The 2020-21 Budget: Proposition 98 Education Analysis

The 2020-21 Budget: Proposition 98 Education Analysis GABRIEL PETEK LEGISLATIVE ANALYST FEBRUARY 24, 2020 analysis full gutter 2020-21 BUDGET LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Table of Contents Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Overall Proposition 98 Package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The Minimum Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Local Control Funding Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Special Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Education Workforce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Workforce Shortages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Educator Workforce Investment Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Addressing the Achievement Gap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Opportunity Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Community Schools and Wraparound Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 School Nutrition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Summary of Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 www.lao.ca.gov analysis full gutter 2020-21 BUDGET LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Executive Summary In this report, we assess the architecture of the Governor’s overall Proposition 98 budget and analyze his specific proposals for K-12 education . Overall Proposition 98 Budget $3.7 Billion in New Proposition 98 Spending Proposals. The new spending consists of $3 .3 billion for K-12 schools and $388 million for community colleges . Across both segments, slightly more than half ($2 billion) is for one-time initiatives and the remainder ($1 .7 billion) is for ongoing augmentations . Nearly all of the ongoing funding is to cover an estimated 2 .29 percent cost-of-living adjustment for various K-14 programs . Total K-12 funding per student would grow to $12,619 in 2020-21, an increase of $499 (4 .1 percent) over the revised 2019-20 level . Many of the Governor’s One-Time Initiatives Would Not Address Root Issues. Most of the Governor’s one-time initiatives seek to improve the education workforce or address poor performance among certain districts and schools . Many of the proposals, however, seem unlikely to have much long-term effect on these issues . We also are concerned that many proposals are missing important details regarding how the funds would be spent . Accordingly, we recommend the Legislature reject most of these proposals, freeing up more than $1 billion in Proposition 98 funds relative to the Governor’s budget . In some cases, we provide alternative options that would align more closely with existing efforts to address the root problems . These alternatives could be structured to cost less than the amounts proposed by the Governor . Legislature Could Use Freed-Up, One-Time Funds to Pay Down Pension Liabilities. School districts face fiscal pressures ranging from rising pension costs to higher costs for special education . Though nearly all districts currently hold positive budget ratings, we expect districts to face more difficulty balancing their budgets in the upcoming year . To the extent the Legislature rejects some of the Governor’s one-time proposals, we think it should consider using the freed-up funds to provide fiscal relief . Of all the available options, we think making additional payments toward districts’ unfunded pension liabilities would offer the greatest fiscal benefit . Paying down these liabilities would improve the funding status of the pension systems and likely reduce district costs over time . Key Messages Special Education Base Proposal Would Reduce Historical Inequities. The administration proposes to make reforms in special education financing and other areas over a multiyear period . In this first year, the administration’s largest proposal is $645 million ongoing to ensure base rates for all special education local plan areas are at least $660 per student . We recommend the Legislature adopt this proposal . By reducing variations in base rates, the proposed new rate would address inequities that have persisted for decades . Recommend the Legislature Take Different Approach in Other Special Education Proposals. In addition to the proposed special education base augmentation, the Governor’s budget provides $250 million one time to increase or improve special education services for preschool-aged students . The proposal sends a confusing message to districts, as districts www.lao.ca.gov 1 analysis full gutter 2020-21 BUDGET are unlikely to hire the additional staff necessary to provide these services with one-time funding . As an alternative, we recommend using the $250 million to provide ongoing funding for preschool-aged children through the state’s base special education formula . This approach would recognize the ongoing costs associated with serving this age group . The administration also proposes $1 .1 million one time for a governance study and two workgroups to inform future special education reforms . We encourage the Legislature to think carefully about the concerns it would like to address and consider funding studies to provide more concrete options on these issues . In adopting its 2020-21 budget, the Legislature could also address other key priorities not directly related to the special education funding model, such as expanding existing initiatives that provide districts technical assistance to implement inclusive practices . Recommend Rejecting Opportunity Grants Proposal. The Governor’s budget provides $300 million one time to provide grants and support to low-performing districts and schools where at least 90 percent of students are low income . Key elements of the Governor’s proposal, including the vision and scope of the grant program, are left entirely to the discretion of the California Collaborative for Educational Excellence and the State Board of Education . As a result, the proposal lacks sufficient detail for the Legislature to determine whether this approach would be an effective way to improve outcomes for low-performing districts and schools . Additionally, the administration appears to have developed this proposal without considering how this funding would align with existing funding provided to support low-performing schools and districts . We recommend the Legislature reject the proposal and instead consider a smaller ongoing augmentation to assist a smaller subset of districts with significant performance issues . Recommend Funding Smaller Community Schools Pilot With Greater Emphasis on Technical Assistance. The Governor’s budget provides $300 million in one-time funding to provide grants to school districts interested in implementing the community schools model . Our review finds that the community schools model is associated with improved student outcomes, but can be difficult to implement . The Governor’s proposal stipulates that grant recipients will receive technical assistance, but does not include any requirements for the level of assistance they would receive . The Governor’s proposal also includes no rules or requirements for how the grant funds could be spent . To provide greater certainty that grantees would implement a community schools model effectively, we recommend the Legislature fund a smaller grant program that focuses on technical assistance . Recommend Approving Smaller Package of Proposals to Address School Workforce Shortages. The administration proposes a total of $532 million one time for various proposals aimed at addressing school workforce needs . We recommend the Legislature approve a total of $93 .1 million for two programs—one that helps school employees earn a teaching credential and another that trains prospective teachers by pairing them with experienced mentor teachers in the classroom . These programs have shown some promise in expanding teacher supply and improving teacher preparation, respectively . We recommend the Legislature reject the other one-time proposals in this areas, as they do not address the underlying factors contributing to workforce shortages . 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET INTRODUCTION In this report, we analyze the Governor’s Other Education Budget Analyses Proposition 98 budget package . The first Complement This Report. The first section of this section analyzes the architecture of the report summarizes the Proposition 98 spending Proposition 98 budget, with an overview of the new changes affecting the California Community Proposition 98 spending, a review of the key fiscal Colleges, but we analyze specific community issues facing school districts, and our overarching college proposals separately in The 2020-21 comments on the Governor’s proposals . The Budget: Higher Education Analysis. We analyze second section describes the underlying changes the Governor’s proposals for State Preschool in in the Proposition 98 minimum guarantee that The 2020-21 Budget: Early Education Analysis. support the Governor’s proposed spending level In our January report, The 2020-21 Budget: and explains how the guarantee could change in School District Budget Trends, we provide detailed the coming months . The five remaining sections of information about compensation, staffing, pensions, this report examine the Governor’s major proposals and other cost pressures affecting school district involving K-12 education . Specifically, we analyze budgets . On the “EdBudget” portion of our website, his proposals for (1) the Local Control Funding we post dozens of tables containing additional Formula (LCFF), (2) special education, (3) the details about the Governor’s education proposals . education workforce, (4) closing achievement gaps, and (5) child nutrition . OVERALL PROPOSITION 98 PACKAGE In this section, we describe the main features of Governor’s budget summary, the goals of these the Governor’s Proposition 98 spending package, initiatives include (1) addressing teacher shortages review some key fiscal issues facing school in high need areas, including special education, districts, and provide our overall assessment of the science, and math; and (2) better preparing Governor’s package . teachers and administrators to address the social-emotional needs of their students . Overview of New Spending Budget Funds Two One-Time Initiatives Governor Proposes $3.7 Billion in New Intended to Close Achievement Gaps. The Proposition 98 Spending. The Governor’s January budget provides $600 million for two new grant budget package contains a total of $3 .7 billion programs intended to address poor academic in new Proposition 98 spending across the outcomes for specific student subgroups . The 2018-19 through 2020-21 period . This amount Opportunity Grant program would provide consists of $3 .3 billion for K-12 education and $300 million for grants to help improve academic $388 million for the California Community Colleges outcomes for low-performing schools and districts . (Figure 1, see next page) . Of the new spending, Grant recipients also would receive additional $2 billion is for one-time initiatives and $1 .7 billion technical assistance through the California is for ongoing commitments . Collaborative for Educational Excellence (CCEE) . Largest Share of One-Time Funding Allocated The Community Schools program would provide for Improving the Education Workforce. The $300 million to support the implementation and largest allocation of one-time funding consists of expansion of the community schools model—an $882 million for five initiatives aimed at improving approach that integrates health, mental health, school employee training, recruitment, and and other services for students and families retention . Most of these initiatives would be and provides these services directly on school allocated as competitive grants . According to the campuses . www.lao.ca.gov 3 analysis full gutter 2020-21 BUDGET Nearly All Ongoing Funding Figure 1 Dedicated to Covering Governor’s Proposition 98 Spending Proposalsa Cost-of-Living Adjustment (In Millions) (COLA). The Governor’s budget K-12 Education dedicates most of the $1 .7 billion Ongoing in new ongoing funding to covering COLA (2.29 percent) and attendance changes for LCFF $1,206 the statutory COLA (projected COLA for select categorical programs (2.29 percent)b 126 at 2 .29 percent) and changes in Child nutrition reimbursement rate increase 60 student attendance . Specifically, Other 6 the budget provides an associated Subtotal ($1,398) $1 .2 billion for the LCFF, One Time $167 million for community college Educator Workforce Investment Grants $350 apportionments, and $147 million Community school grants 300 Opportunity grants 300 for various other school and Special education preschool grant 250 community college programs Grants to address school staffing shortages 193 (including special education, Teacher Residency Grant Program 175 preschool, and adult education) . Stipends for teachers in hard-to-staff subjects/schools 100 The other ongoing augmentations Inclusive Early Education Expansion Program 75 besides COLA also relate to Classified employees credentialing program 64 existing programs . Literacy grants 53 County coordination grants 18 Funding Rises Steadily Each Computer science resources for educators 18 Year of the Period. Figure 2 Refugee student services 15 shows the overall distribution Other 21 of funding by segment over the Subtotal ($1,932) budget period . For each year, the Total K-12 Education $3,329 Governor proposes to set total California Community Colleges funding at the amount required to Ongoing meet the Proposition 98 minimum COLA for apportionments (2.29 percent) $167 guarantee . In per-student terms, Enrollment growth (0.5 percent) 32 funding for K-12 education would Apprenticeship instructional hours 28 grow to $12,619 in 2020-21, an COLA for select categorical programs 22 increase of $499 (4 .1 percent) over Immigrant legal and support services 16 California Apprenticeship Initiative 15 the revised 2019-20 level . Other 16 Funding Per Student Subtotal ($296) at All-Time High. Adjusted One Time for inflation, the per-student Funding for current-year apprenticeship costs $20 funding levels proposed by Work-based learning initiative 20 the Governor would be the Deferred maintenance 17 highest since the passage of Faculty diversity fellowships 15 Proposition 98 in 1988 . Compared Other 20 with the previous all-time high in Subtotal ($93) 2000-01, the proposed funding Total California Community Colleges $388 level for K-12 education is up Total Spending Proposals $3,717 nearly $900 per student . The a Reflects all proposals scored to 2018-19, 2019-20, or 2020-21, including reappropriations. b 2020-21 budget would mark the Applies to special education, state preschool, child nutrition, mandates block grant, charter school facility grants, services for foster youth, adults in correctional facilities, and American fourth consecutive year in which Indian education. per-student funding exceeds the COLA = cost-of-living adjustment and LCFF = Local Control Funding Formula. previous all-time high . 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET District Fiscal Issues 2020-21, school districts’ total contributions to CalSTRS and CalPERS are likely to increase by Turning to a District Perspective. In this part another $800 million to $1 billion . of the report, we shift from an overview of the Pressure to Increase Compensation Likely Governor’s budget to the fiscal trends affecting to Remain High. Available data show the average school district budgets . While each district’s teacher in California earned a salary of $82,700 in budget is unique, most districts in the state are 2018-19, an increase of about $11,300 over the being affected by the following issues: (1) rising 2013-14 level . (After accounting for inflation, the pension costs; (2) continued pressure to increase increase is about $4,000 . The state also required compensation; (3) declining attendance; and teachers to make additional contributions to (4) following several years of strong growth, slower CalSTRS .) Though classified employees typically growth in school funding . We discuss each of these have lower salaries than teachers, available data issues below . suggest their salaries have grown at a similar rate . School Pension Costs Set to Increase. Despite these increases, we expect districts to Required district contributions to the California continue facing salary-related pressure because State Teachers’ Retirement System (CalSTRS) housing and other personal costs of living in and the California Public Employees’ Retirement California are relatively high and growing . System (CalPERS) have grown from $3 .5 billion Student Attendance Likely to Continue in 2013-14 to $8 .7 billion in 2019-20 . (CalSTRS Declining. Student attendance in California has administers pension benefits for teachers, declined every year since 2013-14 and is projected administrators, and other certificated employees, to continue declining over the next several whereas CalPERS administers pension benefits for years . The decline is attributable to decreases classified employees, such as cafeteria workers .) in the number of births in California and overall The rise in costs primarily reflects efforts to address out-migration of school-aged children . Some the large unfunded liabilities the two pension areas, including Los Angeles, Orange, and Santa systems accrued over the past few decades . For Clara counties are in the midst of particularly large Figure 2 Proposition 98 Funding by Segment Dollars in Millions Except Funding Per Student Change From 2019-20 2018-19 2019-20 2020-21 Revised Revised Proposed Amount Percent Funding K-12 Educationa $69,253 $71,572 $74,279 $2,707 3.8% California Community Colleges 9,195 9,477 9,807 330 3.5 Reserve deposit (+) or withdrawal (-)b – 524 -38 -562 – Totals $78,448 $81,573 $84,048 $2,475 3.0% Enrollment K-12 attendance 5,912,934 5,905,605 5,886,490 -19,115 -0.3% Community college FTE studentsc 1,122,691 1,123,753 1,119,421 -4,332 -0.4 Funding Per Student K-12 Education $11,712 $12,119 $12,619 $499 4.1% California Community Colleges 8,190 8,433 8,761 328 3.9 a Includes funding for instruction provided directly by state agencies and the portion of State Preschool funded through Proposition 98. b Proposition 98 Reserve established by Proposition 2 (2014). c Change from 2019-20 to 2020-21 reflects lower baseline enrollment, partially offset by proposed growth. FTE = full-time equivalent. www.lao.ca.gov 5 analysis full gutter 2020-21 BUDGET declines . Attendance declines can sometimes Comments ease certain pressures . For example, districts with Proposition 98 Package Contains a Cushion declining attendance tend to face less pressure to in Event of Downturn. One important feature of the hire additional teachers . Most districts, however, Governor’s Proposition 98 plan is that it sets aside report that declining attendance usually leads to funding in the budget year for one-time activities . tighter budgets . This is because state funding tends Specifically, of the $2 billion in new one-time to decline in tandem with falling attendance, but funds, $1 .4 billion is attributable to 2020-21 . certain district costs—such as central administration The advantage of this budgeting approach is and facility maintenance—do not decline as that if the guarantee falls below projections, the smoothly . To balance their budgets, districts with expiration of these one-time activities provides declining attendance sometimes need to make a cushion that reduces the likelihood of cuts to notable adjustments (such as closing schools ongoing K-14 programs . Such an approach seems or consolidating programs) . Available data also particularly prudent this year, given the economic show that most districts are seeing an increase risks we discuss later in this report . Regardless of in the number of students with disabilities . This the specific programs the Legislature decides to trend means districts face continued pressure to fund in 2020-21, we recommend it adopt a final hire aides and other specialists to support these budget