California’s local educational agencies face an uncertain and complex financial landscape as they plan their 2024–25 budgets. Significant state, federal and local budgetary factors are converging at the same time to potentially cause major budgetary problems for many LEAs.

To help address this looming storm, CSBA’s Research and Education Policy Development department created a budget template, “The Forecast is for Storms – Considerations for LEA budgeting in an uncertain fiscal climate,” to help governance teams communicate these intricate factors to their communities. These dynamics include ever-increasing state budget deficit projections, the end of federal pandemic relief aid and persistent declining statewide enrollment. Governance teams can build a shared understanding of the district’s fiscal landscape by being open and transparent with communities on the complexity of the situation.

The template covers:

• State education funding uncertainty: California faces a massive projected budget deficit for the 2024–25 fiscal year. While the exact dollar amount is being debated as state receipts fall short of budget projections, the Legislative Analyst’s Office (LAO) puts the deficit anywhere between $58 and $73 billion. Gov. Gavin Newsom’s projection places the deficit around $38 billion.

  The discrepancy in projections comes from the Governor using an unprecedented Proposition 98 budgetary maneuver to temporarily stave off cuts. This maneuver essentially grants the state an interest-free loan from current cash reserves that would then need to be paid off in future fiscal years with Prop 98 funds. It also assumes an uptick in future state revenues — that may not materialize — and would leave future budgets deeper in the financial hole.

  This uncertainty is important as around 54 to 64 percent of school funding comes from the state and the federal portion of funding will decrease as federal relief packages expire this year.

• The end of ESSER funding: To address the unprecedented challenges of the COVID-19 pandemic, the federal government passed a historic series of three aid packages, Elementary and Secondary School Emergency Relief (ESSER) funds. While these funds have been invaluable for LEAs in addressing the impact of the virus and its aftermath, they are scheduled to expire in September 2024. The loss of ESSER funding will leave a gap in school budgets that was previously used for initiatives like providing mental health services, hiring additional staff for a wide range of services, addressing learning loss and upgrading and maintaining educational technology. LEAs will be forced to make difficult decisions when looking at programs from which many students benefited. Governance teams should work with staff to continually monitor the U.S. Department of Education ESSER site for any updates on deadlines.
• Declining statewide enrollment: California’s public school enrollment has been steadily declining for nearly a decade. That steady decline took a sharp downward turn during the peak of the pandemic between the 2019–20 and the 2021–22 school years. Statewide enrollment has fallen 6.4 percent from 2016–17 and 5.3 percent from 2019–20. Declining enrollment directly affects school funding, as funding is allocated based on average daily attendance from a base enrollment. Declining enrollment can have significant consequences in everything from reductions in programming to staffing and can even result in school closures.

CSBA’s budget template is a downloadable resource that provides governance teams with a framework for presenting this complex financial picture of their school district in a clear and concise manner. The template is editable, allowing district governance teams to plug in their own budgetary projections to illustrate how these forces interconnect at the local level. The template also contains a comprehensive illustration of both state and LEA budgeting timelines to show where certain deadlines align and where they deviate.

The template allows districts to:

• Explain the factors impacting their budget
• Outline revenue sources
• Outline changes in revenue sources over the next few years
• Show where federal ESSER funding has impacted students and staff
• Illustrate spending priorities

Many communities have read news stories about their local districts receiving unprecedented sums of money over the course of the pandemic. They may not understand that much of this funding was one-time and each contained expiration dates, particularly with ESSER funding.

Communicating the true nature of the school funding landscape in the state is one way that governance teams can keep their communities informed and foster trust during challenging times. By providing a transparent overview of their financial situation, district leaders can use the template to engage in constructive conversations with parents, educators and community members as difficult funding decisions arise. Check back regularly with CSBA’s budget webpage for more tools and resources.