May 15, 2012

May Revision Protects K-12 Programmatic Funding

The May Revision maintains current program funding by crediting “over appropriations” toward settle-up funds.  This means schools will see the same amount of money in 2011-12 as anticipated, but the Proposition 98 base for going forward into 2012-13 will be reduced by approximately $1.5 billion. This $1.5 billion is anticipated to be funded with improving state revenues and the passage of the Governor’s tax proposal.  If the Governor’s tax proposal does not pass, the effect will be a $5.5 billion reduction, of which $2.8 billion (K-14) will be in continuing deferrals and $2.7 billion (K-14) will be from programmatic reductions.

As more information becomes available on the State Budget May Revision for Proposition 98, the Revision becomes more confusing. Some things that are clear: Home-to-School and Special Education Transportation are not eliminated from state funding. Instead, they will continue at the current funding level.   Because the Governor’s Tax initiative will raise more revenue, the minimum guarantee is higher than previously calculated. 

What is not clear is the interaction of the 2011-12 “over appropriation” of Proposition 98 (being used to reduce future settle-up Proposition 98 obligations) that is reducing the current year (2011-12) Proposition 98 minimum guarantee by what appears to be $1.5 billion and the lower 2011-12 guarantee would be used for building the 2012-13 budget.

Normally the 2012-13 minimum guarantee would reflect the reduced Proposition 98 base caused by taking out the over appropriation amount; however, it appears that the Proposition 98 maintenance factor  will be triggered in 2012-13 and will replace the amount that would normally have been reduced.

With the passage of the Governor’s November tax proposal, there could be a small increase in per average daily attendance school funding and a slightly larger deferral reduction than proposed in the January Budget. However, if the taxes are not passed then the deferral levels would remain the same as 2011-12 and there would be $2.7 billion in (K-14) unspecified programmatic reductions or about $425 per K-12 ADA cut.  This would be the only significant cut because the May Revision reverses the January budget proposal to eliminate Home-to-School and Special Education pupil transportation.  The pupil transportation cut will not happen for 2012-13 or 2013-14.  Consequently, districts do not have to budget for a transportation cut.  

The May Revision continues the Transitional Kindergarten proposal that does not mandate Transitional Kindergarten be offered, but allows Transitional Kindergarten to be offered.  The budget assumes a savings but that savings will occur only if school districts decide not to offer Transitional Kindergarten and allow students to participate. It will be a district-by-district decision.

~Dave Walrath