion

Estimated Revenues in First Full Year of Implementation (DOF est.)

DOF: $9.9 billion DOF: $6.9 billion DOF: $6.0 billion DOF: $11.0 billion

Revenue Allocation

K-12 (89%) and CCCs (11%) The new revenues would increase the Proposition 98 guarantee by an estimated $2.5 billion, leaving $4.4 billion to close the Budget gap.

K-12 (89%) and CCCs (11%) The new revenues would increase the Proposition 98 guarantee by an estimated $2.5 billion, leaving $4.4 billion to close the Budget gap.

K-12 (36%); Social and health services (25%); UC, CSU, and CCCs (8% each); county public safety (10%); county maintenance (4.9%); and administrative costs (up to 0.1%).

2012-13 through 2016-17: K-12 (60%); repayment of state bond debt (30%); and child care and preschool (10%) 2017-18 and beyond: K-12 (85%) and child care and preschool (15%).

10

How Do the Tax Initiatives Compare?

Governor/CFT Compromise Proposal

Governor’sProposal

CFT “Millionaires Tax”

Munger Education/ECE

Does Measure Address Realignment Revenue Shift?

Yes Yes No No

Relationship to Proposition 98

Counts toward the Proposition 98

Counts toward the Proposition 98

Counts toward the Proposition 98

Counts toward the Proposition 98

Temporary or Permanent?

Income tax: 2013-2019Sales tax: 2013-2017

Income tax 2012-2016Sales tax: 2013-2016 Permanent 2013 through 2024

Revenues Available To Close 2012-13 Budget Gap

$4.4 billion $4.4 billion None $1.5 billion

Revenues Available To Close Budget Gap in First Full Year of Implementation

Approximately $4.4 billion

Approximately $4.4 billion None $3.0 billion

Sponsor Governor Brown Governor Brown CFT Molly Munger

11

Political and Logistical Challenges

A Field Poll in February placed CFT’s millionaire’s tax first (63% support), then Governor Brown’s (58%), finally Munger’s (43%)

A March 7 Public Policy Institute of California (PPIC) poll placedGovernor Brown’s at 52%

Signature gathering to qualify

About 500,000 valid signatures forMunger’s and CFT’s

About 800,000 for Governor Brown’s(constitutional amendment)

About six weeks remaining tosubmit signatures

12

Weighted Student Funding

Governor Brown has proposed a major change to California’s school finance system

Revenue limits and over 40 categorical programs would be replaced with a weighted student funding (WSF) formula

$4,920 per-ADA base rate, plus 37% additional for English Learners and free and reduced-price lunch students

Six-year phase-in, with 5% phase-in in 2012-13; hold harmless in budget year

Major categorical programs added to flexibility

Economic Impact Aid

Class-Size Reduction

Transportation

13

Weighted Student Funding

The WSF proposal has evolved since January and other changes are expected

Grade span weights, similar to the charter school block grant

Major challenges and shortcomings

Eliminates deficit factor

Redistributes base funding ($5,244 per ADA vs. $4,920 per ADA)

Nothing “magical” about 37% weights

Disregards cost factors unrelated to disadvantaged students

Each Legislator will have winners and losers in his/her district

14

Transitional Kindergarten Proposal in 2012-13

Senate Bill 1381 (Chapter 705/2010):

Changed eligible birth dates for kindergarten and 1st grade

Established “Transitional Kindergarten (TK)”

According to current law, TK is to start in 2012-13

Districts offer TK to students who otherwise do not qualify for traditional kindergarten due to change in age eligibility dates

Must offer TK to students turning five between December 2 andNovember 2 in 2012-13

Can offer TK to students with birthdays between September 2 and December 2

Not required at every school site – whatever works best for the district

Not compulsory – students are not required to attend kindergarten

15

Transitional Kindergarten Proposal in 2012-13

Governor’s Proposal:

Eliminates all statutes associated with TK

TK would be an optional local decision

Allows students turning five at any time during the school year to:

Enroll in kindergarten, fully funded, at the beginning of the school year

On a case-by-case basis, upon local board approval

Legislature has been generally unfavorable – future of proposaluncertain

Resources will be available for TK in either current law or Governor’s Proposal

16

17K-12 Deferrals

Nearly $10 billion in payments of state aid for K-12 schools is deferred into the next year

Equates to more than 38% of the principal apportionment

Districts receiving most of their funding from local sources:

Have always had to borrow to meet cash flow – mostly within year

Borrowing needs are less affected by deferrals of state aid

Districts receiving most of their funding from the state:

Historically, cash flow more closely matches spending

Operating cash needs often met without borrowing

Therefore, deferrals of state aid have a significant impact

Imposes new borrowing requirements to match cash needs

Requires borrowing across fiscal years

May require two Tax Revenue Anticipation Notes, with theassociated costs

18Basic Aid Budget Reductions

Fair Share

Revenue limit districts have been impacted by a deficit of 20.602% in 2011-12 as an ongoing deficit beyond 2011-12

The comparable impact on basic aid districts includes a fair share reduction of 9.57% for the 2011-12 fiscal year

The reduction of the fair share will be based on the 2011-12 P-2 revenue limit subject to the deficit factor for each of the respective districts identified as “basic aid” in the 2011-12

The reduction is taken from categorical program funds apportioned in the 2012-13 fiscal year

Thank you