ExED Analysis: Gov. Brown Signs 2016-17 Budget; Education Funding Increases but Restraint is Advised

Overall, the 2016-17 state budget is positive and provides increases for K-12 schools. But after several years of larger increases, the budget reflects a slowdown in revenue growth. The governor and other observers note that after seven consecutive years of growth, California is “overdue” for a recession.

LCFF:

The budget increases the Local Control Funding Formula by $2.94 billion. This investment closes almost 55% of the remaining gap between current funding and LCFF Target Rates. The Department of Finance estimates that California is now 96 percent of the way toward the “target” LCFF rates. However, FY16-17 is marked by a zero cost-of-living adjustment (COLA), meaning that there is no change from the FY15-16 LCFF target rates.

One-Time Discretionary Funding:

For the fourth year in a row, the budget includes one-time funding, although at a lower rate than prior years. The one-time funding is estimated to equal $214/ADA and will be distributed to schools based on their prior year (2015-16) P-2 ADA. These funds are entirely discretionary but as always, ExED recommends that one-time funds be spent on one-time expenses.

New College Readiness Grant:

The budget provides $200 million for a new College Readiness Block Grant. The grant will provide a minimum of $75,000 to any school serving at least one “unduplicated” pupil in grades 9-12 in 2015-16. Schools that served larger numbers of unduplicated students will receive more funding, but the amount is unknown. Schools must be accredited by WASC or in the process of obtaining accreditation to qualify for funding.

State Start-Up Grant:

In response to the loss of the federal Public Charter School Grant, the budget includes $20 million to provide grants to new charter schools to assist with start-up costs. However, these funds will only be available for allocation after the state expends an estimated $22 million in remaining federal charter grant funds left over from the now expired federal grant.

Budget Planning Guidance:

With slowing revenue and the potential for a recession – along with increasing cost pressures especially in the areas of salaries, health benefits, and retirement benefits (STRS and PERS) – charter schools will need to plan carefully. It is continually imperative for charter schools to build budgets that are sustainable into the future and include the reserves necessary to withstand deferrals and funding cuts.

ExED’s charter school finance experts are always available to assist our client schools. To learn how ExED can make a difference for your school, please contact us.