Child Development

The 1998-99 Governor's Budget proposes $803 million from the General Fund for child development programs in the State Department of Education (SDE). This is an increase of $182 million, or 29 percent, from the current-year level of funding for the programs. The increase is a result of:

The budget also proposes to spend $336 million in federal funds.

The CalWORKs Child Care Program

Chapter 270, Statutes of 1997 (AB 1542, Ducheny, Ashburn, Thompson, and Maddy) reformed California's welfare system and created the CalWORKs program. Under CalWORKs, program participants are (1) required to engage in work and/or work-preparation activities and (2) provided an array of welfare-to-work services, including child care.

CalWORKs delivers child care in three "stages." Stage I is administered by county welfare departments (CWDs) and begins when a participant enters the CalWORKs program. In Stage I, CWDs refer families to resource and referral agencies to assist them with finding child care providers. The welfare department then pays providers directly for the child care services.

County welfare departments transfer families to Stage II when the county determines that participants' situations become "stable"--that is, they develop a welfare-to-work plan and find a child care arrangement that allows them to fulfill the obligations of that plan. Stage II is administered by SDE through its voucher-based Alternative Payment programs (APs). Participants can stay in Stage II while they are in CalWORKs and for up to two years after the family stops receiving a CalWORKs grant.

Although Stage I and Stage II are administered by different agencies, families do not need to switch child care providers when they move into Stage II. The real difference between the stages is who pays providers--in Stage II, APs, operating under contracts with SDE, do this instead of CWDs.

Stage III refers to the entire subsidized child care system administered by SDE. A family can move from Stage II to Stage III so long as the family remains eligible for SDE child care and a space in the program becomes available for them.

The Governor's Proposal for CalWORKs Child Care

The Governor's proposed plan for CalWORKs child care makes two important policy decisions: (1) how to finance CalWORKs child care and (2) how the Stage II child care program will be administered.

Paying for CalWORKs Child Care. The budget estimates CalWORKs child care costs of Stages I and II in the budget year at $882 million. Of this amount, $430 million is in Stage I and $452 million is in Stage II. As shown in Figure 15 (see next page), the budget proposes to pay these costs out of three funding sources: federal grants, Proposition 98 General Fund, and non-Proposition 98 General Fund dollars.

Distributing the Child Care "Load" Between CWDs and SDE. The Department of Social Services (DSS) estimates that roughly 63,000 families would qualify for Stage II child care in the budget year--that is, their situation will be stable enough to move from Stage I to Stage II. The Governor's budget, however, provides funding for only 25,600 families ($189 million) for SDE's Stage II budget. Funding for the remaining 37,400 families ($263 million) is included, along with the entire Stage I budget, in the DSS budget as part of counties' welfare block grants. In other words, the Governor's budget places about 59 percent of the funding for Stage II child care in DSS, thereby dividing the administration of Stage II between CWDs and SDE.
Figure 15
Financing CalWORKs

Child Care--Stages I & IIa


(In Millions)

Federal funds $712
Proposition 98 139
General Fund (non-Proposition 98) 31
Total $882
aDisplays funding for CalWORKs child care proposed in the budgets of the State Department of Education and Department of Social Services.

Issues for Legislative Consideration

Implementing the child care component of the CalWORKs program raises both policy and administrative issues. Below we discuss three aspects of the Governor's proposal that are particularly important for the Legislature to consider:

Proposition 98 and CalWORKs Child Care

The budget proposes to spend $88.5 million of new Proposition 98 funds for California Work Opportunity and Responsibility to Kids child care.

Because of the large number of children involved, the CalWORKs child care system is a large undertaking. The estimated cost in the budget year--$882 million--is larger than the total budget for all state-funded child development programs for the working poor--$664 million. In addition, we project that CalWORKs child care costs will continue to grow, increasing in 1999-00 by at least $100 million. In choosing how to pay for CalWORKs child care, the Legislature faces a number of priority questions, including how much Proposition 98 money should be used to pay for CalWORKs child care.

Financing CalWORKs Child Care in the Budget Year. As Figure 15 illustrates, there are three sources from which to pay for CalWORKs child care: federal grants, Proposition 98 funds, and non-Proposition 98 General Fund dollars. The Governor's budget proposes to spend $139 million out of the Proposition 98 guarantee for CalWORKs child care. This is an increase of $84.5 million, or 156 percent, from the current-year level of Proposition 98 spending for CalWORKs child care. In addition, the budget proposes to spend $4 million in Proposition 98 funds to expand resource and referral services to CalWORKs participants.

