Big (invisible) K-12 spending boost

Should schools assume taxes will pass?

Gov. Jerry Brown gave K-12 school districts significantly more money, tempered by conflicting messages and sober warnings in the revised budget he presented on Monday. Reflecting higher state revenues and an acknowledgment that schools and community colleges have been socked disproportionately in recent years, the extra dollars for 2011-12 would raise base level funding under Proposition 98 $3 billion above the $49.4 billion that Brown proposed five months ago. That’s about half of the $6.6 billion in new money that the state now expects (see budget summary for education).

For most parents and teachers, the extra dollars will be all but invisible. Most districts won’t be rehiring staff or restoring programs from a few years ago; additional per-student aid will rise but a blip. Brown is proposing that nearly all of the money be used to eliminate $2 billion in late payments, known as deferrals, that he had proposed in January, and to pay down $400 million in previous K-12 deferrals, along with $350 million in community college deferrals. That will help districts’ balance sheets, but not the classroom, at least not directly. Funding overall would remain flat.

Brown’s May budget also continues to assume  that the Legislature will put on the ballot – and voters will soon approve – a five-year extension of the temporary increase in the sales tax, the vehicle license fee, and the personal income tax. (The .25 percent income tax increase would be suspended this year but resume in 2012-13.) Tax extensions are critical to closing a budget shortfall that, even with higher revenues, remains at about $10 billion, Brown said.

Though pressed by reporters, Brown and his finance director, Ana Matosantos, were vague – perhaps intentionally so since they are continuing to negotiate with Republicans on timing, length, and details of the taxes – in explaining how districts should go about building next year’s budgets now without knowing for sure there will be more revenue. He said he understood the school districts’ dilemma and indicated that there would have to be a transition in the event that the taxes were approved temporarily by the Legislature (four Republicans willing), then defeated by voters. But he did not elaborate. Even with taxes extended, spending for K-12 and community colleges next year would be $4 billion below the 2007-08 high water mark.

Even with tax extensions, state revenue as a percentage of personal income would fall to the 1972-73 levels (May Revision budget). Click to enlarge.

Even with tax extensions, state revenue as a percentage of personal income would fall to the 1972-73 levels (May Revision budget). Click to enlarge.

The Education Coalition – the California Teachers Association, the state PTA, and the California School Boards Association (CSBA) – all separately praised Brown’s “balanced” approach to the budget. But consultants paid by districts to look into details were giving conflicting advice Monday. School Services of California Inc. was recommending to assume for the best: “Under the current circumstances, we advise following the Governor’s stridently delivered advice; if he is unable to deliver on his plan, the consequences will be laid at the Governor’s door.” But Bob Blattner of Bob Blattner & Associates was urging caution: “The Governor is essentially asking school leaders to jump out of an airplane, trusting that the backpack they are wearing contains a parachute.” Blattner was recommending that districts assume there may be as much as a $675 per student cut in state tuition, and then look for assurances from Sacramento that even if the tax extensions fail, there would be ways to soften the impact – like reinstating the deferrals.

School districts handed out layoff notices to 20,000 teachers statewide. They became final on Sunday. If Brown’s May revise is adopted and taxes are extended, most of the teachers could be recalled. But districts worried that voters would say no to taxes would be wary of adding to their payrolls.

Deferrals and adult supervision

Deferrals have grown dangerously large, to nearly $10 billion, putting dozens of districts in financial danger. As Bob Wells, executive director of the Association of California School Administrators, told us, the first deferral, moving payments back a day, from June 30 to the new fiscal year on July 1, seemed innocuous. But it quickly became a slippery slope, Wells said, with billions of dollars now deferred for 8 to 10 months.

“I think for any family, if you looked at your June budget and said could you hang in there and get your money on July 1, sure; but if you woke up the next day and learned it would be months, then you’d be in trouble,” he said.

Rick Pratt, vice president of CSBA, and Bill Lucia, president and CEO of EdVoice, agreed that erasing some of the deferrals was appropriate. Lucia said that deferring money owed to school districts, forcing them to borrow money, was using education to subsidize other parts of the state budget.

“The governor has now made education a priority, and paying down deferrals is wise for education and wise budgeting,” Lucia said.

