Proposition 98

Substantial Upward Revisions to Estimates of Proposition 98 Minimum Guarantee. State budgeting for preschool, elementary and secondary schools, and the California Community Colleges (CCC) is based primarily on Proposition 98, approved by voters in 1988. Proposition 98 established a minimum funding requirement commonly called the minimum guarantee. Figure 1 shows estimates of the minimum guarantee for 2013-14, 2014-15, and 2015-16. As shown in the figure, the estimate of the 2013-14 and 2014-15 minimum guarantees have increased $612 million and $5.4 billion, respectively from the June 2014 estimates. The estimate of the 2015-16 minimum guarantee is $7.6 billion (12 percent) higher than the 2014-15 Budget Act level. These increases in the guarantee are due primarily to state revenues being higher than assumed in last year’s budget package. The budget package funds at these latest estimates of the minimum guarantees.

Large Upward 2014-15 Adjustments Result in Relatively Modest Year-Over-Year Growth. Figure 2 shows approved Proposition 98 funding levels for each of the three years by segment and fund source. As shown in the figure, growth from the revised 2014-15 level to 2015-16 is $2.1 billion (3 percent). This relatively modest growth is due to the large upward revision to 2014-15 noted above. In 2015-16, total Proposition 98 funding is $68.4 billion. Of this amount, $49.4 billion is General Fund and $19 billion is local property tax revenue. The notable increase in local property tax revenue from 2014-15 to 2015-16 ($2.3 billion, 14 percent) is due in large part to the end of the triple flip and the shift of associated local property tax revenue back from cities, counties, and special districts to school and community college districts. Growth in local property tax revenue is slightly greater than growth in the Proposition 98 minimum guarantee, resulting in a slight reduction in Proposition 98 General Fund from 2014-15 to 2015-16.

Per-Student Funding Increases Significantly. Under the budget package, K-12 per-student funding increases from the 2014-15 Budget Act level of $8,931 to $9,942 in 2015-16—an increase of $1,011 (11 percent). Community college per-student funding also increases significantly, from the 2014-15 Budget Act level of $5,753 per full-time equivalent (FTE) student to $6,379 per FTE student in 2015-16—an increase of $626 (11 percent). (None of these numbers include the $500 million the budget provides for adult education consortia or the $885 million the budget provides for preschool.)

Budget Package Contains Many Spending Changes. For 2013-14, the budget accounts for higher Local Control Funding Formula (LCFF) costs and uses the remaining funding increase for paying down the K-14 mandate backlog. Figure 3 and Figure 4 show Proposition 98 spending changes for 2014-15 and 2015-16, respectively. In addition to these changes, the budget package includes a $256 million settle-up payment related to meeting the Proposition 98 minimum guarantee for 2006-07 and 2009-10 and $207 million in unspent prior-year Proposition 98 funds that have been repurposed. We discuss major spending increases for K-12 education, adult education, and community colleges below, beginning with actions affecting both schools and colleges. We discuss major spending increases for preschool in our companion “Child Care and Preschool” document.

Package Notably Reduces Outstanding K-14 Obligations. The budget package includes the following K-14 actions, all of which reduce the state’s outstanding K-14 obligations. 

• Pays Down Mandate Backlog. As shown in Figure 5, the budget package includes $3.8 billion to pay down the K-14 mandate backlog ($3.2 billion is for the K-12 backlog and $632 million for the CCC backlog). After accounting for these payments, we estimate the outstanding K-14 mandate backlog to be $1.5 billion ($1.2 billion for schools and about $300 million for community colleges). 
• Retires All K-14 Payment Deferrals. As required by trailer legislation enacted last year, the budget package provides $992 million to eliminate all remaining K-14 payment deferrals. The budget year will be the first fiscal year since 2000-01 that the state is set to make all K-14 payments on time.
• Pays Off Emergency Repair Program (ERP) Obligation. The budget includes $273 million for the final ERP payment. Statute requires the state to provide a total of $800 million to school districts for emergency facility repairs, and the state has provided $527 million to date. (Of the $273 million, $145 million comes from a settle-up payment and $128 million comes from unspent prior-year Proposition 98 funds.)

K-12 Education

Large Increase for Local Control Funding Formula (LCFF). The largest single augmentation in the state budget is $6.0 billion for implementing the LCFF for school districts and charter schools—bringing total LCFF funding to $52 billion. This reflects a 13 percent year-over-year increase in LCFF funding. The administration estimates this funding will close 52 percent of the remaining gap to LCFF target rates. As shown in Figure 6, the budget funds 90 percent of the estimated statewide full LCFF implementation cost. School districts and charter schools may use LCFF monies for any educational purpose, including implementation of their Local Control and Accountability Plans.

