The budget contains a number of major issues that raise the question of the role of the state in the design and operation of the K-12 system. There is no context, however, for determining whether these proposals reenforce the appropriate division of state and local responsibilities.
The state should develop a long-term framework that identifies the proper roles the state and local districts play in the areas of governance, finance, and standards. This framework would guide the Legislature in evaluating significant K-12 policy and budget proposals (see page E-17).
Legislature Faces Three Key Decisions in Developing Its 1998-99 K-12 Expenditure Plan
Level of the Guarantee. Our estimate of the 1998-99 minimum guarantee for K-12 education is $176 million less than the budget's. We have developed an alternative budget that differs significantly from the Governor's proposed plan (see page E-27).
Cost-of-Living Adjustment (COLA). The budget proposes a 2.22 percent COLA instead of the 4 percent COLA called for in statute. We recommend the lower amount as it more accurately reflects inflation that has occurred over the past year (see page E-30).
Longer School Year. This one proposal accounts for $350 million in new funds in the budget year. We recommend the Legislature reject the Governor's proposal because more days of the same type of instruction have not been found to improve student achievement (see page E-38).
Statewide Assessment Is Behind Schedule
The statewide test of applied academic skills will not be ready by spring 1999, as planned. We recommend the Legislature (1) delete $30.2 million proposed for the development and administration of this test and (2) allow test development to begin along with development of performance standards (see page E-49).
Budget Increases Proposition 98 Child Care Support of CalWORKs Program
The budget proposes to spend $88.5 million in Proposition 98 funds for child care services exclusively for CalWORKs recipients. The Legislature will want to review this proposal as it evaluates its priorities for the use of Proposition 98 and General Fund monies.
The budget also poses several implementation issues due to its proposal to divide administration of CalWORKs child care between the State Department of Education and county welfare departments. We recommend the Legislature take several actions to address these issues (see page E-58).
Figure 1 (see next page) shows the budget from all fund sources for K-12 education for the budget year and the two previous years. Proposition 98 funding constitutes about three-fourths of overall K-12 funding. In 1998-99, Proposition 98 funding is projected to increase by $222 per student to $5,635. This is a 4.1 percent increase from the revised 1997-98 per-student amount. (Our estimate reflects recent legislative changes that significantly revise the way average daily attendance [ADA] is counted. These changes are discussed in detail later in this Analysis.)
The budget also proposes to spend $472 million from prior-year Proposition 98 funds in 1998-99. As a result of increases in the minimum amounts guaranteed to schools in 1996-97 and 1997-98 (due primarily to higher tax revenues and increased ADA), the state owes schools $427 million more for those years (referred to as "settle-up" funds). An additional $46 million results primarily from unspent prior-year Proposition 98 funding.
Figure 1 also shows that the budget includes expenditures of $3.4 billion in federal funds in 1998-99. This is $88 million, or 2.6 percent, more than estimated federal expenditures in the current year. This change results primarily from a $68 million increase in special education funding.
School Districts by Type and Enrollment. A total of 5.5 million pupils attended school in California's 999 school districts in 1996-97. Figure 2 (see page 7) provides enrollment data by size of school district. Enrollment levels vary significantly among school districts. For example, the state's largest school district, Los Angeles Unified, enrolled 667,305 students in 1996-97, which is more than the combined enrollment of over 650 of the state's smallest school districts.
|K-12 Education Budget Summary|
|1996-97 Through 1998-99
(Funding in Millions)
|K-12 Proposition 98|
|State (General Fund)|
|Local property tax revenue||8,523.8||8,880.6||9,241.0||360.4||4.1|
|Subtotals, Proposition 98||($26,942.4)||($29,275.0)||($31,037.0)||($1,762.0)||(6.0%)|
|State Lottery funds||585.3||656.5||755.1||98.6||15.0|
|Other state funds||51.2||66.6||59.1||-7.4||-11.2|
|K-12 Proposition 98|
|Average Daily Attendance (ADA)b||5,238,926||5,370,279||5,462,947||92,668||1.7%|
|Amount per ADA
|aIncludes unspent Proposition 98 funds and past-year "settle-up" funds.|
|bADA adjusted to exclude excused absences for all years.|
The minimum funding levels are determined by one of three specified formulas. Figure 3 (see next page) briefly explains the workings of Proposition 98, its "tests," and other major funding provisions. The five major factors involved in the calculation of each of the Proposition 98 "tests" include: (1) General Fund revenues, (2) state population, (3) personal income, (4) local property taxes, and (5) K-12 ADA.
