BUDGET STUDY COMMITTEE MEETING

January 24, 2017

3:00 - 4:30 p.m.

Campbell Conference Room – 3rd Floor, North Building

AGENDA I. Call to Order/Roll Call – Mary Ann Dewan II. Set the Agenda – Mary Ann Dewan III. Review and Approval of December 16, 2016 Meeting Minutes – Mary Ann Dewan IV. State Budget Update – Laurie Book V. Budget Development 2017-2018 – Laurie Book VI. Next Meeting – To Be Determined VII. Adjourn COMMITTEE MEMBERS Jon R. Gundry, Superintendent/Committee Chair Darcie Green, Board Member Grace Mah, Board Member Claudia Rossi, Board Member Peter Daniels, Chief Public Affairs Officer Mary Ann Dewan, Deputy Superintendent Philip Gordillo, Chief Human Resources Officer Ann Jones, Interim Chief Business Officer Steve Olmos, Chief Schools Officer Jeanette Rodriguez-Chien, Chief Academic Officer David Wu, Chief Technology Officer Roxanne Barnett, SEIU Sandra Fakaosi, SEIU Lisa Vieler, ACE/CTA Bobby Welch, ACE/CTA

BUDGET STUDY COMMITTEE

UNAPPROVED MINUTES DECEMBER 16, 2016

I. Call to Order/Roll Call

The meeting was called to order by Dr. Mary Ann Dewan, Deputy Superintendent, at 2:06 p.m.

Members Present Others Present Rosemary Kamei, Board Member Don Bolce, Early Learning Services Grace Mah, Board Member Laurie Book, Internal Business Services Mary Ann Dewan, Deputy Superintendent Antonio Fuentes, Head Start Philip Gordillo, Chief Human Resources Officer Theresa Martinez, Business Services (recorder) Ann Jones, Interim Chief Business Officer Pat Raceles, Internal Business Services Steve Olmos, Chief Schools Officer Ana Trujillo, Head Start

David Wu, Chief Technology Officer Roxanne Barnett, SEIU Sandra Fakaosi, SEIU Bobby Welch, ACE/CTA

II. Set the Agenda Dr. Dewan reviewed the December 16, 2016 agenda. There were no questions, changes or

amendments to the agenda.

III. Head Start Grant 2017 Don Bolce, Director-Early Learning Services, shared that the Head Start grant application will go to the

Head Start Policy Council for review and approval, as well as be presented to the Board of Education in January. The grant application will be submitted to the Head Start Regional Office by February 1, 2017. Mr. Bolce explained that Head Start has a five-year grant, with year-to-year funding. Head Start’s fiscal year is May 1 through April 30.

Mr. Bolce discussed challenges the Head Start/Early Head Start Program is facing and opportunities

to maintain funding. Challenges

- decrease to the number of Head Start eligible children - increase to personnel costs - new Head Start Performance Standards for Accountability & Quality Improvement Opportunities - negotiate “no cost” slot reduction to the number of children served - convert some Head Start (3-5 years) slots to Early Head Start (0-3 years) slots - respond to the new performance standards Mr. Bolce expressed that negotiating with the Regional Head Start office for a “no cost” reduction and explaining why we are doing it, would ensure current funding.

Mr. Bolce reviewed increases to personnel costs in 2016-17 and future years’ assumptions, including

PERS/STRS, OPED, and salary increases.

Mr. Bolce discussed increased expectations and accountability from the Federal Government and

Head Start’s increased requirements in data-utilization for quality service and positive school readiness outcomes.

Ana Trujillo, Director-Head Start, reviewed the action plan to deal with under enrollment and the fiscal impact. Strategies include reducing Head Start Preschool by 13 double-session classrooms and increasing Early Head Start by 60 slots (five home-based sites). Ms. Trujillo noted the plan will be included in the grant application.

Mr. Bolce summarized outcomes of the plan: - addresses under enrollment - addresses budget deficit - enhances capacity to meet new Head Start Quality & Accountability Performance Standards - increases services to underserved 0-3 year old population

Mr. Bolce shared details of the Duration grant funding Head Start received separately. This funding

will allow increases to class time for children by converting five double-session classrooms to 10 single-session, longer day programs (6 hours a day, 5 days a week).

Dr. Dewan observed that if the team is successful in negotiating a “no-cost” slot reduction, the

program can be preserved. Otherwise funding would be lost, resulting in continually reducing program and being forced to re-compete since enrollment criteria is not being met.