There is no way to determine analytically the "correct" amount of Proposition 98 money to spend on CalWORKs child care. Instead, the budget reflects the Governor's priorities about balancing resources and needs between the Proposition 98 portion of the General Fund--which pays for K-12 education, community colleges, and child development programs for the working poor--and the rest of the General Fund. Because the state can support CalWORKs child care costs with any combination of funding from these sources, the potential increase in Proposition 98's share of CalWORKs child care costs in the budget year ranges from zero (all new Stage II costs supported with federal funds or non-Proposition 98 General Fund dollars) to $350 million (all new Stage II costs paid for with Proposition 98 funds). The budget's policy call is to support about 25 percent of these new Stage II costs with Proposition 98 funds.

As estimates of both the Proposition 98 guarantee and General Fund revenues become more certain, the Legislature will want to evaluate its priorities for General Fund and Proposition 98 expenditures in determining the appropriate share of CalWORKs child care costs to support with Proposition 98 funds. The Legislature also should consider the long-run implications of this decision. For the next several years, Stage II child care costs are expected to increase. As a result, the Legislature will have to determine annually how to pay for CalWORKs Stage II child care. We estimate that, in 1999-00, the amount needed from state sources to finance CalWORKs Stage II child care may exceed $500 million. Until demand for CalWORKs child care stabilizes, therefore, the program will continue to add to the demand for Proposition 98 funds.

Stage II Child Care Needs to Be Coordinated

We recommend the Legislature direct the Department of Social Services and the State Department of Education to report at budget hearings on their plan to ensure that all families off cash assistance and receiving California Work Opportunity and Responsibility to Kids child care services are served in a way that does not reduce their five-year federal eligibility.

As discussed above, CalWORKs calls for a three-stage child care system, with Stage I administered by CWDs and Stages II and III administered by SDE. As we note above, the Governor's budget proposes to revise this structure by dividing Stage II into two parts, with one part administered by CWDs and the other by SDE.

Dividing Stage II Increases Administrative Flexibility. Officials at the Department of Finance (DOF) give two main reasons for transferring more than half of Stage II funding into county welfare block grants. First, DOF officials state that they want to increase the flexibility given to CWDs in administering the overall CalWORKs program. Increasing counties' welfare block grants means that, in cases in which counties' actual child care needs are less than estimated, CWDs can spend some portion of Stage II federal child care money on other CalWORKs services.

Second, DOF is concerned that SDE cannot easily reallocate Stage II money once it is contracted. The department has to divide Stage II money among 131 APs statewide, each with its own distinct geographical boundaries. Because SDE has no mechanism to "shift" slots from one AP program to another, any slots that SDE allocates to an AP that are not needed in a given region may sit unused for an extended time.

Dividing Stage II Creates Potential Problems Regarding Welfare Time Limits. Under federal welfare reform, adults can receive federally funded benefits for no more than five years over their lifetime. Under current law, every month of child care paid with federal welfare block grant funds through CWDs counts toward a family's federal five-year limit--even for families no longer receiving a CalWORKs cash grant. In contrast, each month of child care provided by SDE to families who no longer receive a cash grant does not count toward their federal five-year eligibility.

Splitting Stage II between CWDs and SDE creates two potential problems related to the five-year limit. First, it is not clear whether there are enough slots in SDE's Stage II budget to accommodate all families who will go off cash assistance in the budget year. Officials at the DOF state that there was not a connection between the number of families estimated to leave cash assistance and the number of Stage II slots allocated to SDE. In addition, DSS could not provide, by the time of this writing, an estimate of the number of families leaving cash assistance in the budget year. As a result, we are unable to advise the Legislature of whether SDE's allocation of Stage II funds is sufficient to meet the child care needs of families who are no longer receiving a CalWORKs cash grant.

Second, because CWDs can keep any unspent Stage II money in their block grant, CWDs have a fiscal incentive to move CalWORKs participants into SDE's Stage II slots as quickly as possible. This incentive may lead CWDs to fill all SDE Stage II slots early in the budget year with families whose situations are "stable," but who are not necessarily close to going off cash assistance. As a result, there may be no SDE Stage II slots available for families who go off cash assistance later in the budget year. These families, then, would remain in a CWD Stage II slot, and their five-year eligibility would continue to be reduced.