Because these factors change during the year, the minimum guarantee under Proposition 98 also changes. Any additional amount needed to fund any increase in a previous year's guarantee is referred to as Proposition 98 "settle-up" funding. The Governor's budget includes $478 million related to "settle-up" for prior years for both K-12 and community colleges ($147 million from 1996-97 and $331 million from 1997-98).
|Distribution of School Districts by Enrollment
|Number of Districts||Enrollment|
|Enrollment Level||Elem||High School||Unified||Total||Total||Percent of Total|
|More than 200,000||--||--||1||1||667,305||12.0%|
|100,000 to 199,999||--||--||1||1||133,687||2.4|
|50,000 to 99,999||--||--||6||6||379,491||6.8|
|40,000 to 49,999||--||--||3||3||138,789||2.5|
|20,000 to 39,999||2||5||35||42||1,164,453||21.0|
|10,000 to 19,999||22||11||55||88||1,252,072||22.5|
|5,000 to 9,999||50||18||60||128||905,320||16.3|
|2,500 to 4,999||63||21||52||136||475,943||8.6|
|1,000 to 2,499||91||21||48||160||280,187||5.0|
|500 to 999||90||18||21||129||93,813||1.7|
|Less than 500||267||10||28||305||62,215||1.1|
|Data exclude county offices of education. Grand total including county offices is 5,612,965.|
|Proposition 98 at a Glance|
|Proposition 98 mandates that a minimum amount of funding be
guaranteed for K-14 school agencies equal to the greater of:
|Test 1--Percent of General Fund Revenues
Approximately 34.5 percent of General Fund plus local property taxes.
|Requires that K-12 schools and the California Community Colleges receive at least the same share of state General Fund taxes as in 1986-87. This percentage was originally calculated to be slightly greater than 40 percent. In recognition of shifts in property taxes to K-14 schools from cities, counties, and special districts, the current rate is approximately 34.5 percent.|
|Test 2--Adjustments Based on Statewide Income
Prior-year funding adjusted by growth in per capita personal income.
|Requires that K-12 schools and the California Community Colleges receive at least the same amount of combined state aid and local tax dollars as was received in the prior year, adjusted for statewide growth in average daily attendance and inflation (annual change in per capita personal income).|
|Test 3--Adjustment Based on Available Revenues
Prior-year funding adjusted by growth in per capita General Fund.
|Same as Test 2 except the inflation factor is equal to the annual change in per capita state General Fund revenues plus 0.5 percent. Test 3 is used only when it calculates a guarantee amount less than the Test 2 amount.|
Other Major Funding Provisions
|Proposition 98 also includes a provision allowing the state to suspend the minimum funding level for one year through urgency legislation other than the budget bill.|
|Restoration ("Maintenance Factor")|
|Proposition 98 includes a provision to restore prior-year funding reductions (due to either suspension or the "Test 3" formula). The overall dollar amount that needs to be restored is referred to as the "maintenance factor."|
The budget proposes $35 billion for Proposition 98 in 1998-99. The shares allocated to the three components remain virtually unchanged from the 1997-98 revised shares. Community College Proposition 98 funding issues are discussed in the Higher Education section of the Analysis(please see Section F).
|Proposed 98 Allocations|
|1997-98 and 1998-99
(Dollars in Millions)
|"Test"||Test 2||Test 2||
|Total Proposition 98||$32,464.4||$32,692.7||$228.3||$34,681.8||$1,989.1|
Governor's Budget Proposals
For Prior-Year Revenue
|School site block grant||$180.0|
|Digital high school||60.0|
|Adult education CalWORKs||12.5|
|Year-round schools deficiency||6.0|
|Standard account code structure||5.5|
|Oxnard extended year pilot||4.2|
|Long Beach USD settlement||4.1|
|Single gender academies||3.0|
|Low performing schools||3.0|
|Teacher national board certification||1.0|
|Salary schedule pilot||1.0|
|Property tax shortfall||$136.1|
|Proposition 98 "settle-up"|
We discuss the proposals shown in Figure 5 later in this Analysis.
The major budget proposals include:
We discuss the details of these proposals later in this Analysis.
Except for revenue limits, the largest K-12 program is special education. Special education funding is expected to increase by $104 million in 1998-99. The class size reduction program, started in 1996-97, will be the second largest categorical program in 1998-99, with proposed expenditures of $1.5 billion. Funding for other categorical programs within the categorical mega-item is expected to increase by $109 million due to the provision of growth and COLA.
|Governor's K-12 Budget Proposals
1998-99 Proposition 98
|Staff development day buy-out||$350.0|
|Digital high school||26.0|
|Staff development programs||20.9|
|Deficit factor buy-out||$52.9|
|Remedial summer school, grades 3 - 6||10.0|
|One-time funding in 1997-98||-$296.1|
|Property tax growth||-360.3|
|Change From 1997-98 (revised)|
|Major K-12 Education Programs
Funded by Proposition 98 General Fund
|1997-98 and 1998-99
(Dollars in Millions)
|Schools and counties||$20,505.8||$21,332.8||$826.9||4.0%|
|Subtotals, revenue limits||($11,796.0)||($12,270.2)||($474.2)||(4.0%)|
|Economic impact aid||384.9||401.2||16.3||4.2|
|Home to school transportation||502.0||523.4||21.3||4.2|
|Class size reduction||1,488.5||1,546.1||57.6||3.9|
|Staff development day buy-out||50.0||400.0||350.0||700.0|
|Digital high school||50.0||76.0||26.0||52.0|
|Deficit factor buy-out||
|aLocal revenue is from local property taxes and is included to show the full amount provided for revenue limits.|