post election update understanding the state budget impact on charter schools v2

Copyright © 2012 Charter School Capital

UNDERSTANDING THE CA STATE

BUDGET IMPACT ON CHARTER

SCHOOLS

POST-ELECTION UPDATE 12.19.12


TODAY’S SPEAKERS

2

Chas Cardall Branche Jones CA LEGISLATIVE

CONSULTANT ORRICK, HERRINGTON

& SUTCLIFFE

John Helgeson CHARTER SCHOOL

CAPITAL


AGENDA

3

What We Will Cover Today

•  Where We Stand •  What We Know •  Impact •  Solution •  Questions


WHERE WE STAND

4

California State Budget •  Where we are today

-  Prior to November election, significant concerns existed regarding public school funding levels and timing

-  Passage of Prop 30 has clarified and strengthened the State budget situation

-  While the pressure for education cuts has been alleviated, timing of payments remains uncertain


WHERE WE STAND

5

Prop 30 Passed •  Best scenario

-  Current funding patterns continue -  Annual GPE funding doesn’t change

•  Capital update -  Significant negotiations continue -  Some issues remain unresolved


WHAT WE KNOW

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Education Protection Account •  Where do new taxes go?

-  New taxes offset the State’s funding obligation but do not increase school funding

-  Why? Part of larger budget plan -  How will tax collections actually work? -  New tax revenue goes into the Education Protection Account

(EPA) for payment to schools in June and possibly July -  Withholding from monthly payments continues through May


WHAT WE KNOW

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Education Protection Account •  Tax revenues less than $6.9 billion

-  The EPA may not be fully funded in June -  Could lead to smaller than expected payments in June -  Schools will be made whole through a “true-up” payment on

July 15 (meaning, paid by the State, not when you will get it).


WHAT WE KNOW

8

Education Protection Account •  Existing funding deferrals

-  We see EPA as another kind deferral -  Current “deferrals” exceeds amount “deferred” LY -  July and August deferrals will be smaller -  Controller flexibility for in year payment delays

o  January moved to December o  March to April


THE IMPACT

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0%

5%

10%

15%

20%

25%

30%

Perc

ent o

f Ann

ual R

even

ues

Rec

eive

d Ea

ch M

onth

Fiscal Year 2012 - 2013

Base Line

2011-2012

Pass


THE IMPACT

10

0%

20%

40%

60%

80%

100%

120%

Cum

mul

ativ

e Pe

rcen

t of S

tate

Aid

Por

tion

GPE

Fiscal Year 2012 - 2013

Base Line

2011-2012

Pass


HOW IT WORKS

11

Case Study •  Assumptions

-  Fictitious school in LA Unified School District -  ADA = 400 -  Rate/ADA = $6,141/ADA (Grades 9-12) -  P-1 = P-2 (we are assuming attendance is level) -  In Lieu Rate = $1,360 -  Total GPE (GPBG+IL) = $2,456,000


HOW IT WORKS

12

Case Study •  Amount of Funding Withheld for EPA

-  Total GPE (GPBG+IL) = $2,456,000 -  EPA from July through January = $286,000 -  EPA from Feb through May = $234,000 -  Total EPA = $521,000 = 21.2% of GPE


HOW IT WORKS

13

Case Study

•  How will CDE Incorporate EPA into P-1 Payments?

GPBG

EPA&Witholding

Schedule&Before&DeferralsDeferral&Amount&(38%)EPA&PaymentPayment&to&School

February172,116$&&&&&&&&&

(58,585)$&&&&&&&&&& &&I&21.2%&of&GPE&&&&&&&&&I&34.0%&of&GPBG&

113,531$&&&&&&&&&(43,142)$&&&&&&&&&&

pd#in#June/Jul70,389$&&&&&&&&&&&


HOW IT WORKS

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Impact of Enrollment Changes at P-1 •  How will P-1 effect the EPA?

-  Existing law is not clear -  $6.9B cap, we think… -  ADA goes up? -  ADA goes down?


THE SOLUTION

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What Should You Do? •  Educate yourself

-  Understand the impacts to your school -  Ask questions -  Carefully analyze month-by-month payments to know what

your cash flow will look like -  Visit CDE site http://www.cde.ca.gov/fg/aa/pa/iassf12adv.asp

-  Plan, plan, plan


THE SOLUTION

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We’re Here To Help You •  Just ask

-  Reach out with any questions you have -  We want you to succeed in bringing high quality education to

your students -  Sign up for our blog to follow timely information at

http://charterschoolcapital.org and click on the blog link •  Charter School Capital provides funding support to cover:

-  21% EPA challenges -  Other payment deferrals and delays -  Growth


QUESTIONS? Charter School Capital

John Helgeson: [email protected]

877.272.1001 charterschoolcapital.org

All information in this presentation is provided for educational and/or informational purposes. It is not intended to provide legal, accounting, or tax advice and should not be relied on for any such purpose. Please consult an attorney, accountant, or financial advisor to answer any financial or legal questions.