Philip Gordillo, Chief Human Resources Officer, observed that we are redefining Early Learning

services and moving to the model of serving younger age groups (0 to 3 year olds). Chief Gordillo recommended sharing the plan with employees after the grant is submitted so they

understand why positions are being held, what the changes/impact will be, transfer opportunities, etc. Trustee Rosemary Kamei added that it would be good to share with the Board as well.

Dr. Dewan thanked everyone for their collaboration and noted that the Head Start grant will be on

the agenda for the January 18, 2017 Board meeting.

IV. PPIC Report on Special Education Funding Dr. Dewan shared information from the Public Policy Institute of CA (PPIC) report regarding special

education funding. The report includes the Institute’s recommendation that the State Board of Education eliminate Special Education Local Planning Areas (SELPAs) and fund through LCFF with the local school districts.

Dr. Dewan remarked that this may not be not likely since not all districts are LCFF funded (some are

basic aid or community funded), and requirements under IDEA remain (SELPA has played a significant role in assisting districts in meeting compliance requirements). Alternatively, it may be beneficial to the districts: will have more ownership of their Special Education programs, and may receive some supplemental funding to provide additional services for students eligible for Special Education. Dr. Dewan anticipates that the Governor will address this issue in his budget.

V. Next Meeting – January 24, 2017 Agenda items include highlights of the Governor’s budget and the next budget development cycle.

VI. Adjournment Meeting adjourned at 3:16 p.m.

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Budget Study Committee MeetingInternal Business ServicesBusiness Services Branch

January 24, 2017

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Governor’s Proposals for the 2017-18 State Budget and K-12 Education

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Presented by Laurie BookTemplate provided by School Services of California

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Overview of the State Budget and the State Economy

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What’s Not in the Budget?

Given the Administration’s conservative revenue estimates and the lean Education Budget due in large part to prior-year adjustments to Proposition 98, the 2017-18 Budget proposal provides no funding for critical programs and obligations, including:

No funding to address the growing local obligations for the California State Teachers’ Retirement System (CalSTRS) and California Public Employees’ Retirement System (CalPERS) unfunded liability

No cost-of-living adjustment (COLA) for Adult Education, Child Care, or State Preschool programs

No new funding for Home-to-School Transportation programs

No funding to close the LCFF “gap”

No additional investments to deal with the state’s teacher shortage

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Risks to the State Budget

The greatest uncertainty comes from state revenue collections

Economic conditions continue to define options for the state

Nevertheless, other factors could push the State Budget out of balance

Federal funds for various state-administered programs could be cut given the new direction of the President-elect

Funding for the Affordable Care Act (ACA)/Medicaid, implemented as Medi-Cal in California

Funding for various education programs

Property tax collections could fall short if higher interest rates depress new home sales, which in turn would increase the General Fund obligation under Proposition 98

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Proposition 98

Proposition 98 still controls education funding

Proposition 98 was adopted by state voters in 1988 as a constitutional minimum guarantee in funding for K-12 education and community colleges

Proposition 98 is a complex formula that includes 3 tests to determine funding

Test 1: would apply if state tax revenue would increase dramatically such that 41% of the state budget would be more than the Test 2 guarantee

Test 2: same amount as previous years plus average daily attendance growth, population and COLA adjustment based on growth in the per capita personal income taxes

Test 3: Per capita General Fund revenues plus one-half percent of the prior year’s Prop. 98 spending amount

2017-18 Funding is based on Test 3 which is used in difficult economic years

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Proposition 98 (continued)

Due to it being a Test 3 year, the Governor’s Budget notes that an additional $264 million in Maintenance Factor will be created

The governor is projecting barely enough growth in the Proposition 98 guarantee to fund the meager 1.48% COLA estimated for 2017-18

This leaves no room for additional gap closure, so the funded level of the Local Control Funding Formula (LCFF) would remain 96% for 2017-18

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The Accountability and Continuous Improvement System Evolves

As we approach full implementation of the LCFF, the state continues to support local control

The LCAP drives the budget, provides transparency, and promotes community engagement

The revised LCAP template provides clear reporting of plans, spending, and progress toward goals

The evaluation rubrics (aka California School Dashboard) take center stage in 2017-18

Used by local educational agencies (LEAs) in the development of the LCAP

Used by oversight agencies to evaluate strengths and weaknesses of an LEA and to determine when to intervene

But the real test is student achievement and the extent to which we are closing the achievement gap