plan that continues to include a mix of students despite the drops in overall district ongoing and one-time spending . attendance . Some One-Time Proposals Unlikely to School Funding Growing at a Slower Address Root Issues. Most of the one-time Pace Compared With Recent Years. From proposals in the Governor’s budget seek to 2013-14 through 2018-19, annual growth in K-12 address longstanding issues in K-12 education, funding per student averaged 5 .9 percent—notably such as recruiting and retaining a well-trained higher than the 3 .8 percent average dating back education workforce and improving outcomes to 1988-89 . (These growth rates are unadjusted in low-performing schools and districts . Many of for inflation .) These increases were due mainly to the proposals, however, seem unlikely to have significant growth in the Proposition 98 minimum a long-term effect on these issues . Specifically, guarantee . They also helped districts respond we are concerned that the proposals are not to their various cost pressures . Since 2019-20, directly connected to the underlying problems or however, growth in the minimum guarantee has aligned with existing state and federal programs begun to slow . Under the Governor’s budget, intended to address those problems . We also Proposition 98 funding per student grows by are concerned that many proposals are missing 3 .5 percent in 2019-20 and 4 .1 percent in important details regarding how the funds would 2020-21—more in line with the historical average . be spent . As we discuss in subsequent sections Most Districts Currently Hold Positive Budget of this report, we recommend rejecting most of Ratings. Districts respond to cost pressures these proposals, freeing up more than $1 billion in different ways, with decisions about salary, inside the guarantee . In some cases, we provide benefits, and staffing often varying notably even alternative options that would align more closely among neighboring districts with similar student with existing efforts to address the root problems . demographics and overall funding levels . The These alternatives could be structured to cost less latest available data suggest that most districts than the amounts proposed by the Governor . have been able to make trade-offs among these Budget Provides Relatively Little Fiscal Relief competing pressures in ways that allow them to for Districts. Nearly all of the one-time proposals balance their budgets . As of December 2019, in the Governor’s budget would require districts 96 percent of school districts held positive budget to implement new programs or expand services ratings . As funding growth slows, however, districts as a condition of receiving funding . Most school likely will face more difficulty balancing their districts, however, are facing relatively tight budgets budgets moving forward . compared to previous years . For example, the 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET entire $1 .2 billion increase associated with the LCFF more quickly . Under this approach, the state would COLA is only slightly above the expected increase make a payment on top of the previously scheduled in pension costs . Given these dynamics, we think increase in district contributions for 2020-21 . districts would have difficulty implementing and Paying down unfunded liabilities would improve sustaining so many new initiatives . To the extent the funding status of the pension systems . It also the Legislature rejects some of these proposals, we would likely reduce district pension costs over think it should consider using the freed-up funds the next few decades—potentially making district to provide districts with additional fiscal relief . This budgets easier to balance on a sustained basis . approach could help districts prioritize the local Alternatively, if the Legislature wanted to provide programs and services they find most effective . more relief specifically in the upcoming year, it Using One-Time Funds for Pensions Could could consider using a portion of the one-time Help Address a Key Cost Pressure. Many school funding to smooth out pension rate increases districts regard higher pension costs as their in 2020-21 . Although this approach lacks the most significant fiscal challenge . To help districts potential for long-term savings, it could improve address this issue, the Legislature could use a districts’ fiscal health in the immediate future . The portion of the freed-up Proposition 98 funding to box on page 8 describes these options in more pay down districts’ unfunded pension liabilities detail . THE MINIMUM GUARANTEE In this section, we provide background on capita personal income, and student attendance the Proposition 98 minimum guarantee, analyze (Figure 3) . Whereas Test 2 and Test 3 build upon the administration’s estimates of the guarantee, the amount of funding provided the previous year, and explain how the guarantee could change in Test 1 links school funding to a minimum share response to updated revenue estimates . of General Fund revenue (about 40 percent) . The Background on Figure 3 Minimum Guarantee Three Proposition 98 Tests Proposition 98 Established the Minimum Guarantee. Test 1 Test 2 Test 3 Proposition 98 (1988) established Share of General Change in Per Change in General a minimum funding requirement Fund Revenue Capita Personal Fund Revenue Income (PCPI) for schools and community colleges commonly known as the General PCPI Fund minimum guarantee . The state About ADA ADA meets the guarantee through a 40% combination of General Fund and Prior-Year Prior-Year local property tax revenue . Funding Funding Minimum Guarantee Depends Upon Various Inputs and Formulas. The California Guarantee based on share Guarantee based on prior- Guarantee based on prior- of state General Fund year funding level adjusted year funding level adjusted Constitution sets forth three main revenue going to K-14 for year-over-year changes for year-over-year changes education in 1986-87. in K-12 attendance and in K-12 attendance and tests for calculating the minimum California PCPI. state General Fund revenue. guarantee . Each test has certain inputs . The most notable inputs ADA = average daily attendance. are General Fund revenue, per www.lao.ca.gov 7 analysis full gutter 2020-21 BUDGET State Could Reduce Districts’ Pension Costs Over the Long Term Long-Term Savings Could Be Achieved Through Supplemental Payments. Both California State Teachers’ Retirement System (CalSTRS) and California Public Employees’ Retirement System (CalPERS) have unfunded liabilities—meaning actuaries estimate that, based on various assumptions about the future (for example, investment returns and life expectancy), the pension systems have insufficient assets to pay future benefits that have been earned by members . The state and school districts share responsibility for paying down the CalSTRS unfunded liability, whereas districts are entirely responsible for any unfunded liability in their CalPERS plans . The state could make a supplemental payment to CalSTRS or to CalPERS on behalf of districts . In other words, the state could pay a lump sum toward districts’ share of the pension systems’ unfunded liabilities above what districts already owe in a given year . This action would reduce school districts’ unfunded liabilities and provide annual savings to school districts over the next few decades . These savings could be significant . Given the estimate of savings is based on future investment returns and other economic and demographic assumptions, however, there is uncertainty about the ultimate amount districts would save . Using a recent CalSTRS analysis that included thousands of possible scenarios, estimated savings over the next few decades from a $1 billion supplemental payment likely could range from $1 billion to $3 .3 billion (including the $1 billion supplemental payment) . Overall, the average savings was $2 .3 billion and in 75 percent of scenarios, the savings exceeded $1 billion . In general, it is our understanding that a supplemental payment to CalPERS has a higher probability of achieving savings over the next few decades . Ultimately, each district’s share of any CalSTRS or CalPERS savings would be proportional to its share of payroll covered by that pension system . State Could Reduce Districts’ Pension Costs This Budget Year Immediate Savings Could Be Achieved Through One-Time Contribution Rate Relief. An alternative option is to provide immediate budget relief by using one-time funds to lower the cost of districts’ CalSTRS or CalPERS contributions specifically in 2020-21 . Under this alternative, the state’s payment would cover a portion of the contribution that school districts otherwise would be required to make—resulting in a lower effective contribution rate for that year . While this approach would reduce costs to school districts in the budget year, it would have no effect on districts’ outstanding, unfunded liabilities or future contribution requirements . Consequently, such a payment would not result in savings beyond the budget year . Unique Case Can Be Made for Small Amount of One-Time CalSTRS Relief. While we think achieving longer-term savings would be more beneficial to districts than one-time savings, providing a small amount of a one-time CalSTRS rate relief in 2020-21 deserves some special consideration . Districts’ effective CalSTRS rate (as a percent of payroll) is scheduled to increase from 17 .1 percent in 2019-20 to 18 .4 percent in 2020-21, then decrease to around 18 .1 percent in 2021-22 (and remain approximately flat thereafter) . One-time funds could be used to eliminate this rate hump, allowing for smoother increases over the next few years . For example, the state could use one-time funds to lower districts’ contribution rate by 0 .8 percent of payroll in 2020-21, meaning districts’ effective rate would increase by 0 .5 percent in 2020-21 and another 0 .5 percent in 2021-22 . We estimate this rate smoothing would cost approximately $300 million . (All other one-time funds could be used for supplemental payments to provide districts longer-term savings .) 8 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Constitution sets forth rules for comparing the programs . The state continues to update its tests, with one of the tests becoming operative and calculation of any required deposits or withdrawals used for calculating the minimum guarantee that for up to nine months after the close of the fiscal year . Although the state can provide more funding year . than required, in practice it usually funds at, or Administration’s Estimates of the near, the guarantee . With a two-thirds vote of each house of the Legislature, the state can suspend Minimum Guarantee the guarantee and provide less funding than the Minimum Guarantee Revised Upward in formulas require that year . 2018-19 and 2019-20. Compared with the At Key Points, the State Recalculates estimates included in the June 2019 budget plan, Minimum Guarantee. The guarantee typically the administration revises its estimates of the changes from the level initially assumed in the minimum guarantee to increase by $302 million in budget act as a result of updates to the relevant 2018-19 and $517 million in 2019-20 (Figure 4) . Proposition 98 inputs . The state continues to In 2018-19, the increase mainly reflects higher update Proposition 98 inputs until the following estimates of local property tax revenue . (In Test 1 May after the close of a fiscal year . If these years like 2018-19 and 2019-20, changes in local updates show that the revised minimum guarantee property tax revenue directly affect the level of the exceeds the initial estimate, the state makes a minimum guarantee . They do not offset General one-time payment to “settle up” the difference . The Fund spending .) In 2019-20, the increase in the Legislature can allocate these settle-up payments minimum guarantee mainly reflects higher General for any school or community college program . Fund revenue . Proposition 98 Reserve Has Rules for 2020-21 Guarantee Increases $2.5 Billion Deposits and Withdrawals. Proposition 2 Over Revised 2019-20 Level. The administration (2014) created a state reserve specifically estimates that the minimum guarantee is $84 billion for schools and community colleges—the in 2020-21, an increase of $2 .5 billion (3 percent) Public School System Stabilization Account over the revised 2019-20 level (Figure 5, see (Proposition 98 Reserve) . The Constitution requires page 11) . Test 1 is operative, with the guarantee the state to deposit Proposition 98 funding into this receiving about 40 percent of the General Fund account when the minimum guarantee is growing revenue projected for 2020-21 . Growth in General relatively quickly and other conditions are met Fund revenue and local property tax revenue (see the box on page 10) . When the guarantee is each account for about half of the increase in the growing relatively slowly, the Constitution requires guarantee . the state to withdraw funds from the reserve and Additional Reserve Deposit Required in allocate them for school and community college 2019-20. As part of the 2019-20 budget plan, Figure 4 Tracking Changes in Proposition 98 Guarantee (Dollars in Millions) 2018-19 2019-20 June 2019 January 2020 June 2019 January 2020 Estimate Estimate Change Estimate Estimate Change Minimum Guarantee General Fund $54,445 $54,505 $61 $55,891 $56,405 $514 Local property tax 23,701 23,942 241 25,166 25,168 3 Totals $78,146 $78,448 $302 $81,056 $81,573 $517 Operative Test 2 1 yes 1 1 no www.lao.ca.gov 9 analysis full gutter 2020-21 BUDGET Key Rules Governing the Proposition 98 Reserve Below, we describe the rules governing Proposition 98 Reserve deposits and withdrawals . Deposits Predicated on Four Main Conditions. To determine whether a deposit is required, the state first determines whether all of the following conditions are met: • Revenues From Capital Gains Are Relatively Strong. Deposits are required only when the state receives an above-average amount of revenue from taxes paid on capital gains (a relatively volatile source of General Fund revenue) . • Test 1 Is Operative. Test 1 years historically have been associated with relatively strong growth in the minimum guarantee due to strong growth in state revenue . • Formulas Are Not Suspended. If the Governor declares a “budget emergency” (based on a natural disaster or slowdown in state revenues), the Legislature can reduce or cancel a Proposition 98 Reserve deposit . Additionally, if the Legislature votes to suspend the minimum guarantee, any required deposit is automatically canceled . • Obligations Created Before 2014-15 Are Retired. Proposition 2 (2014) specified that no deposits would be required until the state paid certain school funding obligations (known as “maintenance factor”) that it accrued during the Great Recession . The state met this condition starting in 2019-20 . Amount of Deposit Depends Upon Additional Formulas. If the state determines that the conditions for a deposit are satisfied, it performs several calculations to determine the size of the deposit . Generally, the size of the deposit tends to increase when the revenue from capital gains is relatively high and the guarantee is growing quickly relative to inflation . More specifically, the deposit equals the lowest of the following four amounts: • The Portion of the Guarantee Attributable to Above-Average Capital Gains. The state calculates what the Proposition 98 guarantee would have been if the state had not received any revenue from capital gains in excess of the historical average . Deposits are capped at the difference between the operative guarantee and the hypothetical alternative guarantee without the additional capital gains revenue . • The Difference Between Test 1 and Test 2 Levels. Deposits are capped at the difference between the higher Test 1 and lower Test 2 funding levels . • Growth Relative to the Prior Year. The state calculates how much funding schools and community colleges would receive if it adjusted the previous year’s funding level (excluding any deposits that year) for changes in student attendance and inflation . The inflation factor is the higher of the cost-of-living adjustment or growth in per capita personal income . Deposits are capped at the difference between the Test 1 funding level and the inflation-adjusted prior-year funding level . • Room Available Under a 10 Percent Cap. The Proposition 98 Reserve has a cap equal to 10 percent of all funding allocated to schools and community colleges . Deposits are only required to the extent the existing balance is below this threshold . Withdrawals Required When Guarantee Is Growing Relatively Slowly. Proposition 2 requires the state to withdraw funds from the Proposition 98 Reserve if the minimum guarantee is not growing quickly enough to support the prior-year funding level, as adjusted for student attendance and inflation . 10 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET the state made its first deposit Figure 5 into the Proposition 98 Reserve Proposition 98 Key Inputs and Outcomes Under ($377 million) . The size of this Governor’s Budget deposit was determined by the difference between the Test 1 and (Dollars in Millions) Test 2 funding levels (described 2018-19 2019-20 2020-21 in the previous box) . Due to the Minimum Guarantee administration’s higher estimate General Fund $54,505 $56,405 $57,573 of the minimum guarantee, this Local property tax 23,942 25,168 26,475 difference has increased to Totals $78,448 $81,573 $84,048 $524 million . The Governor’s Change From Prior Year budget accordingly provides for an General Fund $1,554 $1,899 $1,168 additional deposit of $148 million Percent change 2.9% 3.5% 2.1% to meet the higher requirement . Local property tax $1,317 $1,226 $1,307 Small Withdrawal Required Percent change 5.8% 5.1% 5.2% in 2020-21. Under the Governor’s Total guarantee $2,871 $3,126 $2,475 Percent change 3.8% 4.0% 3.0% budget, the minimum guarantee in 2020-21 is $38 million below the Operative Test 1 1 1 inflation-adjusted funding level from Growth Rates 2019-20 . The Constitution requires K-12 average daily attendance -0.8% -0.1% -0.3% the state to make up this difference Per capita personal income (Test 2) 3.7% 3.9% 4.1% by withdrawing a corresponding Per capita General Fund (Test 3)a 6.2% 4.0% 2.0% amount of funding from the Proposition 98 Reserve Proposition 98 Reserve . This Deposit (+) or withdrawal (-) — $524 -$38 withdrawal reduces the balance in Cumulative balance — 524 487 a the reserve to $487 million . As set forth in the State Constitution, reflects change in per capita General Fund plus 0.5 percent. Note: No maintenance factor obligation is created, paid, or owed over the period. Comments have been stagnant, job growth is down, and trade Estimates of General Fund Revenue Are activity is decreasing . Though these signs do not Reasonable... Of all the factors affecting the necessarily mean a broader economic slowdown calculation of the minimum guarantee, estimates is imminent, they do suggest a higher level of risk of General Fund revenue typically are the most for state revenue estimates compared to previous volatile . Relative to the revenue estimates we budget cycles . prepared for The 2020-21 Budget: California’s Guarantee Is Moderately Sensitive to Fiscal Outlook, the administration’s estimates are Changes in Revenue Estimates Over the similar in 2018-19, higher in 2019-20, and lower Period. To the extent estimates of General Fund in 2020-21 . Across all three years, however, the revenue are higher or lower by May, the minimum administration’s estimates are very close to ours— guarantee would likewise be affected . In general, being less than $100 million below our estimates the relationship between revenue and the minimum (roughly 0 .01 percent of total tax collections) . Given guarantee depends on which Proposition 98 test is these similarities, we think the administration has operative and whether another test could become provided a reasonable starting point for estimating operative with higher or lower revenue . Under our the minimum guarantee . outlook, Test 1 is the operative test each year