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Workshops created and presented by:

Gerry Shelton,Partner

Susan Stuart,Partner

Richard Gonzalez,Chief Facilities Advisor

Jack O’Connell,Partner

Kevin Gordon,President andPartner

Abe Hajela,Partner

Barrett Snider,Partner

Lee Angela Reid,Senior LegislativeAdvocate


Adonai MackLegislative Advocate

Dave WalrathPresident, Murdock, Walrath & Holmes

Workshops created and presented by:

Workshops sponsored by:

• Vetted among numerous energy-oriented companies by CAG 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


BUDGET ACT2013-14


Budget Act Themes and Thoughts• Balanced and conservative• Focus on K-12 schools & health care• Compromise bridges key political and fiscal

differences• It’s a transition year – LCFF, Common Core, Prop

39• Balancing local control and equity• Spend wisely – restore or redirect?


How it Came Together• Compromise represented strong win by

Governor across the board– Legislature couldn’t assert extraordinary power– His revenue numbers – LCFF – Emphasis on poverty/ELL – solving cost issues

without spending more– Prop 39 – largely the Governor’s vision

• Democrats – base raised, economic recovery target, tinkering on poverty/ELL formula


2013-14 Budget Agreement • $96.3 billion budget with $1.1 billion in reserve• Prop 98 grows to $56.5 billion in 2012-13 and $55.3 billion in 2013-14• $2.1 billion toward LCFF implementation• Governor’s LCFF model with some modifications• LCFF accountability system modified since May Revision• Adult Education and ROCP MOE requirement• $3.9 billion buy-down of K-12 inter-year deferrals (2 years) • $1.25 billion for Common Core implementation• $381 million to K-12 for Prop 39 implementation• $250 million for career pathway innovative grants• $50 million increase in mandate block grant funding


State General Fund Revenues(Billions of Dollars)

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

$75.0

$85.0

$95.0

$105.0

$115.0

$125.0

$93.2 $95.3

$79.4

$84.5

$89.9

$86.8

$98.2 $97.1

$104.5

$110.2

$116.0

98.9100

107

112.3

119

124.8

DOF

LAO


State Revenues• The Governor appeared to low-ball 2012-13 & 2013-14

revenues to hold back legislators• Actual tax receipts through May and June suggest that

LAO’s projections are more accurate• Higher GF tax receipts mean a higher Prop 98

guarantee• Prop 98 settle-up is used for one-time purposes in later

years – this fits the Governor’s plan to pay down the “Wall of Debt” and appropriate funds without creating on-going state costs


Prop 98 Changes Over Time


2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2016-17 $40.0

$50.0

$60.0

$70.0

$55.0 $56.6

$49.1 $49.9 $48.5

$46.9

$56.5 $55.3

$67.0

Inter-Year (Cross-Year) DeferralsDeferral* Original Amount 2012-13 Budget Act** Current

Feb 2013 to July 2013 $ 2,000.0 $(1,468.0+532) $ 0 Mar 2013 to Aug 2013 $ 1,300.0 $ (271+1,029) $ 0 April 2013 to Aug 2013 $ 763.8

April 2013 to July 2013 $ 419.0 $ (0+29.4) $ 1153.4 April 2013 to Aug 2013 $ 678.6

April 2013 to July 2013 $ (503.0) $ 175.6

May 2013 to July 2013 $ 800.0 $ 800.0 May 2013 to Aug 2013 $ 1,000.0

May 2013 to July 2013 $ 177.0 $ 1,177.0 June 2013 to July 2013 $ 2,500.0 . . $ 2,500.0 Total Inter-Year Deferred $ 9,461.4 $ (3,655.4) $ 5,806.0 *all amounts shown in millions