Deferrals have had the biggest impact on small school districts and charter schools, which have had to borrow money at much higher rates than large districts, Lucia said. Property-wealthy districts that get a smaller portion of their money from the state for their base revenue were least affected, so reducing deferrals would begin to address that inequity in education funding and will ease cash flow problems, and even prevent some districts from being forced into insolvency, according to Nick Schweizer of the Department of Finance. To the extent that districts have to borrow less, they’ll be able to redirect savings to programs and personnel.

What happened to the all-cuts budget?

I and many others had assumed that Brown would lay out an all-cuts budget in detail – a Plan B – in the event that tax extensions are defeated. In his press conference, he would not be pinned down on the consequences. “I will not give Republicans a road map to ruin; I am giving them a road map to success,” he said.

However, on page 12 of his budget summary, he wrote that community colleges and K-12 schools, comprising 40 percent of the general budget, “would need to bear a heavy share of an ‘all-cuts’ budget.” Proposition 98 would have to be suspended, he said. A cut of $5 billion to Prop 98 is the equivalent of lopping a month off of the school year and laying off 51,000 teachers, eliminating 52,000 courses at community colleges, and raising fees from $36 to $125 per credit.

Brown has said he doesn’t favor using scare tactics to pressure voters to do the right thing. That may be one reason he didn’t lay out Plan B in detail. Another reason is that even an all-cuts budget would require four Republican votes – two in the Assembly and two in the Senate – and last week Republicans vowed not to suspend Prop 98.

Brown said he was optimistic he could turn Republican votes; he said he was talking seriously with between four and 10 of them, without saying who.

One can imagine variables at play in his talks:

  • When to vote: Brown said he’d favor a popular vote as soon as this fall. But that would create problems for school districts; if he could persuade Republicans to extend taxes until a ballot vote next June or in November 2012 (what CTA favors), school districts could budget for a year without cuts.
  • How long to extend taxes: Brown wants to extend taxes for five years. Could he persuade Republicans to agree to two or three?
  • Price of reform: Business groups, including the Silicon Valley Leadership Group, the Bay Area Council, and the Los Angeles Chamber of Commerce, have written Brown calling for a “workout plan” pairing tax increases with structural changes in Sacramento: amending environmental regulations, adopting a spending cap, and scaling  back public pensions. Brown said Monday he too favors annual limits on spending and pension reforms. Can he and Republicans reach a deal that doesn’t alienate Democrats?

Here are some key education numbers:

Proposed 2011-12 Prop 98 guarantee: May revise, $52.4 billion ($38 billion from General Fund); January budget, $49.4 billion. Increase: $3 billion.
2010-11 Prop 98 guarantee, as adopted: $49.7 billion.
2011-12 Prop 98 guarantee without tax extensions: $50.8 billion. Increase over 2010-11: $1.1 billion.
Proposed 2011-12 K-12 per-pupil funding: $7,878; January budget as amended by the Legislature, $7,693. New proposed increase: $185 per student, 2.4 percent.
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  1. Mr. Fensterwald: You are apparently unaware that you are playing a pea shell game with your numbers. You can’t use only single ledger accounting, unless you’re Enron.  You have to consider expenditures as well as revenues.
    Governor Brown’s proposed 2012 General Fund Budget document reports that Prop 98 guaranteed funding for K-12 public schools was cut from $56.6 to $49.1 billion from 2009 to 2011, a $7.5 billion total cut.  But if Gov. brown increases school funding $3 billion for 2012, coupled with the $4.5 billion reduction in “categorical” expenditures authorized in 2009 under AB X-4-2, the $7.5 school funding drop would be totally offset.
    If another round of deregulating of school funding mandates were enacted by the legislature per the LAO’s recommendation under ABX-4-2, possibly expenditures could be reduced by an additional $7.4 billion.  Such a reduction would not entail core teacher layoffs according to the LAO. It would only involve cutting political earmarks and programs along with a modest increase in average class size from 21 to 24 students.
    If you do double entry accounting as would be required under accounting standards, and you assume that the legislature will enact another round of reductions of mandated political earmarks, that would be equivalent to a $1,195 per student per year increase in funding for core educational activities.
    You have a flawed assumption in your numbers of assuming that only the revenue side of the ledger tells the whole story and that expenditures are constant.  Numbers are only functions of assumptions.
    Tell me where I am wrong.

