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www.capitoladvisors.org

www.capitoladvisors.org. 1. www.capitoladvisors.org. 1. Gerry Shelton , Partner. Susan Stuart, Partner. Richard Gonzalez, Chief Facilities Advisor. Jack O’Connell, Partner. Kevin Gordon, President and Partner. Abe Hajela , Partner. Barrett Snider, Partner. Lee Angela Reid,

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  1. www.capitoladvisors.org 1 www.capitoladvisors.org 1

  2. Gerry Shelton, Partner Susan Stuart, Partner Richard Gonzalez, Chief Facilities Advisor Jack O’Connell, Partner Kevin Gordon, President and Partner Abe Hajela, Partner Barrett Snider, Partner Lee Angela Reid, Senior Legislative Advocate www.capitoladvisors.org

  3. Dave Walrath President, Murdock, Walrath & Holmes Dennis Meyers Director of Government Relations Adonai Mack Legislative Advocate www.capitoladvisors.org

  4. Vetted among numerous energy-oriented companies by Capitol Advisors Group on behalf of school districts Energy services company that has a genuine track record of work in the K-12 education space Direct representation of multiple lines of energy efficiency equipment & energy dashboards Workshops sponsored by: www.capitoladvisors.org

  5. 2014-15 Governor’s January Budget www.capitoladvisors.org

  6. Themes and Thoughts www.capitoladvisors.org “Prudent and measured” – conservative revenue projections Focus on the “Wall of Debt” and long-term liabilities Proposed new “Rainy Day” fund Strong investment in education Five-year infrastructure plan, cap & trade, water plan Implements federal health care reform Proposes plan to address prison over-crowding

  7. Governor’s Overall Budget Proposal www.capitoladvisors.org • $106.8 billion budget • $2.5 billion reserve • State General Fund expenditures: • K-12 42.4% • Health 20.4% • Higher Ed 11.6% • Corrections 9.0% • Human Services 6.5% • Natural Resources2.0% • Other 8.1%

  8. State Revenues www.capitoladvisors.org • Governor assumes about 6% growth in overall revenues • Personal Income tax 8.5% • Sales and Use tax 5.0% • Corporation Tax 8.9% • Prop 30 revenues helping, but not permanent • Sales and Use tax expires in 2016 • Personal Income tax (on high-earners) expires in 2018 • Capital Gains revenue extremely volatile • Governor wants to capture high growth in these revenues in the future

  9. State General Fund Revenues(Billions of Dollars) www.capitoladvisors.org

  10. California’s Long-Term Liabilities www.capitoladvisors.org

  11. Plan for Paying Down the Wall of Debt www.capitoladvisors.org

  12. Governor’ Budget Proposal 2014-15 K-12 Education Budget www.capitoladvisors.org

  13. K-12 Proposal - Overview www.capitoladvisors.org • K-12 overall Prop 98 funding of $61.6 billion • $5 billion in ongoing funding for categorical programs outside LCFF • K‐12 Deferrals - $5.6 billion to eliminate remaining inter-year funding deferrals • LCFF - $4.5 billionfor school district and charter implementation and $25.9 million for COE implementation • COLA Increases- provides .86% increase to LCFF base grants and some remaining categorical programs • Prop 39 energy efficiency - $316 million for the second of a 5-year program • $46.5 million increase for state testing programs • Independent study reform • School facility finance - funds shifts and reform • Special Education - adjustments for growth and COLA • Emergency Repair Program -increase of $188.1 million (one‐time)

  14. Proposition 98 www.capitoladvisors.org Test 1 Year – GF revenues drive the guarantee Big growth in the near term, flattens quickly Growth in Prop 98 will determine LCFF implementation timeline Any spending of budget year revenues within Prop 98 for other priorities slows LCFF Conservative estimate, but no apparent manipulations Constitutional change for “Prop 98 Reserve” draws healthy skepticism

  15. Prop 98 Changes Over Time www.capitoladvisors.org

  16. Proposed Constitutional Amendments www.capitoladvisors.org • Governor proposes to strengthen Prop 58 (2004) and ACA 4 (Nov 2014) Rainy Day Fund • Deposits to account when capital gains are more than 6.5% of total General Fund revenues • Doubles maximum size of fund to 10% of revenues • Prop 98 reserve • Also tied to variations in capital gains

  17. Deferrals www.capitoladvisors.org All remaining K-14 inter-year deferrals ($6.2 billion) will be eliminated in 2014-15 $6.2 billion = $5.6 billion (K-12) + $592 million (CCC) Paid with funds from 2012-13 and 2013-14, ($3.7 billion), and from 2014-15 ($2.5 billion) Over $10.4 billion K-14 inter-year deferrals will have been paid down since June 2013; $9.5 billion of those deferrals were K-12 revenue limits Remember: deferral buy-downs are one-time revenues for LEAs Note that all intra-year deferrals ($3.5 billion) were eliminated by the close of 2012-13