Coordination Needed Between DSS, CWDs, and SDE. We agree with DOF that, for reasons of administrative flexibility, it may make sense for both CWDs and SDE to administer Stage II in the budget year. However, to ensure this arrangement will satisfy the needs of CalWORKs recipients, we recommend the Legislature require SDE and DSS to jointly report to the budget subcommittees on the following: (1) an estimate of the number of families that will leave cash assistance in the budget year and a determination of whether SDE's portion of Stage II is large enough to accommodate the needs of these families and (2) how they plan to work together to create an administrative structure that provides a SDE Stage II slot to all families who are off cash assistance.

Improving SDE's Contracting for Stage II Slots

We recommend the Legislature adopt budget bill language requiring the State Department of Education (SDE) to allocate Stage II child care funding in county-wide increments. We also recommend the Legislature require SDE to report to the budget subcommittees on the data it plans to collect to gauge counties' needs for Stage II child care.

One of the department's most difficult tasks in administering Stage II child care is to allocate the correct number of slots to each of the 131 AP programs statewide. To do this perfectly, SDE would have to know the precise number of Stage II slots needed in 131 regions across the state. Two problems make this task especially difficult for the SDE. We discuss each of these problems below.

Give Counties Flexibility to Allocate for Stage II Slots. Estimating the child care need in a region involves three main estimates: CalWORKs caseloads, the rate at which participants need CalWORKs child care, and the available capacity of other state-subsidized child care programs. Each of these three estimates are themselves difficult to determine; therefore, any estimate of child care need is subject to a substantial margin of error.

To address this problem, we recommend the Legislature adopt budget bill language requiring SDE to (1) allocate Stage II money in county-wide increments and (2) ensure that CWDs and APs decide collectively how each counties' allocations should be divided among the APs. We think local APs and CWDs have better information than SDE to predict how child care needs are distributed within counties. Letting these local agencies control the allocation of Stage II slots increases the probability that SDE slots go where they are needed. We recommend adding the following language:

The State Department of Education (SDE) shall determine how much Stage II money shall be distributed to each county, based on its best estimate of counties' needs for Stage II child care. In counties where there is more than one Alternative Payment (AP) program participating in Stage II, SDE shall require the county welfare department and all participating AP programs to jointly determine how much money will go to each AP program.

Make SDE's Contracting Process More Flexible. Despite the best efforts of CWDs and APs, demand for child care locally is unlikely to perfectly match available slots. However, the SDE's contracting process does not allow it to easily move slots among APs. For instance, if SDE contracts with an AP for more Stage II slots than are needed in a given area, the department cannot move those slots to another AP program until the next year's contracting cycle. Therefore, the department cannot readily respond to changing conditions because it cannot move those unused slots to areas of greater need.

This problem could be solved in a number of ways. For instance, if SDE distributed Stage II funding in two allocations--once at the beginning of the fiscal year and the remainder at the mid-point of the year. This would allow the department to revise the county allocations to better reflect actual need for Stage II child care services.

Current SDE plans call for all funds to be allocated at the beginning of the fiscal year. As discussed above, we think this plan would not adequately meet actual county needs for child care. Therefore, we recommend the Legislature require SDE to report to the budget subcommittees the following:

Other Issues

Charter Schools Evaluation

We recommend the Legislature use $400,000 in Goals 2000 funds to support the State Department of Education evaluation of the Charter Schools Act. We further recommend the budget subcommittees include trailer bill language extending by two years the due date of the report.

In December 1997, the Legislative Analyst's Office (LAO) and Stanford Research Institute (SRI International) submitted to the Legislature its report on charter schools, as required by Chapter 767, Statutes of 1996 (AB 2135, Mazzoni). The state provided about $190,000 from the General Fund for SRI's costs of the evaluation. State law extends to charter schools freedom from most state education laws in exchange for a greater focus on outcomes, such as parent satisfaction and student performance.

The SRI report was designed to provide the Legislature with early information on the implementation of the Charter Schools Act. The report contains useful data on the design and operation of California's charter schools and identifies a number of important issues in the area of charter school finance and governance. Given the limited time and resources afforded the study, however, the SRI report was unable to answer many questions that are essential for determining the success of charter schools.