** per final budget agreement

2013-14 Budget Proposal** $ 242.3

Approx. $3.5 billion remaining in Intra-Year Deferrals Balance $ 5,563.7


Governor’s Plan to Pay Down Debt


As of end of 2010-11 2012-13 2016-17Deferrals to schools and community colleges $ 10.4 $ 6.4 $ - Economic Recovery Bonds $ 7.1 $ 5.2 $ - Loans from Special Funds $ 5.1 $ 4.6 $ 0.5 Prior year mandate claims $ 4.3 $ 4.9 $ 3.1 Prop 98 Settle-up $ 3.0 $ 2.4 $ - Borrowing from Local Gov $ 1.9 $ - $ - Deferred Medi-cal costs $ 1.2 $ 2.0 $ 1.1 Deferral of state payroll costs $ 0.8 $ 0.7 $ - Deferred CalPERS payments $ 0.5 $ 0.4 $ - Borrowing from transportation funds $ 0.4 $ 0.3 $ - Total $ 34.7 $ 26.9 $ 4.7 (In Billions)

LCFF COMPROMISE


LCFF Compromise• Fundamental structure of Governor’s proposal

retained• New: Economic Recovery Target (ERT)• New: Base Grants increased• New: Supplemental and Concentration Grants

adjusted• New: CTE/Adult Ed in transition• New: Accountability modified


LCFF Entitlement Target• Entitlement Target = Base Grant +

Augmentations + Supplemental Grant + Concentration Grant + Add-ons

• Base Grant per ADA (will receive annual COLA)K-3 = $6,845 7-8 = $7,1544-6 = $6,947 9-12 = $8,289

• Augmentations – 10.4% ($711.88) for K-3 CSR and 2.6% ($215.51) for 9-12


LCFF Entitlement Target• Supplemental Grant – additional 20% of Base

Grant + Augmentations for each EL, low income and foster pupil (by enrollment)

• Concentration Grant – additional 50% of Base Grant + Augmentations for each student eligible for supplemental grant above 55% concentration threshold

• Add-ons – Home-to-School Transportation and Targeted Instructional Improvement Grant (TIIG)


LCFF Excluded Categoricals• Special education• After School Education and Safety Program • State Preschool• Quality Education Investment Act• State Testing Program• American Indian Education Centers• Early Childhood Education Programs• Specialized Secondary Programs• California Partnership Academies• Agricultural Education Incentive Program• Foster Youth Programs• Adults in Correctional Facilities


LCFF

Base Grant

Supplemental Grant

Concentration Grant

K – 3 CSR Augmentation

9 - 12Augmentation

Trans. Add-on

Entitlement TargetTIIG Add-on

Hold HarmlessFunding

2012-13Revenue Limit

2012-13“Included”

Categoricals

2012-13 Trans.2012-13 TIIG


• 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

• A district will transition toward the greater of its LCFF Entitlement Target or ERT

• Most districts will have LCFF ET > ERT

Economic Recovery Target


Economic Recovery Target• Approx. 230 districts will have ERT>LCFF ET• Approximately 96 of the 230 districts will have an ERT above

the 90th percentile (more than $14,500 per ADA) and will not be eligible to receive ERT payments

• 45 of those 96 districts receive necessary small school funding

• 130+ of the 230 districts will have an ERT below the 90th percentile and will receive ERT payments to restore them to their ERT by 2020-21

• ERT payments will be made in 8 equal, annual installments and will be in addition to any LCFF “gap” funding


Impact on Small School Districts• Funded in LCFF if eligible• LCFF changes eligibility rules and funding levels by

ratcheting down school sizes• Continues soft landing for declining enrollment - ADA is

“greater of current or prior year”• NSS funding increased proportional to increases in

statewide average LCFF allocations• Uncertainty for some small districts above the 90th

percentile with respect to Economic Recovery Target payments


County Offices of Education• New oversight responsibilities – LCFF• Supplemental and concentration grants different (supplemental

Grant = 35%, concentration grant = 35% after 50%)• Creates two-part formula based on costs for regional services

and for alternative educationRegional support funding:

Base grant of $655,920 Additional amount of $109,320 per school district in the county Additional $40 to $70 per ADA in the county (based on a sliding scale,

with less populated counties receiving a higher amount per ADA)

Alternative education funding: Base rate of $11,045 per eligible pupil (pupils who are incarcerated, on

probation, probation-referred, or mandatorily expelled)


Budget Act LCFF Data Runs

District Name District Type

Average Daily Attendance

2012-13 English Learner, Low Income and Foster Youth Unduplicated Percentage

2012-13 Per Pupil Allocation

2013-14 Compromise Proposal

Pre-Recession Funding (07-08 with COLA Applied) in 2020-21

Compromise Proposal, 2020-21

Economic Recovery Payment (X=Yes)