  18. Inter-Year (Cross-Year) K-12 Deferrals www.capitoladvisors.org

  19. COLAs www.capitoladvisors.org • LCFF base grant (indirectly to K-3 and 9-12 Grade Span Adjustments (GSAs), and Supplemental and Concentration Grants): • 1.57% for 2013-14 • .86% for 2014-15 • Affects LCFF target only • Selected Categorical Programs (Special Education, Child Nutrition, Foster Youth, Adults in Correctional Facilities, and American Indian Centers and Early Childhood Education Programs) • .86% for 2014-15

  20. LCFF Entitlement Target www.capitoladvisors.org • Entitlement Target = Base Grant + GSAs + Supplemental Grant + Concentration Grant + Add-ons • Base Grant per ADA (with annual COLA) K-3 = $7,0127-8 = $7,329 4-6 = $7,1179-12 = $8,492 • GSAs– 10.4% ($729) for K-3 and 2.6% ($221) for 9-12

  21. LCFF Entitlement Target www.capitoladvisors.org Supplemental Grant – additional 20% of Base Grant + GSAsfor each EL, low income and foster pupil (by enrollment) Concentration Grant – additional 50% of Base Grant + GSAs for each student eligible for supplemental grant above 55% concentration threshold Add-ons – Home-to-School Transportation and Targeted Instructional Improvement Grant (TIIG) - No COLA

  22. LCFF for 2013-14 Hold Harmless Entitlement Target ------------------------ TIIG Add-on 2013-14 LCFF Funding 11.78% of gap Concentration Grant 2012-13 TIIG Trans. Add-on 2012-13 Trans. Supplemental Grant 2012-13 “Included” Categoricals 9-12 GSA K-3 GSA Base Grant 2012-13 Revenue Limit www.capitoladvisors.org

  23. LCFF for 2014-15 New Entitlement Target 2014-15 LCFF Funding TIIG Add-on Target in 2013-14 28% of new gap Concentration Grant Trans. Add-on Supplemental Grant 9-12 GSA 2013-14 LCFF Funding (adjusted for ADA) K-3 GSA Base Grant (with COLA) www.capitoladvisors.org

  24. Economic Recovery Target www.capitoladvisors.org Goal is to restore all districts to at least 2007-08 funding levels by leveling up LCFF “losers” ERT = undeficited revenue limit in 2012-13 + COLA (1.94%) for 2013-14 thru 2020-21 + categorical funding in 2012-13 w/o 20% flex reductions or “fair share” reductions District are transitioning toward the greater of its LCFF Entitlement Target or ERT Most districts had LCFF ET > ERT

  25. Economic Recovery Target www.capitoladvisors.org Approx. 230 districts had ERT > LCFF ET Approximately 96 of the 230 districts had an ERT above the 90th percentile (more than $14,500 per ADA) and were not be eligible to receive ERT payments 45 of those 96 districts receive necessary small school funding 130+ of the 230 districts had an ERT below the 90th percentile and are receiving ERT payments to restore them to their ERT by 2020-21 ERT payments are being made in 8 equal, annual installments in addition to any LCFF “gap” funding

  26. Stand-Alone Categoricals www.capitoladvisors.org Proposed for Ongoing Funding (no COLA) • After School Education and Safety Program ($546.9 million) • State Preschool ($509 million) • Child Nutrition – Breakfast Startup ($1 million) • Emergency Repair Program ($188.1 million) • County Office of Education Fiscal Oversight ($4.8 million) • California School Information Services ($6.6 million) • K-12 Internet Access ($8.3 million) • State Testing Program ($128.8 million) • California Partnership Academies ($21.4 million) Proposed for Ongoing Funding (includes COLA) • Special education ($3.3 billion) • Foster Youth Programs ($15.2 million) • American Indian Education Centers and Early Childhood Education Programs ($4.5 million) • Child Nutrition ($155.4 million) Proposed for One-time Funding (includes COLA) • Adults in Correctional Facilities ($15 million) Proposed to be Eliminated (funding to be rolled into LCFF) • Agricultural Education Incentive Program • Specialized Secondary Programs

  27. County Offices of Education www.capitoladvisors.org $25.9 million in new funding for COE to fully meet county office of education funding targets under LCFF $4.8 million in continuing on-going funding for County Office of Education Fiscal Oversight Sharper focus in 2014-15 on new role in reviewing LCAPs and expenditure restrictions