A second report on charter schools is due from the State Department of Education (SDE) by January 1999. In this report, which was mandated as part of the original charter act, the department is required to review the "educational effectiveness" of the charter school approach. The department's study has never been funded, however. In the past, we have advised the budget subcommittees to wait for the completed SRI report before funding the SDE study. We felt that the results of the SRI study would give SDE information that would help the department to conduct a more focused, useful study. The SRI report suggests the following issues should receive additional study:

The department has not started work on the report, which is due in less than one year. In addition, the budget does not propose any funding for the study. With the SRI report in hand, however, we think it is time for the Legislature to provide SDE with funds for the study. In addition, to give SDE sufficient time to complete the report, the Legislature would need to extend the statutory deadline for the report.

For these reasons, we recommend the Legislature appropriate $400,000 in Goals 2000 funds to SDE for its mandated charter schools report. We also recommend the Legislature adopt trailer bill language extending the report deadline to January 2001.

Broaden Uses of Staff Development Funds

We recommend the Legislature delete $44.2 million proposed for staff development because the proposals were not sufficiently justified. We also recommend the Legislature broaden the allowable uses for remaining staff development funds to include staff training in mathematics and reading.

The budget proposes to spend $76.9 million for staff development grants to school districts, from two sources. First, the budget allocates $36.9 million in Goals 2000 funds to support district training programs for teachers in reading. Of these funds, $6 million would support reading staff development programs for new K-3 teachers and $30.9 million would pay for training of teachers in grades 4 through 12.

Second, the budget proposes $40 million in one-time Proposition 98 funds for staff development in mathematics. These funds would provide support for additional training in mathematics for teachers in grades 4 through 12. We discuss our concerns with these proposals below.

Mathematics Proposal Lacks Focus, Justification. The $40 million for mathematics staff development has two components: (1) tuition grants to allow mathematics teachers to take college-level mathematics courses and (2) support for staff training provided to school teachers in grades 4 through 8.

We see several problems with the proposal. First, the Department of Finance (DOF) and Office of Child Development and Education provided no information on the specific problem the proposal was trying to address. Better student performance in mathematics is certainly a desirable goal. The question is, what prevents students from higher achievement? At the current time, we have little information to conclude that additional staff development is the key to better student performance in mathematics.

Second, we have several concerns with the specifics of the proposal. The tuition-grant proposal is so broad that a teacher could take virtually any college-level mathematics course, regardless of its relevance to a school's curriculum or a teacher's staff development needs. In addition, by allowing districts to use the funds only for two specific models of delivering services--tuition grants and in-service training--the proposal prevents districts from using the funds to support other training options that may better meet district training needs.

No Justification for Goals 2000 Proposal. In the past few years, the Legislature has appropriated substantial amounts of Goals 2000 funds for reading staff development. In 1995-96 and 1996-97, funds were focused on training K-3 teachers in phonics and other reading-related areas. In the current year, the Legislature provided $56.4 million for reading staff development to all K-12 teachers.

As a result, the Goals 2000 budget proposal for $30.9 million for the training of teachers in grades 4 through 12 would essentially duplicate the Legislature's actions on staff development in the 1997-98 Budget Act. The Department of Finance, however, did not provide any evidence on the need for additional reading staff development for teachers in grades 4 through 12.

Provide Flexible Funds. Given these concerns, we cannot recommend the Legislature approve these proposals. Specifically, we cannot advise the Legislature that the level of needs for teacher training identified in the budget is appropriate or that the relative mix of funding for the two subject areas (reading and mathematics) would meet district needs. Further, we think the proposals unnecessarily restrict local flexibility in meeting district staff development needs.

However, we recognize that districts may have staff development needs in reading and mathematics. We also believe Goals 2000 funds are a reasonable source with which to support staff development activities.

Therefore, we recommend the following:

Teacher Training and Support

We recommend the Legislature delete $11.9 million for new and expanded programs to train and support teachers because the increases have not been adequately justified.

Class size reduction and increases in the number of teachers reaching retirement age have created a growing need for qualified teachers, especially in lower grades. In 1996-97 the number of multiple subject (K-8) credentials issued by the Commission on Teacher Credentialing (CTC) grew by around 14 percent. During this same time period the number of long-term emergency permits issued--which allow a person to teach even though they do not possess the appropriate credential--grew by 107 percent, to 12,347 permits.

The Governor's budget proposes $24.2 million in Proposition 98 funds to expand three existing programs and create two new programs to improve the training of teachers. We have concerns with four of these proposals, which we discuss in detail below.