Jefferson County LMNOP Elementary ELEMENTARY 46 48% 10,413 10,929 14,539 14,539 X

XYZ City Unified UNIFIED 8,890 43% 6,391 6,621 9,317 9,851

• DOF has produced LCFF data runs, which we are providing to you

• Outcomes are predicted, not guaranteed• Use this for general planning purposes, but make

your own assumptions and do your own calculations


CTE/ROCPs• Partnership Academies, Ag Incentive Grants and

Supplemental Secondary Grants pulled out• ROCP funds stay in the LCFF• 2-year prohibition on redirection of ROCP JPA funds• 2-year MOE requirement on ROCP expenditures• Grade 9-12 augmentation – restrictions (now you

see them, now you don’t)• $250 million career pathways funding (one-time)


Adult Education• Adult Ed funding stays in the LCFF• 2-year MOE requirement on Adult Ed

expenditures• $25 million in 2013-14 for 2-year planning

and implementation grants


Grades K-3 Class Size Reduction• Transition to 24:1• Identify gap between 2012-13 K-3 average class

enrollment by school site and target of 24:1• Begin to close K-3 class size gap in proportion to

progress toward closing LCFF entitlement gap – 2013-14 progress toward entitlement target is 11.74%

• Base Grant add-on is per ADA while CSR goal is based on enrollment

• Can locally negotiate a different ratio27www.capitoladvisors.org

LCFF Accountability• Compromise between January proposal (local control)

and May Revision (strict expenditure restrictions)• Major decisions moved to SBE rather than Legislature• Most provisions will not apply for 2013-14, but be

careful• Follow broad reference in trailer bill and DOF guidance– Need to plan ahead for 2014-15– Advocacy groups mobilized to scrutinize spending

decisions


Expenditure of Supplemental and Concentration Grant Funds

SBE to adopt regulations by Jan 31, 2014 that:• Require a school district, COE, or charter school to

“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

• Authorize use of these grant funds for school-wide or district-wide purposes in a manner that is no more restrictive than the restrictions in Title I of the federal No Child Left Behind Act of 2001

6/19/2013 29

Accountability – State Priorities1) Compliance with Williams criteria – instructional

materials, teacher assignments and credentials, facilities2) Implementation of SBE adopted academic content

standards, including programs and services for ELs to access the common core and ELD standards

3) Parental involvement4) Pupil Achievement – statewide assessments, API,

completion of A-G requirements, CTE sequences and AP courses, EL progress toward proficiency, college preparation (Early Assessment Program)


Accountability – State Priorities (cont.)5) Pupil engagement – attendance, dropout and

graduation rates6) School climate – suspension and expulsion

rates, etc.7) Access, including for subgroups and special

needs, to a broad course of study in specified subject areas

8) Pupil outcomes in specified subject areas


Local Control and Accountability Plans

By July 1, 2014 each LEA must adopt (over 2 public hearings) a local control and accountability plan (LCAP) that describes:• Annual goals, for all students and for each LCFF

subgroup, for each of the specified state priorities and for any additional identified local priorities

• The specific actions the LEA will take to achieve those goals


Budget Aligned to LCAP• 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


Updated LCAPsFor 2015-16, and each subsequent year, the LCAP must be updated to include:• A review of LCAP goals, an assessment of progress toward the

goals and the effectiveness of specific actions linked to those goals, and any changes to the goals and specific actions

• A listing and description of expenditures (CSAM) for that fiscal year that implement the specific actions identified in the LCAP

• A listing and description of expenditures that will serve students that generate supplemental and concentration grants


Evaluation and Technical Assistance• 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) - $10 million to create the CCEE to provide technical assistance to LEAs to meet the state priorities identified in each LCAP


Oversight and Intervention• 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


Oversight and InterventionThe 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


