The 2014-15 Budget: Proposition 98 Education Analysis

The 2014-15 Budget: Proposition 98 Education Analysis MAC TAYLOR • L E G I S L A T I V E A N A L Y S T • FEBRUARY 14, 2014 2014-15 BUDGET CONTENTS Executive Summary ...............................................................................................................................3 Introduction ...........................................................................................................................................5 Background ............................................................................................................................................5 Overview: Changes in the Minimum Guarantee .................................................................................7 Overview: Spending Changes ............................................................................................................11 Wall of Debt Plan .................................................................................................................................12 Local Control Funding Formula ..........................................................................................................15 Career Technical Education .................................................................................................................16 Student Assessments ..........................................................................................................................23 Independent Study .............................................................................................................................33 Summary of Recommendations .........................................................................................................40 2 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET EXECUTIVE SUMMARY Overview Governor Proposes $11.8 Billion in Additional Proposition 98 Spending. Proposition 98 funds K-12 education, the California Community Colleges (CCC), preschool, and various other state education programs. The Governor’s budget includes $11.8 billion in Proposition 98 spending increases (attributable to 2012-13, 2013-14, and 2014-15). Of that amount, the Governor dedicates $6.7 billion to paying off outstanding one-time obligations and $5.1 billion for ongoing programmatic increases. Under the Governor’s budget, ongoing K-12 per-pupil funding would increase from $7,936 in 2013-14 to $8,724 in 2014-15—an increase of $788 (10 percent). Overall Plan Reasonable. We believe the Governor’s plan is a reasonable mix of one-time and ongoing spending—eliminating the largest outstanding one-time obligation and significantly increasing ongoing programmatic support for schools and community colleges. A prudent reliance on one-time spending helps the state minimize potential disruption to ongoing school and community college programs were the state’s fiscal situation to deteriorate as a result of revenue volatility or an economic slowdown. Specific Proposals Wall of Debt Plan. The Governor proposes to pay off all outstanding school and community college deferrals, as well as the state’s Quality Education Investment Act (QEIA) obligation, by the end of 2014-15. The Governor also proposes to completely retire the state’s Emergency Repair Program (ERP) obligation by the end of 2015-16 and the state’s unpaid mandate claims by the end of 2017-18. We believe the Governor’s plan is reasonable, particularly as it would pay off all of these obligations one year before the expiration of Proposition 30 revenues. Local Control Funding Formula (LCFF). The Governor proposes to increase funding for the LCFF by $4.5 billion in 2014-15, closing approximately 28 percent of the remaining gap to full implementation. The Governor’s budget also provides $26 million for county offices of education (COEs) to fully fund the remaining gap for their LCFF. In addition, the Governor proposes statutory language requiring that a specified percentage of annual Proposition 98 funding automatically be dedicated to the LCFF each year of the phase-in period. We believe the Governor’s proposal to dedicate school funding increases primarily to the LCFF is a reasonable approach that is consistent with the intent of the Legislature in restructuring the school finance system last year. We are concerned, however, that the Governor’s proposal to automate LCFF funding creates an additional, unnecessary formula that would further complicate school funding and remove the Legislature’s discretion to determine the appropriate amount of funding to allocate for the LCFF. We recommend the Legislature reject this proposal. High School Career Technical Education (CTE) Programs. The Governor proposes to add two high school CTE categorical programs—Specialized Secondary Programs (SSP) and the Agricultural CTE Incentive Program (hereafter referred to as Agricultural Education Grants)—to www.lao.ca.gov Legislative Analyst’s Office 3 2014-15 BUDGET the LCFF. Under the Governor’s proposal, school districts receiving funding for these two programs in 2013-14 would have those funds count toward their LCFF allocation in 2014-15. Beginning in the budget year, districts would have the option to use associated funds exactly as they do now or in a different way to address student needs. We believe the Governor’s proposals are consistent with the LCFF’s core principles of increasing local decision-making authority and reducing historical funding inequities across schools. We recommend the Legislature adopt these proposals. Beyond these specific budget-year issues, we recommend the Legislature adopt an overall approach to CTE that focuses on student outcomes rather than the specific educational strategies used to accomplish those outcomes. Student Assessments. The Governor’s budget increases funding for student assessments by $52 million in 2014-15. The increase is largely due to the higher costs of administering new English-language arts (ELA) and math assessments in 2014-15. The estimated annual cost of the new assessments is significantly higher than the cost of previous ELA and math assessments. The higher cost appears reasonable given the new assessments will be more expensive to score and the state plans to purchase interim and formative assessment tools on behalf of districts. (Having the state purchase these tools may reduce total state and local costs given economies of scale.) We recommend the Legislature approve the augmentation, adopt the Governor’s proposed provisional language making assessment funding contingent upon Department of Finance (DOF) review of associated contract materials, and adopt additional provisional language requiring the testing vendor to meet with legislative staff and DOF on an annual basis to review components and costs of the contract. Independent Study (IS). These programs serve students who are completing some or all of their coursework off-site under a written learning contract. For funding purposes, these programs are required to convert individual student work products into an equivalent amount of classroom “seat time.” The Governor proposes several changes to IS programs. Most notably, the Governor proposes to allow local governing boards to convert entire IS courses (rather than individual IS assignments) to seat time—but only for IS programs serving high school students. Given its potential to reduce some of the administrative tasks required of teachers, we recommend the Legislature adopt this proposal but extend it to IS programs serving all grades. We further recommend the Legislature increase the transparency of the proposal by requiring local governing boards to disclose some basic information about the learning standards and expectations for each approved course. We recommend the Legislature reject a related proposal to establish a special set of funding rules for site-based blended learning, as extending the Governor’s main IS proposal to all grades would better accommodate these programs. 4 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET INTRODUCTION In this report, we analyze the Governor’s sections provide an overview of the Governor’s 2014-15 Proposition 98 budget package. The Proposition 98 package. The subsequent report begins with background on the basics of sections analyze each of the Governor’s major Proposition 98 and school finance. The next two Proposition 98 proposals. BACKGROUND State budgeting for schools and community Guarantee. Although the Proposition 98 tests colleges is governed largely by Proposition 98, apply automatically, the Legislature can provide passed by voters in 1988. The measure, modified more or less funding than the tests require. For by Proposition 111 in 1990, establishes a minimum example, in 1999-00, when state revenues were funding requirement for schools and community booming, the Legislature provided $1.8 billion colleges, commonly referred to as the minimum more than required under the minimum guarantee. Both state General Fund and local guarantee. Alternatively, in 2004-05 and 2010-11, property tax revenue apply toward meeting the the Legislature suspended the minimum guarantee minimum guarantee. As described in Figure 1, and provided less than would otherwise have been the Proposition 98 minimum guarantee is required. To suspend the minimum guarantee determined by one of three tests set forth in the requires a two-thirds vote of each house of the State Constitution. These tests are based on several Legislature and creates an out-year obligation to inputs, including changes in K-12 average daily return K-14 funding to where it otherwise would attendance (ADA), local property tax revenues, have been absent the suspension (discussed further per capita personal income (PCPI), and per capita below). General Fund revenue. State Creates “Maintenance Factor” Applicable Test Determined Automatically. Obligation in Certain Years. Proposition 98 allows The applicable test used to determine the Proposition 98 Figure 1 minimum guarantee is Calculating the Proposition 98 Minimum Guarantee triggered automatically depending on the inputs. Three Tests Used to Determine Minimum Guarantee: Until inputs are finalized Test 1—Share of General Fund. Provides roughly 40 percent of state General (which can take up to Fund revenues to K-14 education. The guarantee was determined using this test 3 of the last 25 years. 24 months after the close of Test 2—Growth in Per Capita Personal Income. Adjusts prior-year a fiscal year), the applicable Proposition 98 funding for changes in K-12 attendance and per capita personal test can fluctuate and the income. The guarantee was determined using this test 13 of the last 25 years. Test 3—Growth in General Fund Revenues. Adjusts prior-year Proposition 98 minimum guarantee can funding for changes in K-12 attendance and per capita General Fund revenues. change significantly. Generally, this test is operative when General Fund revenues grow more slowly than per capita personal income. The guarantee was determined using this test State Can Provide More 7 of the last 25 years. or Less Than Minimum Note: In 2 of the last 25 years, the state suspended Proposition 98. www.lao.ca.gov Legislative Analyst’s Office 5 2014-15 BUDGET the state to provide less funding than the Test 2 factor obligation has been paid off. Figure 2 level in Test 3 or suspension years. In these years, illustrates how these maintenance factor payments the state creates a maintenance factor obligation— are made. The required maintenance factor equal to the difference between the higher Test 2 payment is determined by formula and depends level and the amount of funding actually provided. on how quickly state revenues grow. When state In future years, the maintenance factor is adjusted revenues grow quickly, larger payments are made for changes in K-12 attendance and growth in and the obligation is paid off in a shorter period PCPI. As such, the maintenance factor obligation of time. Until all maintenance factor is paid off, keeps track of the amount of funding needed to the state generates savings each year compared to ensure the earlier reduction does not adversely the level it otherwise would have been required to affect schools and community colleges in the spend. long run. The state has carried an outstanding Most Proposition 98 Funding Provided for maintenance factor obligation in 18 of the past General Purposes. Upon determining the amount 23 years, including an estimated $5.5 billion of total Proposition 98 funding to provide, the obligation at the end of 2012-13. Legislature decides how to spend the associated Maintenance Factor Payments Based on funds. The Legislature allocates funds to schools Growth in General Fund Revenues. When the and community colleges for one of two basic state is carrying a maintenance factor obligation, purposes—general (or unrestricted) purposes Proposition 98 requires the state to provide and categorical (or restricted) purposes. The state additional payments until the entire maintenance allocates general purpose funding to schools through the LCFF and to community Figure 2 colleges through Illustration of How a Maintenance Factor Is Created and Paid apportionments. Currently, 86 percent of all Proposition 98 funding is allocated in Maintenance Factor Obligation Maintenance Factor Payment this manner, with the Proposition 98 Base remaining 14 percent allocated for various categorical programs. Most School Funding Provided Test 2 Level Through LCFF. In 2013-14, the state Test 3 Level eliminated roughly three-quarters of Year 1a Year 2 Year 3 Year 4 Year 5 its K-12 categorical programs and shifted a In this illustration, Test 3 is operative in Year 1 and a maintenance factor equal to the difference between the higher Test 2 level and the lower Test 3 level is created. those funds into the newly created LCFF. 6 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET (Prior to 2012-13, general purpose funding was LCFF provides additional funds to school districts provided through K-12 revenue limits.) Under the based on their numbers of English learner (EL), LCFF, school districts receive the bulk of their low-income (LI), and foster youth students. In funding based on ADA in four grade spans, with 2013-14, 86 percent of K-12 Proposition 98 funding per-pupil funding higher for the upper grades. The was provided through the LCFF. OVERVIEW: CHANGES IN THE MINIMUM GUARANTEE As part of its budget package, the in revenues. The remaining $126 million increase in administration has updated its estimates of the the 2012-13 minimum guarantee is due to baseline minimum guarantee for 2012-13, 2013-14, and property tax revenues being higher than previously 2014-15. We describe the major changes below. budgeted. Because 2012-13 is a Test 1 year, increases in baseline property tax revenues result in higher 2012-13 Changes funding for schools and community colleges. Minimum Guarantee Up $1.9 Billion. As Total Costs Lower by $130 Million. Though the shown in Figure 3, the administration’s revised Governor’s estimate of the minimum guarantee has estimate of the 2012-13 minimum guarantee increased, his estimate of 2012-13 Proposition 98 is $58.3 billion, a $1.9 billion increase from the costs has decreased by $130 million. This is the net estimate made at the time the 2013-14 budget effect of savings due to lower-than-expected ADA was enacted. Of the increase in the minimum in part offset by higher costs for basic aid districts. guarantee, roughly $1.8 billion is due to General • Slightly Lower ADA Costs. Rather Fund revenues being $1.7 billion higher than than increasing by 0.06 percent, as was previously budgeted. The minimum guarantee assumed in the 2013-14 budget plan, ADA increases by more than the increase in General decreased by 0.07 percent—reducing costs Fund revenues due to 2012-13 being a Test 1 year by $200 million. (A few other costs—most with a large required maintenance factor payment. notably for K-3 Class Size