A pencil eraser erasing the word budget on a piece of paper
May Revision cuts LCFF by 10 percent, introduces proposals in effort to mitigate impact

Reflecting California’s pandemic-induced $54 billion budget deficit, Gov. Gavin Newsom presented his May Revision on May 14, estimating that the Proposition 98 guarantee will decline by $19 billion. The Governor also outlined several proposals that he said could mitigate the impacts of dramatic revenue declines on state funding. “We are not just going to roll over and accept $19 billion of cuts to public education,” he said.

Absent from the May Revision is a cost-of-living increase to the Local Control Funding Formula for already distressed local educational agencies that are now experiencing the rising costs of the COVID-19 crisis. In fact, the budget includes a 10 percent ($6.5 billion) reduction to the LCFF. However, Gov. Newsom said an injection of federal funding — such as the HEROES Act now under consideration in Congress — could backfill that dramatic cut. “If the federal government does what it must do under the circumstances to help states large and small across this nation, these cuts would go away,” Newsom said. CSBA has been an ardent supporter of the call for significant federal funding beyond the $13.5 billion delivered in the CARES Act.

“Coupled with a 10 percent cut to LCFF — the primary source of funding for K-12 education — the May Revision impairs the ability of schools to serve all students and to resume on-campus instruction safely,” said CSBA President Xilonin Cruz-Gonzalez. “This budget would be insufficient in ordinary times and is less than what is required for most schools to reopen safely during a pandemic — and if schools don’t reopen, our economy can’t fully reopen.”

While most of the new education proposals from January’s proposal were eliminated, the Governor said the increase to special education base rates will remain, calling the matter a “point of pride.” The proposal calls for a base rate increase to $645 per pupil apportioned on a three-year rolling average of LEA average daily attendance. The new rate is a 15 percent increase in the Proposition 98 General Fund contribution to the base formula funding compared to last year.

Absent additional federal funds, in order to limit further reductions to the LCFF, the May Revision also includes $352.9 million in reductions to K-12 categorical programs. Impacted programs include After School Education and Safety, K-12 Strong Workforce Program and the Career Technical Education Incentive Grant Program.

“Schools understand the financial pressures presented by COVID-19 response — we’ve been dealing with them at the local level every day,” said CSBA CEO & Executive Director Vernon M. Billy. “For that reason, it is frustrating to see a May Revision that reduces support for schools when we are dealing with unprecedented challenges and expenses related to the pandemic. The May Revision cuts the budget for already underfunded schools and does it at a time when costs have skyrocketed for pensions, health care, special education, transportation and other items.”

Among other measures the Governor proposed to aid with district budgets are a temporary three-year suspension of net operating losses and limitation on business incentive tax credits to offset no more than $5 million of tax liability per year. According to a budget summary, these measures, along with more minor tax changes, will generate $4.5 billion in General Fund revenues, of which approximately $1.8 billion would go to the Proposition 98 guarantee in 2020–21. California also received $1.6 billion in federal Elementary and Secondary School Emergency Relief funds, of which $1.5 billion will be allocated to LEAs to address COVID-19 related costs in proportion to the amount of Title I-A funding they receive.

In what the administration describes as a way to “avoid a permanently depressed level of funding for K-14 schools,” the May Revision seeks to provide supplemental appropriations above the constitutionally required Proposition 98 funding level, beginning in 2021–22, and in each of the next several fiscal years, in an amount equal to 1.5 percent of General Fund K-12 revenues per year, up to a cumulative total of $13 billion. The May Revision also reflects the complete withdrawal of the approximately $524 million in the Public School System Stabilization Account, a reserve account.

Deferrals and flexibilities in the cards
Similar to previous economic downturns, the May Revision reintroduces apportionment deferrals into the mix to help the state with its cash flow challenges. The proposal includes a deferral of $1.9 billion in the current year June apportionment, which would be repaid to LEAs in July of 2020; the amounts would triple in the 2020–21 fiscal year to $5.3 billion. This makes cash management and reserves more important than ever. To help in this scenario, CSBA’s Cash Reserve Program provides LEAs with a reliable and economical short-term cashflow funding option. Find out more at www.csba.org/ProductsAndServices.
CSBA will continue to keep members informed of any developments and advocate for a budget that supports schools in the effort to serve all students and respond to COVID-19.