Major Issues

K­12 Education



The State Should Develop a K-12 Framework

The budget contains a number of major issues that raise the question of the role of the state in the design and operation of the K-12 system. There is no context, however, for determining whether these proposals reenforce the appropriate division of state and local responsibilities.

The state should develop a long-term framework that identifies the proper roles the state and local districts play in the areas of governance, finance, and standards. This framework would guide the Legislature in evaluating significant K-12 policy and budget proposals (see page E-17).

Legislature Faces Three Key Decisions in Developing Its 1998-99 K-12 Expenditure Plan

Level of the Guarantee. Our estimate of the 1998-99 minimum guarantee for K-12 education is $176 million less than the budget's. We have developed an alternative budget that differs significantly from the Governor's proposed plan (see page E-27).

Cost-of-Living Adjustment (COLA). The budget proposes a 2.22 percent COLA instead of the 4 percent COLA called for in statute. We recommend the lower amount as it more accurately reflects inflation that has occurred over the past year (see page E-30).

Longer School Year. This one proposal accounts for $350 million in new funds in the budget year. We recommend the Legislature reject the Governor's proposal because more days of the same type of instruction have not been found to improve student achievement (see page E-38).

Statewide Assessment Is Behind Schedule

The statewide test of applied academic skills will not be ready by spring 1999, as planned. We recommend the Legislature (1) delete $30.2 million proposed for the development and administration of this test and (2) allow test development to begin along with development of performance standards (see page E-49).

Budget Increases Proposition 98 Child Care Support of CalWORKs Program

The budget proposes to spend $88.5 million in Proposition 98 funds for child care services exclusively for CalWORKs recipients. The Legislature will want to review this proposal as it evaluates its priorities for the use of Proposition 98 and General Fund monies.

The budget also poses several implementation issues due to its proposal to divide administration of CalWORKs child care between the State Department of Education and county welfare departments. We recommend the Legislature take several actions to address these issues (see page E-58).


Overview

K­12 Education


The budget includes an increase in K-12 Proposition 98 funding of $1.7 billion in the budget year. This is $222 per student, or 4.1 percent, more than the revised estimate of per-student expenditures in the current year. The budget also proposes to spend $472 million from prior-year Proposition 98 funds in 1998-99.

Figure 1 (see next page) shows the budget from all fund sources for K-12 education for the budget year and the two previous years. Proposition 98 funding constitutes about three-fourths of overall K-12 funding. In 1998-99, Proposition 98 funding is projected to increase by $222 per student to $5,635. This is a 4.1 percent increase from the revised 1997-98 per-student amount. (Our estimate reflects recent legislative changes that significantly revise the way average daily attendance [ADA] is counted. These changes are discussed in detail later in this Analysis.)

The budget also proposes to spend $472 million from prior-year Proposition 98 funds in 1998-99. As a result of increases in the minimum amounts guaranteed to schools in 1996-97 and 1997-98 (due primarily to higher tax revenues and increased ADA), the state owes schools $427 million more for those years (referred to as "settle-up" funds). An additional $46 million results primarily from unspent prior-year Proposition 98 funding.

Figure 1 also shows that the budget includes expenditures of $3.4 billion in federal funds in 1998-99. This is $88 million, or 2.6 percent, more than estimated federal expenditures in the current year. This change results primarily from a $68 million increase in special education funding.

School Districts by Type and Enrollment. A total of 5.5 million pupils attended school in California's 999 school districts in 1996-97. Figure 2 (see page 7) provides enrollment data by size of school district. Enrollment levels vary significantly among school districts. For example, the state's largest school district, Los Angeles Unified, enrolled 667,305 students in 1996-97, which is more than the combined enrollment of over 650 of the state's smallest school districts.
Figure 1
K-12 Education Budget Summary
1996-97 Through 1998-99

(Funding in Millions)