of …But Have Some Downside Risk. Although the budget period . After examining many scenarios, the administration’s revenue estimates seem we found that the operative test is unlikely to reasonable based on current economic conditions, change in 2019-20 or 2020-21 . Holding other some signs suggest the economy could slow in factors constant, Test 1 would be operative given the coming months . For example, housing markets www.lao.ca.gov 11 analysis full gutter 2020-21 BUDGET any level of General Fund revenue . This is due Property Tax Estimates Somewhat Above mainly to consistent declines in student attendance Our Projections. Estimates of local property over the budget period, a trend that contributes tax revenue are the other significant factor to Test 1 being operative . In Test 1 years, the affecting the minimum guarantee when Test 1 is guarantee increases or decreases about 40 cents operative . Relative to our November outlook, the for each dollar of higher or lower General Fund administration assumes schools and community revenue . colleges receive somewhat more property Changes in Revenue Would Affect Guarantee tax revenue from local Educational Revenue and Size of Reserve Deposits. Changes in Augmentation Funds (accounts that shift funding revenue estimates and the minimum guarantee between schools and other local agencies) . It also likely would affect the amount of funding the projects slightly faster growth in assessed property state is required to set aside in the Proposition 98 values . On the other hand, the administration Reserve . If revenue were to decrease in has somewhat lower estimates of property tax 2019-20 or 2020-21, the state likely would be revenue attributable to former redevelopment required to make a smaller deposit (in 2019-20) or agencies (the state dissolved these agencies in withdraw additional funding (in 2020-21) from the 2011-12) . Overall, the administration’s property tax Proposition 98 Reserve . These changes in the estimates are $671 million above our November Proposition 98 Reserve level could help insulate estimates over the budget period . The majority of school and community college programs from this difference is attributable to the administration’s drops in the minimum guarantee—though given higher Educational Revenue Augmentation Funds the relatively small amount currently in the reserve, assumptions . To the extent that local property tax this buffer would disappear quickly . On the upside, revenue differs from the administration’s January an increase in revenue would tend to require a estimates, the minimum guarantee would change larger deposit (in 2019-20) or smaller withdrawal on a dollar-for-dollar basis . (As with General Fund (in 2020-21), potentially leaving little of the increase revenue, changes in local property tax revenue available for new spending . (Our analysis holds also could affect the size of reserve deposits or all inputs other than revenue constant, though withdrawals .) changes in these inputs also could affect the guarantee and the reserve .) LOCAL CONTROL FUNDING FORMULA In this section, we provide background on system had adverse effects . Notably, the system LCFF, describe the administration’s proposal and was characterized by a lack of coordination associated projections for LCFF costs, and assess across programs, a compliance-based rather than those projections . student-based mindset, a disconnect between funding and student costs, historic funding Background inequities, and limited local control . In response, State Enacted New School Funding Formula the state eliminated most categorical programs in in 2013-14. Prior to LCFF, the state distributed 2013-14, replacing the previous general purpose school funding through a combination of general grants and program-specific funding formulas with purpose grants (called “revenue limits”) and more one new formula . than 40 state categorical programs . Districts could LCFF Has Three Main Components Plus use general purpose grants for any educational “Add Ons.” LCFF consists of base, supplemental, purpose but had to spend categorical funding on and concentration grants, as well as several small state-prescribed activities . In the years leading add ons . Figure 6 shows the share of total LCFF up to LCFF, policy makers were concerned this 12 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET funding attributable to each of these components . the state estimated LCFF would cost $18 billion We describe each component below . more than the previous system due to its higher per-student funding targets . Given the size of this • Base Grants. The largest component of LCFF additional cost, the state anticipated fully phasing is a base grant generated by each student . in the rate increases in 2020-21 . Instead, the state The number of students is measured using slightly surpassed funding targets in 2018-19 . average daily attendance (ADA) . Base funding Since Full Implementation, State Policy Has rates differ by grade span, with students in Been to Adjust LCFF Funding Rates for COLA. higher grade spans generally generating more Following full implementation, the state adopted a funding than those in lower grade spans . policy of automatically adjusting LCFF per-student The state set per-student base LCFF funding rates for COLA . The specific COLA rate is linked targets about $500 higher than pre-recession to a national price index designed to reflect the funding levels adjusted for inflation . Districts cost of goods and services purchased by state may use base funding for any educational and local governments across the country—the purpose . state and local government price index . This index • Supplemental Grants. For each student who is developed by the federal Bureau of Economic is an English Learner or low income (EL/LI), a Analysis (a division of the U .S . Department of district receives a supplemental grant equal to Commerce) . 20 percent of the base grant . A student who State Adopted COLA Cap Last Year. Trailer is both EL and LI generates the same funding legislation included in the 2019-20 budget rate as a student who belongs to only one of package added a provision that automatically these groups . Districts must use this funding reduces the COLA rate under certain conditions . for the benefit of EL/LI students . Specifically, in years in which growth in the • Concentration Grants. Districts serving a Proposition 98 minimum guarantee is insufficient to student population of more than 55 percent fund an LCFF increase based on the state and local EL/LI also receive a concentration grant equal to 50 percent of the base grant for each EL/LI student Figure 6 above the 55 percent threshold . Districts also Base Grants Comprise About 80 Percent of LCFF Funding must use this funding for the 2019-20 benefit of EL/LI students . Add Ons Concentration • Add Ons. The largest add ons are associated with Supplemental two historical categorical programs—one supporting targeted instructional support and the other supporting home-to-school transportation . Though the state no longer requires districts to operate these specific programs, districts continue to receive their Base 2012-13 allocations for them . State Reached LCFF Funding LCFF = Local Control Funding Formula . Targets in 2018-19. In 2013-14, www.lao.ca.gov 13 analysis full gutter 2020-21 BUDGET government price index, the LCFF COLA is reduced offset by a projected 0 .3 percent decline in ADA . to fit within the guarantee . The augmentation brings total LCFF funding in State Estimated to Spend $63 Billion for 2020-21 to $64 billion . LCFF in 2019-20. LCFF is by far the state’s largest Assessment education program . With $42 .3 billion supported by the state General Fund (and $20 .6 billion supported Projected COLA Rate and Associated by local property tax revenue), LCFF also is the Cost Increase for 2020-21 in Line With Our largest component of the state’s General Fund Estimates. Using the latest data available, we budget . estimate the 2020-21 COLA rate is 2 .14 percent— roughly tracking with the administration’s estimate Governor’s Proposal of 2 .29 percent . The estimated rate will change Provides $1.2 Billion Increase to Make based upon the release of further data updates Growth and COLA Adjustments. In keeping with over the coming months, with the state locking recent state practice, the administration’s largest down the rate in late April 2020 . Given the relatively ongoing augmentation is for LCFF . Specifically, modest growth rate in the federal government’s the Governor’s budget for 2020-21 includes price index, we believe the administration will likely a $1 .2 billion increase to LCFF, which reflects revise its estimate slightly downward as part of the funding for a projected 2 .29 percent COLA, slightly May Revision . SPECIAL EDUCATION Below, we provide background on special Schools Must Serve Students With Disabilities education services and financing, describe the in the Most Inclusive Setting. Federal law Governor’s proposals to reform these aspects of generally requires districts to serve students special education, assess these proposals, and with disabilities in the educationally appropriate offer associated recommendations . setting that offers the most opportunity to interact with peers who do not have disabilities . The Background intent is to provide an “inclusive setting” where Federal Law Requires Schools to Provide students with disabilities are taught alongside Students With Disabilities Individualized their peers in general education classrooms with Education Programs (IEPs). Special education appropriate services . These students may receive is instruction designed to meet the unique needs special education services within the general of each child with a disability . As a condition of education classroom (for example, having an receiving federal funding, the Individuals with aide or interpreter work with them one on one) Disabilities Education Act requires schools to or in separate pull-out sessions (for example, identify all students with disabilities and provide having a one-on-one speech therapy session) . them individualized support beginning at the Other inclusive models may include instruction age of three . The specific support provided to designed for students with varying learning needs each student is detailed in his or her IEP, a legal or co-teaching, where a special education teacher document developed by the student’s teachers, and general education teacher collaboratively teach parents, and school administrators . Support a class that includes students with and without services may include specialized academic disabilities . In 2017-18, 56 percent of all students instruction, speech therapy, physical therapy, with disabilities in California were educated in an counseling, or behavioral intervention services . In inclusive setting—placing California 40th out of 47 states for which data are available . 2018-19, 11 .7 percent of K-12 students received special education in California . 14 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Special Education Supported by Combination AB 602 Base Rates Vary by SELPA. Under of General Purpose and Categorical Funds. AB 602, SELPAs are funded based on overall Schools receive billions of dollars each year (mostly attendance, but the per-student rate each SELPA from LCFF) to educate all students, including receives varies across the state—ranging from students with disabilities . These funds can be $557 to $960 per student in 2019-20 . As described used for any educational purpose but primarily in the box on page 16, this variation was present cover general education costs such as teacher when the state first shifted to the AB 602 model in compensation . Beyond these general education the late 1990s . Over the last 20 years, the state has costs, schools incur additional costs to serve occasionally provided funding augmentations to students with disabilities (for example, to provide increase base rates for SELPAs with below average specialized support and adaptive equipment) . To rates . help cover these additional costs, both the state State Provides Remaining Categorical and federal governments provide categorical Funding Through Various Add Ons. In addition to funding specifically for special education . These the base funding from AB 602, SELPAs may receive fund sources together cover about 40 percent of funding from the state’s many special education the additional cost of special education services . categorical programs, as summarized in Figure 7 Schools cover remaining special education costs (on page 17) . The distribution and spending with general purpose funding (mostly from LCFF) . restrictions of these categorical funds vary . Three Most Funding Allocated to Special Education of these categorical programs—mental health Local Plan Areas (SELPAs). State law requires services, SELPA administration, and professional school districts, charter schools, and county development—are allocated to all SELPAs based offices of education—collectively referred to as on overall attendance . The Out-of-Home Care local education agencies (LEAs)—to participate in program provides funding for students living in a SELPA, which is typically a regional consortium licensed group homes or health facilities . Funding of entities that coordinate special education for group homes and foster children have been held services . Large districts are allowed to serve as in place since 2016-17 due to state reforms that their own SELPAs . Most state and federal special phased out the use of group homes . The remaining education funding is allocated directly to SELPAs . programs provide funding based on a variety of Each SELPA decides how to allocate its special other factors, such as the size of the SELPA, the education categorical funding among its members . number of students with high-cost placements or State Provides Most Categorical Funding low-incidence disabilities, or the participation in Based on Overall K-12 Student Attendance. employment training programs . About 80 percent of state special education funding Federal Law Requires “Maintenance of Effort” is allocated by a base rate formula commonly (MOE) on State and Local Spending. In order called AB 602 (after its enacting legislation in to receive federal special education funding, both 1997) . The formula distributes funding based on states and LEAs must spend at least as much total student attendance rather than a more direct on special education each year as they did the measure of special education costs (for example, preceding year . States and LEAs may choose the number of students identified for special whether their MOE is calculated on the basis of education or the cost of services provided) . The total special education spending or per-student formula uses the greater of the current year’s spending . By “locking in” increased expenditures, or prior year’s overall attendance . The AB 602 this requirement offers an additional incentive for approach ensures schools have little incentive to the state and LEAs to contain special education overidentify students for special education or serve costs . these students in unnecessarily expensive ways . Special Education Expenditures Have The federal government also allocates most of its Increased Faster Than Associated Funding. special education funding based on overall student Figure 8 (see page 18) shows inflation-adjusted attendance . special education expenditures by fund source www.lao.ca.gov 15 analysis full gutter 2020-21 BUDGET History of Special Education Funding in California State Has Overhauled Special Education Funding System Twice Previously. State special education funding has gone through three distinct eras . First, between 1860 and 1980 the state created a patchwork system of special education categorical programs mostly based on specific types of disabilities . Second, in 1980 the state introduced a somewhat simpler funding formula— commonly referred to as J-50—that was based on the types of services provided . Finally, in 1997 the state introduced an even simpler formula commonly known as AB 602 (Davis) that is based on total student attendance . Earliest System Had Array of Programs and Major Shortcomings. Starting in 1920, the state gradually developed a complex system for funding special education, eventually encompassing almost a dozen categorical programs . Each program had distinct funding rates, eligibility, and programmatic requirements . The system of categorical programs had various limitations . Most notably, the system encouraged schools to identify students with whichever disability generated the most funding rather than whichever best described their specific challenges . Second System Funded Based on Specific Services Provided. To address these weaknesses, the state overhauled its special education policies between 1975 and 1980 . California introduced a simpler funding system commonly referred to as the J-50 system (after the associated compliance form) . This system was based on three types of special education services: (1) special day classes which only students with disabilities attend, (2) resource teachers who provide pull-out instructional support for students with disabilities served in general education classrooms, and (3) services provided by specialists such as physical therapy . During this time, California also began requiring all districts to organize into special education local plan areas (SELPAs), which would be responsible for coordinating regional special education services . Second System Also Proved Complicated and Problematic in Practice. In theory, the J-50 system simplified special education funding, but in practice, it replaced one set of complications with another . The system established unique funding rates for each SELPA based on a statewide survey of special education costs in 1979-80 . Though these rates closely tracked special education costs the first few years after 1980, the state’s failure to update its cost survey resulted in seemingly arbitrary funding inequities by the mid-1990s . Most importantly, the J-50 system encouraged schools to serve students with severe disabilities in special day classes, as the funding generated for serving students with disabilities in general education classrooms was intended only to cover students with relatively mild disabilities . Current Funding System Intended to Simplify and Address Unequal Funding. The state overhauled the funding system for a second time in 1997 with the passage of AB 602 . The state shifted to a formula based on overall student attendance to eliminate the complexity and bad incentives characterizing the J-50 system . However, in transitioning from the J-50 system, the state set each SELPA’s per-student funding rate by using its total funding in the last year under the J-50 system . Because funding rates varied notably under the J-50 system, the new rates established under AB 602 also varied notably . In an effort to equalize these rates, the state allocated funding in the late 1990s, early 2000s, and in 2019-20 to increase rates for SELPAs below the statewide per-student average . Despite unequal rates, AB 602 largely realized the state’s original goals of simplifying funding and removing inappropriate incentives regarding the provision of services . 16 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET between 2007-08 and 2017-18 . During this schools increasing staff salaries and being required ten-year period, total state and federal special to make larger pension contributions on behalf of education funding declined (in inflation-adjusted their employees . As a result, local general purpose terms) due to the drop in overall student funding has been covering an increasing share of attendance . However, total special education special education expenditures, rising from about expenditures increased, largely driven by a growing 45 percent ten years ago to about 60 percent number of students with relatively severe disabilities today . requiring more intensive services . Most notably, Special Education Expenditures Vary by the share of students with autism has increased Region. In per-student terms, special education from 1 in 600 in 1997-98 to 1 in 50 in 2017-18 . expenditures vary notably among SELPAs . We Expenditures also have increased as a result of estimate SELPAs spent an average of about Figure 7 California Funds Many Special Education Programs 2019-20 (In Millions) Program Distribution Method Spending Restrictions Funding AB 602a Overall student attendance. Any special education expense. $3,412 Preschool Per-child funding for three- and None. 493 four-year olds with disabilities (one time). Mental health services Overall student attendance. Mental health services for 386 students with disabilities. Out-of-Home Care Location and capacity of Licensed Any special education expense. 