Oversight and InterventionSPI intervention may include:• Modifications to the LCAP• Budget revisions to improve outcomes related

to the state priorities• Stay and rescind any actions, other than those

required by CBAs, if doing so will improve outcomes

• Appoint a trustee to exercise this authority


LCAP Timeline• January 31, 2014

– SBE regulations on use of supplemental/concentration grant funds

• March 31, 2014– SBE template for LCAPs

• July 1, 2014– First LCAPs with 2014-15 budget expenditures aligned to the LCAP

• July 1, 2015– First LCAP update with additional expenditure reporting

• October 1, 2015– SBE evaluation rubrics


OTHER MAJOR BUDGET ISSUES


Funding for Common Core• $1.25 billion in one-time funds• Distributed based upon prior year enrollment (approx. $200 per

pupil)• Goes to school districts, COEs, charter schools• May be used for professional development, instructional

materials, and technology enhancement• LEAs may encumber funds in 2013-14 or 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


Proposition 39• $2.5 billion over 5 years focused on K-14

exclusively• Starting in 2013 14 - $381 million for K 12 ‐ ‐• CA Energy Commission (CEC)to develop

guidelines, application “form,” and approve applications. CDE to distribute funding.

• Guidelines issues following “public input”• Funds allocated 85% on a per pupil basis and

15% on the basis of the number of NSLP eligible pupils

• Goal to get funding out in the budget year.42www.capitoladvisors.org

Proposition 39• Multi-year project approval being considered• Grantees receiving more than $1 million must spend at

least 50% on projects of $250K or more• Energy Conservation Assistance Account – Revolving loan

program with low/no interest loans - $28M in 2013-14– Considerations for small LEAs

• $15,000 minimum grant for small LEAs of 100 ADA or less • $50,000 minimum grant for ADA between 101 and 1,000 • $100,000 minimum grant for ADA between 1,001 and 1,999 • 2 year advance on allocation available for districts with ADA ‐

1,000 or less - August 1st Application to CDE43www.capitoladvisors.org

Proposition 39Energy Commission Guidance Details To Come• Project Criteria Summary must:

– Focus on energy efficiency & demand reduction first– Be cost-effective– Require contracts with specific project details (i.e. Energy

calculations, specifications, & costs)• Submit annual financial audits• “Alternative energy generation projects and other innovative

energy projects may be considered only if the LEA can document on their annual expenditure report that all other cost effective energy efficiency projects are already installed or have committed installation contracts.”


Proposition 39• Project Design Recommendations– Benchmarking– Sequencing of facility priority– Surveys and assessments

• Project Examples– Lighting Retrofits– Lighting Controls– Heating & Cooling

Equipment– Heating & Cooling Controls

– Water Heating– Building Envelope– Water Efficiency– Pool Equipment– Demand Response


Child Nutrition• COLA on state programs funded at 1.565% ($2.438

million)• Decrease in projected meals served led to “growth”

funding decrease of -$1.331 million• Increased federal funds to CDE:– $1.0 million to increase the frequency of compliance

reviews as a result of new federal requirements – $200,000 to increase technical assistance on new federal

requirements under the Healthy, Hunger-Free Kids Act of 2010


Special Education• 2013-14 COLA funded at 1.565%• Protects Necessary Small Special Education

Local Plan Areas• Does not backfill $61 million federal

sequestration cut• Governor vetoes $30 million for equalization• Debate over re-appropriation begins• Consolidates various programs


Child Care and Preschool• Backfills $15.9 million in sequestration cuts ($11.1

million-General Child Development; $4.2 million-Alternative Payment programs; $.6 million-Migrant Day Care)

• Authorizes transfer of unused CalWORKs Stage 2 funds to Stage 3, if needed

• Re-appropriates $10 million in unused 2012-13 funds to establish new slots ($7 million-General Child Development; $2.6 million-Alternative Payment programs; $.4 million-Migrant Day Care)


School Facilities Changes• Eliminates minimum contribution for routine restricted

maintenance• Eliminates state funding for deferred maintenance, makes

it a local discretion with no match• Allows LEAs to use proceeds from the sale of surplus

property for any one-time general fund use through 2016• Makes permanent the requirement that a school district

give first call on surplus property to charter schools (sale or lease)– Revises to only apply to charters with at least 80 units in-district

