Analysis of the 2006-07 Budget Bill Legislative Analyst's Office February 2006

New Categorical Programs

The Governor’s budget contains almost $400 million in new ongoing funding for seven categorical programs. These seven programs span the categorical spectrum-teacher recruitment and retention, beginning teacher support, veteran teacher support, art, music, physical education, computers, fruits, and vegetables. Figure 1 lists the seven programs and their associated purposes. Figure 2 shows the amount the Governor’s budget provides for each program and describes how the funding would be allocated. Of the seven programs, two were funded with one-time monies in the current year. The remaining five would be brand new programs.

New Categorical Programs Not Critical

We recommend rejecting these seven proposals because they: (1) do not address the major fiscal issues facing the state or school districts; (2) take a step backwards for categorical reform; (3) have basic policy flaws; and (4) contain virtually no planning, reporting, evaluation, or accountability components.

Focus on Narrow Issues While Leaving Major Issues Unaddressed. Despite the potential appeal of new art, music, physical education, teacher, computer, and nutrition programs, these proposals would result in substantial new ongoing spending commitments while leaving major underlying school issues unaddressed. As discussed earlier in this chapter, both the state and many school districts remain in shaky financial condition. The state faces both a significant structural budget gap in 2007-08 and billions of dollars in other obligations. At the district level, fiscal conditions also remain uncertain, especially given problems of unfunded retiree health benefits and/or declining student attendance. In this environment, we think available resources should be used for addressing state and local fiscal problems rather than establishing numerous new programs with ongoing spending commitments.

We therefore recommend the Legislature deny the administration’s plan to fund seven new categorical programs. If the Legislature desires to maintain ongoing Proposition 98 spending at the level identified in the Governor’s budget, we recommend redirecting funds proposed for the new programs to a fiscal solvency block grant that would assist districts in addressing their fiscal problems. We discuss this recommendation in the next write-up.

Step Backwards for Categorical Reform. The Governor and Legislature recently undertook categorical reform by enacting Chapter 871, Statutes of 2004 (AB 825, Firebaugh). Section 1 of the act stated the Legislature’s intent to “address the continuing concerns regarding the fragmentation of supplementary funding sources and the need for flexibility.” Despite these concerns, the Governor’s budget funds 63 categorical programs. This is the same number of programs the state funded in 2004-05-the year prior to reform. School districts therefore would face the same number of restrictions and have about the same amount of their funding tied to categorical programs as they did prior to reform.

Devil in the Details. These proposals also have some basic flaws. For some proposals, the problem being tackled is not well-defined or documented. For example, the new art, music, and physical education programs are predicated on the belief that the number of associated course offerings in elementary and middle schools has been drastically reduced in recent years. The data for middle schools, however, show that the number of art and music courses has stayed virtually constant since 2001-02 and the number of physical education courses has increased slightly. Similarly, the physical education teacher incentive program seems to presume that schools are facing a shortage of qualified physical education teachers. Physical education, however, is not one of California’s officially designated teacher shortage areas.

For some programs, the proposed solution also raises concerns. For example, the teacher support proposal would require fully credentialed beginning teachers in low-performing schools to participate in a third year of the Beginning Teacher Support and Assessment (BTSA) program. Many low-performing schools, however, have relatively high percentages of new teachers with emergency permits or intern credentials. These teachers currently are not allowed to participate in BTSA-meaning the proposed solution would not target the teachers likely to be experiencing some of the greatest challenges. Similarly, given that the problem being addressed with the digital classroom program is not well-defined, purchasing computer hardware or software might not be the most needed or effective solution. In addition, certain proposed solutions are not well integrated. For example, the digital classroom proposal is not well integrated with the K-12 High Speed Network nor are the school-day physical education proposals well coordinated with the existing after-school program.

Virtually No Planning, Reporting, Evaluation, or Accountability. The primary reason the state creates categorical programs is to ensure that a specified amount of funding goes directly toward addressing specified problems. This is why categorical programs typically require local spending plans, contain restrictions against using new funds to supplant existing funds, direct schools to report certain expenditure and outcome data, and authorize independent statewide evaluations.

As shown in Figure 3, the Governor’s budget proposals contain almost none of these standard safeguards. The exception is the Fresh Start program, which is the only program already authorized in statute. Of the remaining six programs, none requires data to be reported to the state and none has an evaluation component. Only two programs require school districts to develop a local spending plan and only one program has a supplanting restriction. Thus, for most of the programs, school districts are not required to: spend more for these activities than they are currently spending, think about how they might better use their resources, or report their activities to the state. The state therefore would have virtually no data or assessment information to determine if the specified investments were worthwhile.

In conclusion, we recommend the Legislature not fund seven new ongoing categorical programs at a time when the state budget faces a significant structural imbalance and school districts face serious underlying fiscal issues, such as retiree health costs and declining enrollment. Instead, we recommend the Legislature apply the associated $400 million toward addressing the state’s fiscal issues. Alternatively, if the Legislature decides to provide the $400 million for education, then we suggest using the funds to help districts cope with a variety of fiscal challenges.