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  • Deficit déjà vu: Revenue whiplash jeopardizes ambitious new programs

    Deficit déjà vu: Revenue whiplash jeopardizes ambitious new programs


    Credit: Alison Yin/EdSource

    One year ago, we wrote in this space that it was time for an honest conversation about California’s structural budget problems. We noted that despite the record level of education spending the state was planning, the highly volatile nature of state tax revenues could change that good news into bad nearly overnight. Nobody cared.

    That our cries about a falling sky were ignored last year wasn’t surprising. We were writing only a few months after Gov. Gavin Newsom had reported a surplus of nearly $100 billion in the May 2022 revision. And, his January 2023 budget still projected a “nothing to see here” vibe, despite shifting into a modest deficit. Things were looking pretty OK twelve months ago. Now they aren’t, and despite the governor’s optimism, the fiscal situation may be bad for some time to come, which is why we are picking up this conversation again. If you care about the future of California’s schools and students as we do, you’ll agree we need to have a serious discussion about supporting our education investments with stable revenue.

    The Legislative Analyst’s Office identified a $68 billion “budget problem” in its latest fiscal outlook. The even more dire news, however, came earlier, when its revenue forecasters declared that the state had entered an economic downturn in 2022, resulting in a significant revenue shortfall for budget promises made during 2023-24, and persistent deficits anticipated through 2027-28. On a national level, there is talk of a “soft landing” for the economy. In California, the ride looks to be a bit bumpier.

    And predictably, talk of cutting K-12 funding has already started to emerge. We know from the Great Recession that lawmakers quickly cut per-pupil funding, delayed payments to schools, and swapped funding with local governments. We have the Proposition 98 reserve to draw on this time, but the LAO notes that those funds may dry up to get us out of the 2023-24 and 2024-25 budget hole, leaving school districts in a precarious funding situation if the economy worsens.

    But, as they say in the infomercials, “Wait, there’s more.” There has been a significant push from state leaders to develop a “continuous improvement” model for California schools. This has meant a significant financial investment — in the realm of billions of dollars — in the recruitment and retention of teachers, new programs that address students’ social and emotional learning needs, and experiments with “whole child” approaches to schooling by funding programs like community schools. The issue is that funding for many of these programs was one-time only. Ignoring the issue of school funding stability means that the state’s strategy to shift learning paradigms is at risk of losing resources in the coming years.

    The governor just released his draft budget for the 2024-25 fiscal year with the deficit and education funding featuring prominently. It means that while there will be belt-tightening for schools, much of the gap will be closed by delaying funding to a variety of programs, including preschool, transitional kindergarten and full-day facilities grants, and funding for the UC and CSU systems. The strategy appears to be to fund the status quo this year. Draw upon reserves. Delay some funds here, shift a few billion there. And, generally avoid, where possible, cutting back on special projects funded with one-time funds. Then, hope it doesn’t get any worse.

    Notably, the governor’s Department of Finance is projecting a deficit of $38 billion or $30 billion less than the LAO’s figure from five weeks earlier. That isn’t trivial. Part of the explanation is that recent stock market gains contributed to a more positive revenue picture. Major shifts in tax revenue are, as the governor essentially stated, “normal” in California. That is the problem.

    Fixing the state’s structural fiscal problems will be difficult, and all pieces need to be part of the discussion. This includes reforming Proposition 13, accounting for long-term liabilities such as pensions, and broadening the sales tax base to include services. The conversation must include incentives for the state and local governments to save. It could include unconventional elements such as a sovereign wealth fund, or unpopular ones such as a broadly based consumption tax or resurrecting the state’s inheritance tax.

    Taking a hard look at how the state funds education needs to happen. Uneven funding means that strategic investments like continuous improvement become two steps forward and a step or two back, then repeat. If we are serious about transforming California’s schools and supporting students with adequate and equitable funding, we need to start talking —and acting — to secure stable funding.

    •••

    Erin Heys is policy director and senior researcher at the Berkeley Institute for Young Americans, a research center affiliated with the Goldman School of Public Policy at the University of California Berkeley.

    Patrick Murphy is director of resource equity and public finance at The Opportunity Institute, a national education policy organization that focuses broadly on cradle-to-career education policy, and is a professor at the University of San Francisco.

    The opinions in this commentary are those of the authors. If you would like to submit a commentary, please review our guidelines and contact us.





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  • Teachers, school boards threaten to sue over Gov. Newsom’s fix for revenue shortfall

    Teachers, school boards threaten to sue over Gov. Newsom’s fix for revenue shortfall


    Gov. Gavin Newsom

    Credit: AP Photo/Rich Pedroncelli, File

    The article was updated on May 20 to include a quote from Rob Manwaring and a graphic showing differences in Prop. 98 funding between the governor’s May budget revision and CTA’s estimate of full funding.