ADA for the following fiscal year49www.capitoladvisors.org

School Facilities Program• State facilities bond funds mostly exhausted• OPSC no longer processing applications for

eligibility, modernization, and new construction• Applications are checked for appropriate state

approval and indexed by date order• Expect OPSC to resume processing some

applications as we get closer to state bond approval


MandatesCounty Office of Education

$28 per K-8 ADA $56 per 9-12 ADA $1 per countywide ADA

School District $28 per K-8 ADA $56 per 9-12 ADA

Charter School $14 per K-8 ADA $42 per 9-12 ADA

• Block Grant increased by $50 million for inclusion of Graduation Requirements

• No funds for filed claim reimbursement

• Amends Behavioral Intervention Program to essentially define away the state mandate – CSBA remains concerned

• Block Grant election - August 30


Governor’s Vetoes• The Governor vetoed funding for

– federal funds support ($225,000) by eliminating the requirement to develop a child care preschool plan for a universal preschool program

– federal funds support ($225,000) by eliminating the requirement to translate parent notifications and templates

– Prop 98 support ($30,000,000) of Special Education by deleting the proposed equalization of special education funding

– Prop 98 support ($5,000,000) of State Preschool by deleting some of the proposed increase in preschool slots

• The Governor sustained funding, but provided comments on the future of the California Collaborative for Educational Excellence, Specialized Secondary Programs, and the Agricultural Career Technical Education Incentive Program


OTHER ISSUES2014 Policy and Budget


School Facilities Bond in 2014?• Governor doesn’t support status quo, wants

simplification and more local control• Potential conflict with 2014 water bond• Potential bond language being discussed• 2014 state bond probably $5-7 billion• Supported by SPI and education community


Parcel Taxes• Expect discussions in early 2014• Dems control 2/3 needed to place

Constitutional Amendment on ballot• Lowering vote threshold from 2/3 to 55%• Polling trending down• Assembly working on alternative to allow school

boards to levy different types of taxes


CABs LegislationAB 182 (Buchanan) moving through Senate– Limiting CABs to Ed Code and financings to 25 years

with max 8% interest rate– LEAs may use Gov. Code for standard bonds with

financing at 30 years (down from 40)– Requiring a 4 to 1 repayment – All CABs must be callable– Requires two public presentations, financial analysis

of the CAB, rationale for it, comparison with standard bond, and info about the underwriter


Local Bond Campaign Reform• AB 621 (Wagner) prohibits an LEA from entering

into a financial advisory, legal advisory, underwriting, or other similar relationship with an individual or firm if that individual or firm provided, or will provide, bond campaign services to the bond campaign

• Would take effect January 1, 2014• Bill pending in the Senate


Cost Pressures• Common Core Standards – Professional

Development, Instructional Materials and Technology• CalPERS Contributions• CalSTRS Contributions• Affordable Care Act• Return to 180 Day• Return to 24:1• Employee Salaries and Benefits• Energy Costs


Collective Bargaining• Expenditure, program and accountability rules

are yet to be developed, so do not go beyond 2013-14

• Maintenance of Effort requirements• Make management decisions within new

accountability framework• Consider 2014-15 and following year obligations

before finalizing agreements


The Budget Act and Trailer Bills• AB 110 - Budget Bill - The 2013 14 State Budget‐• SB 73 - Proposition 39 implementation - Implements the California

Clean Energy Jobs Act (Proposition 39) by allocating energy efficiency funds, and providing grants to K 12 and Community Colleges‐

• AB 86 - K 12 Education – ‐ Main education trailer bill; includes retiring deferrals, $1.25 billion for Common Core, and $250 million for CTE grants

• AB 97 - Local Control Funding Formula - Implements the LCFF; includes LCFF grants, LCFF transition, ERT, LCFF accountability, and MOEs for ROCPs and adult education

• SB 91 - Local Control Funding Formula – Enacts amendments to AB 97


Thank You• We will send you this PowerPoint• Please feel free to use the content as you wish• Questions? Please contact Kristie Rucker at

[email protected], or (916) 557-9745


capitoladvisors

Documents

transition year lcff

budget act

energy services company

higher prop

common core implementation

budget agreement

orgstate revenuesthe

legislatorsactual tax