  28. The LCFF Funding Gap www.capitoladvisors.org • Full implementation for districts and charters will occur over many years (DOF sticking with 8-year prediction; LAO disagrees) • Calculation of progress toward full implementation is critical to determining: • K-3 GSA requirements • Supplemental and concentration grant expenditure requirements

  29. K-3 GSA www.capitoladvisors.org • Transition to school site average of 24:1 • Methodology – number of pupils in grades TK-3 enrolled at the school site, divided by the number of full-time equivalent classroom teachers for grades TK-3 at the school site • Identify gap between prior year average K-3 class enrollment by school site and target of 24:1 • Note: 2012-13 does not remain the base year. 2013-14 averages are used to determine 2014-15 class size reduction requirement. Any year in which you make more progress than the minimum requirement effectively accelerates the transition to 24:1 • Close K-3 class size gap in proportion to progress toward closing LCFF entitlement gap (2013-14 progress was 11.78%; 2014-15 progress proposed by Governor is about 28%) • Can locally negotiate alternative ratios • Not waivable by State Board of Education

  30. Supplemental and Concentration Grants www.capitoladvisors.org • LEAs must “increase or improve services” for grant generating students “in proportion to the increase in funds apportioned on the basis of the number and concentration” of those students • SBE regulations - January 16, 2014

  31. LCFF Spending Rules – the Basics www.capitoladvisors.org • Theory – At full LCFF implementation, base grants pay for core program and supplemental/concentration grants are for increased or improved services for EL, low-income and foster youth • Methodology – Calculate 2013-14 base year spending for grant generating students, apply a formula that calculates proportional increases in spending or results (increased or improved services) for EL, low-income and foster youth for each subsequent year as LEAs narrow the gap to full LCFF funding

  32. LCFF Spending Rules – the Basics www.capitoladvisors.org • Practice– Level of spending calculated for 2013-14 will have a significant impact on the year-to-year rate of increased or improved services for grant generating students • Caution– you must think about some defendable metric if choose to demonstrate “increased or improved” services by means other than expenditures

  33. “Proportionality” Tied to Closing “Funding Gap” www.capitoladvisors.org • The base year for upcoming LCAPs is 2013-14, not 2012-13 • Gap funding percentage will drive the proportionality percentage • The estimated closure of the “gap” for 2014-15 is NOT 11.8% (LCFF increase for 2013-14) • The closure of the gap for 2014-15 will be known in the final budget and may be closer to 28% • Creates significant challenges for the LCAP development process outlined in the SBE regulations

  34. SBE Regulations: Step-by-Step www.capitoladvisors.org Seven steps: Determine total revenue from supplemental and concentration grants at full LCFF funding Determine prior year expenditures of additional (beyond core?) support for EL, low-income and foster youth (for 2013-14 must be at least equal to 2012-13 EIA funding) Calculate the gap between prior year spending and target revenue at full implementation (Step 1 minus Step 2)

  35. SBE Regulations: Step-by-Step www.capitoladvisors.org Estimate the increase in supplemental and concentration grant funding for the LCAP year (multiply the gap figure in Step 3 by the DOF calculated LCFF gap reduction percentage - 28% for 2014-15 based on January Proposal) Calculate total supplemental and concentration grant funds for LCAP year - add LCAP year increase (Step 4) to the prior year expenditure (Step 3) Calculate base funding in the LCAP year (total 2014-15 LCFF funding minus Step 5) Calculate minimum proportionality percentage by dividing LCAP year supplemental/concentration grant funds (Step 5) by LCAP year base grant funds (Step 6)

  36. District-wide Use of Funds www.capitoladvisors.org • Districts eligible for concentration grant funds (over 55% threshold) may demonstrate increased or improved services by using funds on districtwide basis, but must: • Identify in the LCAP services provided on a district-wide basis • Describe how those services are directed toward meeting LCAP goals for unduplicated pupils • Districts under 55% threshold may still use funds on a district-wide basis, but in addition to above must: • Describe how district-wide services are the “most effective” use of these funds to meet LCAP goals for unduplicated pupils

  37. School-wide Use of Funds www.capitoladvisors.org • Districts may expend funds on a school-wide basis if unduplicated pupils exceed 40% of a school’s total enrollment, but must: • Identify in the LCAP those services being provided on a school-wide basis • Describe how those services are directed toward meeting LCAP goals for unduplicated pupils • For schools under 40% threshold funds may still be used on a school-wide basis, but in addition to above must: • Describe how school-wide services are the “most effective” use of these funds to meet LCAP goals for unduplicated pupils

  38. County-wide or Charter-wide Use of Funds www.capitoladvisors.org No threshold, can use funds on county-wide or charter-wide basis requires the COE or charter, but must: • Identify in the LCAP those services being provided on a county-wide or charter-wide basis • Describe how those services are directed toward meeting LCAP goals for unduplicated pupils