Reduction—also In these situations, the minimum guarantee is very went down slightly.) sensitive to changes in General Fund revenues, with the marginal increase in the minimum guarantee • Higher Basic Aid Costs. Proposition 30 sometimes even greater than the marginal increase requires school districts to receive at least Figure 3 Increase in 2012-13 and 2013-14 Proposition 98 Minimum Guarantees (In Millions) 2012-13 2013-14 Budgeted Revised Change Budgeted Revised Change Minimum Guarantee General Fund $40,454 $42,207 $1,752 $39,055 $40,948 $1,893 Local property tax 16,011 16,135 124 16,226 15,866 -361 Totals $56,465 $58,342 $1,877 $55,281 $56,813 $1,532 www.lao.ca.gov Legislative Analyst’s Office 7 2014-15 BUDGET $200 per student and community colleges to spike protection provision excludes $2.3 billion receive at least $100 per full-time equivalent in 2012-13 funding from the Proposition 98 (FTE) student from revenues in the newly calculations moving forward, reducing the 2013-14 created Education Protection Account minimum guarantee by a like amount. (EPA). For most school and community Total Costs $150 Million Lower. The college districts, EPA revenues offset state Governor’s estimate of 2013-14 spending is down General Fund costs. For basic aid districts— $150 million from the amount assumed in the whose property tax revenues are sufficiently 2013-14 budget, primarily due to lower-than- high that they receive no state general expected student attendance. (The 2013-14 budget purpose aid—the state is required to make assumed ADA growth of 0.2 percent, while EPA payments to ensure they receive the the Governor’s budget assumes a 0.01 percent required per-student EPA funding. These increase in ADA.) Lower attendance results in a EPA obligations ended up being $68 million $217 million drop in LCFF costs. These lower costs for school districts and $9 million for are partly offset by a $77 million increase to make community colleges in 2012-13. EPA payments to basic aid school and community college districts. (As in 2012-13, the 2013-14 budget 2013-14 Changes did not include funding for this purpose.) Lower Estimate of Property Tax Revenues Minimum Guarantee Up $1.5 Billion. As Increases General Fund Costs. Though the shown in Figure 3, the administration’s revised minimum guarantee is up $1.5 billion, the state’s estimate of the 2013-14 minimum guarantee is General Fund Proposition 98 requirement is $56.8 billion, a $1.5 billion increase from the up $1.9 billion due to estimated local property amount assumed in the 2013-14 budget. This tax revenues decreasing by $361 million. As increase is primarily due to the higher 2012-13 Figure 4 shows, this decrease is primarily driven minimum guarantee and higher year-to-year by lower redevelopment agency (RDA) revenues. growth in per capita General Fund revenues. For 2013-14, the Governor projects ongoing Spike Protection Provision Reduces Ongoing RDA revenues will be $405 million lower than Effect of Increase in 2012-13 Minimum Guarantee. estimated—a $433 million reduction in asset Though the 2013-14 guarantee is up from budget revenues offset by a $29 million increase in ongoing act estimates, it remains $1.5 billion below the RDA revenues. The administration anticipates that revised 2012-13 level despite General Fund court rulings will delay the distribution of some revenues increasing by $1.7 billion from 2012-13 former RDA assets that were assumed to provide to 2013-14. The decrease in the 2013-14 minimum state General Fund savings in 2013-14. guarantee is due to the spike protection provisions of Proposition 98. In a year when the minimum 2014-15 Changes guarantee increases at a much faster rate than 2014-15 Minimum Guarantee $4.7 Billion PCPI, the spike protection provision excludes Above Revised 2013-14 Level. The administration a portion of Proposition 98 funding from the estimates the minimum guarantee will be minimum guarantee calculation in the subsequent $61.6 billion in 2014-15. As Figure 5 shows, this year. In 2012-13, because of the economic recovery is $4.7 billion higher than the revised 2013-14 and additional revenues from Proposition 30, the minimum guarantee. About $3.9 billion of the minimum guarantee increased $11 billion. The 8 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET increase in the minimum Figure 4 guarantee is driven by the Proposition 98 Property Tax Revenue Estimates year-to-year increase in (In Millions) General Fund revenues. 2014-15 As in 2012-13, 2014-15 is 2013-14 Governor’s a Test 1 year in which the Budget Act Budget Difference strong growth in General 2012-13 Fund revenues results in a Ongoing residual RDA revenues $898 $936 $38 RDA assets 1,160 1,167 8 large maintenance factor All other 13,954 14,032 79 payment ($3.3 billion). Totals $16,011 $16,135 $124 The remaining increase in 2013-14 Ongoing residual RDA revenues $790 $818 $29 the minimum guarantee RDA assets 707 274 -433 is due to higher property All other 14,729 14,773 44 tax revenues. Because Totals $16,226 $15,866 -$361 2014-15 is a Test 1 year, 2014-15 Difference increases in baseline and 2013-14 Governor’s From Revised Budget 2013-14 ongoing RDA property tax 2014-15 revenues result in a higher Ongoing residual RDA revenues $818 $743 -$76 Proposition 98 minimum RDA assets 274 42 -232 guarantee. (Changes in All other 14,773 15,712 939 RDA assets do not affect Totals $15,866 $16,497 $631 RDA = redevelopment agency. the minimum guarantee due to rebenching.) Figure 5 Proposition 98 Funding (Dollars in Millions) Change From 2013-14 2012-13 2013-14 2014-15 Revised Revised Proposed Amount Percent Preschool $481 $507 $509 $2 — K-12 Education General Fund $37,740 $36,361 $40,079 $3,718 10% Local property tax revenue 13,895 13,633 14,171 537 4 Subtotals ($51,634) ($49,995) ($54,250) ($4,255) (9%) California Community Colleges General Fund $3,908 $4,001 $4,396 $395 10% Local property tax revenue 2,241 2,232 2,326 94 4 Subtotals ($6,149) ($6,233) ($6,723) ($489) (8%) Other Agencies $78 $78 $77 -$1 -1% Totals $58,342 $56,813 $61,559 $4,746 8% General Fund $42,207 $40,948 $45,062 $4,115 10% Local property tax revenue 16,135 15,866 16,497 631 4 www.lao.ca.gov Legislative Analyst’s Office 9 2014-15 BUDGET Local Property Tax Revenue Up $631 Million. maintenance factor payment, however, would not As Figure 4 shows, total property tax revenues in increase in this situation. Though total General 2014-15 are $631 million higher than the revised Fund revenues would increase, the year-to-year 2013-14 estimates. The Governor estimates baseline growth in General Fund revenues would remain property tax revenues will be $939 million higher essentially unchanged, thus requiring no additional than the revised 2013-14 level. This increase is maintenance factor payment. Because of such partially offset by RDA-related revenues being a differing results, the net change in the minimum combined $308 million lower. The reductions in guarantee resulting from changes in General RDA-related revenues to schools and community Fund revenues could vary significantly at the colleges are primarily driven by former RDA May Revision (and continue changing as the state obligations being higher than expected. updates its General Fund revenue estimates over ADA Is Somewhat Lower Than in 2013-14. subsequent months). The Governor projects overall ADA will decline Changes in PCPI Could Have Counterintuitive by 0.12 percent in 2014-15. This is the net effect Effects. The Governor’s budget projects the 2014-15 of a projected decline in school district ADA PCPI growth factor will be 0.24 percent. (The (2 percent), partly offset by increases in charter PCPI growth factor is calculated by measuring school attendance (15 percent). Because charter the growth in PCPI between the fourth quarter schools represent a much smaller share of the of 2012 and the fourth quarter of 2013.) As the student population (10 percent), overall attendance PCPI factor in the Governor’s budget is only a is still down. Because 2014-15 is a Test 1 year, the projection that was developed during the fourth minimum guarantee is unaffected by the overall quarter of 2013, the actual data—to be released by decrease in student attendance. the federal government in late March—is likely to Effects of New Revenues on Minimum differ somewhat. Because of the PCPI’s effect on Guarantee Will Vary Based on Year in Which the maintenance factor calculation, changes to the Revenues Materialize. The minimum guarantee PCPI growth factor could have counterintuitive for 2014-15 will be sensitive to changes in estimates effects. The maintenance factor calculation is of General Fund revenues. The exact effect on the largely driven by the difference between growth guarantee will vary significantly depending on in per capita General Fund revenues and growth whether revenue estimates change for 2013-14, in PCPI. A larger difference between these two 2014-15, or both years. If, for example, revenues factors corresponds to a larger maintenance factor were unchanged in 2013-14 but $1 billion higher payment. A decrease in PCPI growth would in 2014-15, virtually all of the new revenues would increase the difference between per capita General go to Proposition 98. This is because 2014-15 is a Fund revenue growth and PCPI, thus increasing Test 1 year in which a large maintenance factor the maintenance factor payment. Conversely, an payment is required. Alternatively, if revenues increase in the PCPI growth factor would reduce were up $1 billion in both 2013-14 and 2014-15, the maintenance factor payment. We estimate roughly half of new revenues would go to that a 1 percent increase in the PCPI factor would Proposition 98 in 2013-14 and 40 percent of new decrease the minimum guarantee by roughly revenues would go to Proposition 98 in 2014-15. As $500 million, with a corresponding increase if the in the previous scenario, the additional revenues PCPI factor were to decrease by 1 percent. would increase the Test 1 level in 2014-15. The 10 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET OVERVIEW: SPENDING CHANGES The Governor’s budget includes a total of In 2014-15, $7.6 Billion in Spending Increases. $11.8 billion in Proposition 98 spending increases. Figure 6 provides a summary of the major 2014-15 From an accounting perspective, $2 billion is spending changes. The largest spending increase attributable to 2012-13, $1.7 billion is attributable to is $4.5 billion for the LCFF. The Governor’s plan 2013-14, $7.6 billion is attributable to 2014-15, and also includes $2.5 billion ($2.2 billion for schools $504 million is attributable to earlier years. Schools and $236 million for community colleges) to pay and community colleges, however, will receive down the remaining K-14 deferrals, $375 million all the funds in 2014-15. We describe the major to expand two community college categorical spending changes below. programs, $155 million to fund a 3 percent increase $2 Billion Deferral Paydown to Meet Revised in enrollment growth at the community colleges, 2012-13 Proposition 98 Obligation. The increase in and $82 million to provide a 0.86 percent cost-of- the 2012-13 minimum guarantee combined with lower living adjustment for select K-12 programs as well as ADA costs that year creates a total “settle-up” obligation Figure 6 Proposition 98 Spending Changes of $2 billion in 2012-13. The Governor proposes to retire (In Millions) this obligation by paying 2013-14 Revised Spending $56,813 down additional deferrals— Crosscutting K-14 Adjustments Remove prior-year deferral payments -$1,955 $1.8 billion for schools and Remove prior-year one-time funds -468 $194 million for community Fund QEIA program outside of Proposition 98 -361 colleges. Adjust energy efficiency funds -101 Make other adjustments 9 $1.7 Billion Deferral Subtotal (-$2,876) Paydown to Meet Revised K-12 Education 2013-14 Obligation. The Fund increase in school district LCFF $4,472 Pay down remaining deferrals 2,238 increase in the 2013-14 Increase funding for pupil testing 46 minimum guarantee Provide 0.86 percent COLA to categorical programs 33 combined with lower ADA Fund increase in COE LCFF 26 costs that year results in a Fund new English language proficiency assessment 8 Reduce categorical funding for lower ADA -18 total settle-up obligation Subtotal ($6,805) of $1.7 billion in 2013-14. California Community Colleges The Governor proposes to Pay down remaining deferrals $236 Augment Student Success and Support Program 200 make $1.7 billion in deferral Augment maintenance and instructional equipment (one-time) 175 paydowns—$1.5 billion for Fund 3 percent enrollment growth 155 schools and $163 million Provide 0.86 percent COLA to apportionments 48 Create new community college technical assistance teams 3 for community colleges—to Subtotal ($817) meet this obligation. (We Total Changes $4,746 discuss deferrals in more 2014-15 Proposed Spending $61,559 detail in the “Wall of Debt QEIA = Quality Education Investment Act; LCFF = Local Control Funding Formula; COLA = cost-of-living adjustment; COE = county office of education; and ADA = average daily attendance. Plan” section of this report.) www.lao.ca.gov Legislative Analyst’s Office 11 2014-15 BUDGET community college apportionments. In addition, the We believe this is a reasonable mix of one-time budget plan provides $54 million in testing-related and ongoing spending. Notably, by retiring the increases—$46 million to pay for the new assessments $6.2 billion in deferrals, the plan eliminates the aligned to the Common Core State Standards (CCSS) largest component of outstanding school and and $7.6 million to develop a new English proficiency community college obligations. Moreover, his plan exam aligned to the CCSS. (The budget also includes significantly increases ongoing programmatic a $101 million reduction for school and community support by providing additional funding for LCFF college energy projects due to an updated estimate of and community colleges. associated Proposition 39 revenues.) One-Time Funding Provides Cushion in Provides $504 Million in One-Time Funding Responding to Lower Revenues. Given possible for Statutory Obligations. The Governor’s budget swings in the 2014-15 minimum guarantee, the also includes $504 million in one-time funds for one-time spending on deferral paydowns provides QEIA ($410 million) and ERP ($94 million). We the state with a cushion if the minimum guarantee discuss these programs in more detail in the “Wall were to decrease midyear. If the guarantee were of Debt Plan” section of this report. to decrease, the state could reduce the deferral Per-Student Funding Increases Significantly. paydowns midyear, thus achieving General Fund Overall, the Governor’s plan increases ongoing savings without requiring schools and community K-12 per-pupil funding from $7,936 in 2013-14 to colleges to make programmatic reductions. A $8,724 in 2014-15—an increase of $788 (10 percent). prudent mix of one-time and ongoing spending (These amounts exclude one-time funding, also helps the state minimize potential disruption including funding provided to pay down deferrals.) to school funding in 2015-16 as a result of revenue volatility or an economic slowdown. Because the Overall Plan Reasonable $2.5 billion dedicated to paying down deferrals Prudent Mix of One-Time and Ongoing in 2014-15 is a one-time payment, the state could Spending. Of the $11.8 billion in spending increases reduce spending by a like amount in 2015-16 proposed by the Governor, about $6.7 billion is without requiring schools and community colleges used to pay off outstanding one-time obligations to make programmatic reductions. and $5.1 billion is used for ongoing increases. WALL OF DEBT PLAN The largest component of the Governor’s outstanding school and community college budget plan is his proposal to retire all school and obligations. Figure 7 describes each existing type of community college wall of debt obligations by obligation and