144 Children’s Institutions. SELPA administration Overall student attendance. SELPA-level services, including 100 data management and required reporting. Infants and toddlers Number of infants and toddlers with Early intervention services for 83 special needs served. infants and toddlers with special needs. Workability Number of students enrolled in Job placement and training for 40 employment training programs. students with disabilities. Low-incidence Number of students who are deaf, Services and materials for 19 disabilities hard of hearing, visually impaired, students with qualifying or orthopedically impaired. conditions. Technical assistance Competitive. Support services. 10 leads Extraordinary cost pools Individual student placements. Expenses associated with 6 very high-cost residential or nonpublic school placements. Necessary Small SELPAs Attendance in SELPAs serving SELPA-level services, including 3 fewer than 15,000 students. coordination, data management, required reporting, and fiscal administration. Professional Overall student attendance. Staff development related to 1 Development special education. Total $4,697 a Special education program named after authorizing legislation—Chapter 854 of 1997 (AB 602, Davis). SELPA = special education local plan area. www.lao.ca.gov 17 analysis full gutter 2020-21 BUDGET Figure 8 Local Funds Covering Growing Share of Special Education Costs Special Education Spending by Fund Source, 2017-18 Dollars (In Billions) $14 12 10 8 Local General Purpose 6 Stimulus Federal 4 2 State 2007-08 2009-10 2011-12 2013-14 2015-16 2017-18 $2,000 per student in 2017-18 (spreading costs with disabilities was 65 percent, compared to across all students in the region) . Per-student 83 percent of students statewide . Some students spending among SELPAs ranged from about with disabilities, however, just take longer to $600 to more than $4,000 . Special education graduate . Of the students with disabilities exiting expenditures vary by region for at least three high school in 2017-18, 76 percent left with a reasons . First, the overall incidence of students high school diploma . Of the remaining students, with disabilities varies across the state . Second, 13 .6 percent dropped out, 3 .4 percent aged even SELPAs serving similar proportions of out (reaching age 22), and 7 percent received students with disabilities may differ in the intensity an alternative certification called a certificate of of their services . Third, the cost of providing completion . (Students can receive a certificate of specific special education services varies by region, completion if their IEP team determines they are largely because of differences in the compensation unlikely to meet all requirements for high school packages that LEAs provide teachers and graduation, but can meet an alternative set of specialists . requirements developed by the IEP team .) Students With Disabilities Tend to Have Current-Year Budget Included $645 Million Poorer Outcomes Than Other Students. Students One-Time Funding for Preschool and with disabilities perform worse than students Low-Funded SELPAs. The 2019-20 budget without disabilities across several measures . provided $493 million one-time funding to Based upon the most recent data, students with districts based on the number of preschool-aged disabilities had low scores on standardized tests children with disabilities they serve—$9,010 per of reading and math—scoring as a group at the child . Although districts are required to provide 18th percentile of all test takers . Students with special education services for this age group, the disabilities also have notably lower graduation current-year budget is the first time the state has rates compared to other student groups . In provided funding for this purpose . Districts were not 2017-18, the four-year graduation rate for students required to use these funds for additional services . 18 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Thus, funds likely will be used to cover the costs of harmless . The Governor also proposes to modify existing preschool services . The 2019-20 budget the base formula to use a three-year rolling average also included $153 million one-time funding to of student attendance, rather than the greater of increase AB 602 rates for SELPAs funded below the current year or prior year . The average would the statewide average of $557 per student . be calculated for each LEA, but funding would Current-Year Augmentations Made continue to be allocated to SELPAs . Contingent on Future Special Education Freezes Categorical Funding and SELPA Reforms. The 2019-20 budget package also Membership. In anticipation of future changes to included language specifying that the $645 million special education funding, the Governor’s budget in augmentations would only be ongoing if the proposes to freeze allocations for most special Legislature makes statutory changes in the education categorical programs at 2019-20 levels, 2020-21 budget designed to improve the academic adjusted for cost of living . In addition, the Governor outcomes of students with disabilities . The specific proposes to prohibit LEAs from changing SELPAs reforms are to be determined collaboratively through 2023-24 . by the Legislature and the administration but Future Phases to Be Informed by a Privately may include a reconsideration of the role of Funded Study. In the fall of 2019, a study of SELPAs, an expansion of inclusive instructional special education funding in California was practices, support for addressing disproportionate commissioned using private foundation funding identification and placement of certain student to potentially inform future changes to the special subgroups, and review of special education funding education funding formula . The scope of the study allocations . was developed with input from the administration, the State Board of Education, and the California Governor’s Proposals Department of Education (CDE) . Our understanding Proposes a Multi-Phased Approach Aimed at is the study is expected to recommend a new Improving Special Education. Given the language funding model aimed at addressing variation in in the 2019-20 budget prompting special education student needs and costs, promoting inclusive reform, the administration engaged with various practices, and encouraging early intervention and stakeholders in the summer and fall of 2019 . identification of students with disabilities . The study The administration identified several challenges is expected to be completed within the next year . informed by these discussions, including growing Proposes $1.1 Million for a Governance Study student mental health and social-emotional needs, and Two Workgroups to Inform Future Phases. teachers not prepared to adapt instruction to The Governor’s budget provides $500,000 on a students with diverse needs, shortages in special one-time basis to fund a study on special education education teachers and specialists, and the governance and accountability . The study would lack of clear and consistent messaging from the provide recommendations on (1) improving delivery state to promote inclusive practices that improve of special education services, (2) improving student outcomes for all students . To address these outcomes, (3) ensuring equitable distributions of issues, the Governor proposes to make reforms in services to LEAs, and (4) identifying strategies special education financing and other areas over a and challenges for funding and services under the multiyear period . current and recommended models . The findings First Phase Makes $645 Million Augmentation of the study would be reported to the Legislature From 2019-20 Ongoing to Modify Base Formula. by October 1, 2021 . The budget also includes The Governor proposes to increase the base rate a combined $600,000 one time to convene two for most SELPAs to $660 per student . To fund the workgroups . Of this amount, $350,000 is for a base rate increase, the Governor proposes to make workgroup to develop a standardized IEP template ongoing the $645 million augmentation provided in and consider the feasibility of a statewide IEP 2019-20 . SELPAs that currently have higher rates reporting system . The remaining $250,000 is for than the proposed new base rate would be held a workgroup to develop alternate pathways for www.lao.ca.gov 19 analysis full gutter 2020-21 BUDGET students with disabilities to receive a high school Unclear How Proposed Reforms Address Key diploma . Both workgroups would include the Challenges in Special Education. In explaining Department of Rehabilitation, the Department of the rationale for its proposal, the administration Developmental Services, LEAs, SELPAs, legislative cites several key challenges in special education, staff, and relevant experts . The time frame and the such as teachers not being fully prepared for of the workgroups would be similar to that of the inclusive classrooms and an increasing need for governance study . mental health and social-emotional support for Includes $250 Million in One-Time Funding students . However, the nexus between these for Preschool Services. The Governor’s budget challenges and the special education funding model includes $250 million in one-time funding to be remains unclear . The AB 602 base formula provides allocated to districts based on the number of schools with broad flexibility to use funding in ways preschool-aged children with disabilities served that align with the needs of their students, including by the district . In contrast to the preschool funds promoting inclusive classrooms and providing provided in 2019-20, the Governor intends this additional student services . Similarly, we do not funding to increase or improve program services . see a clear connection between the current special education governance system and the challenges Provides $4 Million One Time to Create the cited by the administration . California Dyslexia Initiative. The Governor proposes to designate a county office of education Current Approach to Studying Problem Limits (COE) to promote best practices regarding the Legislative Input. Many of the key challenges treatment of dyslexia across the state . The cited by the administration align with issues the COE would find effective models that identify Legislature has deemed key priorities . However, and support students with dyslexia and other the privately funded study—which may ultimately specific learning disabilities, create professional inform future proposals from the administration— development on effective instruction for these was initiated, funded, and developed outside of students, and host a statewide conference by the the legislative process . This approach leaves little end of 2020 to disseminate relevant information room to ensure the Legislature’s concerns are and resources . The COE would lead the initiative in incorporated in the study . Although the Legislature partnership with a designated university . will be able to review any new funding model that the administration proposes in the future, this Assessment provides limited time for the administration to then directly address any concerns that the Legislature Proposal Generally Aligned With Original may have about the proposed model . For instance, Legislative Intent. By reducing variations in SELPA the privately funded study is expected to make base rates, the Governor’s proposal addresses recommendations to address the higher costs of special education funding inequities that have serving students with severe disabilities . Providing persisted for decades . Moreover, the proposal is more funding to LEAs for children with more severe consistent with the original intent of AB 602 and disabilities could address this concern, but also our office’s past recommendations . could create incentives for LEAs to overidentify Three-Year Average Would Smooth students with disabilities . The Legislature Funding Changes for Districts With Declining would need sufficient time to evaluate these Attendance. Given statewide student attendance considerations . has been declining since 2013-14 and is projected Base Funding Does Not Include Count of to continue declining over the next decade, shifting Preschool-Aged Children. Although the federal to a three-year average would help smooth the government requires districts to begin providing associated drops in special education base funding special education to children with disabilities on for the majority of districts . In contrast, for the their third birthdays, the AB 602 base formula does smaller share of districts that are growing, a rolling not include student attendance for this age group . average would result in annual funding increases This is primarily because most children in this age somewhat smaller than their growth in attendance . 20 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET group do not attend school and the state does preschool-aged children would allow the state not collect data on the number of preschoolers to recognize local costs associated with serving who live within each school district’s attendance this age group . To address the lack of preschool boundary . As a result, the state provides no funding attendance data, we recommend modifying to account for the costs associated with serving the base formula to double-count kindergarten these children . Districts cover related costs with a attendance for LEAs that provide preschool, combination of federal funding and general purpose effectively using kindergarten attendance as a proxy funding . for preschool attendance . One-Time Preschool Funding Sends Fund Studies and Workgroups Based on Confusing Message to Districts. The Legislative Priority. Considering the administration administration intends for the one-time preschool plans on addressing special education issues over funding to be used to increase or improve services a multiyear period, the Legislature may want to for children . Based on our conversations with think carefully about what issues it would like to various special education stakeholders, effectively ensure are addressed . To the extent that additional increasing or improving services typically requires research or stakeholder input may be helpful, the ongoing spending increases—particularly for hiring Legislature could consider funding other studies additional staff . However, given the one-time and/or workgroups this year to help inform future nature of these funds, schools are unlikely to hire changes to special education . Below we describe additional staff to support these new services . two options the Legislature could consider: Instead, the funding likely will be used for one-time • Reforms to Special Education Categorical activities, such as professional development Programs. The Legislature could fund a study or technology purchases . Districts are also or workgroup that makes recommendations discouraged from using this funding to provide for simplifying or updating the state’s special additional IEP-related services, as this would raise education categorical programs . Many of their local MOE . these programs merit a careful review to Recommendations ensure they are an effective way to distribute funding . Funding for the Out-of-Home Care Adopt Governor’s General Approach program has been partially frozen since to Modifying Base Funding Formula. We 2016-17 because its allocation formula is no recommend the Legislature adopt the Governor’s longer applicable . Some programs, such as general approach of using the $645 million employment training and funding for infant augmentation provided last year to develop new and toddlers, were first established in the AB 602 base rates . The approach is aligned with 1980s and are only allocated to certain LEAs . the original intent behind AB 602 to eliminate The privately funded study may examine historical variations in base rates . We also some of these issues, but a narrower, specific recommend adopting the proposed three-year study might provide the Legislature with more average of attendance to calculate base funding . concrete options for reforming the current This will smooth drops in funding due to declining model . student attendance in many districts across the • Alternative Models That Address High state . Special Education Costs. As previously Use One-Time Preschool Funding for mentioned, one ongoing concern in special an Ongoing Base Increase, Incorporate education is the increasing number of Preschoolers Into the Base. We recommend students with high special education costs . the Legislature make the proposed $250 million The Legislature could fund a study that for one-time preschool funding, instead, an explores options for funding high-cost ongoing base augmentation to fund the addition students while also avoiding incentives of preschool-aged children into the base to overidentify or serve students in more formula . Expanding the base formula to include www.lao.ca.gov 21 analysis full gutter 2020-21 BUDGET restrictive environments . In particular, the the state’s attendance-based funding model does study could examine promising options from not discourage schools from placing students in other states that could feasibly be adopted inclusive settings . In these areas, we encourage in California . Two states, for example, have the Legislature to consider other actions that would models primarily based on overall student improve special education . To further promote counts that also provide LEAs with partial inclusion, the Legislature could expand existing reimbursement for high-cost students . A initiatives that provide districts technical assistance study specifically focused on this issue to implement inclusive practices . Alternatively, the could provide some concrete options for the Legislature could consider funding a workgroup to Legislature to consider adopting . identify the key barriers to implementing inclusive practices and provide recommendations for Directly Address Other Key Priorities, Such how to address these challenges . These actions as Inclusion. Several of the Legislature’s key can be taken now without having to wait for the priorities are not directly related to the state’s administration to suggest future changes to the special education funding model . For example, special education funding formula . EDUCATION WORKFORCE In this section, we analyze the Governor’s principals and other school administrators . Student proposals to address teacher and other staffing services staff include counselors, psychologists, shortages, as well as his proposal to provide social workers, nurses, speech and language additional professional development for school specialists, and librarians . In 2018-19, the state staff . had about 31,000 school services staff, an increase of about 32 percent over the 2010-11 level . WORKFORCE SHORTAGES Teachers, administrators, and student services staff all require credentials issued by the California Below, we provide background on teacher Commission on Teacher Credentialing (CTC) . In and other school staffing shortages, describe contrast, the remaining support staff—including the Governor’s proposals related to these issues, instructional aides, office staff, bus drivers, assess these proposals, and offer associated custodians, and cafeteria workers—do not require recommendations . credentials and are commonly referred to as classified staff . The state had around 262,000 FTE Background classified staff in 2018-19 . California Has More Than 600,000 School Some Districts Unable to Find Credentialed Employees. School districts employ a variety of Teachers. Despite recent growth in the teacher school staff, including teachers, administrators, workforce, some districts in the state are unable to student services staff, and other school support find credentialed teachers . As shown in Figure 9, staff . The state had about 295,000 full-time prospective teachers have various pathways to equivalent (FTE) teachers in 2018-19, an increase earn their teaching credentials . When districts are of 10 percent over the 2010-11 level (the low unable to hire a credentialed teacher for immediate point during the Great Recession) . Coupled with staffing needs, they hire underprepared teachers the effects of declining student enrollment, the with emergency credentials . As Figure 10 shows, statewide student-to-teacher ratio, in turn, has almost 3 percent of the teacher workforce (about dropped every year since its peak in 2010-11 8,200 teachers) had an emergency credential in (23:1) . In 2018-19, this ratio was about 21:1— 2017-18 . The share of teachers on emergency comparable to the level prior to the Great credentials has risen every year since 2009-10, Recession . The state also has about 26,000 FTE when the demand for teachers was low . 