Referring to his January Budget Proposal as a “normalization” and a “correction” of the “distortions” seen in prior year budgets during the pandemic, Gov. Gavin Newsom on Jan. 10 announced a substantially smaller-than-expected three-year budget shortfall of $37.86 billion. Acknowledging the volatile rise and fall in capital gains revenues, which were a significant contributor to the sharp increases in the 2021–22 and 2022–23 budgets, the Governor proposes to fully fund the Proposition 98 Minimum Guarantee at $109.1 billion.

“Based on our initial review of the Governor’s budget information, we’re encouraged that a $38 billion deficit — significantly smaller than the $68 billion shortfall predicted by the Legislative Analyst’s Office — has allowed the Governor to substantially maintain education funding at existing levels,” said CSBA CEO & Executive Director Vernon M. Billy. “We think the Governor’s decision to tap the Proposition 98 Reserve is a prudent step to weather a financial crisis that is still unfolding and to preserve base funding and flexibility for local governance teams. If the Governor’s budget numbers hold, he has established a solid foundation on which the Legislature can build as the budget negotiation process continues.”

Proposition 98 will remain in Test 1 for the current year and the coming 2024–25 fiscal year. This includes a revised Prop 98 Guarantee for the current year at $105.6 billion, which is $2.7 billion below current funded levels. The Governor’s proposal also includes a 0.76 percent cost-of-living-adjustment (COLA) for Local Control Funding Formula (LCFF), an increase of $1.4 billion. To fully fund this increase and to maintain current year LCFF apportionments, the Governor proposes using the Proposition 98 Reserve Account.

To address the budget shortfall and slightly lower Prop 98 funding guarantee, the Governor proposes dipping into the Proposition 98 Reserve in the current 2023–24 fiscal year and in the coming 2024–25 budget year to the tune of $3 billion and $2.7 billion, respectively. There will continue to be deposits into the reserve as well in the amount of $752 million. This leaves a balance in the reserve of $5.7 billion in 2023–24, which continues to trigger the local school district reserve cap in the coming fiscal year.

Included in the budget are proposed changes to “allow local educational agencies to provide attendance recovery opportunities to students to make up lost instructional time, thereby offsetting student absences, and mitigating learning loss and chronic absenteeism, as well as related fiscal impacts.” These changes include:

• Allowing local education agencies (LEAs) to add attendance recovery time to the information reported to the California Department of Education (CDE) for both average daily attendance (ADA) and chronic absenteeism reporting.
• Requiring LEAs to provide remote instruction or opportunities to enroll in neighboring LEAs for emergencies lasting beyond five days and encouraging LEAs to provide hybrid or remote learning.
• Proposed allocation of $6 million in one-time Prop 98 General Fund to research and improve the delivery of hybrid and remote learning and disaggregated attendance reporting to reflect absences related to local and state emergencies.

Implemented by statute in 1992 to shift from the state’s General Fund to local property taxpayers some of the obligation to meet the constitutional minimum funding guarantee in Proposition 98 for K-14 education, the Educational Revenue Augmentation Fund (ERAF) has historically redirected property taxes statewide from cities, counties and special districts to school districts and community college districts. The budget proposes to also include charter schools within the existing ERAF distribution statutes.

The budget also proposes further accelerating how teaching candidates can meet the basic skills requirement and subject matter competency certification through the recognition of a bachelor’s degree as meeting the state’s basic skills requirement and improving the use of transcript review to determine subject matter competency.

Further, the budget proposes $20 million in one-time Prop 98 General Fund to establish a “train the trainers” program to support math coaches to provide training and support math teachers in the implementation of the Mathematics Framework adopted in 2023. The proposal also directs the California Commission on Teacher Credentialing to create a new Elementary Arts and Music Education authorization for career technical education teachers.

Although not a budget proposal, the Governor includes language in the budget summary stating that the “Administration expects to enter into negotiations with the Legislature on their education facilities bond proposals to reach agreement on a bond proposal to be considered in the November 2024 election.” Additionally, the budget proposes to reduce by $500 million (from $875 to $375 million) funding that was to be allocated in 2024–25 for the School Facilities Program and continues the delay in funding of $550 million for the Preschool, Transitional Kindergarten and Full-Day Kindergarten Facilities Grant Program into 2025–26.

The budget also includes a proposed increase of $122.2 million in ongoing Proposition 98 General Funds to fully fund the universal school meals program through 2024–25.

Provides $5 million in one-time Proposition 98 General Funds to extend the Broadband Infrastructure Grant program that provides connectivity opportunities to low-income and poorly connected school sites.

In addition to the above proposals, the Administration announced the following budget adjustments:

• Decrease of $113 million in Proposition 98 General Funds in 2023–24 and $996 million in 2024–25 as a result of increased offsetting of property taxes.
• Increase of $65 million in ongoing Proposition 98 General Funds to provide a 0.76 percent COLA for the LCFF Equity Multiplier and specific categorical programs, which include Special Education, Child Nutrition, State Preschool, Youth in Foster Care, Mandates Block Grant, Adults in Correctional Facilities Program, Charter School Facility Grant Program, American Indian Education Centers and the American Indian Early Childhood Education Program.
• Decrease of $5 million to county offices of education in ongoing Proposition 98 General Funds to reflect drops in ADA and the 0.76 percent COLA.
• Increase of $1.5 million in ongoing Proposition 98 General Funds to support Homeless Technical Assistance Centers established via the federal American Rescue Plan Act.