identifies the corresponding amount the end of 2017-18. In this section, we discuss the the state owes. The largest outstanding obligations Governor’s plan for retiring these obligations. involve payment deferrals and unpaid mandate claims. Background State Has One-Time Proposition 98 Settle-Up State Has $11.5 Billion in Outstanding School Obligations. The state currently has settle-up and Community College Obligations. The state obligations totaling $1.5 billion. A settle-up currently has a total of $11.5 billion in one-time obligation is created when the minimum guarantee 12 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET increases midyear and the state does not make deferrals by the end of 2014-15. As discussed earlier, an additional payment within that fiscal year the Governor designates Proposition 98 funding to meet the higher guarantee. The bulk of the from 2012-13, 2013-14, and 2014-15 to pay down outstanding settle up is associated with the state’s these deferrals. Under the Governor’s plan, all 2009-10 Proposition 98 obligation. The state additional Proposition 98 spending proposed in can designate settle-up payments be used for 2012-13 and 2013-14 is used for deferral pay downs. any educational purpose, including paying off About one-third of the new spending proposed for other one-time obligations, such as deferrals and 2014-15 is for deferral pay downs. mandates. (Because settle up can be used to retire Makes Final $410 Million QEIA Payment the obligations shown in Figure 7, it is not itemized in 2014-15. The Governor proposes to make a separately. If the state were to pay these obligations $410 million payment above the 2014-15 minimum using settle-up funds, no additional spending guarantee (treated as a 2005-06 settle-up payment) beyond the $11.5 billion would be required.) to retire the state’s QEIA-related obligation. Although statute requires a $410 million payment Governor’s Proposals to fully retire the state’s obligation, the estimated Figure 8 (see next page) displays the Governor’s costs of the program in 2014-15 are $316 million. proposed multiyear wall of debt payment plan. (Fewer schools are now participating in the Pays Down All Deferrals by End of 2014-15. program.) The Governor proposes to redirect As shown in Figure 9 (see next page), the the $94 million in freed-up funds to the ERP (as Governor proposes to pay down all $6.2 billion discussed further below). in outstanding school and community college Figure 7 State Has Several Outstanding One-Time School and Community College Obligations (In Millions) Amount Obligation Description Outstandinga Payment deferrals From 2008-09 through 2011-12, the state deferred certain school and $6,164 community colleges payments from one fiscal year to the subsequent fiscal year to achieve state savings. State paid down $4.3 billion in deferrals in the 2013-14 budget plan. Mandates State must reimburse school and community college districts for 4,482 performing certain state-mandated activities. State deferred payments seven consecutive years (2003-04 through 2009-10). Since 2012-13, state has provided ongoing funding for mandates through the Mandates Block Grant.b Emergency Repair Chapter 899, Statutes of 2004 (SB 6, Alpert), requires the state to provide 462 Program certain schools with a total of $800 million for emergency facility repairs. Quality Education Chapter 751, Statutes of 2006 (SB 1133, Torlakson), sets forth a multiyear 410 Investment Act plan to provide an additional $2.7 billion to schools and community colleges. Annual payments of $450 million are to be provided until obligation has been retired. Total $11,518 a At the end of 2013-14 based on July 2013 estimate. b The state provided $300 million in 2010-11 and $90 million in 2011-12 for unpaid mandate claims. www.lao.ca.gov Legislative Analyst’s Office 13 2014-15 BUDGET 2016-17, and 2017-18 to Figure 8 pay off all unpaid mandate Governor’s Multiyear Plan for claims. In 2015-16, the Paying One-Time Education Obligations $1.2 billion payment (In Millions) would be made using Total Owed at Proposition 98 settle-up End of Obligation 2013-14a 2014-15 2015-16 2016-17 2017-18 funds, fully retiring the Deferrals $6,164 $6,164b — — — state’s settle-up obligation. Mandates 4,482 — $1,245c $1,600 $1,637 ERP 462 188 274c — — Assessment and QEIA 410 410d — — — Recommendations Totals $11,518 $6,762 $1,519 $1,600 $1,637 a Based on July 2013 estimate. Reasonable Payment b Paydowns to be made in 2014-15 using 2012-13, 2013-14, and 2014-15 Proposition 98 funds. c Plan. The Governor’s Counts toward settle-up obligations, not towards the Proposition 98 minimum guarantee in 2015-16. d Of amounts reflected, $94 million in QEIA funds not needed to support QEIA program is redirected to plan is a reasonable ERP. multiyear approach that ERP = Emergency Repair Program and QEIA = Quality Education Investment Act. pays off all outstanding Pays Off ERP Obligation in 2015-16. The school and community Governor’s budget provides a total of $188 million college obligations. Such an approach would retire for the ERP in 2014-15. Of that amount, $94 million all outstanding obligations one year before the is being redirected from freed-up QEIA funds expiration of Proposition 30 revenues. (mentioned above) and $94 million is coming from Consider the Functional Benefits of unspent prior-year Proposition 98 funds. Under the Payments. In developing a plan for paying off Governor’s multiyear payment plan, the state would its outstanding obligations, the Legislature may retire more of its settle-up obligation by paying off want to consider how these payments will affect the remaining $274 million in outstanding ERP school and community college spending. Paying obligations in 2015-16. down deferrals will reduce the need for cash-flow Retires Mandate Backlog by 2017-18. The borrowing but is unlikely to result in notable Governor does not propose any funding to reduce additional spending. In contrast, payments for the mandate backlog in 2014-15. As Figure 8 shows, mandates and ERP are one-time funds available the Governor’s plan makes payments in 2015-16, for any purpose, such as deferred maintenance or implementation of the CCSS. (This is because school districts already have paid for the costs Figure 9 associated with the mandated activities and Governor Proposes to Pay Down completed their ERP projects.) All Outstanding K-14 Deferrals Consider the Distributional Effects of (In Millions) Payments. The Legislature also may want to K-12 CCC Totals consider the different distributional effects these Pay Down Scored to: payments would have on school and community 2012-13 $1,813 $194 $2,007 college districts throughout the state. 2013-14 1,520 163 1,683 2014-15 2,238 236 2,474 • Paying Down Deferrals. Though deferral Totals $5,571 $592 $6,164 paydowns would benefit most districts, 14 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET those districts that rely more heavily on Pay Off Obligations Without Increasing state funding (compared to local property Proposition 98 Commitments. As the Governor tax funding) would benefit most from these proposes in 2015-16, we recommend the state use payments. outstanding settle up to pay off some of its existing school and community college obligations. In • Mandates. Paying down the mandate future years, if no outstanding settle-up obligations backlog also would benefit most school and exist, we recommend the Legislature pay off the community college districts, but would remaining obligations while still funding at the disproportionately benefit districts that file minimum guarantee. Such an approach would more claims and claim much higher costs provide the state with more budgetary flexibility (in per-pupil terms) than other districts. in responding to revenue volatility or an economic slowdown. Given Proposition 30 revenues begin to • QEIA. Payments for QEIA would benefit phase out in 2017-18 and fully expire by 2019-20, 365 schools in the bottom three deciles the minimum guarantee could decrease or grow of the state’s accountability index that more slowly in these years. If the minimum currently participate in the program. guarantee were to decrease in 2017-18 or 2018-19, • ERP. Funding for ERP would benefit schools one-time spending in the prior year to pay the in the bottom three deciles that previously mandate backlog would provide the state with had projects approved by the Office of Public a cushion to reduce spending without affecting School Construction. (The $462 million ongoing programmatic funding levels. owed would provide funding to 694 schools on the approved unfunded list.) LOCAL CONTROL FUNDING FORMULA Governor’s Proposals We estimate the 2014-15 LCFF funding level would be approximately 80 percent of the full Provides $4.5 Billion for District LCFF implementation cost. Increases. The Governor’s largest proposed Adds Two Programs to LCFF. The majority of programmatic augmentation in 2014-15 is for the state categorical programs were consolidated into LCFF. In 2013-14, the state provided a $2.1 billion the LCFF in 2013-14. To further simplify the school increase for the first year of implementing the finance system, the Governor proposes to add two LCFF, dedicating $41 billion to the formula remaining categorical programs to the LCFF—SSP (73 percent of the full implementation cost). The ($4.8 million) and Agricultural Education Grants Governor’s proposal dedicates an additional ($4.1 million). Under the Governor’s proposal, $4.5 billion to the LCFF in 2014-15, an 11 percent school districts receiving funding for these two increase from the 2013-14 funding levels. The programs in 2013-14 would have those funds count Governor estimates this additional appropriation towards their LCFF targets beginning in 2014-15. would close approximately 28 percent of the (No change would be made to the LCFF target gap between the 2013-14 funding levels and rates.) The currently required categorical activities full implementation target funding rates. would be left to districts’ discretion. www.lao.ca.gov Legislative Analyst’s Office 15 2014-15 BUDGET Fully Funds COE LCFF. The Governor’s plan increases in LCFF funding were made at the also provides COEs with $1.1 billion in LCFF discretion of the Legislature and included in the funding, an increase of $26 million from the budget plan. In contrast, under the Governor’s 2013-14 level. The administration projects that this proposal, the share of Proposition 98 dedicated to increase will be sufficient to provide COEs their LCFF each year would be predetermined by statute. full LCFF target rates in the budget year. Of the Assessment and Recommendations amount provided, $450 million is generated by the county operations part of the formula, $400 million LCFF Proposals Reasonable. We believe the is generated by the alternative education part of the Governor’s proposal to dedicate school funding formula, $178 million is from a “hold harmless” increases primarily to the LCFF is a reasonable provision that provides some COEs with funding approach that is consistent with the intent of the in excess of their LCFF targets, and $33 million is Legislature in restructuring the school finance for the Home-to-School Transportation add-on. system last year. With the exception of transportation funding Reject Proposal to Automate LCFF Funding. and temporary spending requirements related We have concerns, however, with the Governor’s to Regional Occupation Centers and Programs proposal to set in statute the specific share of (ROCP), COEs have the flexibility to spend LCFF Proposition 98 funding that would be dedicated monies for any educational purpose. to LCFF each year moving forward. Although Proposes New Automated Budget Formula for prioritizing funding for LCFF is consistent with LCFF Funding. The Governor proposes statutory the Legislature’s intent in adopting the LCFF and language requiring that a specified percentage eliminating most categorical programs, we are of annual Proposition 98 funding automatically concerned that the proposal creates an additional, be dedicated to the total LCFF each year (school unnecessary formula that would further complicate district and COE combined). In 2014-15, 76 percent school funding. Such an approach would remove of Proposition 98 funding would be required to the Legislature’s discretion to determine the go towards LCFF. Beginning in 2015-16, until the appropriate amount of funding to allocate for LCFF LCFF target rates are fully funded, 79 percent of in any particular year. Given the considerable loss Proposition 98 funding would go towards LCFF. of associated legislative authority and discretion, we Under current law, prior-year LCFF appropriations recommend the Legislature reject this proposal. are continuously appropriated. This means Recommend Approving Shift of Two Programs these appropriations are automatically adjusted into LCFF. As we discuss in more detail in the next throughout the school year based on changes in section of this report, we recommend approving the ADA and automatically made to school districts, Governor’s proposal to shift SSP and Agricultural even without an approved state budget. In 2013-14, Education Grants into the LCFF. CAREER TECHNICAL EDUCATION In this section, we focus on high school CTE focus on two programs—SSP and the Agricultural programs. We start by providing an overview of Education Grants—both of which would be the state’s current CTE programs, with a particular directly affected by the Governor’s 2014-15 CTE 16 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET budget proposals. We then describe the Governor’s to four-year university systems, while a student Graphic Sign Off CTE proposals, assess those proposals, and offer interested in entering the workforce directly after associated recommendations for the Legislature’s graduation may learn math and science as part of a Secretary consideration. health occupations course. Analyst Various High School CTE Programs Operate Background MPA in California. As shown in Figure 11 (see next Deputy page), high schools receive funding for CTE in Overview of High School CTE Figure 10 High School CTE Consists of Instruction CTE Industry Sectors in a Number of Fields. The California Department of Education (CDE) defines CTE as coursework in one of 15 industry areas. As Agriculture and Natural Resources Figure 10 shows, these industries are diverse and broad in scope—including building and Arts, Media, and Entertainment construction trades, fashion design, and health occupations. Building and Construction Trades Lines Increasingly Blurred Between CTE and “Core” Instruction. High school Business and Finance CTE traditionally has been thought of Education, Child Development, and Family Services as an alternative to a college preparatory pathway. In recent years, however, the state Energy, Environment, and Utilities has increasingly focused on the policy goal of ensuring that students have both college Engineering and Architecture and career options upon graduating from high school. This has increased the state’s Fashion and Interior Design emphasis on promoting career pathways, which are sequences of courses that align with Health Science and Medical Technology postsecondary education and industry needs. In addition, there is a growing literature on Hospitality, Tourism, and Recreation the benefits of contextual (applied) learning, in which students are taught math, English, Information and Communication Technologies and other subjects in a way that incorporates students’ interests in an occupational field. Manufacturing and Product Development As a result, many CTE courses have become Marketing, Sales, and Service integrated into high school students’ regular instructional curriculum—thereby blurring Public Services the traditional lines between CTE and core instruction. For example, a college-bound Transportation student may take high school CTE courses such as engineering and