In addition, several of the programs appear to be good candidates for federal Goals 2000 funding. The federal funds provide states with resources to make strategic investments to improve the quality of K-12 education. Two of the proposals discussed below are one- or two-year programs that, if approved by the Legislature, would be consistent with the intent of Goals 2000. Below, we discuss these program proposals and our recommendations.

Beginning Teacher Support and Assessment (BTSA), Reduce by $6.1 Million. The budget proposes $34.8 million for BTSA in 1998-99, an increase of $16.9 million or 90 percent. This increase includes $0.8 million for a 1998-99 cost-of-living-adjustment (COLA) and $16.1 million to expand the program to include 5,200 more teachers. In the current year, this program provided 5,420 first- and second-year teachers with training, mentors, and materials.

In 1995-96, BTSA received $4.8 million in Proposition 98 support. The budget proposal, therefore, represents a seven-fold increase in the size of the program over a three-year period. Given our projections of lower Proposition 98 funding and the very large increases in BTSA that were approved over the past two years, we think that an augmentation of $10 million is more in line with available resources and what the program can realistically absorb. This would allow the program to provide services to an additional 3,300 teachers. If districts want to expand this program more quickly, school districts could use other funds--such as Mentor Teacher program funds--for that purpose.

Preintern, Reduce by $1.8 Million. The budget proposes $3.8 million to expand the preintern program, which was authorized by Chapter 934, Statutes of 1997 (AB 351, Scott). In 1997-98, this program received $2 million of Goals 2000 funds as a pilot program to test the effectiveness of providing training and support to noncredentialed teachers who are working under a preintern permit (which is equivalent to an emergency permit).

According to CTC, current-year funds will not be awarded to districts until June 1998, which will support local programs in 1998-99. We were unable to obtain details on the design of the program or how CTC planned to evaluate the success of the pilot. Therefore, we think expanding the program at this time is premature. We recommend the Legislature maintain funding at the current level, and delete the proposed augmentation of $1.8 million. We also recommend the Legislature use Goals 2000 funds to support the $2 million cost of the second year of the pilot.

Salary Schedule Pilot, Delete $1 Million. The budget proposes to provide $1 million as incentive funds to school districts to develop innovative compensation systems for teachers. Such systems would encourage and reward teachers for acquiring new skills that improve their classroom teaching. According to the CTC, several districts have successfully en-tered into agreements to modify salary schedules to reflect the needs of the districts.

These agreements are in the best interest of districts because they allow districts to identify and reward exceptional work by teachers. We could not obtain additional information to explain why additional state funds are needed to encourage these reviews. Accordingly, we recommend deletion of $1 million to fund the pilot. As discussed above, if the Legislature chooses to approve this proposal, Goals 2000 funds would be an appropriate source.

Teacher National Board, Delete $1 Million. The budget proposes to provide $1 million for 1,000 grants to teachers to offset the cost of applying for National Board Certification. The National Board Certification is awarded to teachers that demonstrate substantial achievement in subject matter knowledge, teaching skill, school leadership, and community participation. Certification recognizes teachers who are doing a good job. It would not, however, necessarily spur improvements in teachers who are not so accomplished. We could not obtain information to explain how this certification will directly increase the quality of teachers, or why state funds are needed for this purpose. Without information about the costs and benefits of the program, we recommend rejection of this proposal.

High Risk Youth Programs Overbudgeted

We recommend the Legislature reduce by $10 million funding for the high-risk first-time offenders program to reflect realistic expectations about how fast this program can be implemented. We also recommend the Legislature revise the Budget Bill so that the funds in this item can also be used to transition high-risk youth back into school.

Chapter 340, Statutes of 1997 (SB 1095, Lockyer) establishes two programs--the high-risk first-offenders program and the transitioning high-risk youth program. The goal of both programs is to extend the school day to between 8 and 12 hours and provide a range of services--including counseling, job training, and work experience--designed to prevent youths from becoming chronic, repeat offenders. The first-time offenders program serves youths under 16 years old who have been referred to a county probation department. The transitioning high-risk youth program serves youths who are returning to school from juvenile probation camps, ranches, and halls.

The Governor's budget proposes $20 million for the Chapter 340 programs, a four-fold increase from the current-year funding level. The budget, however, proposes to use all $20 million for the first-time offender program--and no funding for the transitioning program. The DOF advises that the proposal reflects the administration's priorities for funding the two programs.

