Total funding for K-12 education is projected to be $68.5 billion in 2008-09.  Of this amount, $65.1 billion is state, federal and local property tax funding accounted for in the Budget.  This proposed budget was constructed first by computing the workload budget funding level.  From the workload budget, adjustments are made to reflect specific policy reductions, including budget balancing reductions.  As a result of these budget balancing reductions, the budget reflects an $865.1 million decrease from the revised 2007-08 total of $66 billion.

K-12 School Spending and Attendance

Per-Pupil Spending
Total per-pupil expenditures from all sources are projected to be $11,935 in 2007-08 and $11,626 in 2008-09, including funds provided for prior year settle-up obligations.

Average Daily Attendance

As a result of a steady decline in birth rates throughout the 1990s, attendance growth in public schools is declining (see Figure K12-04). For the 2007-08, K-12 average daily attendance (ADA) is estimated to be 5,923,000, a decrease of 29,000 from the 2006-07 fiscal year. For 2008-09, the Administration estimates K-12 ADA will decrease by an additional 31,000 to 5,892,000.

• $96.4 million net reduction in 2008-09 to reflect the decline in ADA. The majority of this amount consists of a $142.4 million decrease in school district and county office of education revenue limit apportionments (general purpose funding for schools).
• Despite the overall decline in ADA, there are increases of $46.1 million for the charter school block grant and $18.8 million for adult education due to increased enrollment in charter schools and adult education.
• Due in part to the decline in attendance, there also is a $6.2 million decrease in revenue limit apportionments for 2007-08.

Proposition 98 Guarantee
For fiscal year 2006-07, Proposition 98 funding was $55.1 billion, of which the General Fund share was $41.4 billion.  Local property taxes covered the balance.  The 2007-08 Proposition 98 funding is estimated to increase to $55.7 billion.  The General Fund share in 2007-08 is $40.7 billion which is $1.4 billion lower than the level of Proposition 98 General Fund appropriations included in the 2007 Budget Act.  However, recognizing a reduction of that magnitude would be very difficult for schools to absorb mid-year, the Budget proposes to reduce the 2007-08 Proposition 98 appropriations by $400 million.  This results in a Proposition 98 Guarantee of $56.7 billion in 2007-08.

The Proposition 98 Guarantee for 2008-09 is projected to grow to $59.7 billion of which $43.6 billion would be from the General Fund.  However, as part of the budget-balancing reductions proposed by the Administration, Proposition 98 General Fund will be reduced to $39.6 billion.  Thus, the Administration proposes to suspend the Proposition 98 Guarantee and provide $4 billion, or 9.2 percent, less than the Guarantee would have required in 2008-09.

The totals above include funding for K-12, community colleges and other state agencies that serve students.  K-12 Proposition 98 per-pupil expenditures in the Governor's Budget are $8,458 in 2008-09, down from $8,558 in 2007-08.

California State Teachers' Retirement System (CalSTRS)
The California State Teachers' Retirement System (CalSTRS) administers the Teachers' Retirement Fund, which is an employee benefit trust fund created to administer the State Teachers' Retirement Plan.  The State Teachers' Retirement Plan is a defined benefit pension plan that provides retirement, disability and survivor benefits for teachers and certain other employees of the California public school system.  The Plan is comprised of three programs: the Defined Benefit Program, the Defined Benefit Supplement Program and the Cash Balance Benefit Program.  Within the Defined Benefit Program, there is also a Supplemental Benefit Maintenance Account (SBMA), which provides annual supplemental payments in quarterly installments to retired teachers whose purchasing power has fallen below 80 percent of the purchasing power of an initial allowance.

• The state will make a payment of $80 million in 2008-09 as the first of three payments towards the $210 million in interest from the STRS lawsuit. Another payment of $82 million will be made in 2009-10 and the remaining $48 million will be paid in 2010-11.

Proposed Workload Budget

Cost-of-Living (COLA)
$2.4 billion increase to fund a 4.94 percent statutory COLA: $1.8 billion for revenue limits, $168.7 million for special education, $82.8 million for child care programs, $62.3 million for class size reduction, $52.9 million for the Targeted Instructional Improvement Grant, $49.1 million for Economic Impact Aid and $247.4 million for various categorical programs.

School Facilities Funding Adjustments
An $839 million decrease in 2007-08 and a $569 million increase in 2008-09 for school facilities.  The decrease in 2007-08 is largely attributable to lower than anticipated allocations by the State Allocation Board of modernization funds from the 2006 School Facilities Bond.  The increase in 2008-09 is the result of the anticipated allocation of remaining funds from the 1998, 2002 and 2004 bonds, which have lagged projections, as well as an increased estimate of allocations of new construction funds.