New Secondary School Career Technical Education (CTE) Competitive Grant Program. The budget package includes $900 million in one-time funding for a three-year competitive grant program to promote high-quality CTE. Of this amount, $400 million is provided in 2015-16, $300 million in 2016-17, and $200 million in 2017-18. School districts, county offices of education (COEs), charter schools, and Regional Occupational Centers and Programs operated by joint powers agencies (JPAs) may apply for grants, individually or in consortia. The program provides separate pools of funding for large, medium-sized, and small applicants, based on applicants’ average daily attendance (ADA) in grades 7-12. Specifically, 88 percent of the funding is reserved for applicants with ADA greater than 550, 8 percent is reserved for applicants with ADA between 140 and 550, and 4 percent is reserved for applicants with less than 140 ADA. The Superintendent of Public Instruction (SPI), in collaboration with the executive director of the State Board of Education (SBE), will determine the number of grants to be awarded and specific grant amounts.

Package of Special Education Actions. The budget includes $67 million for a package of special education-related activities, as summarized in Figure 7. Of the $67 million, $52 million is ongoing and $15 million is one time. The largest ongoing augmentation in this package is for expanding services for infants, toddlers, and preschoolers with disabilities as well as requiring preschool staff training and parent education relating to identifying and meeting preschoolers’ special needs. The largest one-time augmentation is for one or two COEs to develop statewide resources and training opportunities for addressing students’ diverse instructional and behavioral needs.

Second Round of Internet Infrastructure Grants. The budget includes $50 million in one-time funding for the second round of Broadband Internet Infrastructure Grants. The K-12 High Speed Network is to award grants to schools that cannot administer online tests or can only administer the tests by shutting down other essential online activities such as email. Grants may be used to purchase Internet infrastructure. The Department of Finance (DOF) must approve projects resulting in costs exceeding $1,000 per test-taking pupil.

Adult Education

Package Provides $500 Million for Adult Education Consortia. The CCC budget includes $500 million for the Adult Education Block Grant. This funding follows a two-year planning period in which school districts, community college districts, and other adult education providers established 70 consortia to coordinate services regionally. The consortia may use block grant funds for adult education in seven priority areas: (1) elementary and secondary basic skills, (2) citizenship and English as a second language, (3) workforce programs for older adults, (4) programs to help older adults assist children in school, (5) programs for adults with disabilities, (6) career technical education, and (7) pre-apprenticeship programs. While various entities offering adult education and workforce training may participate in consortia, only consortia members—school districts, COEs, community college districts, and JPAs—may receive funding directly.

Existing Adult Schools Guaranteed Continued Funding. For 2015-16, up to $375 million of the $500 million is earmarked for existing school district, COE, and JPA adult education programs. These providers had been operating under an LCFF maintenance-of-effort provision that required them to keep spending at least as much on adult education as they did in 2012-13. This provision expires in July 2015. In 2015-16, these providers will receive block grant funding based on their 2012-13 expenditure levels for adult education. If CDE determines these providers’ total expenditures exceed $375 million, their allocations will be prorated.

New Funds to Implement Regional Plans. The CCC Chancellor and SPI will distribute the remainder of the $500 million to the regional consortia based on each region’s need for adult education, as determined by measures related to adult population, employment, immigration, educational attainment, and adult literacy. The consortia, in turn, will allocate funds to member agencies based on regional consortia plans.

$25 Million One Time to Develop Consistent Data Policies and Collect Data. The budget also provides $12.5 million to the CCC Chancellor’s Office and $12.5 million to CDE for data collection and reporting. The Chancellor’s Office and CDE must provide 85 percent of the combined $25 million to regional consortia to develop or update data systems and collect specified data. The remaining 15 percent is for state-level activities to develop consistent data policies and data collection procedures, including measures of effectiveness, common assessment and placement policies, and shared data agreements between agencies. The Chancellor and SPI must submit to the DOF, SBE, and the Legislature a report on their progress toward these goals by November 1, 2015.

Community Colleges

Large Apportionment Increases Above Growth and COLA. The budget provides a $267 million apportionment increase that districts may use for any educational or operational purpose, including retirement costs, professional development, and facility maintenance. This augmentation is in addition to $157 million provided for 3 percent enrollment growth (funding about 30,000 additional full-time equivalent students) and $61 million provided for a 1.02 percent COLA to apportionments. The budget also provides $62 million for community college districts to hire additional full-time faculty.

Large Expansion of Student Support Services. The budget augments the Student Success and Support Program (SSSP) by $200 million. Of this amount, $100 million is to enhance assessment, placement, orientation, and counseling services; $85 million is to further improve access and outcomes for disadvantaged groups; and $15 million is to expand professional development and technical assistance programs to help districts improve their operations and outcomes. (These augmentations follow an SSSP increase of $220 million over the last two years.) In addition, the budget provides $39 million to increase Cal Grant B awards specifically for eligible, full-time, low-income CCC students and $34 million to augment Extended Opportunity Programs and Services, which provide a range of support services for disadvantaged students.

One-Time Funds for Facility Maintenance, Basic Skills Improvement, and CTE. The budget includes a one-time funding increase of $148 million for maintenance and instructional equipment. It also funds a one-time $60 million grant program to help campuses improve their basic skills assessment, placement, instruction, and student support practices. Complementing this initiative is a one-time $10 million Basic Skills Partnership Program to develop better models of collaboration in this area. In addition, the budget provides $48 million to extend the CTE Pathways Initiative for one more year.