The 2023-24 Budget: One-Time K-12 Spending Proposals

2023-24 BUDGET The 2023-24 Budget: One-Time K-12 Spending Proposals GABRIEL PETEK | LEGISLATIVE ANALYST | FEBRUARY 2023 SUMMARY In this brief, we provide our analysis and recommendations regarding the administration’s proposals for using available 2021-22 Proposition 98 funds. Governor’s Budget Includes $990 Million in 2021-22 Proposition 98 Spending Proposals. To bring 2021-22 spending up to the revised estimate of the 2021-22 minimum guarantee, the Governor’s January budget includes a net of $990 million in new one-time spending proposals. This includes (1) using $1.8 billion to cover 2022-23 and 2023-24 Local Control Funding Formula (LCFF) costs; (2) providing $250 million in additional one-time funding for literacy program activities (including an associated evaluation); (3) providing $100 million to fund arts and cultural enrichment for high school seniors; and (4) decreasing funding for the Arts, Music, and Instructional Materials Discretionary Block Grant by $1.2 billion. Recommend Taking Actions to Minimize Reductions to Arts, Music, and Instructional Materials Discretionary Block Grant. The state provided $3.6 billion for this block grant in the June 2022 budget plan. Given that districts have already received the first half of their funding for the block grant and many have adopted plans for how to use the funds, reducing funding would be disruptive to local planning. We recommend the Legislature take actions that would free up funding to decrease or eliminate the proposed reduction to the block. We recommend the Legislature do so in two ways: • Reduce Ongoing Spending in 2023-24. Reducing ongoing spending in 2023-24 would free up room to fund 2023-24 LCFF costs with ongoing funds, which would then free up 2021-22 funds that can be used to minimize or eliminate the need for reducing the discretionary block grant. Reducing ongoing spending in 2023-24 also would help the state avoid passing a budget that creates a deficit in 2024-25. • Reject Additional Literacy Funding and New Arts and Cultural Enrichment Proposal. Given that the state has yet to evaluate the effectiveness of the Literacy Coaches and Reading Specialists (LCRS) program model, it would be premature to provide additional program funding. The Legislature could consider providing additional funding in the future once it has a better sense of program outcomes and magnitude of any implementation challenges. The funding for arts and cultural enrichment would only be available for one set of activities and would only benefit one cohort of high school seniors. Districts that are interested in providing additional opportunities for arts and cultural enrichment could use other funding sources, such as LCFF. Rejecting these two proposals would free up $350 million in 2021-22 that could be used to restore funding for the discretionary block grant. Adopt Evaluation of Literacy Program. To improve the Legislature’s ability to evaluate the effectiveness of the literacy grants funded in 2022-23, we recommend the Legislature provide $500,000 Proposition 98 General Fund for an independent evaluation of the program on or before June 30, 2028 (a year after the encumbrance deadline). Additionally, the Legislature could consider codifying specific questions and data points it would like to be included in interim progress reports and the independent evaluation (such as specific demographic information of children served, challenges in hiring staff, description of other implementation challenges, and identification of possible solutions). www.lao.ca.gov 1 2023-24 BUDGET INTRODUCTION If the revised guarantee is above the revised cost of programs, the state makes a one-time payment The Governor’s 2023-24 budget makes several to “settle up” for the difference. The Legislature proposed changes that affect state spending to can allocate these settle-up payments for any meet the Proposition 98 requirements in 2021-22. school or community college purpose, including This includes (1) using $1.8 billion to cover the existing programs or new initiatives. If program 2022-23 and 2023-24 LCFF costs; (2) providing costs exceed the guarantee, the state can reduce $250 million in additional one-time funding for spending if it chooses. literacy program activities; (3) providing $100 million to fund arts and cultural enrichment for high school Literacy Activities seniors; and (4) decreasing funding for the Arts, The State Authorizes Certain Credentials Music, and Instructional Materials Discretionary to Provide Reading Intervention. Reading Block Grant by $1.2 billion. After accounting for intervention involves pulling out a student from a these changes, the Governor’s proposal would general education class to receive reading content spend at the minimum