LAO 2006-07 Budget Analysis: Education TOC Analysis of the 2006-07 Budget Bill
Education Issue-By-Issue Contents


Funding Per Student

Proposition 98

Proposition 98 Allocations

Enrollment Funding

Setting Education Priorities for 2006-07

Crosscutting Issues

Proposition 98 Update

Governor’s Budget

Prior-Year Adjustments

Current-Year Adjustments

Budget-Year Estimates

Legislative Analyst’s Office (LAO) Forecast

Budget-Year Estimates

Proposition 49 Pays Off Maintenance Factor Obligation

Technical Proposition 98 Issues

Suspension and the Chapter 213 Target

Maintenance Factor

Rebenching the Test 1 Factor

State Owes Proposition 98 Settle-Up for Past Years

Cost-of-Living Adjustment (COLA)

Proposition 98 Priorities

Governor Proposes Significant New Resources

Minimum Guarantee Insufficient to Maintain Base Program

State Still Exposed to Significant Fiscal Threats

K-14 Funding Is Linked to State’s Fortunes

Minimize Impact of Proposition 98 on Structural Gap

Option 1: Supplement Base With One-Time Funds

Pay Off Mandates, Reduce Structural Gap

Option 2: Target New Funds at Highest Local Needs

Address K-12 Fiscal Issues

Achieve California Community Colleges (CCC) Equalization Targets

Departmental Issues


Overview of K-12 Education Spending

Per-Pupil Spending Grows by $604 in 2006-07

Major K-12 Funding Changes

Proposition 98 Spending by Major Program

Enrollment Trends

New Categorical Programs

New Categorical Programs Not Critical

School District Financial Condition

Retiree Health Benefit Liabilities

California Department of Education (CDE) Survey Incomplete, But Reveals Large Liabilities

Why Retiree Benefits Is an Important State Issue

Districts Need to Address Liabilities

Negotiate a Plan to Use Federal Funds for Retiree Costs

Create a Fiscal Solvency Block Grant

District Financial Woes Continue

Improve Incentives, Insist on Local Solutions

A Solution That Rewards Good Financial Practices

Revenue Limits

Redirect Funding for Deficit Factor to COLA

Increase Funding for Declining Enrollment Adjustment

Redirect Equalization Funding to Fiscal Solvency Block Grant

Including Add-On Programs Would Lead to More Uniform Funding Levels


Newly Identified Mandate Review

Fully Fund Ongoing Mandate Costs

Create New Mandate Block Grant

Mandates Often Not the Most Effective Financing Mechanism

A Lengthy and Legalistic Process for Identifying New Mandates

A Claiming Process That Requires Significant State and Local Administrative Effort

Audit Process Increases Friction Between Districts and the State

An Education Mandate Block Grant

Revisit the STAR Mandate

A Proposal to Settle All STAR Claims

Create a New Truancy Program

Problems With the Mandate Approach to Truancy

Establish a New Truancy Grant Program

After School Programs and Proposition 49

Background on Current Program

Recommend Legislature Repeal Proposition 49

The Legislature Faces Legal Constraints and Uncertainties

What Changes Can the Legislature Make Without Going Back to the Voters?

Clarify the Interaction With Proposition 98 and How the State Should Treat Unused Funds

A Framework for Evaluating Competing After School Proposals

Governor’s Proposal Makes Significant Program Changes

Balancing Competing Policy Goals

Assessing the Governor’s Proposal

Other Program Considerations

An Alternative Approach to Reforming Proposition 49

Specifics of the LAO Proposal

Child Care

Eligibility Depends Upon Family Income and CalWORKs Participation

Steps Toward Linking Reimbursement to Quality

Child Care Terminology

Types of Providers

Other Terms

Two Types of Service Models-Vouchers and Direct State Contracts

Problems with the Current Reimbursement System

Increase Funding for Higher Quality Programs

Redirect Child Care Growth Funding

Limit License Exempt Reimbursement Rate

Create a State Level Sibling Discount

Adopt a Sliding Scale COLA for General Child Care and State Preschool

If Proposition 49 Implemented in 2006-07 Child Care Savings Likely

New RMR Survey Awaits Administration Approval

Economic Impact Aid

The EIA Formula Is Outdated and Problematic

Legislature Has Several Options for Addressing CalWORKs Data Issues

Simplify Formula and Provide Funding to Ease Transition


Special Education

Fully Fund the Base Special Education Budget

Technical Issues Involve 2004-05 and 2005-06 Revisions

Fully Fund Growth and COLA on Federal Funds

No New Proposal for Mental Health Services

Facilities Emergency Repair Program

Program Structure Makes It Difficult for Districts To Apply for Funding

Program Creates Bad Incentives

Remove Bad Incentives and Get Funding out to Districts-Modify Funding Distribution System

