Legislature Passes Budget – Education & Facilities Impacts

June 16, 2014

Last night, the Legislature passed the FY 2014-15 Budget Act and a number of accompanying trailer bills in order to meet the June 15 constitutional deadline. The budget includes $108 billion in General Fund spending and reflects a number of important education policy changes, including an expansion of state-funded preschool and a plan to begin addressing unfunded liabilities in the teacher pension system (CalSTRS). Below is a selection of some of the key education components included in the budget as adopted by the Legislature.

The main budget bill, SB 852, and corresponding trailer bills will now be sent to the Governor for his consideration. The Governor has the authority to blue pencil (i.e. line-item veto) dollar amounts from the budget.

Proposition 39­ - Provides $279 million for K-12 grants, to be allocated on a per-ADA basis, plus $28 million for the Energy Conservation Assistance Act (ECAA) loan program, which is administered by the California Energy Commission.

Emergency Repair Program - Provides $188.5 million in one-time funds for the Emergency Repair Program.

School Facility Program Fund Transfer - Shifts remaining fund balances from the Career Technical Education and High Performance Incentive Grant programs to the main New Construction and Modernization programs, effective January 1, 2015. Requires the Office of Public School Construction to report to the State Allocation Board and Legislature by March 1, 2015 regarding efforts to speed up and streamline award of Seismic Mitigation Program funds. This action does notinclude a shift of remaining funds for the Seismic Mitigation Program, Overcrowded Relief Grant Program, or Charter School Facilities Program, which were all considered by the Legislature.

Department of Industrial Relations Monitoring Fee - Includes a restructuring and increase of the public works prevailing wage monitoring fee. Beginning July 1, 2014, a contractor or subcontractor is required to register with the Department of Industrial Relations (DIR), pay an initial registration fee of $300, and pay an annual renewal fee to be set by DIR. Fee revenues will be used to fund administration of the DIR prevailing wage monitoring program.

Common Core­ - Provides $26.7 million for the K-12 High Speed Network, to help schools secure internet connectivity and infrastructure in order to implement Common Core’s new computer-based assessments. Additionally, the budget provides $450 million to pay down the K-14 education mandates backlog; trailer bill language in AB 1463 states that the Legislature intends for districts to use the funding freed up by this payment for Common Core implementation, including professional development, instructional materials, and technology infrastructure.

Preschool Facilities - The budget includes $155 million to expand access to the State Preschool Program. Of that, $10 million is dedicated to the Child Care Facilities Revolving Fund for preschool facilities. These funds may be used for renovation or repair of existing facilities, or for lease of preschool facilities under the Child Care Facilities Revolving Fund. This is a lease-purchase program administered by the California Department of Education for the acquisition of relocatable buildings.

Reserve Cap - The budget includes a measure to establish a cap on local school district reserves for the year after a contribution is made to the state Proposition 98 reserve. School districts with less than 400,000 ADA would be prohibited from having reserves in excess of two times the minimum recommended reserve amount, and districts with more than 400,000 ADA would be capped at three times the recommended reserve. This policy shift is contingent upon passage of ACA 1, the Rainy Day Fund constitutional amendment on the November ballot. It is our understanding that capital reserves are specifically excluded from the reserve limit. This change was not vetted through the regular budget subcommittee or policy committee process and received strong opposition by members of the education management community in the days and hours preceding the budget vote. Key legislative leaders indicated that the cap will only be triggered in very rare circumstances, if ever.

CalSTRS - The budget includes a negotiated agreement to begin to address unfunded CalSTRS liabilities, at a somewhat more modest rate than that originally proposed by the Governor. The plan increases contribution rates for teachers, employees, and the state.

~ Rebekah Cearley