guarantee. In this brief, we in a separate setting or instruction in a separate provide our analysis of the proposal and make specialized reading class. All teachers with a associated recommendations for the Legislature multiple subject teaching credential (required to be to consider. an elementary school teacher) or a single subject teaching credential in English (required to teach BACKGROUND middle or high school English) are authorized to In this section, we provide background on the provide reading intervention services. Teachers Proposition 98 minimum guarantee, early literacy, with credentials in other subject areas can provide and arts education. reading intervention services if they obtain either a Reading and Literacy Added Authorization (RLAA) Proposition 98 Minimum Guarantee or a Reading and Literacy Leadership Specialist Proposition 98 (1988) Establishes Minimum (RLLS) credential. To obtain an RLAA or RLLS, Funding Level for Schools and Community individuals must have at least three years of Colleges. This minimum funding level is commonly teaching experience and complete a preparation called the minimum guarantee. The state calculates program that includes coursework and supervised the minimum guarantee based on certain inputs, field experience. In 2020-21, the California such as state General Fund revenue, per capita Commission on Teacher Credentialing (CTC) issued personal income, and K-12 student attendance. 289 new RLAAs and RLLS credentials (194 RLAA The state can choose to fund at the minimum and 95 RLSS credentials). This increased to 430 in guarantee or any level above it. It also can suspend 2021-22 (358 RLAA and 72 RLLS newly issued the guarantee with a two-thirds vote of each house credentials). Between 2015-16 and 2021-22, about of the Legislature, allowing the state to provide less 1,700 unique individuals were issued an RLAA funding than the formulas require that year. The state and/or RLLS. meets the guarantee through a combination of state State Has Recently Provided Various General Fund and local property tax revenue. One-Time Funding to Support Improvement in At Key Points, State Recalculates Minimum Literacy. The state has funded various one-time Guarantee and Certain Proposition 98 Costs. literacy initiatives with Proposition 98 General Fund The guarantee typically changes from the level and federal funds in recent budgets. We describe initially assumed in the enacted budget as the state some of these one-time budget actions below. updates the relevant Proposition 98 inputs. The state • The 2021-22 budget included $50 million to updates these inputs until May of the following establish the Early Literacy Support Block fiscal year. The state also revises its estimates Grant program to improve early literacy. of certain school and community college costs. Under this program, block grants were When student attendance changes, for example, provided to the 73 schools with the lowest the cost of LCFF tends to change in tandem. 2 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET performance on third grade state reading Arts Education assessments. Additionally, $3 million was State Law Has Minimum Requirements in Arts provided for a lead county office of education Education. State law requires schools to provide (COE) to provide statewide professional instruction in visual and performing arts (including development and technical assistance music) to all students in grades 1 through 6. State focused on effective literacy instruction law also requires schools to offer such courses in in early grades. The 2021-22 budget also grades 7 and 8 as electives. The specific courses included $1.5 billion in educator professional and amount of instruction are determined by each development grants that local education local governing board. In high school, students agencies (LEAs)—school districts, charter may take an arts course to earn their high school schools, and COEs—can use over five diploma. The state requires students to complete years, as well as $10 million for statewide one year of either (1) visual or performing arts, (2) a professional development on reading foreign language, or (3) career technical education. instruction and intervention. Local governing boards can add other requirements • The 2022-23 budget provided a total of for high school graduation. Many school districts $265 million to fund three literacy coach set their minimum graduation requirements to initiatives. First, the budget provided match the course requirements for admission to the $225 million to create the LCRS program. state’s public universities, which require one year These funds were allocated to eligible schools of visual and performing arts. Students may also to develop school literacy programs, employ receive arts programming through