Actual

1996-97



Estimated 1997-98


Proposed 1998-99
Change From

1997-98

Amount Percent
K-12 Proposition 98
State (General Fund)
Cash $18,268.6 $20,194.4 $21,546.0 $1,351.6 6.7%
Loan repayment 150.0 200.0 250.0 50.0 25.0
Local property tax revenue 8,523.8 8,880.6 9,241.0 360.4 4.1
Subtotals, Proposition 98 ($26,942.4) ($29,275.0) ($31,037.0) ($1,762.0) (6.0%)
Other Funds
General Fund
Teachers retirement $809.4 $876.9 $645.5 -$231.3 -26.4%
Bond payments 761.0 787.9 849.8 61.9 7.9
Other programsa -95.6 393.5 231.1 -162.4 -41.3
State Lottery funds 585.3 656.5 755.1 98.6 15.0
Other state funds 51.2 66.6 59.1 -7.4 -11.2
Federal funds 2,760.6 3,350.3 3,438.0 87.6 2.6
Other local 2,590.0 2,584.2 2,587.2 3.0 0.1
Totals $34,404.3 $37,991.0 $39,602.8 $1,611.9 4.2%
K-12 Proposition 98
Average Daily Attendance (ADA)b 5,238,926 5,370,279 5,462,947 92,668 1.7%
Amount per ADA

(excluding loan)

$5,114 $5,414 $5,635 $221 4.1%
aIncludes unspent Proposition 98 funds and past-year "settle-up" funds.
bADA adjusted to exclude excused absences for all years.


Proposition 98

Proposition 98, enacted in 1988 as a voter-approved amendment to the California Constitution (later amended by Proposition 111 in 1990), establishes a minimum funding level for K-12 schools and the California Community Colleges (CCC). Proposition 98 also provides support for direct educational services provided by other agencies, such as the state's special education schools and the California Youth Authority. Proposition 98 funding constitutes over three-fourths of total K-12 funding.

The minimum funding levels are determined by one of three specified formulas. Figure 3 (see next page) briefly explains the workings of Proposition 98, its "tests," and other major funding provisions. The five major factors involved in the calculation of each of the Proposition 98 "tests" include: (1) General Fund revenues, (2) state population, (3) personal income, (4) local property taxes, and (5) K-12 ADA.

Because these factors change during the year, the minimum guarantee under Proposition 98 also changes. Any additional amount needed to fund any increase in a previous year's guarantee is referred to as Proposition 98 "settle-up" funding. The Governor's budget includes $478 million related to "settle-up" for prior years for both K-12 and community colleges ($147 million from 1996-97 and $331 million from 1997-98).
Figure 2
Distribution of School Districts by Enrollment

October 1996

Number of Districts Enrollment
Enrollment Level Elem High School Unified Total Total Percent of Total
More than 200,000 -- -- 1 1 667,305 12.0%
100,000 to 199,999 -- -- 1 1 133,687 2.4
50,000 to 99,999 -- -- 6 6 379,491 6.8
40,000 to 49,999 -- -- 3 3 138,789 2.5
20,000 to 39,999 2 5 35 42 1,164,453 21.0
10,000 to 19,999 22 11 55 88 1,252,072 22.5
5,000 to 9,999 50 18 60 128 905,320 16.3
2,500 to 4,999 63 21 52 136 475,943 8.6
1,000 to 2,499 91 21 48 160 280,187 5.0
500 to 999 90 18 21 129 93,813 1.7
Less than 500 267 10 28 305 62,215 1.1
Totals 585 104 310 999 5,553,275 100.0%
Data exclude county offices of education. Grand total including county offices is 5,612,965.






Figure 3
Proposition 98 at a Glance

Funding "Tests"

Proposition 98 mandates that a minimum amount of funding be guaranteed for K-14 school agencies equal to the greater of:
  • A specified percent of the state's General Fund revenues (Test 1), or
  • The amount provided in the prior year, adjusted for growth in students and inflation (Tests 2 and 3).
Test 1--Percent of General Fund Revenues

Approximately 34.5 percent of General Fund plus local property taxes.