  39. LCAP Timeline www.capitoladvisors.org January 31, 2014 • SBE regulations on use of supplemental/concentration grant funds March 31, 2014 • SBE template for LCAPs July 1, 2014 • LEAs must adopt LCAPs for 2014-15 July 1, 2015 • LEAs must update LCAPs for 2015-16 October 1, 2015 • SBE evaluation rubrics

  40. LCAPs – State Priorities www.capitoladvisors.org Compliance with Williams criteria – instructional materials, teacher assignments and credentials, facilities Implementation of SBE adopted academic content standards, including programs and services for ELs to access the common core and ELD standards Parental involvement Pupil Achievement – statewide assessments, API, completion of A-G requirements, CTE sequences and AP courses, EL progress toward proficiency, college preparation (Early Assessment Program)

  41. LCAPs – State Priorities (cont.) www.capitoladvisors.org • Pupil engagement – attendance, dropout and graduation rates • School climate – suspension and expulsion rates, etc. • Access, including for subgroup, to a broad course of study in specified subject areas • Pupil outcomes in specified subject areas Two additional priorities for COEs: • Services for expelled students • Regional services for foster youth

  42. SBE LCAP Template www.capitoladvisors.org • SBE Draft Template - see SBE January Agenda Item 20, Attachment 3: http://www.cde.ca.gov/be/ag/ag/yr14/agenda201401.asp • Groups state priorities under three broad categories: • Conditions of Learning (1, 2, 7, 9 and 10) • Pupil Outcomes (4 and 8) • Engagement (3, 5 and 6)

  43. SBE LCAP Template www.capitoladvisors.org SBE provides “guiding questions” related to LCAP engagement process and for each of the three broad state priority categories Template includes fields for goals, metrics, applicable subgroups, three year plan for goals, actions and expenditures, etc. Note: Actions and expenditures may apply to more than one state priority and more than one goal – LCAP with expenditures is not the same thing as a budget

  44. LCAP - Community Engagement www.capitoladvisors.org Prior to adopting LCAP and budget you must: • Present LCAP to parent advisory committee • Present LCAP to EL parent advisory committee if LEA enrolls 50 or more ELs equaling at least 15% of total enrollment • Notify public of opportunity to submit written comments on draft LCAP • Public hearing to present draft LCAP and opportunity for public comment • Public hearing to adopt LCAP and budget

  45. Budget Aligned to LCAP www.capitoladvisors.org For 2014-15, and each subsequent year, the LCAP must be adopted before the LEA adopts its budget The county superintendent, or SPI, shall disapprove a budget that does not include the expenditures necessary to implement the LCAP

  46. Evaluation and Technical Assistance www.capitoladvisors.org • SBE to adopt LCAP evaluation rubrics by October 1, 2015 that: • Assist LEAs in evaluating strengths and weaknesses and areas needing improvement • Assist county superintendents or the SPI to identify LEAs in need of technical assistance • Assist the SPI to identify LEAs for which intervention is warranted • California Collaborative for Educational Excellence (CCEE) - CCEE to provide technical assistance to LEAs to meet the state priorities identified in each LCAP

  47. Oversight and Intervention www.capitoladvisors.org • LCAPs submitted to county superintendent (the SPI for COEs) for review, and shall be approved if: • LCAP adheres to SBE template, and • The budget includes expenditures sufficient to implement the specific actions identified in the LCAP • If LCAP is not approved, or if the LEA requests technical assistance, the county superintendent (or SPI) may: • Assist in identifying strengths or weaknesses related to the state priorities • Assign an academic expert or team to assist in implementing effective programs and improving student outcomes • Assign the CCEE to provide advice and assistance

  48. Oversight and Intervention www.capitoladvisors.org The SPI is authorized to intervene if both of the following criteria are met: The LEA did not improve outcomes for three or more pupil subgroups (ethnic, socio-economically disadvantaged, ELs, special needs, foster youth) with respect to more than one state priority for three out of four years, AND The CCEE has provided assistance and submits findings of failure to implement recommendations or persistent inadequate performance

  49. Other Major Budget Issues www.capitoladvisors.org

  50. Funding for Common Core www.capitoladvisors.org • 2013-14 budget provided $1.25 billion in one-time funds • Expect debate over additional funding • Distributed based upon prior year enrollment (approx. $200 per pupil) • Went to school districts, COEs, charter schools • May be used for professional development, instructional materials, and technology enhancement • LEAs must spend by the end of 2014-15 • Funds subject to annual audit • LEAs must: • Create plan for use of funds, describe and adopt at a public meeting • By July 1, 2015, report detailed expenditure information to CDE

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