participating in and train literacy coaches and reading before/after school and summer programs. and literacy specialists, and develop and 2022-23 Budget Included $3.6 Billion implement interventions for students. (A total One-Time Proposition 98 Funding for an Arts, of 390 schools were eligible.) Second, the Music, and Instructional Materials Discretionary budget provided $25 million for a COE to Block Grant. Funding is provided to LEAs on a develop and provide statewide training per-student basis and is available through 2025-26. for educators to become literacy coaches LEAs may use these funds for professional and reading specialists. Finally, the budget development and instructional materials in various included $15 million for the Reading and academic subject areas, including visual and Literacy Supplementary Authorization performing arts. In addition, LEAs may use these Incentive Grant Program, which will provide funds for professional development related to financial assistance to teachers interested in school climate (such as training on de-escalation obtaining an RLAA and/or RLSS. strategies). Funds may also be used for operational • In addition to state funding, the federal staffing costs (including retirement and health government awarded $37.5 million in benefit cost increases), materials and equipment Comprehensive Literacy State Development to keep schools safely open during the COVID-19 Grant funds to the California Department of pandemic, and purchasing diverse and culturally Education (CDE) in 2019 to expand literacy relevant books and text that support independent efforts statewide over five years. CDE student reading. Each local governing board must distributed these funds in 2021 through a adopt a public plan that describes how funding will competitive grant process to seven COEs be spent. to serve as local literacy lead agencies. Voters Recently Approved Statewide Ballot Each literacy lead agency will implement Measure to Provide Dedicated Arts Funding to evidenced-based, multiyear, small-scale Public Schools. Proposition 28 (2022) requires pilots with school districts that support the the state to provide additional funding to increase literacy priorities established in the State arts instruction and/or arts programs in public Literacy Plan. schools. The amount required each year is equal to 1 percent of the amount of Proposition 98 funding provided to K-12 education in the previous year. www.lao.ca.gov 3 2023-24 BUDGET Proposition 28 distributes the funding to LEAs year—$613 million for 2022-23 and $1.2 billion for based on their prior-year enrollment in preschool 2023-24. (The budget also includes $200 million in and K-12, with additional funding for students unspent prior-year funding to cover 2023-24 LCFF from low-income families. Local governing boards costs.) Covering 2022-23 LCFF costs with may use up to 1 percent of this new funding for 2021-22 funding allows the administration to bring administrative expenses. The remainder of the spending down to the revised estimate of the funding must be distributed to LEAs’ school minimum guarantee in 2022-23 without affecting sites based on their enrollment. The funding is the amount of LCFF districts receive. For 2023-24, primarily to be used for hiring new staff to expand covering some LCFF costs with 2021-22 funding arts education programs. (Schools with less than allows the administration to make other ongoing 500 students are automatically exempt from this spending increases while maintaining spending staffing requirement.) The remaining funding at the minimum guarantee. Most notably, the can be used for training, supplies and materials, Governor’s January budget includes $6.4 billion to and for arts educational partnership programs. provide a statutory cost-of-living adjustment (COLA) Proposition 28 requires the principal of a school to K-12 programs, as well as $300 million in new site (or the program director of a preschool) to ongoing funding for high-poverty schools. develop a plan for spending the funding they Provides Additional $250 Million One-Time receive. The principal or program director would Funding for Literacy Program Activities. determine how to expand a site’s arts instruction The Governor’s budget proposes an additional and/or programs. $248 million to further support the recently established LCRS program, which reflects more GOVERNOR’S PROPOSALS than a doubling of program funds. These funds are Governor Makes Several Changes to 2021-22 intended to increase the number of high-poverty Proposition 98 Spending. Compared with the schools participating in the LCRS program. estimate included in the June 2022 budget plan, the Specifically, eligibility is for elementary schools administration revises its estimate of the minimum that have not previously