    Two powerful education groups’ opposition could derail Gov. Gavin Newsom’s plan to fix a massive state budget shortfall for TK-12 schools and community colleges and lead to litigation this summer with an unpredictable outcome.

    The dispute is over Proposition 98, the 35-year-old, complex formula that determines how much money schools and community colleges must receive annually from the state’s general fund. Newsom says he’s complying with the law while largely sparing schools and community colleges the larger budget cuts facing UC, CSU and non-educational parts of state government.

    To which the California School Boards Association and the California Teachers Association say, “Thanks, but no thanks.”

    In separate announcements, the school boards association on Wednesday and CTA on Friday threatened to sue over what they characterize as an end run around the Proposition 98 formula that would deny schools and community colleges billions of dollars. They argue that Newsom’s tactic would set a bad and expensive precedent that governors in other tight times would imitate if allowed.  

    David Goldberg, CTA President

    CTA President David Goldberg called the budget maneuver “an outright assault on public school funding” that would “wreak havoc for years to come.”

    Patrick O’Donnell, a former high-ranking Assembly member who is now chief of government affairs for the school boards association, said the organization is willing to sit down with the governor but will not permit a violation of the state constitution on Proposition 98, “our lifeline to education.”

    Like other areas of state government, schools and community colleges are facing a massive revenue shortage — a drop of $17.7 billion in Proposition 98 funding over a three-year period, including $3.7 billion just since January alone.

    The biggest piece of the drop reflected a big miscalculation. Because of winter storms in early 2023 across much of the nation, the federal government and California pushed back the filing date for taxes from April 15 to Nov. 15. As a result, Newsom and legislators lacked accurate revenue estimates when they set the 2023-24 budget in June; it turns out they appropriated $8.8 billion more than the minimum required under Proposition 98.

    Since TK-12 and community colleges had already budgeted and spent the money,  Newsom promised to hold them harmless. The contention is over his Department of Finance advisers’ plan to treat the “overpayment” as an off-the-books accounting maneuver.

    The Department of Finance would pay for the $8.8 billion in cash — the state apparently has lots of it these days — and then accrue the expenditure from the general fund over five years, starting in 2025-26.  

    The proposed budget “is not only legal and constitutional in our view, but is designed to provide predictable and stable support” in response to unprecedented disruption in revenue projections,” said H.D. Palmer, the deputy director for external affairs for the Department of Finance. But the nonpartisan Legislative Analyst’s Office has questioned whether the governor’s plan is prudent, without commenting on its legality. And key legislators, including the chairs of the budget subcommittees on education financing — Sen. John Laird, D-Santa Cruz, and Assemblymember David Alvarez, D-San Diego — appeared skeptical in hearings this week.

    CTA and the school boards association have a different beef: the “manipulation” of the Proposition 98 obligation. Voters passed the proposition as a constitutional amendment to protect education spending from tax cutters and, as has happened more often lately, tax volatility. The formula sets a funding floor but not a ceiling, and the Proposition 98 appropriation in any given year generally becomes the base for calculating the next year’s minimum. There are several “tests,” tied to economic conditions and growth in student attendance, that determine how much Proposition 98 funding changes annually.

    The teachers union and the school boards association argue that the extra $8.8 billion becomes the floor for calculating the 2023-24 obligation, and that it is not a mistake or overpayment.

    By CTA’s calculations, adding in the $8.8 billion and applying other Proposition 98 factors would raise funding for 2023-24 by $6.8 billion beyond what Newsom calls for in his May revision and $5.1 billion more in 2024-25.

    “The Proposition 98 maneuver proposed in the May Revise threatens public school funding,” Goldberg said in a statement. “Eroding this guarantee would harm schools for years to come and create the conditions for larger class sizes, fewer counselors, school nurses and mental health professionals, cuts to essential school programs and potential layoffs.” 

    Kenneth Kapphahn, senior fiscal and policy analyst for the Legislative Analyst’s Office, said that the agency hasn’t seen CTA’s calculations but that the union’s numbers are “close to what we are tracking.”

    “The Administration is trying to illegally exclude the $8.8 billion that already was spent on schools in 2022-23 when calculating the minimum guarantee for 2023-24,” said Rob Manwaring, senior policy and fiscal adviser for the advocacy nonprofit Children Now. “In passing Proposition 98 as a constitutional amendment, voters were clear they wanted to avoid manipulations to suppress spending on schools and community colleges.”

    Suspension of Proposition 98 likely

    Newsom’s May revision to the budget calls for using $8.8 billion from the general fund to plug the shortfall for 2022-23, draining what remains of the nearly $8.5 billion Proposition 98 reserve to balance 2023-24 and 2024-25, and making a couple of billion dollars’ worth of cuts, including facilities spending for preschools and transitional kindergarten, middle-class college scholarships, tuition grants for teacher candidates and a delay in funding preschool slots.