22 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Figure 9 Teachers May Receive Credentials Through Various Preparation Pathways Traditional Teacher Integrated Teacher Preparation Internship Teacher Residency Preparation Description Prospective teachers enroll Interns teach in the Residents teach with a Students complete the at an accredited teacher classroom as the mentor teacher while required coursework, preparation program, where teacher of record and completing the required student-teaching, they complete the required concurrently complete coursework and teaching and teaching coursework, student- the required coursework assessments. Most often, assessments during teaching, and teaching and teaching residents commit to their undergraduate assessments. assessments. working at the school after programs. completing the program. Length BA + 1 year BA + 2 years BA + 1 to 1.5 years BA Program Sponsor University School district, COE, or School district or COE University university in partnership with a university Cost Tuition None None Tuition Compensation None Paid None None BA = bachelor’s degree and COE = county office of education. Teacher Workforce Affected by Several profession also affects the statewide market, as Important Factors. Overall, the statewide market teachers who voluntarily leave the profession must for teachers is affected by demand, supply, and be replaced by new teachers . Factors associated turnover . The demand for teachers is largely with teachers vacating their current jobs include driven by changes in student enrollment and lack of support from administrators and parents, the level of state funding, as school districts lack of control over their work, a high prevalence typically use the bulk of state funding increases of student misbehavior or tardiness, and lack of for some combination of hiring additional teachers access to a teacher mentorship program . and increasing teacher salaries . Demand also is influenced by class size preferences, as class size Figure 10 reduction policies require Share of Underprepared Teachers additional teachers to staff smaller Is Low but Increasing classes . As statewide student enrollment declines, however, Share of Teacher Workforce on Emergency Credentials class sizes may be reduced 6% without hiring additional teachers . The supply of teachers is driven 5 by multiple factors, including 4 prospective teachers’ perceptions regarding the availability of jobs, 3 the rate at which California can 2 produce newly credentialed teachers, and districts’ ability 1 to recruit teachers from out of state and attract former teachers 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14 2015-16 2017-18 back into the profession . The rate at which teachers leave the www.lao.ca.gov 23 analysis full gutter 2020-21 BUDGET Underprepared Teachers More Common received one-time funding from the state since in Certain Subject Areas. The US Department 2016-17 to address teacher shortages . Some of Education requires states to report teacher programs are aimed at increasing the supply of shortages using a specified federal methodology . teachers . For instance, the Classified School The CDE has identified shortages of special Employee Teacher Credentialing Program education, science, and math teachers nearly (Classified Program) provides financial support every year since 1990-91 . Such staffing difficulties for classified staff to pursue their teaching are consistent with nationwide trends . Special credential . Other programs focused on improving education teachers tend to have higher rates of or accelerating teacher preparation, particularly in turnover, likely due to additional stress factors, such high-need subject areas . The Teacher Residency as the increased risk of lawsuits and considerable Grant Program funds the expansion of residency reporting requirements associated with a student’s programs in special education, bilingual education, IEP . Teacher shortages in science and math are and STEM fields that provide prospective teachers attributed to a shortage of undergraduates in more support and classroom experience by science, technology, engineering, and math (STEM) first teaching alongside a mentor teacher . Other majors and the high salaries that these graduates programs, such as the Golden State Teacher Grant can receive in other professions . In 2017-18, about Program, targeted teacher recruitment in schools one-third of new teachers in both special education with higher shares of underprepared teachers . and STEM fields held emergency credentials . California Also Has Shortages in Certain Low-Income Urban and Rural Districts Also Student Services Positions. Most notably, Rely More Heavily on Underprepared Teachers. certain types of special education specialists Staffing difficulties appear most pronounced are in particularly short supply . These specialists in low-income urban schools, as well as rural provide a range of direct services to students schools . Nationwide, teacher turnover tends to with disabilities . Services can include providing a be greater in city-center schools (18 percent from student who has a speech impediment with speech latest available data in 2011-12) and schools with therapy and providing sign language interpretation high rates of poverty (22 percent in 2011-12) . for a student who is deaf . Most districts try to In California, higher turnover also is reported in hire specialists who work exclusively for the these types of schools . Rural schools experience district, but they typically contract with third party different staffing pressures depending on their staffing agencies when unable to hire their own location and population base . Staffing is most specialists . Contract specialists are generally more difficult for rural schools with a declining population expensive than district staff and typically work on base . Rural schools close to large population one-year contracts . In 2015-16, 23 percent of all centers with a university may find attracting new occupational therapists working in schools were teachers easier than more isolated rural schools, employed through third party staffing agencies, but also experience higher rates of turnover as as were 16 percent of all speech and language teachers often leave for urban districts offering pathologists . By comparison, 5 percent of all higher pay . The districts with the largest shares of psychologists working in schools were employed underprepared teachers are mostly smaller, rural through staffing agencies . districts . In 2017-18, 83 of all districts throughout Governor’s Proposals the state had more than 10 percent of their teachers on an emergency credential . Of these, As we discuss below, the Governor’s budget 95 percent had fewer than 5,000 students . A few includes a total of $532 million one-time very small districts had more than one-third of their Proposition 98 General Fund for various proposals teachers on emergency credentials . aimed at addressing school workforce needs . In Recent Years, State Has Funded Various Provides $239 Million One Time for Previously Programs to Address Teacher Shortages. Funded Teacher Programs. The Governor’s Figure 11 describes the programs that have budget includes $175 million for a second round of 24 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET funding for the Teacher Residency Grant Program . program . Unlike the funding previously provided As Figure 12 (see page 26) shows, the Governor for the Teacher Residency Grant Program, proposes three main changes to the rules for this the Governor’s proposal does not specify an Figure 11 State Has Provided Nearly $300 Million Since 2016-17 to Address Teacher Shortages General Fund Unless Otherwise Indicated (In Millions) Program Year Description Funding Allocation Amount Golden State Teacher 2019-20 Provides financial assistance to CSAC awards funds to participating $90 Grant Program students enrolled in teacher teachers. preparation programs who commit to working in a high-need subject at a priority school.a Teacher Residency Grant 2018-19 Supports establishing and expanding CTC competitively awards grants 75 Program teacher residency programs in to districts, COEs, and school- special education, STEM, and university partnerships. There are bilingual education. two grant types: (1) planning grants of up to $50,000 and (2) residency grants of up to $20,000 per resident in the new or expanded program. Local Solution Grants 2018-19 Provided funding to local efforts to CTC competitively awarded grants 50 recruit and retain special education of up to $20,000 per participant teachers. to districts, COEs, and schools. Grantees required to provide a dollar-for-dollar match. Classified School 2016-17 and Provides financial assistance to CTC competitively awarded grants of 45 Employee Teacher 2017-18 classified school employees, such $4,000 per participant per year for Credentialing Program as instructional aides, to pursue up to five years to districts, COEs, teaching credentials. and schools. Integrated Undergraduate 2016-17 Supported expanding integrated CTC competitively awarded planning 10 Teacher Preparation programs that allow participants grants of up to $250,000 to Grants to earn a bachelor’s degree and universities. a teaching credential within four years. Programs focused on special education, STEM, and bilingual education received funding priority. California Educator 2017-18 Assisted districts with recruiting and California Center on Teaching Careers 9 Development Program preparing teachers, principals, and competitively awarded grants to 26 other schools leaders. districts, COEs, and schools. This program was federally funded. California Center on 2016-17 Established a statewide teacher CTC competitively awarded grant to 5 Teaching Careers recruitment center to recruit qualified Tulare COE to operate center. and capable individuals into the teaching field, particularly to low- income schools in special education, STEM, and bilingual education. Bilingual Teacher 2017-18 Supported teachers pursuing CDE competitively awarded grants to 5 Professional authorization to teach bilingual and eight districts and COEs. Development Program multilingual classes. Total $289 a A priority school is defined by CTC as having a high share of teachers on emergency credentials. CSAC = California Student Aid Commision; COE = county office of education; STEM = science, technology, engineering, and math; CTC = Commission on Teacher Credentialing; COE = county office of education; and CDE = California Department of Education. www.lao.ca.gov 25 analysis full gutter 2020-21 BUDGET amount of funding that would Figure 12 go to each shortage area . (The Governor Proposes Three Changes to Teacher Residency initial funding for the program in Grant Program Rules 2018-19 provided $50 million for special education and $25 million Current Proposed Changes for both STEM and bilingual Subject areas Special education, STEM, and May also include other education .) The Governor’s budget bilingual education. shortage areas identified also includes $64 .1 million for the by CTC. Classified Program . The program Priority Applicants with schools that exhibit Removes priorities 3 and 4. rules would mostly remain the one or more of the following same, but priority would be given characteristics: (1) at least 50 percent low-income to districts, COEs, and schools students; that have not previously received (2) located in rural or densely funding . The amount provided populated region; could fund at least 3,200 new (3) at least 5 percent of teachers on emergency credentials or without participants . the appropriate credentials; and Includes $100 Million One (4) higher than 20 percent teacher Time for New California Teacher turnover over three years. Credential Award Program. The Maximum planning $75,000 $150,000 Governor’s budget establishes grant award service awards of $20,000 for STEM = science, technology, engineering, and math; and CTC = Commission on Teacher Credentialing. each newly credentialed teacher in special education, bilingual the plan to address identified student services education, STEM, and computer science who teach workforce shortages . Priority would be given to in a “high-need” school for four years . A school is entities applying in a consortium and planning considered high need if (1) 50 percent or more of to provide financial support for tuition, fees, and its students are low income, (2) at least 5 percent books . The remaining $3 million would be for of its teachers are underprepared, (3) the school is administrative costs . located in either a rural or densely populated area, Assessment or (4) more than 20 percent of its teacher leave within three years . Eligible school districts and Classified Program Is in High Demand… The COEs, submit award requests to CTC on behalf Classified Program is oversubscribed . The initial of their teachers . The service awards are paid two rounds of funding provided enough financial out annually, with participating teachers receiving assistance to support 2,260 classified employees . $5,000 for each of the four years they teach at a However, an additional 6,000 classified employees high-need school . The proposed $100 million would requested to participate, and applications from support around 5,000 service awards . 27 school districts and COEs remain unfunded . Provides $193 Million One Time for New Administrators we spoke to viewed the program Workforce Development Grant Program. The as a long-term recruitment and “grow-your-own” proposed grant program is aimed at increasing the retention strategy . Administrators also noted that, number of student services staff in the state . The compared to the current teacher workforce, the CDE would select a COE to develop specific grant participants in the Classified Program are more criteria and award the grants . Of the proposed likely to be from the local community and share $193 million, $20 million would be for planning the same racial and ethnic backgrounds as the grants for at least 100 school districts, COEs, students they serve . and charter schools to develop their own plan to …But Slow to Produce Teachers. Classified recruit and prepare student services staff . Up to Program participants appear to experience some $170 million would be for implementation grants delays earning their teaching credentials . The with funds awarded based on the feasibility of 26 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET program requires participants to already have Grant Program in 2018-19 specifically for special completed two years of college or an associate’s education residency programs . Of that amount, degree . In the first round of funding, however, $23 million remains available . The CTC has 679 participants (70 percent) already had a released a second request for proposals to award bachelor’s degree and, hence, could expect these remaining funds . In contrast, the $25 million to complete a teacher preparation pathway in set aside for STEM and bilingual education has one or two years . By the third year, however, been exhausted . only 196 participants had earned their teaching Residency Programs May Improve credential and begun teaching . We heard several Preparation but Are Challenging to Initiate possible explanations from districts for the low and Sustain. Research suggests that teachers rates of completion . Most commonly, districts prepared through residency programs tend to feel mentioned that some participants had difficulty more prepared than other beginning teachers and passing the teaching assessments required for typically remain teaching in the same district for earning a credential, while others were attending a longer period of time . Despite these potential courses on a part-time basis because of work benefits, however, residency programs can be and other commitments . Districts also mentioned difficult to develop and financially sustain . For that some participants may have decided not to example, the districts we spoke to mentioned the pursue a career in teaching . Because CTC does following challenges: not track data at the individual participant level, • District-University Collaboration. we do not know how frequently and for what Establishing a reliable district-university reasons participants decided to exit the program . partnership and tailoring the university’s To date, the program has produced 300 new teacher preparation courses to the residents’ teachers (across the two funding rounds), and needs required substantial work . CTC anticipates the number of credentialed teachers to increase significantly now that more • Attracting Residents. Some programs early participants have completed their bachelor’s mentioned losing prospective residents to degrees . internship programs, which—unlike residency programs—allow students to earn a teacher Classified Program Not Targeted to Statewide salary while they are completing their Shortage Areas. Although applicants were program . required to demonstrate a need for credentialed teachers in their applications, those with greater • Sustainability. Financially sustaining a need did not receive priority in the application residency program on an ongoing basis can process . As a result, several districts participating be challenging, as districts would need to in the program have relatively low shares of cover costs out of their local general purpose underprepared teachers . Of the 23 districts that funding . applied individually (not part of a larger consortium), • Mentor Teachers. Some districts did not 14 had a lower percentage of teachers on consider offering a residency program in emergency credentials than the statewide average . special education because they lacked Seven districts have both lower shares of teachers experienced mentor teachers to support on emergency credentials and lower shares of residents . Some experienced teachers low-income students than the statewide averages . are hesitant to take on the additional This differs from most other teacher-related state responsibilities required to be a mentor programs, which target resources to subject areas teacher when they find their teaching and school districts where teacher shortages are workload already overwhelming . most pronounced . • Immediate Staffing Needs. Districts unable Funding From Previous Teacher Residency to find credentialed teachers may prefer to Grant Still Available. As previously discussed, have a teacher in the classroom immediately $50 million was provided to the Teacher Residency as an intern or on an emergency credential www.lao.ca.gov 27 analysis full gutter 2020-21 BUDGET rather than wait for a resident to complete award . The proposed program is also very similar their program . to the Golden State Teacher Grant Program funded in 2019-20, which similarly awards $20,000 