received LCRS program guarantee up $178 million in 2021-22, primarily funding and have a student body where at least due to local property tax revenue exceeding 95 percent of students are low-income or English previous estimates. The administration also learners. These funds would be available for revises its estimates of 2021-22 Proposition 98 encumbrance through June 30, 2028 (a year spending down by about $800 million, primarily longer than the initial funding for LCRS program). due to lower-than-expected LCFF costs. To bring Additionally, the Governor proposes $2 million 2021-22 spending up to the revised estimate of to (1) increase funding for statewide training the 2021-22 minimum guarantee, the Governor’s services for educators to become literacy January budget includes a net of $990 million in coaches and reading and literacy specialists, new one-time spending proposals. (See Figure 1.) This includes a Figure 1 total of $2.1 billion in spending increases, offset by a $1.2 billion Governor Proposes Several Changes to spending reduction. We describe 2021-22 Proposition 98 Spending these proposals in more detail in (In Millions) this section. Uses 2021-22 Funding to Local Control Funding Formula backfilla $1,814 Cover 2022-23 and 2023-24 LCFF Arts, Music, and Instructional Materials Discretionary Block Grant -1,174 Literacy program activities 250 Costs. The Governor’s budget Arts and cultural enrichment for high school seniors 100 proposes to use $1.8 billion in Total $990 2021-22 funding to cover LCFF a Includes $613 million to cover 2022-23 costs and $1.2 billion for 2023-24 costs. Budget also costs in the current and budget includes $200 million from unspent prior-year funds to cover 2023-24 costs. 4 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET and (2) provide up to $500,000 to conduct an ASSESSMENT independent evaluation of the effectiveness of the Covering Ongoing Costs With One-Time LCRS program. The independent evaluation would Funding Creates Deficit for 2023-24. As we include an examination of (1) how funds were used, discuss in our recent brief, The 2023-24 Budget: (2) how expenditures impacted student literacy Proposition 98 Overview and K-12 Spending Plan, achievement, (3) how LEAs plan to continue to fund using one-time funds to cover ongoing 2023-24 literacy programs past the award period, and (4) the costs creates a deficit in the Proposition 98 budget effectiveness of the literacy trainings. The evaluation the following year. If the state were in a recession, would be submitted to the Legislature on or before this deficit would compound an already difficult June 30, 2029 (a year after the encumbrance budget situation and make program reductions or deadline of the additional funding). deferrals more likely or more severe. Even if the Provides $100 Million One Time for Arts guarantee continues to grow, the deficit would and Cultural Enrichment for High School reduce the funding available to cover COLA Seniors. This proposal is intended to give all and other priorities. Recognizing these risks, high school seniors in the 2023-24 school year the Legislature generally has avoided adopting access to arts and cultural institutions, museums, Proposition 98 budgets that contain these deficits and art enrichment experiences. Funding would except during downturns. be allocated to LEAs in 2023-24 based on their Literacy Program Activities Remain in Early 11th grade enrollment in 2022-23. LEAs could use Implementation Stages. CDE allocated the the funding to cover transportation and admission $225 million in LCRS program funds to schools in to (1) arts and cultural institutions; (2) live art January 2023. Moreover, CDE and CTC are still in and cultural performances; and (3) off-campus the process of finalizing the request for application extracurricular arts and cultural activities, (RFA) for the statewide literacy training contract workshops, and learning experiences. Funding and supplementary authorization incentive grant must be prioritized for admission, program, and program. (As of February 13, 2023, the RFAs have activity costs. Any remaining funding may be not been posted. We understand that these RFAs used for transportation costs. The administration will be posted in the spring of 2023.) Given that estimates the proposal would provide LEAs with LCRS program dollars were just recently allocated about $200 per high school senior. to schools, it is too early to determine whether Reduces Arts, Music, and Instructional LEAs have faced any barriers to implementation. Materials Discretionary Block Grant by However, we understand that during initial $1.2 Billion. To fund the proposals described conversations with CDE, LEAs mentioned the above, while also maintaining spending at the overall teacher shortage as possibly being