Budget Accelerates Programs' Growth Too Fast. The Governor's budget proposes enough money, in our estimation, to fund a relatively large statewide program. We believe this level of funding is not warranted, for two reasons. First, we do not know how many districts and county offices of education will choose to implement the programs in the budget year. Given the amount of planning required to put together programs with multiple services, however, it is unlikely that local education agencies could implement the programs to this extent in the budget year.

Second, a slower startup of these programs can help improve the quality of the program in the long run. It takes time for new programs to resolve implementation issues, such as determining the types of services that are most effective, and achieving the necessary inter-agency linkages. By encouraging a slower startup, therefore, the Legislature can help focus local implementation on quality rather than quantity.

For these reasons, we recommend the Legislature reduce funding for the high-risk first-time offenders program by $10 million. We also recommend the Legislature revise the Budget Bill so that both high-risk first-time offenders programs and transitioning high-risk youth programs can be funded with the remaining $10 million.

Commission on Teacher Credentialing

We recommend the Legislature adopt budget bill language requiring the Commission on Teacher Credentialing to complete its Year 2000 computer upgrades and an information technology strategic plan before it receives funds for other computer projects.

The budget proposes $198,000 from the General Fund to upgrade the CTC computer systems. The proposed project would cost $1 million over five years ($0.3 million in one-time costs and $0.7 million in on-going costs). The CTC is requesting these funds because many of its computers are old and have insufficient memory to work effectively. The request appears reasonable. We have the following concerns with the proposal, however:

For these reasons, we recommend the Legislature delay funding for this project until CTC has complied with the Governor's executive order on Y2K compliance and developed a five-year technology plan that is consistent with the commission's strategic business plan. The following budget bill language is consistent with this recommendation.

Of the funds appropriated in this item, $198,000 for the upgrading of Commission on Teacher Credentialing (CTC) computer systems shall be made available only after the Department of Information Technology certifies that CTC has completed (1) all year 2000 computer upgrades and (2) an information technology strategic plan.

Special Grants for Museums

We recommend the budget subcommittee request the state Department of Education (SDE) to report on the status of grants given to museums. We further recommend the Legislature require SDE to audit museums that have received special grant funds to determine whether the funds have been used as they were intended. The Legislature should require the department to report its audit findings by December 31, 1998.


The 1997-98 Budget Act includes $7.2 million of one-time Proposition 98 funds for six noneducation agencies--mostly cultural and science museums. Since 1995-96, the state appropriated around $21 million in Proposition 98 funds as grants to six museums. Several museums received funding in more than one year. Trailer bills usually have broadly specified the purpose of each grant. The uses range from building or retrofitting facilities to developing exhibits and programs.

The SDE administers these grants. It requires that each museum complete an application describing the intended use of the funds. Once SDE certifies that the museum plans to use the funds according to the intended purpose, funds are disbursed. The museum then has two years to spend the grant. The department withholds payment of 10 percent of the total grant amount until the museum provides a final report about how it used the funds.

Problems With Special Grants

In our review of the implementation of the museum grants, we found several problems, as discussed in more detail below.

Projects Are Funded Prematurely. Several of the projects were not at a stage where funding was needed. For example, the California Indian Museum was awarded a $2 million grant in 1996-97 to prepare a museum site at the San Francisco Presidio. Legislation specified that the funds were to be used to retrofit a building at the Presidio. Due to disputes with the Presidio Trust, the museum has been unable to acquire any building space at the Presidio and, as a result, it has been unable to use the money. The California Indian Museum is now in the process of finding alternative space and intends to request legislation to modify the original statute so that it can use the money for an alternative purpose.

Unclear Educational Connection. The special grants to museums are funded with Proposition 98 funds. Proposition 98 supports K-12 and community colleges as well as direct educational services provided by other agencies, such as the state's special education schools and the California Youth Authority.

The educational value of the museum projects is not always clear, however. It can be argued that museums provide indirect educational benefits to a community--that the function of a museum is by its very nature, educational. Museums can also benefit schools by offering direct services to students in the form of reduced priced or free admission, school outreach, and on-site teacher training.

Most of the grants, however, are not spent on programs directly related to schools or teachers. The majority of grants provide funds for capital outlay or other physical improvements. In our review of educational programs and materials provided by several of the museums, we found a wide range of quality and educational relevance in the materials. At one end of the spectrum, the Simon Weisenthal Center offers teachers a comprehensive lesson plan and supporting materials for discussing tolerance and racism in preparation for museum visits. Other museums offered far less in the way of direct services.