Requires that K-12 schools and the California Community Colleges receive at least the same share of state General Fund taxes as in 1986-87. This percentage was originally calculated to be slightly greater than 40 percent. In recognition of shifts in property taxes to K-14 schools from cities, counties, and special districts, the current rate is approximately 34.5 percent.
Test 2--Adjustments Based on Statewide Income

Prior-year funding adjusted by growth in per capita personal income.

Requires that K-12 schools and the California Community Colleges receive at least the same amount of combined state aid and local tax dollars as was received in the prior year, adjusted for statewide growth in average daily attendance and inflation (annual change in per capita personal income).
Test 3--Adjustment Based on Available Revenues

Prior-year funding adjusted by growth in per capita General Fund.

Same as Test 2 except the inflation factor is equal to the annual change in per capita state General Fund revenues plus 0.5 percent. Test 3 is used only when it calculates a guarantee amount less than the Test 2 amount.

Other Major Funding Provisions

Suspension
Proposition 98 also includes a provision allowing the state to suspend the minimum funding level for one year through urgency legislation other than the budget bill.
Restoration ("Maintenance Factor")
Proposition 98 includes a provision to restore prior-year funding reductions (due to either suspension or the "Test 3" formula). The overall dollar amount that needs to be restored is referred to as the "maintenance factor."


Proposition 98 Allocations by Segments

Figure 4 displays the allocation of Proposition 98 funding by segment. The overall increase for Proposition 98 in the current year is $228 million. As Figure 4 shows, K-12 education's share of this amount is $213 million and the Community College's allocation is $16 million. The amount of funding for other agencies did not change.

The budget proposes $35 billion for Proposition 98 in 1998-99. The shares allocated to the three components remain virtually unchanged from the 1997-98 revised shares. Community College Proposition 98 funding issues are discussed in the Higher Education section of the Analysis(please see Section F).
Figure 4
Proposed 98 Allocations
1997-98 and 1998-99

(Dollars in Millions)



1998-99 Proposed
Change From

1997-98

Revised

1997-98
Budget Act Revised Change
Proposition 98
"Test" Test 2 Test 2

--
Test 3

--
Total Proposition 98 $32,464.4 $32,692.7 $228.3 $34,681.8 $1,989.1
K-12 Education
Amount $29,062.4 $29,275.0 $212.6 $31,037.0 $1,762.0
Share 89.5% 89.5% 89.5%

--
Community Colleges
Amount $3,313.6 $3,329.3 $15.7 $3,554.4 $225.1
Share 10.2% 10.2% 10.2%

--
Other Agencies
Amount $88.4 $88.4

--
$90.4 $2.0
Share 0.3% 0.3% 0.3%

--


Governor's Budget Proposals

Prior-Year Proposition 98 Funds

As noted earlier, the budget proposes to allocate to K-12 education $472 million in prior-year Proposition 98 funds. Figure 5 (see next page) shows the major expenditure proposals, which include:
Figure 5
K-12 Education

Governor's Budget Proposals

For Prior-Year Revenue

(In Millions)
Program Expansions
School site block grant $180.0
Digital high school 60.0
Adult education CalWORKs 12.5
Test development 11.0
Year-round schools deficiency 6.0
Standard account code structure 5.5
Oxnard extended year pilot 4.2
Long Beach USD settlement 4.1
Single gender academies 3.0
Low performing schools 3.0
Subtotal ($289.3)
New Programs
Staff development--mathematics $40.0
Community policing 10.0
Teacher national board certification 1.0
Salary schedule pilot 1.0
Subtotal ($52.0)
Funding Adjustments
Property tax shortfall $136.1
Deferred maintenance -5.5
Other K-12 0.2
Subtotal ($130.8)
Total $472.1
Sources:
Proposition 98 "settle-up"
1996-97 $127.3
1997-98 299.3
Other 45.5
Total $472.1

We discuss the proposals shown in Figure 5 later in this Analysis.

1998-99 Budget Proposals

The budget proposes a General Fund K-12 Proposition 98 funding increase of $1.4 billion for 1998-99. (After including $360 million in higher estimated property tax collections and adjusting for $296 million in one-time expenditures in the 1997-98 budget, total new Proposition 98 spending in K-12 education is $2 billion.) Figure 6 (see next page) highlights each of the major changes proposed for K-12 Proposition 98 in the budget year.

