May 18, 2000

memorandum

 To:            CCEA Executive Committee

 From:        Peter Birdsall & Theresa Inslee

 Subject:    May Revision

 On May 15, the much awaited May Revision to the Governor’s proposed 2000-01 State Budget was released.  With revenues exceeding the budget proposal by over $12 billion dollars, schools will receive an additional $3.8 billion above the Governor’s January proposal.  The May Revision brings the total Proposition 98 funding to $42.7 billion - which represents $1.1 billion above the 2000-01 Proposition 98 guarantee.  The following are the major K-12 education proposals in the May Revision.

Eliminating the Deficit

For school districts, the effect will be to eliminate the current deficit factor of 6.996%.  This is equivalent to approximately a 7% increase above the cost-of-living adjustment (COLA) for the coming year. For county offices of education, the current deficit factor is 8.628%.  These deficits would also be eliminated under the Governor’s proposal.

The projected cost of eliminating the revenue limit deficit is $1.84 billion.  Approximately $1.792 billion will go to school districts and $48 million to county offices of education.

According to the Governor’s press statement, “An agreement was reached on the funding after many discussions among Senate President Pro Temp John Burton, Assembly Speaker Robert Hertzberg and the Governor’s staff.  “Even though our economy is booming, teachers are still suffering from the recessionary cutbacks of the early 1990’s.  Today’s proposal repays California’s debt in full.”

Personal Income Tax Exclusion for Teachers

The income tax exception for teachers was announced May 13 and is fast becoming one of the most publicized aspects of the budget revision.  Under this proposal, credentialed teachers and administrators in the state would not have to pay state income tax for all wages received for working in K-12 public schools.  The estimated revenue reduction for this proposal is $545 million.  This together with the proposed elimination of the revenue limit deficit, are overwhelming the majority of the new ongoing funding proposed for K-12 education. 

There appears to be an increasing consensus within the Legislature that the Governor’s proposal of state tax exclusion will be rejected.  If this is to be the case, it would free up $545 million for appropriation for other purposes.  If this happens, a key issue will be how much of this money is appropriated to public schools, how much is used for permanent tax cuts, and how much is appropriated for other purposes.

COLA and Growth

Significant news in the May Revision was that the cost-of-living adjustment (COLA) has been increased to 3.17%.  The Department of Finance indicates that the cost of the increased COLA is $113.7 million.  In addition, the estimates in enrollment growth were increased from 1.26% to 1.45% at a cost of $62.4 million. 

One-time Budget Proposals

Certificated Staff Performance Bonuses:  $500 million in one-time funds is included in the May Revision to fund the Academic Performance Index Teacher Performance Awards program.  Under this program, 132,600 awards would be given of between $2,000 and $5,000 to certificated staff in K-12 public schools that meet their API score target growths.

Connecting California Schools Initiative:  $402 million is provided to fund this initiative, which is designed to improve student access to computers at school.  Of this total amount, $325 million is for the purchase of computer hardware, $50 million is to help link universities and K-12 schools, $25 million is for the training of teachers and administrators in the use of technology (this is in addition to $25 million already proposed for this purpose), and $2.25 million is to conduct a survey and help local education agencies in developing technology plans. 

The English Language and Literacy Intensive Program:  This is a $300 million program consisting of two parts:

1. $250 million for competitive grants for “intensive English language acquisition instruction”.

2. $50 million to public libraries to expand the Family Literacy Program.

Governor’s Performance Awards Programs:  $40 million is augmented to fully fund awards of $150 per pupil for all schools with a 95% participation rate on the STAR test and reach their Academic Performance Index (API) growth targets.  The augmentation brings the funding for these awards to $232.3 million.

Immediate Intervention/Underperforming Schools (II/USP):  An additional $3.9 million is proposed to fully fund planning grants of $50,000 for 430 new participants in the II/USP program. 

Professional Development Institutes:  $35 million is being proposed beyond the January budget proposal of $115.5 million to fund Professional Development Institutes.  These institutes would provide stipends of between $1,000 and $2,000 to provide training for teachers in certain courses and grade levels at the University of California (UC).