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The Education Budget and Challenges Ahead

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Major K-12 Proposals

The Governor’s Budget proposal includes:

$422.9 million for the K-12 portion of Proposition 39 (2012) – Clean Energy Jobs Act

$287 million for discretionary one-time uses

$200 million for the Career Technical Education Incentive Grant (CTEIG) Program

$93 million to support projected charter school ADA growth

$58.1 million for categorical programs’ COLA (1.48%)

$8.5 million for the Mandate Block Grant (MBG) to reflect the addition of the Training for School Employee Mandated Reporters program

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Proposition 55: California Extension of the Proposition 30 Income Tax Increase

Proposition 55 was approved by voters in November 2016

Proposition 55 extends the temporary personal income tax increase first enacted by Proposition 30

While the higher tax rates for high-income earners will be extended for an additional 12 years (through 2030), the sales tax increase expired at the end of 2016

Passage of Proposition 55 maintains, but does not increase, education funding above the Proposition 30 level

Proposition 55 is a replacement for Proposition 30, not an addition to it

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Proposition 51: California Public School Facility Bonds Initiative

Approved by the voters in November 2016

Proposition 51 is a $9.1 billion state-wide bond for school facilities

Proposition 51 affords all county offices and K-14 local agencies an opportunity to participate

There is money for new construction, modernization, hardship, emergency and other programs specified in the current School Facility Program

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Proposition 39 (2012): The California Clean Energy Job Act

Proposition 39 – The California Clean Energy Jobs Act provides funding for K-12 and community colleges for energy efficiency projects

The last date to submit Energy Expenditure Plans is August 1, 2017

This is to ensure that all funds are encumbered by the statutory deadline of June 30, 2018

All projects must be completed by June 30, 2020

Estimated funding for SCCOE is $547,657

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One-Time Discretionary Funds

The Governor’s Budget proposes $287 million in one-time funds for school districts, COEs, and charter schools in 2017-18

This equates to approximately $48 per ADA

Expenditure of these funds is determined by the local governing board and can be used for any one-time purpose

Like prior years, these funds will offset LEAs’ outstanding mandate reimbursement claims on a dollar-for-dollar basis

Because all LEAs receive these one-time discretionary funds, regardless of their outstanding mandate claims, in our view these funds should not be counted as meeting this state constitutional obligation

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State Mandated Cost Program (SMCP)

Enacted as a voter initiated constitutional amendment in 1979, the SMCP is an nuanced part of the California School District Budget

State Mandated Cost protect schools against legislation that is passed without appropriate funding

Examples of Mandated Cost:

Preparation of the LCAP

Mandated child-abuse reporting

Criminal background check

Uniform complaint procedures

Collective bargaining

COE fiscal accountability reporting

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Sources of One-Time Funding

The Administration has consistently provided one-time funding to repay outstanding mandates, and 2017-18 is no different

The chart below shows the historical one-time discretionary funding per ADA

The 2017-18 estimate for SCCOE is $75,686 based on 2016-17 P-2 ADA

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Career Technical Education Incentive Grant

$200 million for the CTEIG

This is the final installment of funding for the

three-year program that began in 2015

LCAPs need to meet college and career readiness

as a priority

Schools will be responsible for maintaining the

programs from their LCFF funding going

forward

Provide pupils with quality career

exploration and guidance

SCCOE Allocation:2015-16 $240K, 2016-17 $187K,

2017-18 ?

COE LCFF Funding Model

LCFF implementation for COEs is quite different – unlike school districts and charter schools, the LCFF was fully implemented for COEs in 2014-15

Simplifies funding formula calculations, but . . .

COEs have seen minimal increases in LCFF revenues since in 2015-16

There are two LCFF funding calculations:

County LCFF Target Entitlement

County LCFF Transition Calculation

The SCCOE is funded on the higher amount of the two funding calculations

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COE LCFF Target Funding Model Operations Grant

The Operations Grant combines three components that reflect funding needs based on county office responsibilities, the number of districts within the county, and the countywide ADA (includes COLA of 1.48%)

COE LCFF Target Alternative Education Grants - Calculation

The Alternative Education Grant calculation is based on the following factors:

A 2017-18 base grant amount of $11,598 per ADA (includes COLA of 1.48%on 2016-17 rate)

The Unduplicated Pupil Percentage (UPP) of students enrolled in county office programs meeting the eligibility criteria for a supplemental or concentration grant