to Residency Model Could Be More Suitable newly credentialed teachers who agree to teach for Larger Districts. Given these implementation for four years at a school with a high share of challenges, residency programs may not be an underprepared teachers in high-need subject areas . effective model for some districts to implement— Some newly credentialed teachers may receive particularly smaller, rural districts . Large districts funding from both programs, which would further are more likely to have the key factors for reduce the effectiveness of this additional funding in developing and operating a residency program, addressing teacher shortages . such as sufficient capacity to support program Workforce Development Grants Unlikely development, close proximity and preexisting to Address Variety of Challenges in Hiring partnerships with local teacher preparation Student Services Staff. In speaking with various programs, and an adequate supply of mentor school professional associations, we learned that teachers . the underlying reasons for staffing shortages in Proposed Changes Could Result in Residency student services positions vary by credential . For Programs in Areas With Temporary Shortages. school psychologists, nurses, and speech and By expanding the grant program to include language pathologists, the biggest factor is the shortage areas identified by CTC, some grants lack of capacity in existing credentialing programs may ultimately fund residency programs for to meet demand . For instance, only four programs shortage areas that are not longstanding . Rather, in the entire state currently prepare school nurses . these shortage areas could reflect temporary For school counselors, we found no evidence increased demand due to an economic recovery . of a shortage . School districts have increasingly For instance, CDE started identifying elementary hired counselors in recent years as a response to school teachers as a shortage area in 2015-16, growing student mental health and social-emotional when district hiring was at its peak . Relative to needs, but districts have been able to fill these longstanding shortage areas, however, the shortage positions . Several representatives we spoke to also of elementary school teachers is less pronounced . mentioned that districts tend to disproportionally In 2017-18, one-fifth of all new elementary school cut student services staff during downturns, teachers were underprepared . In contrast, more which then results in temporary shortages during than one-third of new special education teachers economic recoveries as districts begin to hire back were underprepared . The number of newly staff . prepared elementary school teachers has also grown each year since 2013-14, suggesting that Recommendations the magnitude of this shortage may be declining . Recommend Approving Smaller Package Impact of Proposed California Teacher of Proposals, Freeing Up Funding for Other Credential Awards Likely Limited. We have Priorities. Of the $532 million proposed by the identified several concerns with the structure of the Governor to address workforce shortages, we proposed California Teacher Credential Awards . recommend the Legislature approve $93 .1 million By focusing mainly on addressing recruitment for an additional round of funding for the Classified challenges at high-need schools, the program Program and the Teacher Residency Grant does not address the problems in teacher supply Program . We also recommend certain changes and retention underpinning the state’s teacher to how these programs operate . We recommend shortages . Moreover, the effectiveness of this rejecting the remaining proposals, as they are award as a recruitment incentive is limited . For unlikely to effectively address teacher and school example, it is possible that the program might staff shortages . Collectively, our recommendations provide awards to some recipients who would have would free-up $439 million in one-time taught at a high-need school even without the funds for the Legislature to direct to its other 28 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Proposition 98 priorities . (As we discuss earlier the Golden State Teacher Grant Program, which in this report, we recommend the Legislature use addresses the same challenges as the proposed such freed-up funding to reduce school districts’ program and may be targeted to the same group of unfunded pension liabilities .) We discuss our individuals . Should the Legislature be interested in specific recommendations in more detail below . incentive funding for teachers, we suggest focusing Target Classified Program to Shortage Areas. efforts on expanding the total supply of teachers in Given the substantial demand for the Classified shortage areas . For instance, the Legislature could Program, we recommend the Legislature approve instead consider targeting the funding to expand the Governor’s proposal to provide $64 .1 million enrollment in the integrated teacher preparation for this program . In addition, we recommend programs at the undergraduate level . Under this several modifications to ensure the program is approach, the state could increase the total supply more directly targeted toward addressing teacher of teachers by encouraging more undergraduate shortage areas . Specifically, we recommend giving students to pursue teaching in a high-need subject priority to districts with higher shares of teachers when they might have otherwise pursued another on emergency credentials and higher shares profession . of low-income students . We also recommend Reject Workforce Development Grant, requiring grant recipients to report to CTC data Explore Other Approaches. We recommend regarding participant retention and turnover . This the Legislature reject the Governor’s proposal to would help the Legislature better understand establish a new Workforce Development Grant how individual participants progress through the Program . The grants would not address the pipeline . underlying causes of shortages and could target Reduce Proposed Teacher Residency Grant some student services positions where a shortage Program Augmentation to $29 Million, Reject is not evident . To the extent the Legislature is Other Proposed Changes. We recommend interested in addressing school staffing shortages, the Legislature provide $29 million for a second we suggest exploring ways to expand the capacity round of funding for this program . Along with the of the state’s higher education systems to prepare $23 million in unspent funding from the previous more student services staff in shortage areas . grant, CTC would have a total of $52 million to We note that the state provided $3 million to the award for new residency programs in 2020-21— California State University in 2019-20 to expand its equivalent to the amount of funds awarded thus speech and language pathology programs over four far . Given the challenges in building and sustaining years . Similar approaches may be more effective these programs, we believe this amount is sufficient in expanding the supply of other student services to address additional demand for new residency staff . programs . We also believe the current program rules are more appropriately targeted than the EDUCATOR WORKFORCE Governor’s proposed changes in addressing INVESTMENT GRANT the long-standing shortage areas in the schools most affected by these challenges . As such, we Below, we provide background on professional recommend the Legislature reject the proposed development for teachers, describe the Governor’s changes to broaden the funding to other subject proposal to provide additional professional areas and modify the priority areas . development for teachers and other school staff, Reject California Teacher Credential Award assess his proposal, and offer an associated Proposal. We recommend the Legislature reject recommendation . the Governor’s proposal to establish the Teacher Background Credential Award Program . The proposal does not address critical challenges underlying teacher Professional Development Activities Are shortages, such as teacher supply and retention . In Locally Determined and Funded. Teachers and addition, the state is in the process of administering other school staff negotiate with their school www.lao.ca.gov 29 analysis full gutter 2020-21 BUDGET district on the amount of required time dedicated New Educator Workforce Investment to professional development each year . If these Grant (EWIG) Program Funded in 2019-20. activities occur when school is not in session, the The 2019-20 budget provided $37 .1 million district typically compensates staff at a negotiated in one-time non-Proposition 98 General Fund hourly or daily rate . If teachers attend professional (available over five years) for grants to develop development during the school day, the district statewide professional development for teachers, generally must pay the cost of hiring a substitute administrators, instructional aides, and counselors . teacher . The topics of the professional development Under the EWIG program, CDE and CCEE will also can be decided through collective bargaining . award competitive grants to universities or nonprofit Outside of the negotiated activities, teachers and organizations in five focus areas . The implementing school staff may voluntarily participate in additional legislation set aside specific amounts of funding for professional development opportunities . This time two of these focus areas—$10 million for English may also be compensated as determined in the learners and $5 million for students with disabilities . local collective bargaining agreement . The remaining funding is to be used for grants Districts Receive Some Federal and State related to social-emotional learning and school Funding for Professional Development. Districts climate, computer science, and ethnic studies . The primarily fund professional development through CDE is in the process of soliciting applications and local general purpose funding (mainly LCFF) . anticipates awarding most grants by June 2020 . In addition, the federal government provides Governor’s Proposal $210 million to California annually to support professional development activities . All districts Provides $350 Million One-Time receive this federal funding, but a majority of the Proposition 98 Funding for Second Round of funds go to low-income districts and schools . EWIG. As shown in Figure 13, the Governor’s Additionally, the state provides districts funding for proposal provides additional EWIG funding in five mandated school staff trainings on HIV prevention different focus areas . This includes four of the education and mandated reporting of child abuse . focus areas funded in 2019-20, with the computer Districts Have a Variety of Options for science grant expanded to include all STEM fields . Providing Professional Development. School The Governor’s budget also adds one new grant districts have a variety of options for choosing focused on improving literacy across all subject how to provide training and resources to their areas and does not provide additional funding employees . Many districts develop their own for ethnic studies . In contrast to the first round, training and resources based on the specific needs of their workforce . For example, some Figure 13 districts set aside time for professional learning Governor Proposes Spending communities, where teachers from the same Additional EWIG Funds in grade level or subject area work collaboratively to Five Focus Areas improve their teaching skills throughout the school (In Millions) year . In addition, districts can obtain professional Grant Amount development from a variety of public agencies, such as COEs, SELPAs, CDE, public universities, STEM and computer science $100 and various agencies associated with the statewide Literacy 75 system of support . These options can be free Social-emotional learning and 75 school climate of charge or on a fee-for-service basis . Districts Students with disabilities 50 also may receive training from various private English learners 50 entities, including private universities and nonprofit Total $350 organizations . STEM = science, technology, engineering, and math; and EWIG = Education Workforce Investment Grant. 30 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET where universities and nonprofit organizations were available over the next several years, the proposal eligible to apply, the second round of funding is does not address the common barriers districts available for COEs and school districts . Grantees and school staff face in accessing professional would be expected to collaborate with the grantees development . In the fall of 2019, CDE conducted a from the first round and various relevant state survey of school staff to identify the key barriers to agencies . Grantees would be required to offer accessing professional development . Respondents trainings free of charge to participants and to give most commonly identified a lack of time as a major priority to low income schools, as well as school barrier, followed by the cost of participating in districts, COEs, and schools identified as needing training . Fewer respondents identified a lack of support under the state’s school accountability professional development opportunities available system . as a major barrier . In our conversations with district administrators, they also identified the lack Assessment of time and additional costs as key challenges . First Round of EWIG Has Yet to Be Awarded, Teachers have limited time outside of the classroom Second Round Is Premature. The CDE only to participate in professional development, and recently concluded the process of soliciting participating during the school day requires the applications in January and February of this year for district to pay for substitute teachers to take the the grants in computer science, English learners, teacher’s place in the classroom . The Governor’s and students with disabilities . The CDE intends the proposal does not address these barriers to request for applications for the social-emotional accessing professional development opportunities . learning and school climate grant to be released Recommendation in March . Given that the first round of grants has not yet been awarded, the Legislature has no Reject EWIG Augmentation. In view of the information at this time to determine whether the above, we recommend the Legislature reject program is an effective use of funding . In deciding the Governor’s proposal to provide $350 million whether to augment the program, the Legislature one time for EWIG . To the extent the Legislature would ideally know more about the training and is interested in funding an additional round of resources developed with the grant, the number EWIG, we suggest to revisit the issue after CDE of staff that benefited from the tools developed, can share basic information about the resources feedback on the quality of the professional that have been developed and the number of development, and what changes to the program school staff that have received training with the rules are needed to improve its effectiveness . current EWIG funding . Waiting until resources Providing an augmentation—particularly a tenfold have been developed also would potentially allow increase—without this information is premature . the Legislature to incorporate feedback from the Primary Barriers to Professional Development first grant round, further refine the topics covered Are Time and Cost, Not Availability of Training. by the grants, assess remaining demand, and Although the administration intends to significantly subsequently allocate an appropriate level of increase the amount of professional development funding . ADDRESSING THE ACHIEVEMENT GAP In this section we analyze the Governor’s OPPORTUNITY GRANTS proposals to fund Opportunity Grants for low-performing districts and schools, as well as Below, we provide background on state funding his proposals related to community schools and to improve outcomes for low-performing student coordination of wraparound services . subgroups, districts, and schools; describe the Governor’s proposal to support low-performing www.lao.ca.gov 31 analysis full gutter 2020-21 BUDGET schools and districts; analyze the proposal; and Significant Ongoing State and Federal offer associated recommendations . Funding Allocated for Disadvantaged Students. School districts currently receive $15 .2 billion in Background ongoing state funding and $3 .9 billion in ongoing federal funding for supporting student groups Student Achievement Gaps in California Are Large and Persistent. Year after year, Latino and that have historically had below-average student African American students consistently have lower outcomes . The single biggest component of this average state standardized test scores than white spending is the $10 billion the state allocates and Asian students . Latino and African American through the LCFF supplemental and concentration students also tend to have worse outcomes on grants . The largest component of ongoing federal other academic performance measures, such as spending is the nearly $2 billion the state receives attendance and suspension rates . Racial and ethnic through Title I, Part A of the Every Student achievement gaps generally hold even when taking Succeeds Act (ESSA) to support supplemental family income into account . Low-income students, educational services for low-income students . English learners, students with disabilities, All Districts Must Develop Plans for Helping homeless youth, and foster youth also have Students Improve. In conjunction with establishing worse outcomes on average than other students . LCFF in 2013-14, the state adopted a new system Figure 14 shows disparities in high school of accountability for school districts . A core part graduation rates by race/ethnicity and student of the new accountability system is a requirement subgroup for the class of 2019 . that each district develop a strategic plan known as the Local Control and Accountability Plan Figure 14 Disparities in Graduation Rates by Race/Ethnicity and Program Subgroup Four-Year Cohort Graduation Rates, Class of 2019 Low Income Group Average Non-Low Income All Students 81% 85% 92% African American 75% 77% 87% Race/Ethnicity Hispanic 81% 82% 89% White 80% 88% 94% Asian 92% 94% 96% Low Income 81% Homeless Youth 70% Program Subgroup English Learners 69% Students with Disabilities 68% Foster Youth 56% 32 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET (LCAP) . Districts must adopt an LCAP every three 814 schools . Grantees received a flat sum of years and update the plan annually . State law $156,000 per qualifying school . specifies the various groups (such as teachers and About One-Third of Districts Qualify for parents) that districts must include in their planning Differentiated Assistance. Out of California’s 944 process . In their LCAPs, districts must identify their school districts, 301 qualified for differentiated achievement gaps, set performance goals, and assistance in 2019 . For a majority of qualifying track progress toward meeting those goals . districts, students with disabilities were one of the State Has New System for Supporting School subgroups that met the criteria for differentiated Districts With at Least One Low-Performing assistance . Approximately one-third of districts that Student Subgroup. In developing its new qualified for differentiated assistance were flagged accountability system, the state also moved to based on the status of either their foster youth, evaluating school district performance based upon homeless youth, or both . For these three student multiple measures, including not only test scores groups, districts most commonly qualified for and graduation rates but also chronic absenteeism assistance because of poor academic performance, and suspension rates, among others . A district low engagement (as measured by graduation with at least one subgroup that is identified as and chronic absenteeism rates), and poor school low performing in two or more of these areas is to climate (as measured by suspension