June 29, 2011

State Budget Update

The State Budget agreement includes two major policy changes that will affect school budgeting for 2011-12 and because of the 2011-12 effects, probably 2012-13, 2013-14 and 2014-15.   

The first is the suspension of the ability to reopen layoffs between July 1, 2011 and August 15, 2011.  The suspension is for one year only.  The second is the state mandating the revenue methodology school districts must use in determining their 2011-12 budget and mandating that school districts maintain staffing and program levels “commensurate” with that mandated revenue level (see attached amendments to Education Code Section 42127). 

I believe the safest course a school district can take at this time is to not rescind any layoff notices until legal counsel advises on the implications of the new Education Code Section 42127 requirements for your school district.  The language is an attempt to have school districts budget and staff without regard to the potential cuts if state revenues are more than $2 billion less than projected in the State Budget. 

The problem for school districts, however, is that for reasons beyond anyone’s control, revenues could be more than $2 billion less than projected. If that is the case, then significant cuts will have to be made in the remaining half year of 2011-12. 

School districts with state funding for Home-to-School Transportation would lose all of their reimbursement after January 1 if the most severe cuts occur; and could lose up to an additional $250 per ADA after January 1 if the most severe cuts occur.  Because of contracts, school districts would not be able to layoff certificated employees; consequently, the only choice would be expenditure reductions which would probably have to be negotiated. 

I also advise that as soon as your attorneys complete their review of the attached language, you start thinking and perhaps talking to the appropriate bargaining units on their suggestions on how to deal with a possible loss of state funds if the triggers are pulled because of substantially lowered state revenues.   

There is no need for any action right now.  There are other parts of the budget which could provide relief in 2012-13 from the effects of significant cuts if state revenues are significantly lower.  Because of those other provisions, any reduction would be a one time reduction affecting only the 2011-12 year.   

Summary

It is still too early to rescind layoff notices.  It is not too early to start reviewing the implications of the language in Education Code Section 42127.  There will be a more detailed state budget update after the Governor signs the budget with his blue pencil action.

~Dave Walrath