All students in juvenile court schools are deemed to be eligible – a 100% UPP for those schools

A supplemental grant for the percentage of eligible pupils equal to 35% of the base grant – $4,059 per eligible pupil in 2017-18

A concentration grant for the percentage of eligible pupils exceeding 50%, which equates to 17.50% of the base grant – $2,030 per eligible pupil in 2017-18

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COE LCFF Target Funding Model Add-Ons

Targeted Instructional Improvement Block Grant $13,184

Home-to-School Transportation $977,663

Both add-ons based on 2012-13 fiscal year

Add-on amounts remain static, COLA is not applied

To summarize, the LCFF Target calculation includes the Operation Grant, Alternative Education Grant and the Add-Ons

Components of the County LCFF Transition Calculation

2012-13 County Revenue Limit (held constant) $19,532,160

Rate per ADA (held constant) $8,768.84

Alternative Education ADA

2012-13 Categorical Programs (held constant) $5,168,697

2012-13 Local Revenue for Regional Occupational Centers/Programs (held constant) $5,386,110

SCCOE’s LCFF is funded with our own property taxes

COLA does not apply to the Transition calculation

SCCOE is funded on the higher amount between the LCFF Target and LCFF Transition calculations

SCCOE is funded on the LCFF Transition calculation

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Special Education

The Governor’s Budget includes no new funding for special education programs beyond the 1.48% COLA

Estimated at $7.88 per ADA

Assembly Bill (AB) 602 statewide target rate increases to $540.56 per ADA

Special Education costs increase as overall funding declines

No mechanism in place to increase funding based on student needs

SCCOE’s Special Education costs are recovered through a rebenchingprocess and agreements with the school districts

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Local Agency Operations and the Budget

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Managing Volatile Projections

Multiyear financial planning is a sound business practice

However, it is very challenging to prepare meaningful MYPs in this environment

Multiyear projections (MYPs) continue to show that most LEAs will be making budget cuts to balance budgets in the out years

Build reserves for the lean times

The enacted State Budget often differs significantly from what was planned in an LEA’s budget

LEAs need to build the MYP based on the best information available

And then be flexible and revise often

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Multiyear Projections

CalSTRS and CalPERS employer contributions are still increasing

No specific funds are provided for this cost increase

Health and welfare contributions are increasing

Contributions to restricted programs continue to increase

Declining enrollment will continue to make it difficult to balance the budget

Expectations are for COLA-only years after the LCFF target is reached

The SCCOE is not funded on LCFF target, so the COLA does not apply

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Revenues Now Flatten Out

State revenues, and Proposition 98 revenues, are now forecast to flatten out

Even with the addition of the Proposition 55 taxes in the out years, education funding is now projected to be below earlier forecasts

Erosion in the state’s revenue forecasts consume all of the gains from Proposition 55

The state continues to meet the minimum Proposition 98 guarantee – and nothing more

Collective bargaining settlements that left the district with a “positive” certification at First Interim may come up short at the Second Interim

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Budget Certifications

Positive Certification: COE will meet its financial obligations for the current fiscal year and two subsequent fiscal years

Qualified Certification: COE may not meet its financial obligations for the current fiscal year or two subsequent fiscal years

Qualified certifications are on the rise as historically large funding increases taper off

Expectation is the list will continue to grow at 2016-17 Second Interim as a result of significant decrease in 2017-18 gap closure percentage for school districts

Negative Certification: COE will not meet its financial obligations for the remainder of the current fiscal year or for the subsequent fiscal year

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Educator Effectiveness – Expenditure Report

The 2015-16 State Budget provided funding for Educator Effectiveness to school districts, COEs, charter schools, and state special schools with certificated staff

The funds may be used to support the professional development of certificated teachers, administrators, and paraprofessional educators

As a condition of apportionment, LEAs must submit a Final Expenditure Report by July 1, 2018

The CDE released the Final Expenditure Report template online, which shows the data elements to be collected, but the final report submission will be done through an online tool the CDE is developing

The template can be found at: http://www.cde.ca.gov/fg/aa/ca/educatoreffectiveness.asp

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Educator Effectiveness

The SCCOE’s grant award is $552,739, and is allocated to the following programs:

Alternative Ed, $40,847

Early Learning Services, $85,840

Early Start / Part C, $30,682

Foster Youth and Homeless, $10,226

Inclusion Collaborative, $15,310

Migrant Education, $25,536

Special Education, $310,581

Environmental Education, $33,717

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Classified School Employees Teacher Credentialing Program