Funding museums with Proposition 98 funds also raises possible legal concerns. For example, in 1997-98 the California Museum Foundation received a grant of $775,000. The Foundation received this money on behalf of the African-American Museum, which is part of the California Science Center. Ordinarily, a state agency, such as the California Science Center, is not eligible for funding with Proposition 98 monies.

Grants Are Poorly Administered. The Department of Education provides limited oversight in the distribution of grants. The department had an opportunity to prevent several of the problems discussed above through the way it administers the grants. In our view, instead of implementing a system that addressed these problems, SDE's administrative process exacerbates the problems.

The primary concern is that SDE's payment process does little to hold museums accountable for the funds they receive. Below we describe three ways that the payment system compromises accountability.

Require Increased SDE Oversight

The department has a responsibility to protect the state's fiscal interests in this matter. The department's grant process falls far short of the mark. At the current time, however, SDE plans no changes in this process. For this reason, we recommend the Legislature take the following steps to improve how these grants are administered:

Request SDE to Report on the Status of Grants to the Budget Subcommittee. We recommend the Legislature request SDE to report on the status of each grant during budget subcommittee hearings. The department should report on the following: (1) how the grants have been spent or will be spent; (2) how much of the funds have been spent; (3) if projects are not completed, when will they be completed; and (4) if funds are being used according to their intended purpose.

Require the Department of Education to Audit Museums. Currently, the application filled out by each museum requires it to keep records for auditing purposes. Requiring audits of the six museums will let the Legislature know whether funds were used as expected and send a message that the state is serious about proper use of the grants. We recommend the Legislature require SDE to conduct an audit of each museum and report its findings to the Legislature by December 31, 1998. Specifically, we recommend the adoption of the following supplemental report language:

The Department of Education shall conduct an audit of all museums that have received special grants with Proposition 98 funds in fiscal years 1995-96 through 1997-98. The audit should determine the following: (1) how each museum used their funds, (2) whether the use complied with the terms of the grant, (3) a chronology of expenditures over the grant period, and (4) the amount of remaining funds.

Maximize Direct Benefits to Schools. If, in the future, the Legislature decides to provide museum grants with Proposition 98 funds, we recommend the Legislature consider measures to ensure that funds are spent in ways that maximize direct benefits for schools. This could be accomplished by requiring that funds are to be used to provide free or reduced priced admission to students, support for classrooms, or training for teachers. Another option is to provide museum grant funds directly to schools. This option allows schools to choose museums that provide programs of educational benefit, and to spend their grant towards visits or bringing museum services on site.