graphic arts to CTE = career technical education. satisfy course requirements for admission www.lao.ca.gov Legislative Analyst’s Office 17 Template_LAOReport_fullpage.ait ARTWORK #140059 2014-15 BUDGET Figure 11 California’s High School Career Technical Education (CTE) Programs 2013‑14, Unless Otherwise Specified State-Funded Funding Programs Description (In Millions) Regional Occupational Regionally focused CTE offered during the school day, after school, $384.0a Centers and Programs and in the evening at high schools and regional centers. Primarily (ROCP) serves high school students ages 16 through 18. Career Pathways Trust One-time competitive grants intended to improve linkages 250.0 between CTE programs at schools, community colleges, and local businesses. Authorizes several types of activities, such as creating new CTE programs and curriculum. These funds are available for expenditure through 2015-16. CTE Pathways Initiative Funding intended to improve linkages between CTE programs at 48.0 schools, community colleges, universities, and local businesses. This program sunsets at the end of 2014-15. Of these funds, $8.2 million supports California Partnership Academies and $5.2 million supports Linked Learning (both reflected below). California Partnership Small learning cohorts that integrate a career theme with academic 29.6 Academies education in grades 10 through 12. Considered a form of Linked Learning (see below). Linked Learning One-time funding to support small, career-themed learning cohorts 5.2b within comprehensive high schools that tie academic coursework to technical content and work-based learning. Specialized Secondary Competitive grants that provide seed money to pilot programs 4.9 Programs that prepare students for college and careers in specialized fields ($3.4 million). Funding also supports two high schools specializing in math, science, and the arts ($1.5 million). Agricultural CTE Ongoing funding that can be used for the purchase of nonsalary 4.1 Incentive Program items for agricultural education. Funds are commonly used to purchase equipment and pay for student field trips. Districts are required to provide matching funds. Federally Funded Programs Carl D. Perkins Ongoing funding that can be used for a number of CTE purposes, $56.3 including curriculum and professional development and the acquisition of equipment and supplies for the classroom. Of these monies, 85 percent directly funds local CTE programs and the other 15 percent supports statewide administration and leadership activities. Youth Career Connect One-time competitive grants available for the 2014-15 school year 12.0c Grant that are intended to improve career options for high school students by facilitating partnerships with businesses, high schools, and higher education. Grant recipients are required to provide a 25 percent match. a Due to categorical flexibility allowed between 2008-09 and 2012-13, this amount is likely higher than the actual amount spent by providers on ROCP. In 2013-14 and 2014-15, providers must spend on ROCP at least as much as in 2012-13. b In addition, since 2008, the James Irvine Foundation has contributed more than $100 million to Linked Learning. c Assumes California receives an amount proportional to its population (12 percent). Total federal appropriation is $100 million. 18 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET various forms, including categorical programs, measures of student performance. Specifically, one-time competitive grants, foundation funding, Chapter 577, Statutes of 2012 (SB 1458, Steinberg), and federal funding. In addition, many high requires the State Superintendent of Public schools fund CTE instruction using their LCFF Instruction (SPI) to develop by 2015-16 a revised (general purpose) monies. API for high schools that takes into account Largest High School CTE Categorical Program graduation rates and high school students’ Folded Into New K-12 Funding Formula. The readiness for college and career. In October 2013, 2013-14 budget package eliminated approximately the SPI provided to the Legislature a statutorily three-quarters of categorical programs and folded required status report that laid out a number of their associated funding into LCFF. The state’s options under consideration for broadening the largest CTE categorical program, ROCP, was API, including assigning points to high schools included in this consolidation. However, to ensure based on the extent to which their students are ROCP continued to operate during the next couple deemed college and career ready. Currently, the SPI of years, the budget package requires providers is gathering feedback on the possible components (school districts and COEs) to maintain at least of the new API. their 2012-13 level of state spending on ROCP in Specialized Secondary Programs 2013-14 and 2014-15. Funds used to satisfy this maintenance-of-effort (MOE) requirement count Consists of Two Distinct Parts. The SSP was toward school districts’ LCFF allocations. At the created in 1984 with the stated goal of encouraging end of 2014-15, school districts and COEs will have high schools to create curriculum and pilot discretion to spend former ROCP funds as they programs in specialized fields, such as technology choose. and the performing arts. In 1991-92, SSP’s mission Several Smaller High School CTE Programs was expanded to include base funding for two Left Out of LCFF. The 2013-14 budget package high schools that are affiliated with the California took a different approach for three smaller CTE State University (CSU) system. Of the $4.9 million programs. Specifically, SSP, Agricultural Education provided for SSP in the current year, $3.4 million is Grants, and California Partnership Academies awarded as “seed” funding for the development of (CPA) were retained as stand-alone categorical specialized instruction and $1.5 million supports programs. In signing the 2013-14 Budget Act, the state’s two SSP-funded high schools. however, the Governor expressed his desire to fold Competitive Grants Totaling $3.4 Million SSP and Agricultural Education Grants into LCFF Awarded in 2013-14. In the current year, CDE, in 2014-15. which administers SSP’s competitive grant State in Process of Refining CTE program, has awarded 67 SSP grants totaling Accountability Measures. For the past fifteen $3.4 million. The SSP funding is distributed in years, the state’s accountability system for public four-year grant cycles. School districts initially schools has been based almost entirely on student apply for a one-year planning grant. Applicants test scores. Based on these test results, schools then reapply for three-year implementation have received an annual Academic Performance grants. Funds are permitted to cover various costs, Index (API) score and ranking. Recently, the state including equipment and supplies, instructor has been moving toward a more comprehensive and staff compensation, and teacher release time accountability system that includes multiple to develop curriculum. After the grant cycle is www.lao.ca.gov Legislative Analyst’s Office 19 2014-15 BUDGET complete, recipients are ineligible to reapply for SSP to pay for teachers. (By statute, these teachers do grants. not need to be credentialed.) Arts, Science, and Technology Are Common Agricultural Education Grants Themes for Competitive Grant Program. The SSP competitive grant program funds various types of Agricultural Education Grants Totaling instruction. As Figure 12 shows, of the 67 grants $4.1 Million Awarded in 2013-14. The stated awarded in 2013-14, 42 percent are arts programs purpose of Agricultural Education Grants is to and 15 percent are science, technology, engineering, create an incentive for high schools to offer state- or mathematics (STEM) programs. Other industry approved agricultural programs. In the current areas include business and agriculture. year, CDE has awarded 303 grants to 222 school Total of $1.5 Million in Ongoing SSP Funding districts totaling $4.1 million. Funds typically Provided to Two High Schools on Top of LCFF. are used by grant recipients for instructional In addition to competitive grants, SSP provides equipment and supplies. Other allowable uses of a total of $1.5 million in annual funding for two the funds include paying for field trips and student Graphic Sign Off high schools operating in conjunction with the conferences. CSU system. This amount is split evenly between GranSt Feucnredtsa Arrye Awarded to All Qualified an arts-themed high school affiliated with CSU ApplicanAtsn. Thalyes CtDE administers the grants by Los Angeles and a math- and science-themed splitting aMvaPiAlable funds based on the number of high school affiliated with CSU Dominguez Hills. qualified Dapeppliucatynts in a given year. To qualify, (Unlike virtually all other public schools, students grantees must provide matching funds. In compete for admission to these two schools.) The addition, the high school program must offer three SSP funds provided to these schools is on top of instructional components: classroom instruction, LCFF monies they receive and are used primarily a supervised agricultural experience program (project-based learning), and student leadership Figure 12 development opportunities. To receive a grant Specialized Secondary renewal, high schools must agree to be evaluated Programs by Area of Focus annually on 12 program quality indicators. (These indicators include curriculum and instruction 2013-14 requirements, leadership development, industry Othera Art-Related involvement, career guidance, and accountability.) As part of this process, five regional supervisors conduct on-site reviews and provide ongoing Agriculture technical assistance to grantees. Governor’s CTE Proposals Adds SSP and Agricultural Education Grant Business-Related to LCFF. The Governor proposes to add both STEM SSP and Agricultural Education Grants to LCFF. a Includes education, transportation, and mixed-industry programs. Under the Governor’s proposal, school districts STEM = science, technology, engineering, and mathematics. receiving funding for these two programs in 2013-14 would have those funds count toward ARTWORK #140059 20 Legislative Analyst’s Office www.lao.ca.gov Template_LAOReport_sm.ait 2014-15 BUDGET their LCFF targets beginning in 2014-15. (No • Inflexibility. Categorical programs change would be made to the LCFF target rates.) typically are highly prescriptive in terms The currently required categorical activities would of how funds are spent. This is as true be left to districts’ discretion. of CTE categorical programs as other Makes No Changes to ROCP and CPA. The K-12 categorical programs. Yet students’ Governor’s budget does not make any proposal problems and educators’ preferred solutions related to the existing MOE spending requirement can vary across the state. By requiring for ROCP. Additionally, the Governor’s budget does funds to be spent in a specific way for a not make any proposal related to CPA. specific purpose, categorical programs Increases High School LCFF Rate by can limit district and school flexibility to 11 Percent. While not a specific proposal related develop local strategies that address local to CTE, the Governor’s budget proposes additional needs in the most effective and efficient LCFF monies for schools in 2014-15, which high way. schools also can use for CTE instruction. The • High Administrative Costs. Categorical average high school base rate would increase from funds generally are expensive for districts $6,306 in 2013-14 to $6,987 in 2014-15, an increase and CDE to administer. Districts of $681 (11 percent). (When accounting for the must apply for, track, and report the additional funding provided for EL/LI students, appropriate use of categorical funds and the high school rate is notably higher—$8,384 in CDE must oversee districts’ compliance 2014-15.) As indicated earlier, many districts likely with numerous statutory and regulatory are devoting some portion of this base funding for requirements. CTE activities. Given the large proposed funding increase in the high school base rates, districts • Focus on Inputs, Not Results. Because of would have considerably more to spend on these the focus on how categorical funds are types of activities in 2014-15. spent, the state and districts often can lose Assessment and sight of the outcomes the programs are Recommendations intended to achieve (such as successful transitions to college or the workforce). As detailed below, we recommend the Adoption of LCFF Reflects Commitment to a Legislature adopt the Governor’s proposals to fold More Streamlined and Rational Funding System. SSP and Agricultural Education Grants into LCFF It was largely in recognition of the need to overhaul and also take steps to ensure that high schools the state’s overly burdensome and ineffective are held accountable for the quality of their CTE K-12 categorical system that the Legislature and programs. Governor enacted LCFF. The LCFF is based on two Categorical Programs Have Notable main underlying principles, namely that: (1) unless Drawbacks. While categorical programs can be the state has a compelling reason to the contrary, helpful in certain instances, we generally believe districts should be permitted to decide how to they should be used sparingly. This is because allocate their funding to address their student categorical programs have several short-comings, needs; and (2) the overall funding level provided by including: the state should reflect the higher costs of educating www.lao.ca.gov Legislative Analyst’s Office 21 2014-15 BUDGET specific groups of students (such as EL students), to purchase and ways to enhance students’ who may need additional services to be successful. learning experience through field trips, In response to this latter goal, the LCFF generally is conferences, and other activities. These designed to provide similar-sized districts serving costs typically are covered with LCFF similar students with a similar amount of funding. or certain non-state sources (such as Proposal for SSP and Agricultural Education federal Perkins funding). For example, Grants Is Consistent With LCFF Tenants. according to the most recent data from The Governor’s proposal to eliminate SSP and CDE, in 2011-12 districts spent more than Agricultural Education Grants as stand-alone $300 million in state general-purpose categorical programs is consistent with the purpose monies on school equipment, materials, of LCFF, as discussed below. and supplies. These funds are used to cover a wide range of instructional costs—from • SSP Competitive Grants. The purpose of supplies in chemistry labs to materials SSP competitive grants is to encourage for fine arts classes. Given the substantial program innovation and development of unrestricted resources available and new curriculum in high schools. Having a currently being spent for these purposes, restricted program implies that innovation no clear rationale exists for providing a and development of new curriculum is a small separate appropriation for covering supplemental activity that requires special similar costs in one specific discipline incentives and a separate funding stream. (agricultural education). Yet, course and program development is a core function for educators, and schools Recommend Legislature Approve the already have wide discretion to use LCFF Governor’s Proposals. Given these findings, for such core activities. we recommend the Legislature approve the Governor’s budget proposals to consolidate SSP • SSP-Funded High Schools. In creating and Agricultural Education Grants into LCFF. uniform per-pupil LCFF rates with Under his proposal, districts currently receiving adjustments for particular student groups, these funds would continue to receive them in the Legislature and Governor sought to 2014-15 and subsequent years (though those funds provide a more rational finance model would now count toward meeting their LCFF that significantly reduced historical funding targets). Districts would have the option funding inequities across schools. The two to use these funds exactly as they do now (though SSP-funded high schools, however, work without the administrative burden associated with at direct cross-purposes to the LCFF. We meeting current CDE compliance requirements). estimate that students at these two schools Alternatively, districts would have flexibility to use receive roughly $1,200 more in per-student these funds in a different way to meet students’ funding than students at other high schools needs. (Eliminating these categorical programs with similar students. would reduce administrative workload within • Agricultural Education Grants. Educators CDE’s Agricultural and Home Economics Office. routinely make decisions about the type Currently, this office has 15 positions. The CDE of instructional equipment and supplies indicates about one full-time position is dedicated to administering Agricultural Education Grants.) 