The 2016-17 State Budget included $20 million to promote classified school employees to become teachers

SCCOE was awarded $200,000 for the period of December 2016 through June 30, 2018

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Home-to-School Transportation

Maintenance of Effort

LEAs are subject to a maintenance of effort (MOE) requirement to expend “no less for those [HTS] programs than the amount of funds the school district expended . . . in the 2012-13 fiscal year”

Continue to budget and expend on an ongoing basis the minimum amount required by law

MOE

Budgetary Advice

SCCOE continues to meet the MOE requirements

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Routine Restricted Maintenance Account

Note that COEs calculate their Routine Restricted Maintenance Account (RRMA) contribution based on the General Fund, less any restricted accounts

The SCCOE 2017-18 estimated RRMA is $1,449,035

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2017-18 SCCOE Budget Development Assumptions

Incorporate salary settlements for 2017-18 and 2018-19 for multiyear projection

Back out prior year one-time funding requests

Increase CalPERS and CalSTRS rates

Adjust Other Post Employment Benefit (OPEB) to Actuarial Study

Adjust indirect rates

Some program rates may be different from the 2017-18 preliminary proposed ICR of 10.76% for SCCOE due to Grant agency restrictions that limit the indirect cost rate to a level less than the SCCOE preliminary proposed ICR, or based on Superintendent’s approval

Lottery revenues will be budgeted at $144 per ADA for Unrestricted and $45 per ADA for Restricted

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The Road Ahead

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Outlook for California’s Schools

At the top level, California’s public education system relies on a healthy economy and increasing tax revenues

How these funds are distributed is determined by the State Constitution and state laws – Proposition 98, LCFF, etc.

With the enactment of the LCFF in 2013-14, it appears that there will be no further major changes in how revenues will be distributed

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The Next Recession

No one knows when the next downturn will occur

The current recovery is now the third longest on record, about 7½ years old

The longest recovery lasted 10 years, beginning in April 1991

Governor Brown has managed the state’s finances as if a recession is just around the corner – and so should you

Maintain or build your reserves

Develop realistic MYPs

Adjust expenditures in line with realistic revenue assumptions

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SCCOE Assumptions for 2017-18 Budget Development by Branch

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Office of the Superintendent

Media and Communication:

Implement communications consulting services for school districts

Crisis Communications

School Bond Campaigns

Communication Audits and Planning

School Operations Communications Support (Budget, Boundary Changes, School Closures)

Market digital media, graphics, and translation/interpretation (Spanish) services for school districts and other non-profits

Seek grant opportunities to support regional communications campaigns

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Business Services Branch

Reviewing costs for all general services

Analyzing for potential cost reduction opportunities in leases, etc.

Review vacant positions as they come open

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Educational Services Branch

Possibility of increasing fees for services. We would maintain sliding scale approach based on size of district

Review and decide upon further funding of One-Time funded programs

Reduce travel costs by coordinating team member attendance

No staff reductions are anticipated based on current and future projects/workload

Branch team members will continue to seek out grant opportunities

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Human Resources

Review the fee structures for our credentialing programs (Leaders in Educational Administration Program and Education Preparation for Inclusive Classrooms) to ensure these programs remain cost recovery

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Student Services Branch

Alternative Education (AED) – currently conducting an internal staffing and program study, reviewing staffing ratios, existing contracts and other funding sources such and Title I, potential impact on staffing

Special Education (SpEd) - in the rebenching process

Opportunity Youth Academy - increase enrollment and attendance, open additional sites

Migrant Education - monitoring district expenditures and will recapture unspent funds

Walden West - planning to raise fees, expand summer programs, start migrant summer program, expand facility lease for weekend weddings and events

Inclusion Collaborative - exploring a fee for service model, looking at working collaboratively with AED and SpEd on projects/staffing

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Student Services Branch

Early Start – working on expanding current SARC contract and exploring rebenching block money as well as medi-cal funds

Headstart and State Pre-School (HS/SPS) – working on closing some classes and giving up some slots. This will have an impact on staffing

Educare – review staffing and combining resources from HS and SPS

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Technology Services Branch

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Next Steps

2017-18 SCCOE Budget Development Workshops

February 15 and 23, 2017

May Revision Workshop by School Services of California

May 19, 2017

Public Hearing for the 2017-18 Proposed Budget and LCAP

June 14, 2017

2017-18 Budget and LCAP Adoption

June 21, 2017

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