Federal Funds

Federal Carryover Proposal

Reject All but One Component of Governor’s Carryover Proposal

Migrant Education


Funding Model

Concerns With the Current Funding Model

Revise Funding Model to Improve Quality of Services and Enhance Accountability

Revise Funding Model to Reflect Program Priorities

Migrant Education Data System

Concerns with the Current Data System

Enhancing Data System Could Improve Program Effectiveness

Carryover Funds

Use Carryover Funds to Build Better System

Authorize Limited Local Carryover Authority


Other Issues

Test the Impact of a CAHSEE Block Grant

Many Factors Affecting Student Success on CAHSEE

Test Different Approaches

Instructional Materials


Total Higher Education Budget Proposal

Major Funding Sources

Funding by Segment

Major Cost Drivers for Higher Education

Major Budget Changes

Intersegmental: Protecting Legislative Priorities in Higher Education

Higher Education Budget-Key Choices

Specific LAO Recommendations

What About the Budget for Community Colleges?

Intersegmental: UC And CSU Enrollment Growth And Funding

Recent Enrollment Trends

UC Has Generally Met Enrollment Targets

CSU Has Not Been Meeting Enrollment Targets

Governor’s Budget Proposal

Determining Enrollment Growth Funding For 2006-07

How Much Enrollment Growth Should Be Funded?

Provide 2 Percent Enrollment Growth

LAO Higher Education Enrollment Projections

Adjust CSU’s Base Budget to Reflect Actual Enrollment

Ensuring Enrollment Targets Are Met

How Much General Fund Support Should Be Provided for Each Additional Student?

Development of Current Marginal Cost Methodology

Chronology of Marginal Cost Funding

UC and CSU Used Different Methodologies Before 1992

Legislature Called for New Methodology in 1990s

Legislature Requests Marginal Cost Review for 2006-07

Governor Proposes New Marginal Cost Methodology

Concerns With Governor’s Proposal

Ignores Contribution of Student Fees

Over Budgets Certain Costs

Limits Legislative Budgetary Discretion

LAO Marginal Cost Recommendations

Refine Current Marginal Cost Methodology

Fund Enrollment Growth Based on LAO’s Revised Methodology

Intersegmental: Year-Round Operations at UC and CSU

Key State Actions Toward Fully Implementing Year-Round Operations

Update on Summer Enrollment

UC Summer Enrollment Has Increased

CSU Summer Enrollment Has Declined

Issues for Legislative Consideration

Should the State Provide Funding to Fully Convert Additional Campuses?

How to Encourage Better Utilization of the Summer Term?

Intersegmental: Student Fees

Share-of-Cost Fee Policy Would Benefit Students and the State

State Financial Aid Programs Intended to Ensure Access

Maintain Students’ Share of Cost at Current-Year Level

Reject Concept of Fee Buyout


University of California (6440)

Student Fees

Intersegmental Issues Involving UC

General Fund Base Increase

Other Issues

K-14 Outreach Programs


California State University (6610)

Proposed General Fund Changes

Student Fees

Intersegmental Issues Involving CSU

General Fund Base Increase

K-14 Outreach Programs

Continuous Appropriation of Fee Revenue Could Reduce Accountability

California Community Colleges (6870)

Major Budget Changes

Proposition 98 Spending by Major Program

Student Fees


Modest Growth in College-Age Population Brings No Tidal Wave

Why Has Enrollment Lagged Population Growth?

Effect of Decline on the Student Population Profile

Recent Enrollment Funding Trends

2006-07 Enrollment Growth


Equalization Makes Sense

2004-05 Budget Act Initiated Multiyear Equalization Effort

Equalization to Cost More Than Governor’s Proposed $130 Million

Link Equalization Funding to New Apportionment Allocation Method

Career Technical Education

Retiree Health Benefit Liabilities

CCC Accountability update

New CCC Accountability System

CCC District-Level Accountability Reporting

Cal-PASS Funding a Good Investment

Student Aid Commission (7980)

Major Budget Proposals

Promote Parity for Financially Needy Students Attending Public and Private Universities

Avoid Complicating Existing, Well-Structured Program

Intersegmental Issue Involving CSAC

Restructuring How the State Administers Grant and Loan Financial Aid Programs

Organizational Options

Single State-Agency Structure Had Shortcomings

Existing Two-Agency Structure Has Shortcomings

Recommend Single Agency With Flexibility in Daily Operations but Stronger Accountability Requirements