Ongoing Funding

The most significant proposals of the Governor’s May Revision in terms of ongoing funding are:

• $50 million to expand incentive programs for certificated staff in low-performing schools that meet their annual Academic Performance Index (API) growth targets.  This increases the total funding for this program to $100 million.  The Governor’s Office of Education indicates that at least 1,000 teachers in the top performing schools will receive bonuses of $25,000.  An additional 11,250 teachers will receive bonuses of $5,000 or $10,000. 

• $40 million to fully fund school site grants of $150 per pupil for all schools that achieve their growth targets, with at least 95% participation in the STAR testing program. 

• $35 million in increased funding for the UC-administered Professional Development Institutes that are proposed as part of the Governor’s education initiatives this year.  The $35 million is intended to allow the option of one, two, or three week institutes to allow teachers to receive intensive staff development.  This proposal is included in AB 1941 (Wright).

• $20.2 million to augment the STAR testing program; primarily to support the development and administration of writing assessments for pupils in grades 4 and 7. 

• $15.9 million in additional funding for the “Teaching as a Priority” (TAP) Program.  This program would provide funding for teachers and schools that meet requirements for increasing the number of fully credentialed teachers serving in low-performing schools and reducing the number of teachers on emergency permits.  This proposal is carried in SB 1505 (Alarcon).

• $8.5 million to increase the grant awards for high schools to establish advanced placement programs and to increase the number of high schools who participate from 400 to 550. 

One-Time Funding

The other dramatic news for K-12 education in the May Revision was how the Governor proposes to allocate a huge amount of one-time funding to K-12 education.  In total, the Governor proposes over $1.3 billion in additional one-time funding.  This includes the following:

• $500 million for teacher performance bonuses based on growth in the API.  Under this proposal, the bonuses would be awarded to every certificated employee on a sliding scale of $5,000 for 20% or higher growth on the API, $3,000 for 15% growth, $2,500 for 10% growth, and $2,000 for 5% growth.

• $400 million for educational technology.  In combination with the Governor’s January budget proposal, this brings funding for educational technology to an astonishing $600 million.  This proposal is, in turn, divided into three parts.  (1) The Governor’s proposal would add $325 million for the purchase of computers.  In combination with the January proposal, this brings total funding for this purpose to $500 million.  According to the Governor’s staff, this will reduce the ratio of students to up-to-date multimedia computers to 8:1.  (2) An additional $25 million for professional development for teachers and administrators, bringing the total for this purpose to $50 million.  (3) Finally, a new $50 million is included to establish an internet “backbone” in county offices of education in an effort to bring high speed internet access to all public schools. 

• $300 million for the English learning and literacy intensive program.  This would include $250 million for three-year competitive grant awards to school districts of up to $400 per English Language Learner to provide intensive English language acquisition instruction.  The proposal also includes $50 million to public libraries to expand the family literacy program.  This is connected to the community-based tutoring program established under Proposition 227. 

• $239 million for state mandates. 

• $50 million for teacher performance bonuses.  As with the budget year proposal, this is intended to provide 12,250 teachers in schools that meet their API growth targets with bonuses of $5,000 to $25,000.    

What’s Missing?

In a year of dramatic proposed funding increases for K-12 education, the reality is that a number of critical issues were not addressed in the May Revision.  These include the following:

Summer School/Intervention Funding

A number of legislators have been pushing hard to raise the hourly rate for summer school and intervention programs and to increase or eliminate the cap on funding.  The May Revision contains no new proposals in this issue area. 

Special Education

Advocates had been hoping to resolve the issue of the special education mandated cost claim.  There also had been high hopes that some of the one-time funds would be used to eliminate prior year deficits in special education.  The May Revision contains no significant proposals in these issue areas. 

Legislative Proposals

Numerous Legislators were carrying bills to address various high priority issues including funding for Regional Occupation Centers and Programs (ROCP), career preparation, school safety, and transportation.  Other proposals would have expanded the number of staff development days or expanded the high school class size reduction program.  None of these proposals are included in the May Revision. 

What’s the next step in the budget process?

Now that the Governor has released his May Revision, the budget subcommittees will focus on the difficult issue of funding priorities.  The budget subcommittees will most likely complete their work by early next week, which then sets the stage for budget issues to move forward to the Budget Conference Committee.  The conference committee consists of three members from the Senate and three members from the Assembly.

If you have any questions regarding this memo, please call either of us at 916/441-3302.