    A win for the CTA and the school boards association, whether through negotiations or in court, wouldn’t immediately send additional revenue, which the state doesn’t have, to districts’ doorsteps or resolve the challenge of a $17.7 billion shortfall. 

    O’Donnell, representing the school boards, acknowledged that adding billions to the Proposition 98 minimum could compound the “short-term pain” of balancing the budget. 

    This immediate result could be additional cuts, an emergency suspension of Proposition 98 this year or the creation of billions of dollars in IOUs called deferrals.‘ The legislative analyst’s Kapphahn said that the state is heading into the next fiscal year with less state revenue and without a rainy day fund to help out. 

    Suspending Proposition 98 when the state cannot fund its minimum obligations has been done twice, in 2004-05 and 2010-11. Suspension requires a two-thirds vote of the Legislature and creates a debt, called the “maintenance factor,” that, Kapphahn said, “can take many years to be restored.”

    Deferrals, which were used in the years after the Great Recession, involve late payments, anywhere from days to months, into the next fiscal year, which are rolled over yearly until there’s enough new money to end them. 

    “There’s a whole series of options, and they are all difficult. Every single one seems to require us to pay money that is not budgeted with the possible exception of the governor’s proposed maneuver,” said the Senate’s Laird. “We are going to have intense discussions over the next few weeks about these options.”

    CTA acknowledged that a Proposition 98 suspension might be inevitable but also essential. “At least a suspension brings a constitutionally required restoration of the guarantee level” through repayments of the maintenance factor, it said in a statement Friday,  “thereby avoiding a permanent reduction in school funding and the whims of future Administrations.” 

    The union intends to put pressure on legislators. “We will be calling our elected leaders in the coming weeks to demand protection of school funding,” Goldberg said, adding that CTA will launch a media campaign to ensure that our communities understand what’s at stake.”





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  • West Contra Costa makes big push to get kids to class – and raise revenue while doing it

    West Contra Costa makes big push to get kids to class – and raise revenue while doing it


    Verde Elementary School in West Contra Costa Unified School District

    Top Takeaways
    • Raising attendance would improve student outcomes and help the district achieve a balanced budget.
    • The district will focus on boosting attendance of all students, not just those who are “chronically absent,” using a range of attendance-improvement strategies.
    • Improving attendance will require an investment of funds and offering incentives, experts say.

    To boost student attendance, the West Contra Costa Unified School District has launched a comprehensive plan to increase attendance by 2 percentage points this school year. 

    The plan will be reviewed by the school board at its meeting on Wednesday.

    The challenge is in part an educational one. If students aren’t in class, they’re far less likely to succeed. It is also a financial strategy that is crucial to the district’s attempts to fend off insolvency and a state takeover for the second time in 30 years. 

    That’s because the main source of state funding for schools in California is based not just on how many students are enrolled, but on how many students actually show up each day for class.  

    But bumping up attendance, even by a few percentage points, is not as easy as it might seem, regardless of the district.  

    So what happens in this 29,000-student district in the San Francisco Bay Area, which includes Richmond and several adjacent communities, also holds lessons for numerous other financially struggling districts in California and nationally. 

    According to interim Superintendent Kim Moses, the math is simple: For every 1 percentage point increase in attendance, the district can raise $2.75 million in additional state funding. 

    Raising attendance by nearly 3 percentage points would generate over $7 million — about the same amount the district is projecting it will have to reduce its budget during each of the coming two years to achieve a balanced budget. 

    “It’s the biggest lever that we have,” board President Leslie Reckler, who is fully behind the attendance strategy to avert even more cuts in programs and staff than the district has already made, said in an interview. “We get paid by who shows up.”

     Moses told the school board at a recent meeting, “If we are successful in increasing our attendance, that is a way to increase revenue. Then we can rescind the reductions we are proposing.”

    Until now, the district’s attendance improvement plan has focused on “chronically absent” students — those who miss 10% or more instructional days per year. That has yielded results, pushing overall attendance rates in the district to 92.3% last fall, just below the state average. 

    But over the last few months, attendance rates in the district have started to drift down again, to 89.5% in February, according to district figures. 

    Natalie Tovani-Walchuk, vice president of local impact for Go Public Schools, an advocacy organization working in several Bay Area school districts, including West Contra Costa, speculates that some of the decline could be related to illnesses — the flu, Covid, norovirus and RSV — that simultaneously struck the district in recent months. It could also be that some immigrant parents fear bringing their children to school because of the Trump administration’s crackdown on undocumented immigrants.  