22 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET Recommend Overall Approach to CTE That (2) complete a sequence of CTE courses, (3) earn Focuses on Student Outcomes. The Legislature community college credit in a CTE program, does not need to make any decisions now about (4) obtain an industry certification, and (5) secure two larger CTE programs—ROCPs and CPAs—as an apprenticeship. By holding districts more certain related statutory provisions do not trigger accountable for student outcomes, the state off until 2015-16. Looking ahead, however, we could promote the positive benefits of CTE while recommend the Legislature adopt an overall providing more local flexibility to develop effective approach for high schools and CTE that relies more programs. heavily on student outcomes and less heavily on Recommend Legislature Request SPI Provide the specific educational strategies educators use Update on Development of Revised API. The to achieve those outcomes. Under this approach, planned addition of college and career readiness the Legislature would eliminate programmatic measures to the API provides an opportunity for requirements for all CTE programs in favor of the Legislature to obtain a more comprehensive evaluating and holding districts and high schools look at high schools’ performance. To ensure the accountable for student outcomes. In evaluating Legislature is well informed about likely changes success, the Legislature could use various outcome to the API, we recommend the Legislature request measures, such as the number and share of students the SPI to present a status update at a spring budget who: (1) meet both high school graduation and hearing on the development of the revised API. university admissions course requirements, STUDENT ASSESSMENTS In this section, we provide background on state’s original and new systems of standards and the state’s academic standards and assessments, assessments. describe the Governor’s proposals to increase California’s Original Academic funding for California’s new student assessments, Standards and Assessments assess those proposals, and make several related recommendations. California Has Had Academic Standards for More Than 15 Years. As Figure 13 shows (see next Background page), California first adopted academic content In the late 1990s, California adopted academic standards for its core content areas—ELA, math, standards specifying the content that students science, and history-social science—in 1997 and were expected to learn while in school. Shortly 1998. Shortly thereafter, the state developed English after developing these standards, the state adopted language development (ELD) standards for ELs a series of assessments aligned to those standards as well as visual and performing arts standards. that measured the extent to which students had Several years later, the state adopted standards for mastered the required content. A few years ago, physical education, CTE, and world languages. California began the process of replacing these Student Assessments Aligned to Standards in original standards with newly developed CCSS. Core Subject Areas. To determine whether students These new standards have triggered development of were successfully learning the standards in the a new round of assessments. Below we describe the core content areas, the state developed summative www.lao.ca.gov Legislative Analyst’s Office 23 2014-15 BUDGET assessments that students took each spring. (A as the CSTs, but was designed for students whose summative assessment is intended to measure disabilities precluded them from achieving student mastery of content taught throughout the proficiency on the CSTs. The CAPA was designed school year.) Collectively these assessments were for students with severe cognitive disabilities and known as the Standardized Testing and Reporting covered only portions of content standards. (STAR) program. Most students took the California State Has Assessment to Determine English Standards Tests (CSTs)—the main component of Proficiency. Another component of the state’s the STAR program. As Figure 14 shows, the state assessment system is the California English administered grade-level CSTs in ELA for grades 2 Language Development Test (CELDT). The CELDT through 11; in math for grades 3 through 7; in is aligned to the state’s 1999 ELD standards. science for grades 5, 8, and 10; and in history-social (As we discuss later, the state has yet to develop science for grades 8 and 11. In addition to the a new assessment aligned with the 2012 ELD specific grade-level exams, students took a number standards.) The CELDT is used to (1) dGetrearmphiniec i fS ign Off of course-specific CSTs in grades 8 through 12. an incoming student should be classified as an EL Secretary Two Alternative Assessments for Students and (2) measure an EL’s proficiency in subsequent Analyst With Disabilities. Under the STAR program, some years. (School districts administer the CELDT to MPA students with disabilities were required to take one any incoming student whose parent or guardian Deputy of two other assessments—the California Modified reports on the home language survey that a Assessment (CMA) or the California Alternate language other than English is the student’s initial Performance Assessment (CAPA). The CMA language learned or the primary language used at covered the same grade-level content standards home.) Decisions regarding reclassifying students Figure 13 Adoption of Academic Content Standards in California English-Language Arts English-Language Arts Mathematics Mathematics Physical Education ELD ELD Career Technical Education 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 World Languages Science Visual and Performing Arts Science History-Social Science California-Specific Content Standards Career Technical Education Common Core State Standards Next Generation Science Standards ELD = English Language Development. 24 Legislative Analyst’s Office www.lao.ca.gov ARTWORK #140059 Template_LAOReport_large.ait 2014-15 BUDGET are made at the local level Figure 14 based on CELDT results, California Standards Tests (CST) performance on other state Standard Grade-Level Exams End-of-Course Examsa assessments, teacher input, English-Language Arts 2 through 11b None. and local criteria. Standards-Based Mathematics 2 through 7 Algebra; Geometry; Algebra II; Integrated Mathematics 1, 2, Tests in Spanish (STS) and 3; General Mathematics; for Some ELs and Dual High School Summative Mathematics. Immersion Students. Science 5, 8, 10 Biology; Chemistry; Earth The STS are assessments Science; Physics; Integrated/ in Spanish aligned to Coordinated Science 1, 2, 3, and 4. California’s 1997 ELA and math standards. The state History-Social Science 8, 11 World History. a required students that had Primarily designed to test middle and high school students in specific subject areas. b As part of the English-language arts CST, students take a writing exam in grades 4 and 7. been receiving instruction in Spanish or had been Governor’s Association and Council of Chief State enrolled in school in the United States for less than School Officers, in consultation with education one year to take the STS. Students required to take experts, developed a set of common standards the STS also were required to take the ELA and in ELA and math for grades K-12. (California’s math assessments in English (either the CST or Governor and Superintendent of Public Instruction CMA). Students who are not ELs but are currently were a part of this group.) The new standards, enrolled in a dual immersion program—receiving known as the CCSS, were intended to be better at instruction in both Spanish and English—also preparing all students for college and career. The could take the STS. finalized standards were released in June 2010. Certain Assessments Required by Federal California Created Commission to Review Law. As set forth in the No Child Left Behind Act CCSS. Among other things, Chapter 2, Statutes (NCLB) of 2001, the federal government requires of 2010, of the Fifth Extraordinary Session states to assess students in ELA and math in (SBX5 1, Steinberg), created an Academic Content grades 3 through 8 and at least once from grades Standards Commission to review the CCSS and 10 through 12. The NCLB also requires states to determine whether the state should adopt these assess students in science at least once during: new standards. Upon recommendation of the (1) grades 3 through 5, (2) grades 6 through 9, and commission, the State Board of Education (SBE) (3) grades 10 through 12. States also are required ultimately adopted the CCSS, with the addition of to annually assess the English proficiency of a few California-specific standards, in August 2010. ELs. California’s STAR program exceeded these To date, the CCSS have been adopted by 45 states requirements. and the District of Columbia. (Four states—Alaska, Nebraska, Texas, and Virginia—did not adopt Common Core Standards and either the ELA or math standards. Minnesota Assessments in ELA and Math adopted the ELA standards only.) Common Core Standards in ELA and Math California Part of Consortium for Developing Adopted by 45 States. In 2009, the National New Assessments. In September 2010, as part www.lao.ca.gov Legislative Analyst’s Office 25 2014-15 BUDGET of its Race to the Top Assessment Program, the students within the required testing window. federal government awarded $330 million to To help ease the transition to computer-based two consortia to develop assessments aligned exams, SBAC will provide a pencil-and-paper to the CCSS. California and 22 other states are option in the first three years the assessments are members of the Smarter Balanced Assessment administered. In the 2013-14 budget, the state Consortium (SBAC), which received $160 million. provided $1.25 billion in one-time funding for (The other consortium, Partnership for Assessment implementation of the CCSS. These funds can be of Readiness for College and Careers, received used for technology, professional development, or $170 million.) The federal funding is being used to instructional materials. Initial surveys show that develop the new SBAC assessments and conduct virtually all school districts plan on using some field tests during spring 2014 using a sample of portion of these funds to purchase additional students from member states. These field tests technology. will be used to ensure the quality of assessment Assessments Will Use Computer-Adaptive questions, establish proficiency levels, and ensure Technology and Performance Tasks. One part of technological systems are ready for administration the SBAC assessments will be computer adaptive, of the assessments. The official SBAC assessments such that the difficulty of the next test item is based will be administered by member states in spring on whether the student answered the previous 2015. (Unlike the CSTs, the SBAC assessments item correctly. Because computer-adaptive exams do not have a second grade exam. The SBAC essentially provide a custom set of items for each assessments also lack end-of-course assessments in student, fewer items are required to determine various mathematical subjects.) a student’s skill level. In addition to computer- Ongoing Responsibilities of SBAC and adaptive test items, the SBAC assessments Member States. Moving forward, the SBAC is will include performance tasks for students to responsible on an ongoing basis for developing complete, which will require students to review additional test items, producing common materials source materials and respond in writing to several such as manuals, and maintaining a digital library questions. The SBAC test blueprints, for example, of instructional tools for SBAC member states. show that the ELA performance tasks for grades As the federal Race to the Top funding expires in 3 through 5 will require students to review source September 2014, these activities will be funded materials, answer three short-response questions, by fees charged to the SBAC’s member states. and write one long essay. Because students are Individual states will be directly responsible for expected to use evidence to integrate knowledge funding the administration, scoring, and reporting and skills across multiple content standards, of the assessments. the SBAC assessments are expected to measure New Assessments Will Require Devices and deeper understanding of course material. (By Internet Connections. The assessments developed contrast, virtually all of the items on the state’s by SBAC are intended to be taken online using CST exams were noncomputer-adaptive, multiple- a desktop computer, laptop computer, or tablet. choice questions.) As we discuss later, because Given the technology required to administer these performance tasks cannot be graded by a computer, exams, school districts must have the technological the new SBAC exams will be more costly to grade capacity to administer the assessments to all than the CSTs. 26 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET In 2013-14, SBAC Field Test to Replace ELA Next Generation Science Standards and Math CSTs and CMA. To begin transitioning State Recently Adopted New Science to the CCSS, Chapter 489, Statutes of 2013 (AB 484, Standards. Given the CCSS created common Bonilla), eliminates all ELA and math CSTs and standards only in ELA and math, a group CMAs beginning in 2013-14. (The state retained of 26 states and various national science the CAPA.) For 2013-14, Chapter 489 requires organizations—including the National Research school districts to participate in the SBAC field Council, National Science Teachers Association, test and redirects funding from the CSTs and and American Association for the Advancement CMA to cover the associated costs. Five percent of of Science—convened a group in 2011 to develop California students will take a sample of questions new K-12 science standards. (California was a and complete one performance task in either ELA lead state partner in the development of these new or math. The remaining 95 percent of students will standards.) In March 2013, the Next Generation take a sample of both ELA and math questions and Science Standards (NGSS) were finalized and will complete a performance task in one subject. released to the public. Chapter 624, Statutes of (No paper and pencil version of the field test will 2011 (SB 300, Hancock), required the SPI to be available.) All students will take the full-length convene a group of science experts to adopt new SBAC assessments in both subjects in 2014-15. science standards, using the NGSS as the basis for (For the next two years, CDE must provide school discussions. Upon recommendation from the group districts with access to test forms for assessments of science experts, the SBE adopted the NGSS in that are no longer required by law. The cost of September 2013. administering these exams must be paid by school