Gov. Brown Releases January Budget Proposal for 2017-18

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To meet the January 10 constitutional deadline, today Governor Jerry Brown released his January Budget Proposal for the 2017-18 fiscal year, effectively ending speculations of the Administration’s revenue projections and priorities for the coming year. At the press conference, his remarks focused on the customary theme of maintaining “fiscal prudence” and encouraged the Legislature to begin budget conversations with “precaution” since the state’s progressive tax system significantly relies on taxing the high-income earners. As a result, there is a heightened “uncertainty” and “unpredictability” of our “volatile” revenue system. In his comments, there were nearly no reference to school education except for a question asked by a reporter regarding the passage of Proposition 51, the $9 billion K-14 school facility bond, and a reference to the governor’s continued commitment to funding the Local Control Funding Formula.

It is no surprise that the California Legislature and the governor will direct their attention to the national political landscape, as there are several policies with significant fiscal implications that could negatively impact the state. These include an impending threat to repeal the Affordable Care Act that could cost the state more than $20 billion in federal subsidies and result in an estimated loss of 334,000 jobs, potential tax cuts to the highest income-earners as well as changes to immigration and climate change policies that could disrupt communities throughout California.

Below is ACSA’s initial review of the governor’s January budget proposal. A full analysis will be provided at the end of this week as additional details become available.

Overview
Gov. Brown’s budget proposes a flat funded General Fund budget plan of $122.5 billion, a 0.2 percent decline from the current fiscal year. As a result, this year’s investments in K-12 public education are relatively modest compared to the year-over-year augmentations schools have received since the November, 2012 passage of Proposition 30, the temporary income and sales taxes. The budget proposes to fund the Proposition 98 minimum guarantee at $73.5 billion, a $500 million downward adjustment to the 2016-17 funding levels in an effort to not over-appropriate the minimum guarantee.

More specifically, the administration includes the following proposals:

Actions to Balance the Budget
Compared to the 2016 Budget Act signed last June, the administration notes that the state is experiencing a modest deficit as a result of a $5.8 billion decline in its revenue forecast for 2015-16 through 2017-18. To close the budget deficit and rebuild the state’s operating reserve, the budget proposes various solutions, including technical adjustments to the Proposition 98 minimum funding guarantee. The budget summary notes that despite these adjustments, the overall K-14 funding level will continue to grow by a projected $2.1 billion for 2017-18.

• Recapture 2016 Allocations ($0.9 billion)—The 2016‑17 Budget contained a large
  package of one‑time spending. Much of that spending remains uncommitted at this point in time, and the budget proposes to eliminate the authority to spend the dollars. The two largest components of this proposal are eliminating the $400 million set‑aside for affordable housing that was never allocated, as well as a $300 million transfer to modernize state office buildings planned for 2017‑18.
• Constrain Spending Growth ($0.6 billion)—The budget limits spending proposals
  to keep spending flat in 2017‑18 compared to 2016‑17. This involves pausing rate increases for child care, not providing Middle Class Scholarships to any new students, and not submitting a variety of spending proposals (including those to implement new legislation) from state departments that otherwise were justified.

Education Budget
As part of the $73.5 billion provided through the Proposition 98 minimum guarantee, the budget includes the following proposal for public education:

• Local Control Funding Formula: $744 million, bringing total formula implementation to 96%.
• One-Time Discretionary Funding: $287 million in one-time discretionary block grants allocated on a per-pupil basis, and funding will offset any outstanding mandate reimbursement claims.
• Special Education: In response to the 2015 recommendations of the California Statewide Special Education Task Force and the recent report by the Public Policy Institute of California, the administration indicates they will engage stakeholders in a conversation throughout the spring budget process to obtain feedback on the current special education finance system and the recommendations included in the recent reports.
• K-12 School Facilities: While voters passed Proposition 51 in November, 2016 to authorize $7 billion in state general obligation bonds for K-12 schools, the administration is interested in pursuing regulatory and policy changes to address their concerns with the existing bond program. The administration also intends to introduce legislation requiring facility bond expenditures to be included in the annual K-12 Audit Guide.
• Career Technical Education: While it is not a new appropriation, it is important to note the budget provides $200 million for the CTE Incentive Grant Program, the final installment of funding for this three-year program initiated in the 2015 Budget Act. The Department of Finance has made it clear that commencing with the 2018-19 fiscal year, school districts who received grant funding will be expected to support the full cost of maintaining these programs with their existing LCFF allocations.

As a major education stakeholder, ACSA will be actively engaged in the budget discussions with the administration to ensure our best interests are upheld. Throughout this legislative season, ACSA will keep you apprised of all budget negotiation discussions until the budget is completed by the June 15^th constitutional deadline.

The full budget can be found at http://www.ebudget.ca.gov/FullBudgetSummary.pdf.

Statement from Wesley Smith, ACSA Executive Director
Public education is in the strongest position it has been in a decade and our students are the beneficiaries of the good work we’ve done in our schools, our communities, and inside the State Capitol. But ACSA acknowledges that there is more work to be done.

I’m intrigued with Governor Brown’s 2017-2018 budget proposal and the role ACSA will play in positioning our students for success. As student advocates, we believe the improvements and increases to funding are critical. The passage of Proposition 55 in November maintains existing funding for our students, but those levels are not enough to meet increased expectations and student needs. We must pursue long-term investments to stabilize public education for years to come.

Moving forward, a responsibility rests with lawmakers on how to confront the growing impact of pension obligations on school budgets, we must strengthen collaboration on the implementation of the new accountability system, as well as mitigating federal changes that impact our state’s public schools.

ACSA has been a leader is student advocacy and we look forward to working with the legislature to craft a budget that serves our public school students.