Findings and


K­12 Education
K-12 Priorities
1. Develop Information on Future Funding Options.Recommend appropriating $2 million in federal Goals 2000 funds to develop four demonstrations programs that would provide information on the relative costs and benefits of major K-12 programs. E-20
2. Legislative Analyst's Office Outlook Indicates Fewer Proposition 98 Funds. We project that there will be $196 million less in Proposition 98 funds for 1998-99 than the amount estimated in the Governor's budget because of changes in projected General Fund revenues. E-23
3. Balance State and Local Funding Needs.Recommend developing the K-12 budget based on the Legislature's goals for public education and the relative roles of the state and local school districts in the governance of schools. E-26
Options for 1998-99 Funds
4. Create a Proposition 98 Reserve. Recommend setting aside $75 million in Proposition 98 reserve to protect against over-appropriating the minimum funding guarantee. E-29
5. Approve K-12 Cost-of-Living Adjustment (COLA) Calculation. Recommend approval of proposed trailer bill language to change the way K-12 COLAs are calculated because the proposed COLA calculation would more accurately reflect inflation that has occurred over the past year. E-30
6. Provide Step Adjustment for Class-Size Reduction.Recommend increasing by $77.3 million support for class-size reduction to reflect increased school district salary costs of the program. E-32
7. Fund All Mandates. Recommend providing $1.2 million to support costs of the law enforcement notification mandate because these costs will come due in the budget year. Also recommend using $4 million in one-time money to pay for prior-year claims. E-32
8. Reject Opportunity Scholarships. Recommend deleting this item for a cost of $39 million in non-Proposition 98 General Funds because the benefits of vouchers have not been determined. E-33
9. Delete Summer School Augmentation.Recommend deleting $10 million for summer reading programs in grades 3 to 6 because the budget already provides schools sufficient funds for this purpose. E-34
10. Maintain Local Control Over Expulsions.Recommend deleting $6.2 million and trailer bill language to expel students possessing drugs at school in order to maintain local control over expulsions. E-35
Options for Prior Year Funds
11. Give Block Grants to Districts. Recommend providing $188.2 million for school district block grants because districts have a better understanding of overall district needs than individual schools. E-36
12. Reject Other Policy Initiatives. Recommend deleting $10 million for community policing and $3 million for low-performing schools initiatives because the budget provides insufficient details about these proposals. E-37
Longer School Year
13. Little Evidence to Support a Longer Year. Recommend rejection of the Governor's longer-year proposal because more days of the same type of instruction have not been found to improve student achievement. E-38
Revenue Limits
14. Include Public Employees' Retirement System (PERS) Costs in Base Revenue Limits. Recommend enactment of legislation to eliminate the PERS reduction from the revenue limit calculation. E-44
15. Eliminate All Program Deficits. Recommend enactment of trailer bill language to eliminate the deficit factors used for county offices of education and various K-12 revenue limit calculations and delete $52.9 million proposed to buy-out these deficit factors. E-47
16. Reopen Longer Day and Year Incentives. Recommend the Legislature enact trailer bill language to reopen longer day and longer year incentives at a cost of $225,000. E-47
Assessment and Accountability
17. Test of Applied Academic Skills Behind Schedule.Recommend deleting $31.2 million for test development and administration. Recommend removing statutory requirement that requires academic standards be adopted before test development can begin. E-49
18. Improve System for Identifying Low-Performing Title I Schools. Recommend the Legislature direct the State Department of Education to use the Standardized Testing and Reporting test to identify the lowest-performing Title I schools. E-51
Child Development
19. Coordinating Administration of Stage II Child Care.Recommend the Legislature direct the State Department of Education (SDE) and the Department of Social Services to report at budget hearings about how they will work together to ensure that families off cash assistance and receiving California Work Opportunity and Responsibility to Kids child care services do not reduce their federal five-year lifetime eligibility. E-61
20. Contracting for Stage II Child Care.Recommend the Legislature adopt budget bill language requiring SDE to allocate Stage II funding in county-wide increments. Recommend the Legislature require SDE to report to the budget subcommittees on its plans to distribute Stage II child care funds in a way that best meets county child care needs. E-63
Other Issues
21. Charter Schools Evaluation. Recommend the Legislature use $400,000 in federal Goals 2000 funds to support the SDE evaluation of the Clinton Schools Act. E-65
22. Staff Development in Reading and Mathematics.Recommend (1) deleting $40 million in one-time funds for mathematics staff development and (2) providing $26.9 million in federal Goals 2000 funds for district staff development needs in reading and mathematics, in order to maximize district flexibility over available funds. E-66
23. Reduce Spending on Beginning Teacher Support and Assessment (BTSA). Recommend approval of $10 million of the $16.1 million the budget proposes for the expansion of BTSA because this increase is more in line with what the program can realistically absorb. E-68
24. No Increase for Pre-Intern Pilot Project.Recommend deletion of $1.8 million to expand the Pre-Intern program because expansion of this pilot program is premature. Further recommend using federal Goals 2000 funds to support the pilot's $2 million base program allocation. E-68
25. Deny Salary Schedule Pilot Request.Recommend deletion of $1 million proposed for a new salary schedule pilot program because the proposal is not adequately justified. E-68
26. Deny Teacher National Board Certification Request.Recommend deletion of $1 million proposed for incentive grants for Teacher National Board Certification because the proposal is not adequately justified. E-68
27. High-Risk Youth. Recommend reducing funding by $10 million to reflect realistic estimates of how quickly the program can expand. We also recommend revising the Budget Bill so that both the first-time high-risk youth offenders program and the transitioning high-risk youth program are funded. E-69
28. Commission on Teacher Credentialing. Recommend enactment of budget bill language to require the Commission on Teacher Credentialing to complete its year 2000 upgrades and information technology strategic plan before beginning any other computer projects. E-71
29. Provide an Update to the Legislature. We recommend the Legislature request the State Department of Education (SDE) report on the status of all museum grants to the budget subcommittee. E-72
30. Require the Department of Education to Audit Museums. We recommend the Legislature require SDE to audit museums that receive Proposition 98 special grants to determine whether the grants are appropriately spent. E-72


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