Development of New NGSS-Aligned districts. Chapter 489 also makes the STS optional, Assessments Not Yet Underway. Unlike the but provides state funding to administer the exam CCSS, no consortia have been established to for ELs who receive instruction in Spanish or have develop assessments of the NGSS. The SPI is been in the U.S. less than one year.) required to consult with stakeholders and make School Accountability Systems Temporarily recommendations to the SBE regarding the Suspended During Transition. Because the field development of a new assessment aligned to test is intended to determine the quality of the the NGSS. The recommendations must include assessments and make subsequent refinements cost estimates and a plan of implementation to them, none of the results will be reported. As to replace the current science STAR exams a result, California schools will have virtually no with NGSS-aligned assessments. Until the ELA or math scores available for state and federal NGSS-aligned assessments are ready, the state will accountability purposes. The state is currently continue to administer the CST, CMA, and CAPA seeking a waiver from the federal accountability science exams in grades 5, 8, and 10 (as required requirements. The U.S. Secretary of Education has by federal law). Chapter 489 eliminates all end-of- expressed willingness to grant waivers to schools course science assessments in specific subject areas participating in the consortium field tests. In other beginning in 2013-14. states, however, only a small portion of schools are participating in the field tests. (The box on page 30 Other Changes to Standards and Assessments discusses associated accountability issues in more History-Social Science at Crossroads. Of the detail.) four core subjects, history-social science is the only www.lao.ca.gov Legislative Analyst’s Office 27 2014-15 BUDGET area without new standards or assessments. While other subject matter. The SPI also may consider California’s history-social science standards remain whether additional assessments should be in place, Chapter 489 eliminated California’s developed to supplement existing exams in ELA, history-social science CST exams beginning in math, and science. These recommendations must 2013-14. include suggestions regarding grade level, content, New ELD Standards Adopted, New and assessment type, as well as include a cost Assessments to Be Developed. Chapter 605, estimate and timeline for test development. Statutes of 2011 (AB 124, Fuentes), required the Governor’s Proposals state to update its ELD standards to align with the CCSS. The SBE approved the new CCSS-aligned Increases Total Assessment Funding by ELD standards in November 2012. The state $52 Million in 2014-15. As shown in Figure 15, now must develop an assessment based on the the Governor’s budget provides $149 million for new standards to replace the CELDT. The CDE student assessments in 2014-15, a $52 million currently plans to develop a short initial screener increase from the 2013-14 spending level. Of that to use for placing incoming students and a longer amount, $129 million is from Proposition 98 summative assessment to determine proficiency at General Fund and $21 million is from federal Title the end of the year. VI funds. New Primary Language Exams to Be Provides Funding for New Exams Based on Developed. Among its other provisions, Consortium Estimates. The largest increase in Chapter 489 also requires the SPI to develop new proposed spending is associated with the higher assessments in languages other than English that costs of administering assessments in 2014-15. As are aligned with the ELA CCSS for use no later shown in Figure 16, the budget includes $77 million than 2016-17. (These new assessments would for the ELA and math SBAC assessments. Of that replace the STS, but presumably also could be amount, $67.5 million is to cover the estimated developed for languages other than Spanish.) The contract costs of administering, scoring, and SPI must consult with stakeholders to determine reporting the new assessments. (This cost the purpose and content of such exams, as well estimate is based on data provided by SBAC.) The as how the exam would be included in the state’s remaining $9.6 million would be used to pay the accountability system. The SPI then must make SBAC-managed services for ongoing maintenance recommendations and provide a cost estimate of the system, including adding additional test to the SBE no sooner than one year after the items and conducting additional research. (The new SBAC assessments in ELA and math are exact cost of these services has not yet been administered. finalized with SBAC.) Based on these two estimates, SPI to Submit Plan for Future of Other Exams the state would spend a total of $24 per student on in 2016. By March 1, 2016, the SPI must have SBAC assessments. consulted with various groups and submitted Funds Development of Three New recommendations to the SBE regarding the Assessments. The Governor’s budget also includes inclusion of other assessments into the state’s $13.6 million for the development of assessments assessment system. The SPI is to consider whether aligned to the ELD standards ($7.6 million), the the state should add assessments in social science, NGSS ($4 million), and ELA exams in primary visual and performing arts, technology, or any languages other than English ($2 million). These 28 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET Figure 15 Budget for Student Assessments (In Millions) 2010-11 2011-12 2012-13 2013-14 2014-15 Enacted Enacted Enacted Enacted Proposed Expenditures State-level contract costs $88.0 $91.4 $94.4 $74.1 $125.9 District apportionmentsa 28.6 28.1 34.1 23.7 23.5 Totals $116.7 $119.5 $128.5 $97.8 $149.4 Funding State Proposition 98 General Fund $88.7 $90.4 $104.0 $72.7 $128.8 Federal Title VI 28.0 29.1 24.5 25.1 20.6 Totals $116.7 $119.5 $128.5 $97.8 $149.4 a Provides per-student funding to cover district administration costs. Rates vary by test, ranging from $2.52 to $5 per student. funds would be used to contract with vendors to of Feasibility Study Reports (FSRs) to DOF that begin developing the new assessments. document the need for additional positions. Makes Funding Contingent on DOF Review Funding for the two program consultants also is of Contract Material. The funding provided for contingent upon DOF approval of an expenditure the new assessment system and development of plan that justifies why the additional positions future assessments is contingent upon DOF review are necessary for monitoring the new assessment of the SBE-approved contracts. The CDE would contract. be prohibited from spending the funds until DOF Figure 16 approved the contracts. Contract Costs for Student Assessments Provides Additional Positions for Implementation of New System, Contingent 2014-15 (In Millions) Upon Additional Information. The Governor’s New ELA and Math Assessments budget also includes $482,000 for CDE to manage Administration and reporting $67.5 SBAC-managed servicesa 9.6 additional assessment workload. The budget Subtotal ($77.0) includes two, two-year, limited-term positions Development of New Assessments and $250,000 (non-Proposition 98 General English language development $7.6 Next Generation Science Standards 4.0 Fund) for additional workload associated with Primary languages other than English 2.0 creating an automated process and user interface Subtotal ($13.6) integrating student-level data from the California Ongoing Assessments California High School Exit Exam $11.4 Longitudinal Pupil Achievement Data System and Prior-year testing costs 8.3 the new testing system. The remaining $232,000 California English Language Development Test 7.4 (non-Proposition 98 General Fund) is for hiring Cost of other assessments 6.1 Assessment review and reporting 2.1 two program consultants at CDE that would Subtotal ($35.4) be experts in the use of technology for student Total State-Level Contract Costs $125.9 assessments. (No additional position authority a SBAC will provide ongoing support of the assessment, including developing additional test items and conducting additional research. is provided for these two consultants.) All four ELA = English-language arts and SBAC = Smarter Balanced Assessment positions are contingent upon the submission Consortium. www.lao.ca.gov Legislative Analyst’s Office 29 2014-15 BUDGET Assessment and assessments will include several written response Recommendations items and short essays, they cannot be scored by a computer. As a result, these assessments will Higher Costs Appear Reasonable as New be more expensive to score than the previous Tests More Expensive to Grade. The estimated ELA and math CSTs, which consisted almost annual cost of the new SBAC assessments—$24 per exclusively of multiple-choice questions that could student—is significantly higher than the cost of be computer-scored. The exact costs of the new previous ELA and math assessments. According system, however, will ultimately depend on the cost to CDE, the state spent roughly $15 per student to of the new contract negotiated between the SBE and administer grade-level exams in ELA and math a vendor. The SBE is expected to release a Request from 2009-10 through 2011-12. These higher for Submission during the spring of 2014, with the costs, however, appear reasonable considering terms of a contract expected to be completed by the the different structure of the new exams. Because summer of 2014. the performance tasks included in the SBAC State and Federal Accountability Systems in Flux Both the state and federal accountability systems primarily rely on student assessment data to evaluate the performance of schools and districts. Given recent changes in standards and assess- ments, these accountability systems will undergo significant changes over the next several years. State Academic Performance Index (API) Relies Exclusively on Test Scores. The state’s API measures school performance using data from the California Standards Tests (CSTs), California Modified Assessment (CMA), California Alternate Performance Assessment (CAPA), and California High School Exit Exam (CAHSEE). For each school, achievement on student assessments is combined into an API score that ranges from 200 to 1,000. The state has set a school API perfor- mance target of 800, which falls above the performance level that represents a “basic” mastery of grade-level skills (700) and below the performance level that represents academic “proficiency” (875). Schools that have yet to reach the API performance target of 800 are expected to meet an API growth target. A school’s API growth target is equal to 5 percent of the distance between a school’s prior-year API and 800, or a gain of 5 points, whichever is greater. Each significant student subgroup at a school also is expected to meet an API growth target (the distance between the subgroup’s prior-year API and 800, or a gain of 5 points, whichever is greater). Subgroups exist for African American, American Indian/Alaska Native, Asian, Filipino, Latino, Pacific Islander, White (not of Hispanic origin), economically disadvantaged, English learner, special education, and foster youth students. With the exception of foster youth, a subgroup is considered significant if it consists of 30 or more students. Foster youth are considered a significant subgroup if they consist of more than 15 students. API May Not Be Available in 2013-14 and 2014-15. Current law gives the Superintendent of Public Instruction discretion not to calculate an API score in 2013-14 and 2014-15 if the transition to the new assessment system compromises the API results across schools and districts. Because 30 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET Higher Costs Also Linked to Interim and instruction and assess student learning on a daily Formative Assessments. The higher cost of the basis. Teachers will be able to rate items in the SBAC assessments also is driven by the state’s plan digital library, submit their own tools, and share to purchase interim and formative assessment tools with teachers in other member states. from SBAC. The interim assessment software allows Though Interim and Formative Assessments teachers to design exams throughout the year to Increase State Costs, May Create Overall measure some or all of the grade-level standards. Efficiencies. Chapter 489 requires that the state Items on the interim assessment will use the purchase interim and formative assessments same grading scale as the summative assessment, and make them available to districts at no cost. allowing for teachers to easily determine whether A portion of the estimated $9.6 million in costs students have mastered the standards taught to for SBAC-managed services will be for accessing date. Teachers also will have access to a digital the interim and formative tools. In addition, library of formative tools—smaller learning the Governor’s budget provides $4.7 million in modules or activities that can be used to improve additional contract costs related to managing most assessments previously used in calculating the API will not be administered in 2013-14, little data will be available to calculate an API. (Only results from the CAPA; the CAHSEE; and science tests in grades 5, 8, and 10 will be available.) In 2014-15, results from the new English-language arts (ELA) and math assessments will be available, but if no API is calculated in 2013-14, developing API growth targets for 2014-15 still may not be possible. (As we discussed in the “Career Technical Education” section of this report, the state also will make changes to the API for high schools beginning in 2016-17.) Federal Adequate Yearly Progress Measure Also Relies Mostly on Test Scores. The federal accountability system, as set forth in the No Child Left Behind Act (NCLB) of 2001, measures whether schools and districts have made Adequate Yearly Progress (AYP). In order to annually meet AYP, schools and districts must demonstrate success based on the following four indicators: (1) the percentage of students that score at proficient or above on assessments in ELA and math (CSTs, CMA, and CAPA); (2) student participation in state assessments; (3) graduation rates; and (4) API scores. Success on these indicators applies to schools and districts as well as to each numerically significant subgroup within a school or district. (All state subgroups, with the exception of foster youth, also are federal subgroups.) Schools and districts that do not make their AYP targets for two consecutive years enter federal Program Improvement, which requires them to implement various turnaround strategies. Virtually No Data to Measure Proficiency in 2013-14. Because most California students will be participating in field tests of the new ELA and math assessments in spring 2014, virtually no 2013-14 student data will be available for determining whether California schools and districts have met the AYP target. (Only students taking the CAPA will have eligible ELA and math scores.) Absent a waiver, California schools and districts will be considered to have failed to meet the AYP target. www.lao.ca.gov Legislative Analyst’s Office 31 2014-15 BUDGET the interim assessment system. (Under the STAR California students must pass the California High testing system, the state provided no interim School Exit Exam (CAHSEE) in order to graduate or formative tools to school districts. Districts with a high school diploma. (Some students with that chose to administer interim assessments disabilities are exempt from this requirement.) or purchase additional formative tools covered The CAHSEE covers both ELA and math. Because these costs using existing resources.) Although the CAHSEE is based on the prior ELA and math purchasing these tools from SBAC will increase standards (based on math standards through the state assessment costs, it likely would reduce total first part of Algebra I and ELA standards