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  2.  With the passage of AB1200, school districts really do not have to the option decide what scenario they want to use for budget assumptions. Each school district has their budgets approved by a County Office of Education. It is the County of Education, not consultants who set the assumptions school must use for budgeting purposes. It would make sense to me that some body like the Department of Finance establish budget assumptions that are given to County Offices rather than leave it to each County Office.

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    • Good point, Mike. It will be interesting to see how the county superintendents come down on the issue.
      Wayne (you can call me John), the Enron in this case is the Legislature and Governor (along with voters who want good schools but don’t want to pay for them), who have deferred payments to schools and community colleges from one year to the next while creating the illusion that they are meeting Prop 98. That’s the pea shell game, and Brown has recognized that it’s time to be straight about it. You neglect to factor in deferrals.

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  3. Some factual corrections:
    Factual error #1:
    [It would only involve cutting political earmarks and programs along with a modest increase in average class size from 21 to 24 students.]
    I have children in elementary, middle and high school.  My 4th grader is in a class of 35 students.  My 2 middle schoolers have classes with 34 to 43 students in them and my high school student and his friends are in classes with more than 50 students.
    Factual error #2:
    [If another round of deregulating of school funding mandates were enacted by the legislature per the LAO’s recommendation under ABX-4-2, possibly expenditures could be reduced by an additional $7.4 billion.]
    If a categorical program goes away, it doesn’t mean the need to pay for that program goes away.  Categoricals  include things like:  Special Education, food & nutrition, after school education and safety, Class Size Reduction, bus transportation and maintenance, adult education, charter schools, foster youth educational services, apprentice programs, english language programs, multi-track year round programs, partnership academies, AP grants, Arts & Music, tutoring, counselors, GATE programs, instructional materials, International Baccalaureate, PE, State Assessments (STAR, CAHSEE, etc.), teacher credentialing, etc.
    So, just to reiterate – taking away the categorical funding for these programs doesn’t suddenly create a windfall for a school district that can be used to go on a shopping spree.  It just means that there is more flexibility in allocating the pools of money.

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  4. My last comment was addressing Wayne Lusvardi’s comments.

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  5. Thank you for these points Kimberley.  Wayne’s comments totally fail to acknowledge that categorical funds are there to provide services to students; because the funds may now be moved around does not mean that the students and their needs have gone anywhere.
    In our district, we are still providing nearly all of the programs funded by categoricals, just moved around a bit.  We did eliminate a number of administrative functions that had previously been required to handle the massive reporting requirements of categorical funds.  Adult Education is the one area that was swept into the general fund where the funded services were largely eliminated.  That “windfall” brought us, oh, about 0.6% of our total general fund.

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  6. Kimberley
    1. We’re talking about the AVERAGE class size – not one specific class in a certain school district for band or music or whatever.
    2. AB 18 is pending in the legislature that would convert “categorical” programs into a Block Grant.  Then it would be up to each local school district to decide what among all the so-called essential programs you list would be funded.  Actually your list doesn’t help you cause because it shows that core teachers would not be affected by a budget cut of categorical programs.  Also you fail to answer why the State Legislative Analyst, not me, calls these funding mandates a “broken system.”
    3. There are medically needy people suffering with cancer who cannot get treatment due to lack of funds because someone believes their earmark is absolutely essential.  What is the morality of that?

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  7. Wayne, I have seen those figures for “average” class sizes, but like Kimberly, I find it hard to square that point of data with what everyone seems to observe in actual classrooms.  Neither of our sons have been in a single public school classroom that was as small as that 21-student “average”, since they left 3rd grade.  Every single class that my son (a sophomore) is in this year has 35 or more students.  (There is one entire wall of his chemistry classroom that his teacher cannot reach unless the students stand up and more their desks.  One wonders where the fire marshal is!)  I have tried to stay involved as a volunteer in my sons’ schools, and I see plenty of classrooms.  I understand that anecdotal evidence can be misleading, but really, is anyone seeing class sizes of 24, let alone the supposed current “average” of 21?  Those class sizes may be found in early elementary (which are still rarely lesss than 20) and special ed classes (with 6-10 students, but those are very few in number); however, it stretches credulity to think that those instances are enough to outweigh all of the classes in grades 4-12 that are often much larger.  I wonder whether the figure for “teachers” in the class size calculation includes personnnel who aren’t actually teaching in classrooms. The ratio cited by the LAO and elsewhere certainly seems fishy, like so much of our education “data”, unfortunately.