    “All of this creates conditions which you can’t control,” said Tovani-Walchuck, a former school principal born and raised in Richmond. 

    Aiming to boost attendance of all students

    After initially focusing on chronically absent students, the district is now aiming to boost the attendance of all students, and to focus on schoolwide attendance-improvement strategies, including:

    • Targeting schools with the lowest attendance and developing “individualized action plans” for those schools.
    • Expecting schools to implement activities that reinforce positive attendance habits, such as recognizing students whose attendance improves and working more closely with families “to build stronger connections between school and home.”  
    • Helping schools use a toolkit developed by the district, including prepared scripts in communicating with parents, along with “action plans” for targeting lagging attendance to promote “Stronger Together: Show Up, Rise Up,” the theme of the attendance campaign. 
    • Recruiting more parents, representatives of community-based organizations and community members to participate in the district’s Student Attendance Review Board, to which students who are repeatedly absent or truant can be referred.   

    But Michael Fine, CEO of the Fiscal Crisis and Management Assistance Team, an agency set up by the state to help districts in difficult financial straits, said, “There is a limit to how much improvement in attendance can be made.” 

    A year ago, his agency issued a report concluding that, despite financial and other improvements, West Contra Costa faced a high risk of insolvency.  

    A realistic goal, Fine said, would be to increase attendance by 1 percentage point each year over the next three years. He pointed out that the district will probably have to spend money on extra staff time and incentives to generate interest among students, parents and schools. 

    “Programs like this cost money, so you have to spend to be successful,” Fine said. 

    Fine recalls that when he was a deputy superintendent at Riverside Unified, the district persuaded local businesses to award a used car to high school seniors who achieved perfect attendance across their entire K-12 careers, or other incentives like computers and bicycles for meeting less ambitious goals. His district spent about $250,000 a year on the program, but generated $1.2 million in increased attendance revenue.  

    Increasing attendance is especially challenging because there are many reasons why students don’t show up for school, all detailed in a presentation to be considered by the board at its monthly meeting this week. These include lack of transportation, illness, parent work schedules, child care constraints, and students feeling disengaged, unsupported and bored at school, plus, in some cases, severe mental health issues. 

    As a result, any initiative to reduce absenteeism demands a range of strategies to address its underlying causes. 

    Hedy Chang, executive director of Attendance Works, a nonprofit organization focusing on attendance, said West Contra Costa Unified appears to be on the right track by surveying parents and identifying why individual students don’t come to school. Another plus, she said, is the district’s creation of so-called community schools, which already work with social service organizations that can also help. 

    “It looks like the district has some things in place,” she said.  But she also cautioned that schools with large numbers of low-income students, like many in West Contra Costa, will likely experience higher absenteeism rates and have to come up with multifaceted responses to overcome them. 

    Building positive relationships with parents

    The district says one school that has made notable strides is Verde Elementary, a community school serving transitional kindergarten through eighth grade students in North Richmond, an unincorporated area of the district. 

    The efforts of Martha Nieto, Verde’s “school community outreach worker,” have been central to the school’s efforts to boost attendance. 

    Nieto, a mother of six who was born in Mexico, says that a key to getting kids to school is building positive relationships with parents. Each day, the school systematically records which students are absent. Attendance clerk Patricia Martines then calls parents’ homes, sometimes with the assistance of school secretary Patricia Farias, who attended the school and still lives in the neighborhood. 

    Each Friday, Nieto  offers what she calls a “School Smarts” class for parents to learn how to get involved in the school. As for students, Nieto provides incentives to improve attendance with modest gifts like a soccer ball, or free ice cream or nachos, which she also hands out on Friday mornings. Students with perfect attendance are awarded medals at “Celebration of Learning” events held regularly in the school cafeteria. 

    The challenge, Go Public Schools’ Tovani-Walchuk says, is to extend efforts like these across the entire district. 

    “These are moments of real strength, and we’re seeing what is truly possible,” she said, referring to Verde Elementary. “But it has not been yet systematized where every school has their school community outreach worker doing this work. That’s really determined site by site, depending on its priorities.”

    Verde Elementary school secretary Victoria Farías, who attended the school as a student, assists with keeping track of attendance.
    Credit: Louis Freedberg / EdSource

    School board member Demetrio Gonzalez-Hoy says that in addition to boosting the attendance of existing students, there needs to be more emphasis on attracting new ones to the district. That’s because the district’s financial plight is largely due to student enrollment that has declined by an average of 3.1 percentage points over the previous four years, according to the Fiscal Crisis and Management Assistance Team report. 

    “It has to be a two-pronged approach,” he said. “We need to get families moving into our community to come to our schools. We don’t want to be a place where we have to be closing schools.”

    “If we want to continue to thrive as a district, we have no other option,” he said. 





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