rates) . receive targeted support—known as differentiated State Created CCEE to Support Some assistance—from its COE, sometimes in Low-Performing Districts. California established consultation with other regional and state partners . CCEE by statute in 2013 to play a key role in As part of differentiated assistance, COEs must do coordinating activities of the statewide system of at least one of the following: (1) review the district’s support . Among its other activities, CCEE works strengths and weakness and identify effective with COEs that have been designated as regional programs that could help the district improve, leads to improve support and oversight for districts . (2) assign an academic expert to help the school The CCEE also provides direct technical assistance district improve outcomes, or (3) request CCEE to some low-performing districts . The goal of provide assistance to the district . (We discuss the this technical assistance is to identify areas of role of CCEE in greater detail below .) For a district improvement for target school districts and assist that has persistent performance issues in three them in developing better instructional practices . or more student subgroups, the Superintendent CCEE Also Provides Intensive Support to of Public Instruction may intervene under certain Some Districts. Chapter 426 of 2018 (AB 1840, circumstances . Committee on Budget) allows for CCEE to provide State Allocates Federal Funds to Some intensive support to districts that receive an Low-Performing Schools. Federal law requires emergency state loan . CCEE is currently providing that each state devote a share of its ESSA Title I, support to three districts that have received and Part A funds to grants for schools that qualify not yet paid back an emergency loan: Inglewood for comprehensive support and improvement, Unified, Oakland Unified, and Vallejo City Unified . as defined by the state’s education agency . To support these districts, CCEE leads a team that In California, qualifying schools are those with includes (but is not limited to) representatives from persistently low high school graduation rates or the district, the COE that oversees the district, and those where several student groups are very low the COE in the region that serves as a geographic performing according to the state’s performance lead . This team sets objectives and identifies standards . Districts must use these funds to priority areas for the district, spends approximately improve student performance using evidence-based eight weeks undertaking a comprehensive strategies that align with the district’s LCAP and are instructional assessment, and develops a plan aimed at improving outcomes for low-performing that includes continual monitoring of the district’s student subgroups . Last year, the state distributed progress toward its goals . $127 million for this purpose to assist a total of www.lao.ca.gov 33 analysis full gutter 2020-21 BUDGET Legislature Established Achievement approved by the executive director of the State Gap Work Group in 2019 and Required Board of Education . Report. In response to concerns over student Funding to Be Used for Wraparound Services achievement gaps, the Legislature tasked our and Improvements to Instruction. Recipients may office with convening a work group on the topic use the grants for a variety of activities, including and submitting a report by February 1, 2020 . staff recruitment and retention, wraparound student As required by the Supplemental Report of services such as mental health care, extended the 2019-20 Budget Act, the group included learning time, and acquiring new instructional representatives from both houses of the Legislature, materials . the administration (including the Department of Finance), and CDE . The group met five times Assessment over the course of fall 2019 . The resulting report, Proposal Lacks Detail, Gives Too Much Narrowing California’s K-12 Student Achievement Discretion to Other Agencies. Several key Gaps, included policy options for better supporting elements of the Governor’s proposal are left disadvantaged and low-performing students . entirely to the discretion of the CCEE and the State Board of Education, with no requirement that the Governor’s Proposal plan incorporate input from the Legislature . Most Provides $300 Million One-Time Opportunity notably, the proposal gives authority to CCEE to Grants for Low-Performing School Districts determine the overall scope of the grant program and Schools. Of this amount, $270 million is and set criteria for selecting grant recipients . for providing grants directly to low-performing Although providing CCEE with flexibility in how to districts and schools where at least 90 percent of best support schools is reasonable, we do not think students are low income . Recipients could be a the Legislature should defer other key decisions— school or consortia of schools within a district, a such as the breadth and scope of the program . school district with numerous high-poverty schools, Moreover, the proposal does not require CCEE’s a charter school, or a COE with high-poverty plan to specify a set of expected outcomes or key schools in its jurisdiction . Grant recipients would metrics to evaluate the effectiveness of the grant . be required to take certain actions as a condition Without this type of information, the Legislature of receiving this funding . The CCEE is to allocate would be unable to assess whether the program is funding to grant recipients on or before March 30, an effective use of funding, particularly in terms of 2021, and the funds would be available through improving low-performing school and districts . 2024-25 . The remaining $30 million is for CCEE to Not Clear How Governor’s Proposal Meshes fund support for and oversight of grant recipients . With Existing System of Support. Rather than A portion of this funding would be for COEs with augmenting existing supports for low-performing jurisdiction over grant recipients to assist CCEE schools and districts, this proposal seems to add in its support and oversight activities . In addition, a new layer to the already complex statewide COEs are to develop resources that could be used system of support . The administration has not by schools statewide . articulated how this new layer would interact with Leaves Key Decisions Regarding Program the existing support provided to school districts by Structure to CCEE and State Board of CDE, COEs, CCEE, and other regional and state Education. The Governor’s proposal requires partners . Additionally, though the administration CCEE to develop a plan for administration of the specifies that CCEE is to consider other funding grant program by November 30, 2020 . This plan that Opportunity Grant recipients already have must include the vision and scope of the program, received, it offers no guidance regarding how grant selection criteria, criteria for identifying this funding would be incorporated into the new low-performing schools, the role of COEs and program . Without carefully considering the support grant recipients, and a description of how grant and assistance already being provided, the support recipients will be evaluated . The plan must be provided through the proposed Opportunity Grant 34 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET program could be duplicative and/or in conflict with districts (for example, no more than ten) with existing support . significant achievement gaps that have not Using One-Time Funds for Ongoing Purposes narrowed over time . The CCEE would provide these Unlikely to Make Lasting Impact. The Governor’s districts with intensive intervention and include proposal allows schools and districts to use CDE and the applicable COE in the improvement Opportunity Grants on expenditures such as redesign process . Keeping the number of districts staffing improvements, extended learning time, small could help all the involved groups devote and integrated student health care . Many of those the attention needed to undertaking intensive activities, however, are ongoing expenditures that intervention without spreading their efforts too would need to be sustained with ongoing funding . If thin . Such an approach would require a smaller the school is unable to identify additional resources investment of state funds and focus on changing to cover these costs, the benefit of such spending instructional, administrative, and financial practices would only last until the Opportunity Grant funding within participating districts . We recommend that expires . Temporary funding of this nature might be the Legislature further develop this option, giving best used for one-time spending, such as intensive particular consideration to which of the involved coaching and training, that helps districts and groups (CDE, CCEE, COE, and the district) would schools make the systemic changes necessary to be held accountable if a district does not improve improve student outcomes . after three to five years . If such an approach proved to be successful in improving district outcomes, Recommendations the Legislature could consider gradually increasing funding to assist a larger number of districts . Reject Governor’s Proposal. The Governor’s proposal lacks sufficient detail for the Legislature COMMUNITY SCHOOLS AND to determine whether this approach would be an effective way to improve outcomes for WRAPAROUND SERVICES low-performing districts and schools . As designed, In this section, we provide background on the proposal also does not allow for legislative community schools and wraparound services, input . Additionally, the administration appears to describe the Governor’s proposals related to have developed this proposal without considering these issues, analyze those proposals, and offer how this funding would align with existing funding associated recommendations . provided to support low-performing schools and districts . As such, we recommend that Background the Legislature reject the Governor’s proposed Opportunity Grant program . State Funds Wraparound Services Through Consider Smaller Ongoing Augmentation a Few Categorical Programs. In attempting to to Provide Intensive Support in Districts With address concerns with academic achievement Persistent Challenges. The achievement gap gaps in schools, education practitioners and work group that the Legislature asked us to policymakers have increasingly shifted from convene in 2019 discussed a policy option that focusing solely on the quality of academic involves establishing a crisis assistance program instruction toward a more holistic assessment of for districts with poor academic performance . This how nonacademic factors—such as health, mental option, like the Opportunity Grants proposal, was health, safety, and economic security—influence intended to improve outcomes for persistently academic outcomes . Approaches to address these low-performing districts . The option that emerged factors often focus on providing disadvantaged from work group discussions, however, is more students with wraparound supports to meet targeted and more integrated into the state’s other needs beyond academic instruction . The existing system of support . Under this option, state currently funds a few programs that provide the Legislature would allocate funding for CCEE wraparound services for students . For example, the to provide crisis assistance for a small group of state provides $650 million annually for before and www.lao.ca.gov 35 analysis full gutter 2020-21 BUDGET after school programs that primarily serve children different funding sources to operate their programs . in low-income schools . The state also allocates In addition to state and local education funding, $27 million in ongoing funds to wraparound community schools may rely on other funding services for foster youth, including counseling and sources, such as cash transfers or in-kind services training for independent living . from other government agencies (such as a county Some Districts Partner With Other Public social services office), federal Title I grants, small Agencies to Offer Wraparound Services. In donor contributions, and philanthropic funding . addition to state and local funds, some school Some California Districts Have Adopted districts utilize the resources of partner agencies to the Community Schools Model. Redwood City provide wraparound services for students . These School District has followed the community schools partner agencies may be other public institutions, model since 2000 . Five of the district’s schools— nonprofit organizations, or other private entities . comprising one-third of the district’s student For example, last year Los Angeles Unified School enrollment—currently operate as community District opened wellbeing centers at 50 high schools . Oakland Unified School District adopted schools in partnership with both public partners the community schools model in 2009 with the (including the COE and County Department intent of becoming the first school district in the of Mental Health) and the nonprofit Planned country to implement the model district wide . Parenthood Los Angeles . The new wellbeing Forty-one Oakland schools—approximately half of centers offer a variety of services, including all schools in the district—currently have full-time substance use education and mental health community school managers . Students at those support groups . schools that do not yet have full-time community Community Schools Model Has Been One school managers still receive wraparound services, Approach to Improve Outcomes for Low-Income as some wraparound services are coordinated Students. To address nonacademic determinants across the entire district . Some COEs have also of student success, a growing number of school opted to support community schools . For example, districts across the country have implemented the last year Los Angeles COE launched a community community schools model . As Figure 15 shows, schools pilot in partnership with other county researchers have identified four “pillars” of a fully agencies, including the Department of Children implemented community schools model . In addition and Family Services and the Department of Public to traditional instruction, community schools Health . The pilot program currently operates on typically offer extensive wraparound student 15 high school campuses across Los Angeles services and extended learning opportunities, such county . as after-school tutoring . In addition, community Other States Have Supported the Community schools devote significant resources to community Schools Model. Some states have offered engagement and make use of collaborative funding and technical assistance to districts leadership structures, such as giving parents and interested in implementing the community schools community partners a formal role in setting policy . model . Legislation enacted in New Mexico last Though many traditional schools may incorporate year provides competitive grants to schools and one or two of these elements—such as by districts that adopt the community schools model . offering some limited wraparound services—a fully Similarly, Florida established a grant program in implemented community schools model treats all of 2019 to assist up to 12 public schools in adopting these elements as core functions . the community schools model . The grant is Community Schools Rely on Variety of administered by University of Central Florida Center Funding Sources. Because community schools for Community Schools, which since 2014 has offer services above and beyond those found at a provided technical assistance, training, and other traditional public school, they tend to have higher resources to develop community schools in Florida . per-student expenses than comparable schools . As New York has also offered community school a result, most community schools use a variety of funding to districts within the state since 2013 . 36 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Governor’s Proposals model . The Superintendent of Public Instruction and State Board of Education would jointly Creates One-Time Community Schools administer the grant, giving priority to applicants Grant Program. The Governor’s budget provides who serve high-poverty student populations . $300 million in one-time funding to create the Administration of the grant would include providing California Community School Partnership Grants technical assistance, first to potential grant program . Grants would be available to LEAs applicants and later to grant recipients . Funds interested in implementing the community schools Figure 15 The Four Pillars of Community Schools Examples Included Below Integrated Family and Collaborative Leadership Extended Learning Student Supports Community Engagement and Practices Time and Opportunities • On-site mental and physical • Community partnerships • Site-based leadership teams, • After-school and health care including school staff, community before-school care • Increased interaction with partners, and families • Other social services offered parents and families • Summer programs in coordination with outside • Professional development providers • School climate services related to social-emotional • Tutoring learning, restorative justice, and • Home visits trauma-informed care www.lao.ca.gov 37 analysis full gutter 2020-21 BUDGET would be available until June 30, 2025 . Grantees model requires fundamental changes to the way would be expected to share program data with school districts and schools operate . As a result, CDE, and the Superintendent would be required implementation of the community schools model to report on the grant program’s impact to the can be a complicated process . Experts say the Governor and Legislature by December 31, 2025 . following elements are critical for successful Provides $18 Million One-Time Funding for implementation: COEs to Improve Coordination With Local • Planning and Developing Community Wraparound Service Providers. CCEE would Partnerships. The lead educational agency administer $18 million in grants to COEs for the behind the implementation of a successful purpose of improving coordination efforts with community school may spend a year or more wraparound service providers to ensure that developing its implementation strategy before students have access to these services . The funds putting it into action . Researchers suggest would be available until June 30, 2025 and would the planning stage is key because the most be allocated to COEs based on a methodology successful implementation plans reconsider developed by CCEE . Grantees would be required the core elements of a school’s governance to consult with both CCEE and a public institution structure and guiding philosophy, rather than of higher education . Additionally, grantees would simply adding community school services on be expected to prioritize grant funds for activities top of the existing school structure . Schools aligned with those of LEAs in their county that may also need time to establish strong receive California Community Schools Partnership relationships with potential service providers Grants or Opportunity Grants . and community allies . Assessment • Funding. Community schools typically require a variety of long-term funding streams, Research Finds Community Schools Are including both public and private funding Associated With Improved Outcomes. Formal sources . Because community schools evaluations of community schools tend to find frequently rely on philanthropic support, positive results . In 2017, researchers at the establishing a sustainable community school Learning Policy Institute and National Education in a region where relatively few nonprofits Policy Center reviewed 143 studies of the or private foundations operate may be more community schools model and concluded that difficult . “well-implemented community schools lead to • Support. Researchers emphasize that improvement in student and school outcomes .” successfully implementing the community In particular, they found consistent evidence that school model requires a substantial amount implementing a community