through state and local costs on interim and formative tools grade 10), it will no longer be aligned with student given the economies of scale. expectations under the CCSS. Recent legislation Recommend Additional Oversight of modifying the state assessment system has not Contract. We recommend the Legislature adopt addressed the future of the CAHSEE. Rather the Governor’s provisional language making than spending additional resources to develop assessment funding contingent upon DOF a new high school exit exam, the Legislature review of contract materials. This would ensure could consider using a student’s performance on that the amount of funding provided in the the 11th grade SBAC assessments to determine budget is aligned with actual contract costs. We whether a student has demonstrated knowledge recommend the Legislature adopt additional sufficient to earn a diploma. This would ensure that language requiring the vendors of the state’s SBAC expectations for high school graduation are aligned contract to meet with legislative staff and DOF with the CCSS, while avoiding duplicative tests and staff on an annual basis to review components reducing testing time. and costs of the contract. Such an approach would Using Teachers to Score Assessments Could provide additional oversight of contract costs. The Provide Professional Development Opportunities. Legislature adopted similar language in 2010-11 In order to score the performance tasks in the and 2011-12. SBAC assessments, the state’s contractor will Review FSRs Before Approving New Positions. hire and train individuals to review and score The CDE has not yet provided FSRs related to the student responses. Individuals will be trained to four new positions included in the Governor’s develop a deep understanding of the CCSS and budget. Absent these reports, the Legislature distinguish between high quality and low quality lacks sufficient information to assess the merit work. Because such training encourages mastery of providing additional positions to CDE. We of the CCSS, it could serve as a quality professional recommend the Legislature review the required development activity for teachers and other FSRs and associated documentation prior to instructional staff. Given these potential benefits, approving any new positions. the Legislature could consider requiring the state’s In Future Years, Consider Using SBAC contractor to give priority to credentialed teachers Exams to Replace the High School Exit Exam. In and other school staff when hiring individuals to addition to completing the appropriate coursework, score SBAC performance tasks. 32 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET INDEPENDENT STUDY In this section, we discuss the Governor’s their schedules, recover missed credits, or because proposals relating to IS, provide our assessment they prefer an individualized setting. of those proposals, and offer associated IS Funding Determined by Converting Student recommendations for the Legislature’s Assignments to Seat Time. Since IS students do consideration. not attend school on a daily basis, funding for IS programs is based on students’ academic work Background products. For each assignment, the supervising Below, we provide information on certain state teacher equates a student’s work to an equivalent funding rules, IS programs, and special rules for amount of seat time. This conversion is based charter schools running IS programs. on the supervising teacher’s judgment as to the Most State Funding Linked to Students’ Seat number of classroom instructional hours that Time. To qualify for state funding for students in would have been required to achieve a similar a regular classroom setting, a district must offer amount of learning. An IS program can claim full a minimum number of classroom instructional per-pupil funding if the seat-time equivalent of the hours per year. The required instructional hours— students’ work is the same as the time the students often known as seat time—vary by grade level (with would have spent in a classroom setting. a daily average of six hours required for grades IS Students Work Under Detailed Written 9 through 12, five hours for grades 4 through 8, Learning Contracts. Every student participating in 4.7 hours for grades 1 through 3, and 3.3 hours for IS works under an individualized learning contract. kindergarten). Students generate state funding only This document describes: (1) the time, place, and for the days of the school year they are physically manner in which students will submit assignments; present in class. (2) the methods of study for the pupil’s work and IS Provides Alternative to Classroom- the methods for evaluating that work; (3) the Based Instruction. In contrast to the traditional materials and staff resources that will be available classroom setting, an IS program allows students to the student; and (4) the number of missed to earn credit for academic work they complete assignments that may occur before the school needs independently. The purpose of an IS program is to to reevaluate whether the student should remain in allow schools to adapt activities and assignments to IS. An IS contract is valid for up to one semester, individual student needs without the requirement and a written copy of the contract must be signed for daily attendance. An IS program can take by the student, one of the student’s parents, and all a variety of forms, such as online instruction, teachers who will instruct the student. In addition, blended learning (partially online and partially IS programs must maintain records that include: site-based), paper-based learning packets, assisted (1) the date each work product was assigned, home-schooling, and internship-based learning. In completed, and assessed; (2) representative samples all cases, students are supervised by a certificated of the student’s work signed and dated in all cases teacher who assigns and evaluates student work on by the supervising teacher; and (3) written evidence a periodic basis. Students enroll in IS programs for that all state and local policies pertaining to IS a variety of reasons, such as to gain flexibility in have been observed. The IS programs are audited www.lao.ca.gov Legislative Analyst’s Office 33 2014-15 BUDGET annually for compliance with these requirements. to programs in which students learn in part An IS program that fails to maintain the necessary through supervised instruction at a school site records receives an audit finding and may face and in part through independently completed financial penalties—usually the requirement to online coursework. For funding purposes, these repay the state funding generated by any students programs must count student attendance based on whose records are missing or incomplete. the requirements for classroom instruction (seat IS Programs Have Limits on Student-Teacher time) or IS (work products tied to seat time). The Ratios. The state sets a cap on the ratio of students seat-time funding model tends to be used when to teachers in IS programs. This cap is determined the online coursework is provided on-site under differently for school districts and charter schools. the supervision of a teacher whereas the IS format For a school district, the student-teacher ratio tends to be used when the online coursework is cannot exceed the districtwide average student- conducted off-site. teacher ratio in classroom settings. For a charter Special Fiscal Review Required for Certain Graphic Sign Off school, the student-teacher ratio cannot exceed the Charter Schools. In 2001, the Legislature average ratio for the largest unified school district established a special fiscal review for charter Secretary within the county or 25:1, whichever is higher. schools offering IS programs. The review requires Analyst (As a practical matter, many charter schools rely charter schools offering less than 80 percent of MPA on the 25:1 cap because the ratio at the largest their instructional time in a classroom setting Deputy district—even when above 25:1—fluctuates from (most IS charter schools fall into this category) year to year.) If an IS program exceeds its ratio cap, to submit financial information to the SBE every the state provides no per-pupil funding for students few years. Most notably, the SBE must verify in excess of the cap. these charter schools: spend at least 80 percent of Participation in IS Concentrated in High Schools and Charter Schools. Available data Figure 17 suggest that about 140,000 California students Independent Study Enrollmenta took at least half of their coursework through IS 2012-13 in 2012-13. (An additional 25,000 students took at least one but fewer than half of their courses School Districtsb Charter through IS.) Collectively, these students represent (High School) Schoolsc about 2.6 percent of all K-12 enrollment. Figure 17 (High School) shows the relative distribution of IS enrollment by grade level and provider. About two-thirds of total School IS enrollments are high school students whereas Districtsb (Elementary) one-third is elementary students. Regarding providers, about two-thirds are charter schools whereas one-third is district-run programs. (In Charter Schoolsc (Elementary) recent years, enrollment in charter school IS programs has grown rapidly while enrollment in a Students enrolled in independent study for at least 50 percent of their coursework. district-run programs has remained stable.) b Includes county offices of education. IS Programs Sometimes Used to Deliver c Includes charter schools operated by school districts. Blended Learning. Blended learning refers 34 Legislative Analyst’s Office www.lao.ca.gov ARTWORK #140059 Template_LAOReport_sm.ait 2014-15 BUDGET their budget on instruction and related services, standards.” Similar to existing IS programs, spend at least 40 percent specifically on salary students would work under the general supervision and benefits for teachers, and meet the student- of a teacher and work under written learning teacher ratio caps. Charter schools that do not meet contracts, but these contracts (unlike existing IS these requirements can lose either 15 percent or contracts) could last up to one year and be stored 30 percent of their per-pupil funding. (For schools electronically. Teachers would be required to far below the requirements, the SBE may award no communicate with students at least once a week to funding, effectively closing the charter school.) In determine if students were making “satisfactory 2012-13, about 250 charter schools (or one-fourth of academic progress,” as measured through statewide all charter schools) were subject to this additional assessments, the completion of assignments, review, with about 10 receiving funding reductions and other locally determined measures. The of 15 percent. communication could include an in-person meeting, phone call, or online video conference. If Governor’s Proposals Figure 18 Summary of Governor’s Independent Study Proposals As shown in Figure 18, the Governor 9 Creates New “Course-Based” Independent Study (IS) Option has a package of IS • Allows local governing boards to convert entire courses (rather than proposals, which we individual assignments) to seat-time for funding purposes. • Requires students to work under written learning agreements and the discuss below. general supervision of a teacher (same as existing IS). Creates New • Allows instruction to occur off site (same as existing IS). “Course-Based” IS • Requires students to make “satisfactory academic progress,” as determined weekly by a teacher, to remain in program. Option. The Governor • Allows IS programs serving grades 9 through 12 to use this option. proposes to allow high 9 school IS programs to Creates Variant of New IS Option for Site-Based Blended Learning Programs convert entire courses • Creates an option similar to the course-based IS option but with two (rather than individual major differences: – Requires daily on-site instruction under the general supervision of assignments) to seat time. a teacher. (An instructional aide could be responsible for providing Under this option, the instruction for some portion of the day.) – Allows IS programs serving grades K-12 to use this option. local governing board would need to certify the 9 Makes Two Changes to Student-Teacher Ratio Caps seat-time equivalency of • Computes ratio caps by grade span instead of by districtwide averages. the IS course. In addition, • Allows ratios to exceed caps if agreed upon in a collective bargaining agreement. the local board would 9 need to certify the IS Eliminates One Recordkeeping Requirement in Existing IS Programs course was “of the same • Eliminates requirement that each student assignment bear the signature rigor and quality” as a of the supervising teacher. classroom-based course 9 Exempts Charter Schools Using New IS Options From Special and that the course Fiscal Review included “all relevant • Exempts charter schools using new IS options from the special fiscal local and state content review generally required of charter schools offering IS programs. www.lao.ca.gov Legislative Analyst’s Office 35 2014-15 BUDGET satisfactory progress was not occurring, the teacher and maintain representative samples of student would be required to inform the student’s parents/ work would remain in place.) guardians and conduct an evaluation to determine Exempts Charter Schools Using New IS whether the student should remain in IS. (Students Options From Special Fiscal Review. The Governor removed from a course would be credited with a proposes to deem charter schools that use either prorated share of the seat time approved for the of the new IS options as classroom-based for the course.) purpose of determining whether a charter school Creates Variant of New IS Option for Blended must receive special fiscal review. That is, these Learning Programs. The Governor proposes to charter school IS courses would count as classroom create a variant of the course-based IS option time (regardless of how or where the course was to serve certain types of site-based blending taught), thereby being exempt from the special learning programs. This option includes all of the fiscal review. elements from the course-based option, including Assessment and written learning contracts, but contains two major Recommendations modifications. First, students would be required to be on a school site on a daily basis, similar to Compared to the IS proposals the Governor students in a classroom-based program. Unlike a introduced last year, the proposals introduced this classroom-based program, however, students could year are more modest—making changes to certain be supervised during this time by their teacher or funding and programmatic rules but maintaining an instructional aide. Second, this option would much of the basic structure of IS. As shown in be open to IS programs serving grades K-12 rather Figure 19, we think many of the components of than limited to grades 9 through 12. the Governor’s IS proposals this year have merit, Makes Two Changes to Student-Teacher though we identify several ways the Legislature Ratio Caps. Under the Governor’s proposal, all IS could improve upon the proposals. programs would be subject to the caps on student- New IS Options teacher ratios. The Governor proposes, however, to make two changes affecting these caps. For school Course-Based Option Includes Reasonable, districts, the caps would be calculated separately Streamlined Seat-Time Conversion Process. for grade spans K-3, 4 through 6, 7 through 8, The Governor’s proposal to establish a seat-time and 9 through 12 rather than being based on the equivalency for each course provides a reasonable districtwide average. The Governor also proposes mechanism of counting students for funding to allow the caps to be exceeded if agreed upon in a purposes. Although the Governor maintains many local collective bargaining agreement. of the administrative