post election update understanding the state budget impact on charter schools

Copyright © 2012 Charter School Capital

UNDERSTANDING THE CA STATE

BUDGET IMPACT ON CHARTER

SCHOOLS

POST-ELECTION UPDATE

12.5.12


TODAY’S SPEAKERS

2

Chas Cardall Branche Jones CA LEGISLATIVE

CONSULTANT ORRICK, HERRINGTON

& SUTCLIFFE

John Helgeson Stuart Ellis CHARTER SCHOOL

CAPITAL CHARTER SCHOOL

CAPITAL


AGENDA

3

What We Will Cover Today

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


WHERE WE STAND

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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

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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 State funding obligation and do not increase school funding

-  New tax revenue goes into the Education Protection Account (EPA) for payment to schools in June

-  Approximate 21.2% withholding from monthly payments continues

-  Funds withheld from schools through May will be paid to schools from the EPA in June


WHAT WE KNOW

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Education Protection Account •  Tax revenues less than $6.9 billion

-  The EPA will not be fully funded in June -  Smaller than expected payments will be made -  Schools will be made whole through an increased “true-up”

payment on July 15


WHAT WE KNOW

8

Education Protection Account •  Tax revenues more than $6.9 billion

-  The EPA will be more than the target in June -  Larger than expected payment will be made -  State will be made whole through a decreased “true-up”

payment on July 15


WHAT WE KNOW

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Education Protection Account •  Existing funding deferrals

-  Deferrals of P1 payments into July and August may mean there is not enough actual funding in some months to withhold the 21.2% amount

-  July and August deferrals will be in smaller amounts -  Those funds will be accelerated into the EPA payment in

June


WHAT WE KNOW

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Impacts of Enrollment Changes •  How will enrollment changes reflected in the P1 filing

impact the application on Prop 30? -  We don’t yet know what CDE’s approach will be -  Existing law is not clear -  We believe enrollment changes in the P1 filing will flow

through into P1 apportionment period so the 21.2% withholding will be applied against actual school funding


WHAT WE KNOW

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Impacts of Enrollment Changes •  How will enrollment changes reflected in the P1 filing

impact the application on Prop 30? -  CDE still aiming for a withholding percentage and approach

that results in a withholding through May of $6.9 billion -  Overall annual amount of GPE funding for schools is not

expected to change


WHAT WE KNOW

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Implementation •  Continued uncertainty as to how Prop 30 and EPA payment

will be implemented this year and in the future -  New taxes offset the State’s funding obligation and do not

increase school funding -  Although new taxes are to be dedicated to schools, they are

designed as a larger budgetary solution for the state, decreasing the State’s General Fund obligation to schools


WHAT WE KNOW

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Implementation •  Continued uncertainty as to how Prop 30 and EPA payment

will be implemented this year and in the future -  Prop 30 does not seem to allow any of the new tax revenue

to go directly to the State’s General Fund -  Likely means the amounts withheld annually and to be paid

out of the EPA will be based on high case estimates of Prop 30 taxes

-  Otherwise the State might end up with more in the EPA to be paid to schools than CDE withheld, resulting in an additional windfall for schools and less General Fund relief for the State


THE IMPACT

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California State Budget •  Payment timing

-  EPA withholding began in July -  Continues at 21.2% through May -  Other deferrals remain -  Controller flexibility for in year payment delays may not be

exercised in same manner as last year


THE IMPACT

15

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

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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


THE IMPACT

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An exercise to put this deferral in context…


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

Stuart Ellis: [email protected]

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.