The major budget proposals include:

We discuss the details of these proposals later in this Analysis.

Proposition 98 Spending by Major Program

Figure 7 (see page 13) shows Proposition 98 spending for the major K-12 programs. Revenue limit funding accounts for $21.3 billion in 1998-99, or about 72 percent, of total Proposition 98 expenditures. The state General Fund supports about 58 percent of revenue limit funding, and local property taxes provide the remaining 42 percent.

Except for revenue limits, the largest K-12 program is special education. Special education funding is expected to increase by $104 million in 1998-99. The class size reduction program, started in 1996-97, will be the second largest categorical program in 1998-99, with proposed expenditures of $1.5 billion. Funding for other categorical programs within the categorical mega-item is expected to increase by $109 million due to the provision of growth and COLA.
Figure 6
Governor's K-12 Budget Proposals (General Fund)

1998-99 Proposition 98

(In Millions)
1997-98 (revised) $20,194.4
Enrollment Growth
Revenue limits $359.6
Categorical programs 147.3
Subtotal ($506.9)
Cost-of-Living Increases
Revenue limits $474.0
Categorical programs 183.0
Subtotal ($657.0)
Funding Adjustments
Child care $44.0
Voluntary desegregation 19.3
Other 1.2
Subtotal ($64.5)
Program Expansion
Staff development day buy-out $350.0
Deferred maintenance 135.0
Child care 123.5
Digital high school 26.0
Staff development programs 20.9
Test administration 20.2
High-risk youth 20.0
Other 14.9
Subtotal ($710.5)
New Programs
Deficit factor buy-out $52.9
Remedial summer school, grades 3 - 6 10.0
Zero tolerance 6.2
Subtotal ($69.1)
Offsetting Adjustments
One-time funding in 1997-98 -$296.1
Property tax growth -360.3
Subtotal (-$656.4)
1998-99 (proposed) $21,546.0
Change From 1997-98 (revised)
Amount $1,351.6
Percent 6.7%


Figure 7
Major K-12 Education Programs

Funded by Proposition 98 General Fund

1997-98 and 1998-99

(Dollars in Millions)



Estimated

1997-98



Proposed

1998-99

Change From

1997-98

Amount Percent
Revenue Limits
Schools and counties $20,505.8 $21,332.8 $826.9 4.0%
Local revenuea 8,709.8 9,062.6 352.8 4.1
Subtotals, revenue limits ($11,796.0) ($12,270.2) ($474.2) (4.0%)
Mega-Item
Desegregation $588.9 $613.9 $25.0 4.2%
Economic impact aid 384.9 401.2 16.3 4.2
Home to school transportation 502.0 523.4 21.3 4.2
School improvement 378.6 394.7 16.1 4.2
Instructional materials 165.1 172.1 7.0 4.2
Other programs 552.9 576.4 23.5 4.2
Subtotals ($2,572.4) ($2,681.6) ($109.2) (4.2%)
Other Programs
Special education $2,027.2 $2,130.8 $103.6 5.1%
Class size reduction 1,488.5 1,546.1 57.6 3.9
Child development 621.1 803.2 182.1 29.3
Adult education 475.3 498.0 22.7 4.8
ROC/P 292.6 309.5 16.9 5.8
Summer school 164.9 180.8 15.9 9.6
Mandates 137.2 140.9 3.7 2.7
Staff development day buy-out 50.0 400.0 350.0 700.0
Digital high school 50.0 76.0 26.0 52.0
Deficit factor buy-out

--
52.9 52.9 n/a
Deferred maintenance

--
135.0 135.0 n/a
Other 519.1 320.9 -198.2 -61.8
Subtotals ($5,826.0) ($6,594.2) ($768.3) (13.2%)
Totals $20,194.4 $21,546.0 $1,351.6 6.7%
aLocal revenue is from local property taxes and is included to show the full amount provided for revenue limits.


 


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