schools model led of technical assistance—sometimes over the to higher attendance and graduation rates, as course of several years . LEAs without prior well as narrower academic achievement gaps experience operating community schools may as measured by standardized tests . Similarly, a need help learning how to develop external RAND Corporation evaluation of 30 community partnerships, collaborate with other public schools in New York City concluded the city’s agencies, identify ongoing funding streams, community schools initiative had successfully and rebuild existing governance structures to increased graduation rates and decreased chronic align with the community schools model . absenteeism and disciplinary incidents . Three years after implementation, however, the RAND Proposal Lacks Detail to Ensure Community Corporation found no significant effect on English Schools Model Is Successfully Implemented. Language Arts achievement and only a small effect To overcome the obstacles associated with on math proficiency . implementing the community schools model, Implementation Can Be Challenging. the majority of new community schools rely on Successfully adopting the community schools significant technical assistance from external 38 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET partners . The Governor’s proposal stipulates that also recommend the Legislature establish a grant recipients will receive technical assistance, community schools technical assistance office prior but does not include any requirements for the level to requesting applications for funding . This office of assistance the Superintendent and State Board would then be able to provide grant applicants of Education must provide . Similarly, the Governor’s with information regarding what implementation proposal includes no rules or requirements for of the community schools model entails . Once how community schools grant funds should be grant funds are released, the office could provide spent . In the absence of specific requirements, it is additional assistance to grant recipients during possible that grantees may not fully implement the implementation . Beginning with a smaller grant community schools model, or fail to implement it in ensures that the number of LEAs receiving awards compliance with evidence-based best practices . at any given time does not exceed the state’s Unclear How County Outreach Funds Would capacity to provide grantees with technical Improve Coordination With Service Providers. assistance . Focusing on a smaller number of LEAs The Governor’s proposal does not establish clear (for example, no more than ten) would also allow expectations for how coordination between COEs the technical assistance team to provide more and wraparound service providers is to improve intensive support that ensures the LEA will make with additional one-time funding, nor does it specify the systemic changes necessary to successfully what additional costs COEs are expected to incur implement the community schools model . In to improve coordination . It is also unclear why addition, we recommend that technical assistance COEs would be required to consult with a public for the community schools grant be provided higher education institution . in coordination with other support grantees are receiving, such as differentiated assistance from Recommendations their COE . If the results of this approach appear promising, the Legislature could choose to provide Fund Smaller Community Schools Pilot With grants to a greater number of LEAs in subsequent Greater Emphasis on Technical Assistance. budget years . To provide greater certainty that grantees would effectively implement a community schools Reject County Outreach Funding Proposal. model, we recommend the Legislature fund a Given that the administration has not provided a smaller grant program that sets aside sufficient clear explanation as to how the county outreach funding for intensive technical assistance . We funds would be used, we recommend rejecting the proposal at this time . SCHOOL NUTRITION In this section, we provide background on free lunch and $3 .10 per reduced-price lunch . school nutrition programs, describe and assess The state program provides an additional 24 cents the Governor’s proposals, and offer associated per free or reduced-price breakfast or lunch . Both recommendations . reimbursement rates are adjusted annually for inflation . Districts participating in either the state or Background federal program must serve meals that meet certain State and Federal Government Both nutritional standards . Administer Nutrition Programs. California schools Roughly 60 Percent of California Students that participate in either federal or state school are Eligible for Free or Reduced-Price Meals. nutrition programs are reimbursed by the number of Students are eligible for free meals if their family’s eligible meals they serve . For example, in 2019-20, annual income is at or below 130 percent of the districts that participate in the federal National federal poverty level (FPL)—$27,729 for a family School Lunch Program generally receive $3 .50 per of three . The reduced-price meal eligibility is www.lao.ca.gov 39 analysis full gutter 2020-21 BUDGET 185 percent of the FPL ($39,461 for a family of time . School districts typically provide training to three) . Students from families who are not eligible meet this requirement and cover the annual costs for free or reduced-price meals can eat the same within their nutrition program (rather than having meals provided to eligible students, but must pay employees find training on their own) . Districts must for the meal . offer training that is job related, but have discretion Number of School Lunches Served Has on the exact topics and format of the training . For Decreased Statewide. Consistent with statewide example, topics can include food safety standards declining enrollment in schools, the total number of and meal counting procedures . The district school lunches served in California through federal could provide this training in person or have its nutrition programs has decreased in recent years . employees watch a prerecorded webinar . In 2013-14, 555 million lunches in California were Governor’s Proposal served through the federal nutrition program . By 2017-18, the state served roughly 15 million fewer Increases Reimbursement Rate for School lunches—a decrease of 2 .7 percent . Throughout Meals. The Governor’s budget includes $60 million this period, the bulk of the lunches served (roughly ongoing Proposition 98 General Fund for a rate 80 percent), were provided either for free or at a increase for free and reduced price meals served reduced price . to eligible students in schools . The budget also Best Practice Is for School Nutrition Revenue includes $4 million ongoing Proposition 98 General to Cover Costs of the Program. A school district’s Fund for a 2 .29 percent COLA . Combined, these primary revenue sources for school nutrition proposals would increase the state’s school programs are federal and state reimbursements, meal reimbursement from 24 cents per meal in as well as payments received from students who 2019-20 to 34 cents per meal in 2020-21 . The purchase meals . The largest expenses for a food proposal also requires school districts to report service program include labor, food, and supplies . to CDE how they used the reimbursement rate School district costs can vary based on staff increase to improve the quality of reimbursed compensation, quality of food purchased, and school meals or increase participation in the school how food is prepared and served to students . For nutrition program . example, a school district that cooks food at each Funds One-Time Food Service Training school site has a different model and associated Initiative. The Governor’s budget also provides costs compared to a district that processes food in $10 million one-time Proposition 98 General Fund a central kitchen before distributing to school sites . to support training for food service workers on Regardless of the exact structure of the nutrition how to promote healthier foods . Funds will be program, the Fiscal Crisis and Management distributed to all districts based on the number of Assistance Team—a team of fiscal experts who classified school employees . Funds can be used conduct in-depth studies of district budgets to train staff on food preparation, marketing, or and recommend specific steps for improving changing the school lunch environment . their fiscal health—recommends labor costs not Assessment exceed 45 percent of nutrition revenues, with food and supplies also not to exceed a similar share . School Nutrition Programs Appear to Face Districts also have the option to use their general Certain Cost Pressures. School districts cite purpose funding (such as LCFF) to cover costs in various cost pressures associated with their school the nutrition program that exceed school nutrition nutrition program . One notable cost pressure is the revenue . declining participation in school nutrition programs Federal Law Requires School Food Service driven by overall declining enrollment . With Workers Meet Annual Training Requirements. declining school meals served, school districts will Food service workers are required to complete receive less federal and state meal reimbursements six hours of training per year if they are employed and will not be able to benefit as much from full time and four hours if they are employed part economies of scale . This is because certain district 40 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET costs—such as administration and the upkeep promote nutritious foods by making other one-time of equipment—do not decline proportionally with purchases . For example, instead of training food the number of meals served . School districts also workers on how to change the lunch environment, noted cost pressures associated with increasing a school district might benefit from using one-time staff salaries and benefits . These factors are not funding to buy the furniture or supplies needed to unique to nutrition programs . Since 2013-14, make the specific improvements . increases in state K-12 funding (primarily from Recommendations LCFF) have resulted in school districts increasing staff salaries . Over this period, schools also have Rate Increase for Nutrition Program Seems been required to make larger pension contributions Reasonable, but Consider Trade-Offs. The on behalf of their employees . These growing costs proposed reimbursement rate increase would likely are evident in our review of school nutrition financial help districts address some cost pressures they data . The share of statewide school nutrition costs cite in regards to their school nutrition programs . going towards staff compensation has increased However, any ongoing increase for school nutrition from 48 percent in 2013-14 to 54 percent in means those funds are not available for LCFF or 2018-19 . other purposes that also can ease district cost Reporting Requirement Unnecessary Given pressures . If the Legislature does provide the the Funding’s Allowable Uses. The Governor’s reimbursement rate increase for school nutrition, proposal allows school districts to use funds we recommend rejecting the Governor’s proposed associated with the proposed reimbursement reporting requirement . Given that districts would rate increase in a variety of ways as long as the be allowed to use the funding for a wide range spending is intended to (1) improve the quality of of purposes, the reporting language likely would foods served or (2) increase student participation . not facilitate greater legislative oversight of the Several examples of how districts can use these program . funds are listed in the proposed budget trailer Modify Allocation of One-time Funds and legislation, but school districts would not be limited Allow LEAs to Use Funds for Both Training to these options under the Governor’s proposal . and Supplies. We recommend the Legislature Given the broad goals of the funding increases allow the one-time funds be used for a broader and wide range of allowable uses, virtually any set of expenses, including supplies, and training school nutrition expense likely would be deemed as topics beyond what would be allowed under the meeting the statutory intent . Accordingly, we find Governor’s proposal . A broader set of allowable that the proposed requirement for school districts uses would provide districts with more flexibility to report how they used the reimbursement rate to use funds in a way that best supports districts appears unnecessary . in further promoting nutritious foods . Since our Limited Use of One-Time Funds Reduces recommendation would allow districts to use Opportunity to Promote Nutritious Foods. The one-time funds for activities outside of training, Governor’s proposal limits the uses of the proposed we also recommend changing the manner in one-time funds for training on three topics—food which one-time funds are allocated to districts . preparation, healthy food marketing, and changing Instead of allocating funds based on the number of a school lunch environment . Such limited options employees, we recommend the Legislature allocate reduces the opportunity for districts to make other funds based on the number of reimbursable meals one-time purchases that could better promote the school district serves . This is a more direct nutritious foods at a school . Other training topics, indicator of the size of a school district’s nutrition such as basic nutrition training for food services program . workers, also could help school districts promote nutritious foods . School districts also could better www.lao.ca.gov 41 analysis full gutter 2020-21 BUDGET SUMMARY OF RECOMMENDATIONS Issue Governor’s Proposal LAO Recommendation Overall Proposition 98 Package Mix of one-time and $2 billion for one-time initiatives Build a final budget package that continues to rely ongoing spending (including $1.2 billion attributable upon a mix of one-time and ongoing spending, to 2020-21) and $1.7 billion for as this approach minimizes the likelihood of ongoing augmentations. programmatic cuts in the event of an economic downturn. Use of one-time funding Most funding allocated to several Reject most of these proposals, as they are initiatives intended to improve the unlikely to address the root problems. Use education workforce and close the freed-up funding to pay down districts’ achievement gaps. unfunded pension liabilities, as this alternative would improve the funding status of the pension systems and likely make district budgets easier to balance on a sustained basis. The Minimum Guarantee General Fund revenue General Fund revenue estimates are Use the Governor’s estimates as a reasonable similar to our projections over the starting point for developing the Proposition 98 period. budget. Prepare for the possibility that revenue estimates could weaken over the coming months. Expect the minimum guarantee to increase or decrease about 40 cents for each dollar of higher or lower revenue. Local property tax revenue Property tax revenue estimates are Expect the minimum guarantee to increase $671 million above our projections or decrease on a dollar for dollar basis if over the period. property tax revenue is higher or lower than the Governor’s estimates. Proposition 98 Reserve Total balance of $487 million by the Expect the constitutionally required balance to end of 2020-21. increase if the guarantee grows and decrease if the guarantee drops. Local Control Funding Formula Cost-of-living adjustment $1.2 billion to cover 2.29 percent Projected COLA rate and associated cost (COLA) statutory COLA and attendance increase are in line with our estimates. changes. Special Education Base funding $645 million ongoing to increase Adopt proposal. Addresses historical inequities in most base rates to $660 per base funding rates. student. Base rates to be calculated using three-year average of attendance. Studies and work groups $1.1 million one time to fund Fund studies and work groups based on governance study and two work legislative priorities. groups to recommend other special education reforms. Preschool funding $250 million one time for increased Use funds for an ongoing base increase and and improved services. incorporate preschool-aged children into base formula. (Continued) 42 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET Issue Governor’s Proposal LAO Recommendation Education Workforce Educator Workforce $350 million one time for professional Reject proposal. Consider additional funding after Investment Grant development grants in five focus the state has basic information about how the first areas. round of grants (funded in 2019-20) were used. Workforce Development $193 million one time for grants to Reject proposal. Consider addressing underlying Grant Program address student services staff causes of shortages, including expanding shortages. enrollment in preparation programs. Teacher Residency Grant $175 million one time for additional Provide $29 million, as interest in additional Program teacher residency grants. Various residency programs in longstanding shortage program changes that modify areas may be limited. Reject proposed program priority schools and broaden changes. Current program rules are better eligibility to other subject areas. targeted to shortage areas. California Teacher $100 million to establish new service Reject proposal, as it would not address Credentialing Award awards for each newly credentialed underlying causes of teacher shortages in high- Program teacher in a high-need subject who need subjects or high-need schools. teaches in a high-need school for four years. Classified School $64.1 million one time for additional Adopt proposal. Give priority to districts with more Employee Teaching grants to provide financial severe shortages and higher shares of low- Credential Program assistance to classified school income students. Require districts to report data employees pursuing a teaching on participant retention and turnover. credential. Addressing the Achievement Gap Opportunity Grants $300 million one time to provide Reject proposal. Consider a smaller ongoing grants and support to low- augmentation to provide intensive support performing districts and schools to a small number of districts with persistent where at least 90 percent of challenges. students are low income. Community School $300 million one-time grants for Fund a smaller community schools pilot with Partnership Grants implementation of the community greater emphasis on technical assistance. schools model. Consider establishing an office of technical assistance prior to awarding grants. County Outreach funding $18 million one time for county Reject proposal. offices of education to improve coordination with county wraparound service providers. Child Nutrition Rate increase $60 million ongoing to increase Consider trade-offs. A nutrition rate increase reimbursement rate for free and would likely help districts address some school reduced price meals served. nutrition cost pressures, but any ongoing Reporting language on how funds increase for school nutrition means funds are used. are not available for other K-12 purposes. If adopting increase, recommend rejecting proposed reporting requirement. One-time training initiative $10 million one time to support Allow funds to be used for a broader set of training for food service workers. expenses, including supplies, and training topics beyond what would be allowed under the Governor’s proposal. www.lao.ca.gov 43 analysis full gutter 2020-21 BUDGET K-12 EDUCATION UNIT Sara Cortez School Nutrition 916-319-8348 Sara.Cortez@lao.ca.gov Kenneth Kapphahn Overall Proposition 98 Package 916-319-8339 Kenneth.Kapphahn@lao.ca.gov The Minimum Guarantee Amy Li Special Education 916-319-8358 Amy.Li@lao.ca.gov Education Workforce Ned Resnikoff Local Control Funding Formula 916-319-8312 Ned.Resnikoff@lao.ca.gov Addressing the Acheivement Gap LAO PUBLICATIONS This report was reviewed by Edgar Cabral and Anthony Simbol. 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