requirements currently Eliminates One Recordkeeping Requirement imposed on existing IS, eliminating assignment- in Existing IS Programs. For existing IS programs based time conversions would reduce some tasks that do not want to use the new course-based IS that require the particular effort of teachers (such options, the Governor proposes to eliminate the as maintaining detailed logs of all assignment and requirement that all student assignments be signed making time judgments about every assignment). and dated by a supervising teacher. (The underlying The resources not spent on these administrative requirements for teachers to evaluate student tasks could be directed toward student instruction assignments, keep a record of all work assigned, and other activities. Placing responsibility for the 36 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET seat-time conversion on local governing boards also the Legislature’s recent focus on increasing the has the benefit of making boards more accountable autonomy of schools. for the quality of their IS programs. For all these Course-Based IS Option Could Benefit Earlier reasons, we recommend the Legislature adopt this Grades. Given the versatility of the Governor’s proposal. proposal for course-based IS, we believe the option (Although there could be some concern that could benefit K-8 IS programs too. The concerns local governing boards might assign different that motivate the creation of the course-based amounts of seat time to a course, existing IS option, such as reducing paperwork requirements, programs also face this issue in that teachers can apply equally to IS programs serving earlier grades. assign different amounts of seat time to similar New and nontraditional forms of instruction student assignments. Furthermore, the Governor’s may be found in all grade levels and adopting a proposal includes some elements that could make proposal only for high school IS programs misses the seat-time conversion process more consistent an opportunity to encourage innovation in than under current IS programs, including a earlier grades. For these reasons, we recommend clear standard for approving courses and board extending this option to all grades (K-12). disclosure of the amount of seat time approved for Additional Information on Standards and each course.) Learning Goals Could Improve Course-Based IS. Course-Based Option Also Facilitates a We believe the Governor’s proposal for course- Variety of Instructional Formats. Another based IS could be further improved by requiring strength of the Governor’s course-based IS local governing boards to provide additional proposal is that it can accommodate a variety of information when approving courses. Specifically, instructional formats. Figure 19 That is, rather than Summary of Independent Study Recommendations focus narrowly on encouraging a specific Governor’s Proposal LAO Recommendations type of instruction, the Creates new “course-based” • Adopt basic proposal. Governor establishes a Independent Study (IS) option • Extend proposal to all grades. • Require additional information on framework that schools standards and learning goals for each can use to receive funding course. for a variety of programs Creates variant of new IS option • Reject proposal (programs can be that best meet local needs. for site-based blended learning accommodated by above option, if This approach could programs extended to all grades). encourage local creativity Makes two changes to student- • Adopt proposal. in offering new types of teacher ratio caps • Providing corresponding flexibility to nontraditional instruction, charter schools. thereby expanding the Eliminates one recordkeeping • Adopt proposal. options for students requirement in existing IS • Allow contracts to last up to one year. with needs less easily programs • Allow electronic recordkeeping. served in a classroom Exempts charter schools using • Reject proposal. setting. The framework new IS options from special • Simplify and refocus fiscal review also is consistent with fiscal review process. www.lao.ca.gov Legislative Analyst’s Office 37 2014-15 BUDGET we recommend the governing board disclose for Districts. Computing the IS caps by grade span each course: (1) the relevant local and state content would result in IS student-teacher ratios being more standards reflected in the course and (2) the student comparable to other district programs. As a result, learning goals for the course. This information the proposal would increase flexibility for high would help local stakeholders—including students, school IS programs. This is because class sizes in parents, and teachers—compare an IS course high schools tend to be larger than in elementary with a classroom-based course to determine if the schools. We estimate that basing the IS high courses were similar in content and rigor. It also school cap on other high school programs would would help these stakeholders determine whether effectively raise the IS cap by about two students the amount of seat time approved for each course per teacher. (Conversely, the IS cap in earlier grades was reasonable given what the students would be would be lowered, but since relatively few school learning. Given that local governing boards already districts enroll elementary students in IS programs, would need to ensure the course was of comparable the effect is less significant.) The Governor’s rigor and included relevant standards, we believe proposal to allow higher caps to be collectively this requirement could be satisfied with only a bargained would allow schools the flexibility to small amount of additional work. increase student-teacher ratios above current limits Site-Based Blended Option Provides Little but would minimize the chances that a district New Flexibility. We are concerned that the adopts an excessively high ratio. We believe both of site-based blended learning option would provide the Governor’s proposed changes to the IS caps are little, if any, added benefit—especially if the course- reasonable and recommend adopting them. based IS option were extended to grades K-8. The Grade-Span Adjustment Does Not Provide blended learning option allows an instructional Corresponding Flexibility to Charter Schools. The aide to provide classroom supervision but only in Governor’s proposal to compute IS student-teacher exchange for placing all students on an IS contract ratios by grade span provides greater flexibility and providing daily instruction on-site. The for school districts but little new flexibility for supervision requirements are more flexible than charter schools. Although charter schools would the rules for classroom-based instruction, but less be allowed to compare their IS ratios to the grade flexible than the rules for existing IS or the new span-adjusted ratios in the largest unified school course-based option. (Under either of these latter district, those ratios change annually, making options, there is no requirement for any particular many charter schools reliant on the 25:1 ratio. In amount of time on site, and time on site may be addition, only about 20 percent of charter schools supervised by a teacher or other individual.) We have collective bargaining agreements in place think a blended learning program willing to make that would allow them to negotiate a higher cap. the effort of establishing learning contracts for all To provide corresponding flexibility to charter of its students would be likely to use one of the schools, we recommend the Legislature increase more flexible IS options. For these reasons, we the ratio cap for their IS programs serving grades recommend the Legislature reject the proposal. 9 through 12 from 25:1 to 27:1—consistent with the expected increase of two students per teacher in Student-Teacher Ratio district IS high school programs. (For other grade Changes to Student-Teacher Ratio Caps levels, the charter school ratio requirement would Would Increase Flexibility for Most School remain 25:1.) 38 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET Recordkeeping offering a similar academic program and using the existing IS option would be subject to the review. Recommend Eliminating Recordkeeping That is, apart from whether they use assignment- Requirement in Existing IS Programs. We based or course-based attendance accounting, the recommend adopting the Governor’s proposal to two schools could be very similar in every other eliminate the requirement for supervising teachers way, yet only one would be subject to the review. in existing IS programs to sign every assignment. We can identify no compelling reason why the As described earlier, an IS program is required method of converting IS to seat time should be to maintain an extensive “paper trail” including a deciding factor in triggering this review. We assignment logs, samples of assignments, and recommend the Legislature reject the Governor’s other documentation. Removing the signature proposal but consider alternatives for improving requirement would eliminate one highly specific charter school fiscal oversight (as discussed below). compliance requirement while leaving other Recommend Either Improving Review Process recordkeeping in place. or Strengthening Routine Fiscal Oversight. The Charter School Special Fiscal Review Legislature has two basic options for improving the fiscal oversight of charter schools operating IS Existing Fiscal Review Process Has Several programs. Drawbacks. We think the special fiscal review process for charter schools has several drawbacks. • Rework Special Fiscal Review Process. Some parts of the review—such as the requirement One option would be to simplify and to spend a fixed percent of revenues on staff refocus the special fiscal review for all salary—are not well aligned with goals the charter school IS programs. The Legislature Legislature has established for charter schools, such could do this by relaxing some of the as the encouragement of “different and innovative more specific spending requirements and teaching methods.” Additionally, charter schools reducing the penalties that accompany that miss one of the spending thresholds by a narrowly missing the spending thresholds. narrow margin face a loss of 15 percent of their • Redirect Resources Toward New Process. funding, creating a “cliff” around the thresholds. Alternatively, the Legislature could Moreover, some aspects of the process are not consider whether the resources devoted clearly defined, such as how facility-related costs to reviewing all IS charter schools would should be counted toward the spending thresholds. be better spent scrutinizing schools that Given these issues, we believe the special fiscal show warning signs of financial abuse review could be improved. or mismanagement. For example, the Governor’s Proposed Solution Raises Concern. state could replace the existing review Although the special fiscal review has several with heighted scrutiny of all schools that problems, we are concerned about the Governor’s received negative audit findings, displayed proposed solution. Under his proposal, a charter unusual spending patterns, or generated school using the course-based IS option would formal complaints. be exempt from the review while a charter school www.lao.ca.gov Legislative Analyst’s Office 39 2014-15 BUDGET SUMMARY OF RECOMMENDATIONS 9 Proposition 98 Spending Plan • Governor’s mix of ongoing and one-time Proposition 98 spending is reasonable. Given possible swings in the 2014-15 minimum guarantee, one-time spending provides the state with a cushion if the minimum guarantee were to decrease midyear. Also helps the state minimize a potential disruption to school funding in 2015-16 as a result of revenue volatility or an economic slowdown. 9 Revenues • Track revenue developments, as Proposition 98 minimum guarantee is likely to be highly sensitive to changes in General Fund revenues in 2014-15. The exact effect on the guarantee will vary significantly depending on whether revenue estimates change for 2013-14, 2014-15, or both years. General Fund increases only in 2014-15 will result in virtually all revenue going to Proposition 98, while increases in both 2013-14 and 2014-15 will provide a lower share of funding for Proposition 98. 9 Wall of Debt Plan • Adopt a plan to eliminate outstanding one-time Proposition 98 obligations by the end of 2017-18. Governor’s plan is a reasonable starting point. When paying off existing obligations, consider the different distributional effects these payments would have on school and community college districts throughout the state. Also consider the functional benefits of such payments. Some payments would provide cash flow relief whereas others would allow for one-time general purpose spending. 9 Local Control Funding Formula (LCFF) • Adopt a plan that dedicates ongoing funding to second-year implementation of LCFF. • Reject Governor’s proposal to create a statutory formula requiring a certain portion of Proposition 98 funding be dedicated to LCFF each year of the phase-in period. 9 High School Career Technical Education (CTE) Programs • Adopt the Governor’s proposals to eliminate Specialized Secondary Programs and Agricultural CTE Incentive Program and fold associated funds into LCFF. • Moving forward, adopt an overall approach to CTE that focuses on student outcomes rather than the specific educational strategies used to accomplish those outcomes. • Request Superintendent of Public Instruction present at a spring hearing a status report on development of a revised Academic Performance Index that includes college and career readiness indicators. 9 Student Assessments • Approve augmentation for student assessments. Costs appear reasonable given new tests will be more expensive to grade. State costs also will increase due to purchasing interim and formative assessments on behalf of districts, but total state and local costs could decline due to economies of scale. • Adopt the Governor’s provisional language making assessment funding contingent upon Department of Finance (DOF) review of contract materials. • Recommend additional provisional language requiring the vendor of the state’s Smarter Balanced Assessment Consortium contract to meet with legislative staff and DOF on an annual basis to review components and costs of the contract. 9 Independent Study (IS) • Adopt the Governor’s proposal to allow local governing boards to convert entire courses (rather than individual assignments) to seat time. Extend this option to all grade levels. • Adopt the Governor’s proposal to compute school districts’ student-teacher ratios by grade span and allow caps to be exceeded if collectively bargained. Provide corresponding flexibility to charter schools by slightly increasing their ratio for grades 9 through 12. • Reject the Governor’s proposal to create a modified IS option for site-based blended learning (as these programs could be accommodated by extending the course-based IS option to all grades). • Also reject the proposal to exempt charter schools using the course-based IS option from special fiscal review. Instead, simplify the fiscal review or strengthen fiscal oversight of certain IS charter schools. 40 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET www.lao.ca.gov Legislative Analyst’s Office 41 2014-15 BUDGET 42 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET www.lao.ca.gov Legislative Analyst’s Office 43 2014-15 BUDGET Contact Information Edgar Cabral Proposition 98 319-8343 Edgar.Cabral@lao.ca.gov Wall of Debt Student Assessments Carolyn Chu Local Control Funding Formula 319-8326 Carolyn.Chu@lao.ca.gov Natasha Collins Career Technical Education 319-8335 Natasha.Collins@lao.ca.gov Kenneth Kapphahn Independent Study 319-8339 Kenneth.Kapphahn@lao.ca.gov LAO Publications This report was reviewed by Paul Steenhausen and Jennifer Kuhn. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 44 Legislative Analyst’s Office www.lao.ca.gov