SACRAMENTO >> As education officials throughout the state prepare for the new year, a report by the state’s Legislative Analyst’s Office (LAO) released this fall states the outlook for general funds earmarked for education is uncertain beyond the 2017 fiscal year.
The report says California budgeting for schools and community colleges is governed largely by Proposition 98, passed by voters in 1998. The ballot measure, modified two years later, established a minimum funding requirement, commonly referred to as the “minimum guarantee.”
In addition to Prop. 98 funds, schools and community colleges receive federal funds, other revenue sources such as the lottery and various other regional funds such as parcel taxes.
The Prop. 98 Guarantee Fund depends on various factors including changes in K-12 average daily attendance, per capita personal income and per capita General Fund revenue.
Though in most years the state has made available an amount at or close to the minimum guarantee, the state has the discretion to provide funds above this guarantee.
The Willits Unified School District recently completed a state-required audit of their financial position as of June 30 by a Southern California firm specializing in school district audits and received a favorable opinion in regards to compliance with the provisions of laws, regulations, contracts, grant agreements and other fiscal matters.
During the final school board meeting of the year on Wednesday, Dec. 14, Superintendent Mark Westerburg said the district budget projections are based on what district officials actually know about the economy based on previous year funding and other projections.
“If the state’s economy picks up, they are going to get us closer to 100 percent of what we are supposed to be,” he said. “This is based on what we know, and we know we are not in a position to go crazy, we are also not in a position to run out and go replace facilities.”
Here are some educational highlights from the LAO report for the 2015 and 2016 fiscal years:
– The 2015 minimum guarantee decreased $378 million due to an estimated $1.4 billion drop in the state general fund tax revenues, a drop offset by a $1 million increase due to various other adjustments.
– Though the minimum guarantee has fallen, Prop. 98 local property tax revenue is up $262 million. The financial analysts attribute this increase to higher than expected transfers from educational revenue augmentation funds to schools and community colleges. The increase in property tax revenue reduces Prop. 98 General Fund costs to $640 million.
– Further revenue declines in the General Fund in 2015-16 would have no effect on the minimum guarantee.
LAO estimates the minimum guarantee will grow from $71.9 billion in 2016-17 to $74.5 billion in 2017-18, an increase of $2.6 billion. Nearly half of this increase is covered with property tax revenue.
The state’s 2016-17 budget provided $71.9 billion in funding for schools and community colleges, with $496 million allocated for one-time activities. According to the LAO, analysts estimate that General Fund revenue could fall as much as $500 million below estimates in 2017-18 with no change in the minimum guarantee.
According to the state’s fiscal outlook projections for subsequent years, Legislative Analyst Mac Taylor’s staff analyzed the state budget, including education funding, under two probable scenarios: one that assumes continued growth over several years, and one that assumes a mild recession including a big stock market decline, beginning in the middle of 2018.
Under the former, economic growth increases from $71.9 billion in 2016-17 to $83.5 billion in 2020-21, with an average growth rate of 3.8 percent. Under the latter (recession), the guarantee declines by $1.4 billion (almost 2 percent) from 2018-19 to 2019-20.
The LAO staff says the recession scenario illustrates the volatile nature of Prop. 98 funding. To provide some protection against this, the state has made available some of the Prop. 98 funds for one-time activities. If the guarantee undergoes declines, analysts state the expiration of this one-time funding provides a fiscal buffer ensuring against reduction of ongoing school and community college programs.
The report also highlights higher education and assumes increases for California State University for 2017, projecting an ongoing augmentation of $26 million beginning in 2017, attributed to savings generated from policy changes made the middle class scholarship program in 2015. Under these assumptions, the analysts project General Fund support will grow by $43 million for the University of California system and $75 million for CSU.