Home-to-School Transportation
The Governor's Budget proposes ongoing General Fund increases of $349.1 million for the Home-to-School Transportation program.

Deferred Maintenance and Emergency Repairs
$115.5 million for the Deferred Maintenance program.

High Priority Schools Grant Program
$73 million for the High Priority Schools Grant program.

Charter Schools
$18 million for the Charter School Facilities Block Grant program.

Improving Our Education Data System

• The California Longitudinal Pupil Achievement Data System (CalPADS) will enable tracking of individual student enrollment history and academic performance data over time. Chapter 1002, Statutes of 2002 (SB 1453) authorizes the development of a system to: (1) provide school districts and the California Department of Education (CDE) access to data necessary to comply with federal No Child Left Behind reporting requirements, (2) provide a better means of evaluating educational progress and investments over time, (3) provide local schools information that can be used to improve pupil achievement and (4) provide an efficient, flexible and secure means of maintaining longitudinal statewide pupil-level data.
  • $8.1 million ($2.2 million General Fund and $5.9 million special and federal funds) to fully fund the recently approved contract to develop this system.
• The California Longitudinal Teacher Integrated Data Education System (CalTIDES), authorized by Chapter 840, Statutes of 2006 (SB 1614), will serve as the central state repository for information regarding the teacher workforce for the purpose of developing and reviewing state policy, identifying workforce trends and providing high-quality program evaluations of the effectiveness of teacher preparation and induction programs. CDE, in consultation with the Commission on Teacher Credentialing, is responsible for developing the system.
  • $1.8 million in one-time federal Title II funds for three limited-term staff for CDE for system development workload and $400,000 for the Commission on Teacher Credentialing's workload associated with this effort.

Proposed Budget Balancing Reductions
Despite the fiscal challenge facing California, the K-12 education budget preserves funding for all core instructional programs, albeit at a slightly lower level, reflecting a 1.3 percent reduction in total funding compared to funding in 2007-08.  The Governor's Budget approach thus spreads the impact over as many programs as possible to minimize the impact on each, while preserving as much funding as possible for classroom instruction.

Total budget-balancing reductions for K-12 Education programs amount to $4.4 billion in 2008-09.

• $2.6 billion in 2008-09 for school district and county office of education revenue limit apportionments, eliminating the 4.94 percent COLA.
• $357.9 million in 2008-09 for Special Education; no COLA will be provided and existing state funding for local schools' special education costs will be reduced.
• $198.9 million in 2008-09 for Child Development Programs; no COLA or growth will be provided for this program and approximately 8,000 slots will be reduced.
• $59.6 million in 2008-09 for Before and Afterschool Programs. The Administration will propose a ballot initiative to amend Proposition 49 to achieve these savings.
• $14.2 million in 2008-09 for Child Nutrition Programs; this reduction will cut the free and reduced price meal reimbursements by approximately $0.02.
• $1,095.7 million in 2008-09 for other K-12 categorical programs. COLA adjustments will not be provided and proportional funding rate reductions will be applied to programs such as Class Size Reduction, the Charter School Categorical Block Grant, Instructional Materials, Supplemental Instruction, Home-to-School Transportation, Supplemental School Counseling and various Career Technical Education programs.
• $5.6 million in 2008-09 for CDE administration and program support.
• $9.2 million in 2008-09 for CDE State Special Schools.
• $5.1 million in 2008-09 for the California State Library; this will reduce state support to local libraries and reduce state reimbursement of the costs for inter and intra-library book loan programs.
• The Administration proposes to change the K-14 program COLA factor from the State and Local Implicit Deflator to the Consumer Price Index for Wage Earners and Clerical Workers (CPI-W), reducing the COLA from 4.94 percent to 3.65 percent.

Special Session Issues
The Governor has called a Special Session of the Legislature to immediately address the budget and cash shortfall.  Included in the Special Session is a proposal to decrease K-14 Education program costs by $400 million in 2007-08. Due primarily to a significant reduction in General Fund revenues anticipated for 2007-08, the Proposition 98 minimum guarantee is $1.4 billion lower than the level of Proposition 98 appropriations included in the 2007 Budget Act.

• The Budget proposes to reduce the 2007-08 Proposition 98 appropriations by only $400 million; this reduction will be split between school and community college apportionments, $360 million and $40 million, respectively.