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  8. Average class size involves taking all students and then dividing that count by the number of FTE at that site. Because most schools have additional credentialed educators for special ed, ELL support, reading specialists, and the like, an “average class size” of 24 does not actually mean that there are any regular classes at that school as small as 24.

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  9. Jim, there are regular classes that size in some places in the state, generally in rural areas or other very small districts.
    The larger districts are often running classes right on the line of what’s legal, such that if a new kindergartener shows up midyear, they have to redistribute all the kids in that grade somehow, causing a lot of disruption.

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  10. The categorical flexibility has been a huge help in budgeting, even when it is spent on substantially the same services. Not only does it ease some of the reporting constraints, but also it has given our (small) district some ability to change the program to deliver more value to more students for the same money, while keeping the spirit of the program intact. For example, in our district, Community Day School money is being used to target potential problems sooner, while they are still enrolled in the regular school, with good results. I recall someone at Stanford is studying the impacts, and I will be interested to see their findings.

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  11. Jim, you are correct in your instinct about class sizes.  Wayne, “AVERAGE” class sizes are arrived at by taking all certificated instructors (small special education classs, resource specialists, ELL teachers, reading recovery teachers and many others not directly in a general Ed classroom), and dividing the number of students by that number.  In addition, for a myriad of reasons teachers in the upper grades are required to have a non-teaching period during the day.  This is also factored into the class size average, so that the actual classroom is much larger than the statistical “average”. 
    Clarification – while it is convenient to assume my numbers in the worst light (those numbers must refer to PE or band), here are some specific examples:  4th grade class – 34 students; 8th grade geometry – 43 students; 11th grade AP Calculus – 50+ students.  It would greatly benefit the conversation if you actually went to a public school and listened to the students, teachers, staff and administrators.  They have a lot of knowledge about what ACTUALLY goes on in education (as opposed to politically loaded talking points.)
    2.  With regard to categorical funding, no one has suggested that the status quo is good.  That was not your original premise, which was that if the programs go away the money is freed up to spend on teachers and classrooms.  My point was that many of these programs are either legally mandated anyway or part of a comprehensive, quality education. 
    3.  With regard to your “#3″ , I’m assuming you are a single payer advocate and that you support the current bill in the legislator.

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  12. Everyone, Kimberly’s formula above calculates the teacher-student ratio, which is not the same as the average class size. In a 19th-century one-room school house the two figures would be the same, as would also be true of a fictional elementary school that had only classroom teachers who spent all day in front of students, with none of the specialized teachers she mentions that real schools have. But another big factor unmentioned so far is the contact ratio, that is the fraction of paid hours in which a teacher is actually in class teaching. If our imaginary elementary school above were a secondary school with a rather cushy 50 percent contact ratio, so that the teachers spent half of their time in front of students and the other half preparing lessons and so on, the average class size would be precisely double the student-teacher ratio. In real schools these numbers are not so neat, but the average class size is never the student-teacher ratio; it is always larger, and California already has the largest in the 50 states.

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  13. Kimberly and Bruce, I see the factors you’ve mentioned that could cause the LAO’s class size figure to result in the class sizes we observe.  Still, it seems hard to believe that we have so many teachers handling small classes of rural, special ed, remediation, ELL etc. students that we can get to an average class size of 21.  Think of it this way:  for every single class of 35 students, it takes another class with only 7 students to yield an overall average class size of 21.  That gap between the 21-student figure and the much larger classes seen in so many schools still seems larger than what these other factors can account for.  Are we sure some non-instructional or para-professional personnel aren’t being included in this calculation?

    I belabor this point only because the class-size figure is so clear-cut and tangible for the public.  Unfortunately, the average taxpayer without children currently in public school — and 63% of households in CA don’t have any children in the home at all – is going to hear that figure and think, “Heck, when I was in school my classes usually had 25-30 kids in them.  There’s plenty more room to cut.”

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  14. Jim, here’s a link to a report from February that states that the average size of most California classes is now 31, with 25 being typical in K-3:
    I can’t account for where the figure of 21 comes from; perhaps some old data, from a somewhat less bad period?

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