Friday, February 20, 2009

Budget Update 2/20/09

It now appears that we will have a State budget. We are in the process of interpreting this budget and its impact on SUSD. This will take some time since many programs will be impacted.

I have rescheduled my State of the District to allow time to prepare to share with all of you the impact on our District. The State of the District is now scheduled for March 9th, 4:00 p.m. at Ustach Middle School. Please take a look at the other planned meetings that are posted on this blog site to the right.

Next Tuesday’s (2/24/09) Board meeting will be held at Mary Ann Sanders Elementary School with open session starting at 7:00 p.m.. Along with the Board’s normal agenda, they will discuss the budget update, give directions on future budget meetings and consider (no action) other budget reduction options.

The following are a few key highlights regarding education that have been gleaned from the new State budget. This information will also be shared with the Board at our next meeting next Tuesday, 2/24/09. Please don’t hesitate to email me if you have questions.

John Halverson


Early action on 2009-2010 budgets: This is considered an “18 month budget” because is covers the mid-year “adjustments” to the current year budget (2008-2009) and includes a full 2009-2010 budget. In other words, the good news: the Legislature will have adopted the earliest state budget ever – a full 5 months before the start of the next fiscal year.

Unprecedented local flexibility for schools: For schools, the local flexibility authority granted is unprecedented. There is very broad local flexibility covering 53 categorical programs, including significant loosening of K-3 Class Size Reduction class-size ratios. Most of the categorical flexibility provided is in place for anywhere from 3-4 years beyond the current year.

Reduced budget year cuts to education: The cuts for the 2009-2010 education budget are less than the governor proposed and what the districts expected, based on the governor’s proposal.

Additional deferrals: There are $2.7 billion in additional “deferrals” of payments to schools, beyond the ones proposed by the governor and the Legislature earlier this year. This means we will be delayed in receiving some of our state allocations.

Special Election in May: May 19 is the scheduled date for the special election placing several of the key provisions of the budget before the voters. Implementation of this budget is dependent upon voter approval of these provisions. Seven days thereafter, the governor will release his May Budget revision, which will reflect updated revenue estimates, as well as the fiscal impacts of the voters’ decisions on key components of this budget. The legislative budget subcommittees will then be charged with making any needed adjustments. So we will likely see further budget action after the very important month of May. In other words, failure of these provisions at the polls or a worsening economy could change the budget plan.

Current year funding: Current year (2008-2009) K-12 funding cuts total the same level as proposed earlier by the governor (about $1.9 billion). They include the elimination of the current year 0.68% revenue limit COLA, but, unlike, the governor’s proposal, the remainder of the cut is split evenly between revenue limits and categoricals with half coming from revenue limits (a little over 2% additional cut) and the remainder through a 15% cut to specified categorical programs (outlined in detail below).

The estimated revenue limit deficit factor for the 2008-2009 increases to 7.844% for school districts which equates to a net decrease this year of 2.2%.

The estimated revenue limit deficit factor for the 2009-2010 is 13.094% for districts which equates to an additional .75% cut.

Categorical program flexibility: The budget agreement provides unprecedented categorical flexibility to schools, beginning in the 2008-2009 year through 2012-13. The proposal divides existing categorical programs into three groups or “tiers”.

Categorical Programs in “Tier I” receive no funding cut and there is no “program flexibility” in the use of funds and no statutory requirements can be waived. These fully protected programs in SUSD include:

-Child Nutrition - Home-to-School Transportation
-Economic Impact Aid - K-3 Class Size Reduction
- Special Education

Categorical Programs in “Tier II” will receive a funding reduction of approximately 15% this year and another 4.9% next year across each program, but there is no program flexibility, with the programs to be operated in accordance with current statutes. Our programs include:

- State Testing -English Language Acquisition Program

Categorical Programs in “Tier III” include a total of 43 programs not included above. These remaining programs include major programs such as Gifted and Talented, Professional Development, Teacher Credentialing Block Grant, Instructional Materials, Targeted Instructional Improvement Grants, summer school, School and Library Block Grants, and CBET are among the programs in Tier III that we have in the Sylvan Union School District. These programs will each sustain a 15% cut this year and another 4.9% next year and, in addition, we are granted “maximum flexibility” to use funds from these programs for any educational purpose, including unrestricted general fund purposes. Again, this flexibility is in place for the current year plus for additional four years.

Language in the budget bill does not specify that current teacher credentialing requirements linked to the BTSA program will continue to remain in place (Teacher Credentialing Block Grant). And, there is specific language in the budget bill clarifying that school districts do not have to meet current requirements to purchase newly-adopted instructional materials in FY 2008-2009 and 2009-2010.

K-3 Class Size reduction Flexibility

Technically, there is no change to the statutory requirements of the K-3 class size reduction program. However, changes have been made to the penalty provisions should a class size exceed the current 20.4 to 1 ratio. Currently, a school district loses all CSR incentive funding ($1071/student) for an eligible class if it exceeds an average of 20.4 students. The changes to the penalties will provide significant flexibility for school districts to adjust class sizes and continue to receive current funding levels minus the associated penalty percentage.

The following K-3 CSR penalty levels would be in place for the 2009-2010 year plus three years:

Up to 20.4: No penalty
20.5 – 21.5: 5% penalty
21.5 – 22.5 10% penalty
22.5 – 23: 15% penalty
23 – 25: 20% penalty
Over 25 students: 30% (there is no upper limit/cap)

The bill specifies that districts are only eligible to receive funding under these relaxed penalties if they were participating in the K-3 CSR program as of December 10, 2008.

Access to prior-year categorical reserves:

The budget authorizes districts to access ending fund balances as of June 30, 2008 (from the 2007-2008 school year only), from most restricted, categorical program accounts – to use for any educational purposes. The programs we have that are “protected” from such access are:

- Economic Impact Aid (EIA) -Instructional Materials
- Targeted Instructional Improvement Grants (TIIG) - Special Education
- Supplemental Instruction - Home-to-School Transportation

Routine Maintenance Reserves: The amount of funding school districts are required to set aside in “routine restricted maintenance accounts” is reduced from 3% to 1% of the district’s general fund budget for the 2008-2009 year plus 4 years.

Deferred Maintenance: The local .5% statutory match for deferred maintenance is eliminated for the 2008-2009 year plus 4 more.

Reserve for Economic Uncertainties: The budget bill makes no changes to current law requirements for district minimum general fund reserves for economic uncertainties. This means we will still be required to maintain a 3% contingency.

Impact of federal stimulus funding: This funding will provide $789 billion to boost the national economy. While there will be billions of dollars provided for education, these resources may have smaller than anticipated impact on reducing the size and magnitude of the state reductions in education funding, simply because the state could use federal dollars to further reduce state spending for education.

The current stimulus package contains funding dedicated to a provision called the “State Stabilization Fund.” This funding will be allocated to the local school districts and/or higher education using existing funding formulas, which could be used to backfill cuts, prevent layoffs, and modernize schools as well as other purposes.

However, these funds will be allocated to the governor to determine how they will be spent. The state Legislature will probably also take part in deciding how best to use those resources. A substantial portion of that money may be used to avoid additional state borrowing to balance the state budget – and to help build the state’s general fund reserves.

Many questions still remain regarding what this budget language means and how we will implement it. We will be diligently working to interpret this budget and will attempt to keep all informed as we proceed through this spring and our budget planning in the Sylvan Union School District.

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