the minimum guarantee for 2021-22, the Governor’s greatest implementation challenge in finding budget includes a $1.2 billion reduction to the qualified staff for literacy programs. $3.6 billion provided last year for the Arts, Music, Arts and Cultural Enrichment Proposal and Instructional Materials Discretionary Block Has Limited Scope. Unlike the funding from the Grant. This would result in a 33 percent reduction discretionary block grant and the arts funding to all LEAs’ allocations. provided by Proposition 28, the $100 million Budget Also Includes $941 Million Ongoing proposed for arts and cultural enrichment is much in Proposition 28 Funding. As required by more limited in use. These funds would only be Proposition 28, the Governor’s budget includes available for one set of activities and would only $941 million ongoing funding in 2023-24 for arts benefit one cohort of high school seniors. To the education programs. As required by the measure, extent that LEAs deem this a local priority, they this funding is on top of the Proposition 98 funding can use other funds (such as LCFF) to cover these requirement otherwise calculated for 2023-24. costs. Using another funding source such as LCFF would allow them to extend opportunities to students across all grades. www.lao.ca.gov 5 2023-24 BUDGET Reducing Discretionary Block Grant Would • Reject Additional Literacy Grant Funding Be Disruptive to Local Planning. CDE notified and New Arts and Cultural Enrichment LEAs of their allocations for the discretionary Proposal. Given that the state has yet to block grant this fall and distributed the first half evaluate the effectiveness of the LCRS of funding in December 2022. Our understanding program model, it would be premature to is that many LEAs already adopted plans for how provide additional program funding. The to use these funds, often after discussions in the Legislature could consider providing additional community and with school employee groups. funding in the future once it has a better sense Reducing the discretionary block grant by one-third of program outcomes and the magnitude of would require districts to revisit these plans and any implementation challenges. Moreover, could require changing larger aspects of their LEAs that are interested in providing additional budget plans. Given the variety of allowable uses opportunities for arts and cultural enrichment for the block grant, LEAs would not be able to could use other funding sources, such as use Proposition 28 funding to cover many of their LCFF. Rejecting these two proposals would planned expenditures. The funds for Proposition 28 free up $350 million in 2021-22 that could be (1) are limited to arts education, (2) must be used to restore funding for the discretionary spent on ongoing salaries and benefits in larger block grant. schools, and (3) are to be spent at the discretion of Adopt Evaluation of Literacy Program. school principals. To improve the Legislature’s ability to monitor the progress of implementation and evaluate RECOMMENDATIONS overall program effectiveness of the LCRS Take Actions to Minimize Reductions to Arts, funding provided in 2022-23, we recommend Music, and Instructional Materials Discretionary the Legislature provide $500,000 Proposition 98 Block Grant. To minimize disruption to LEA budget General Fund for an independent evaluation of the plans, we recommend the Legislature take actions program on or before June 30, 2028 (a year after that would free up funding to decrease or eliminate the encumbrance deadline of the existing funding the proposed reduction to the Arts, Music, and for the LCRS program). Additionally, the Legislature Instructional Materials Discretionary Block Grant. could consider codifying specific questions and Specifically, we recommend the Legislature: data points it would like to be included in interim • Reduce Ongoing Spending in 2023-24. progress reports and the independent evaluation As we discussed in our recent brief, we (such as specific demographic information recommend the Legislature reduce ongoing of children served, challenges in hiring staff, spending in 2023-24 to avoid passing a description of other implementation challenges, and budget that creates a deficit in 2024-25. identification of possible solutions). The Legislature has a variety of options for making ongoing reductions, including (1) funding a lower COLA; (2) rejecting or delaying implementation of new ongoing funding for high-poverty schools, or (3) making certain reductions to existing programs, such as the Expanded Learning Opportunities Program or State Preschool. Taking one or a combination of these actions would free up room to fund 2023-24 LCFF costs with ongoing funds, which would then free up 2021-22 funds that can be used to minimize or eliminate the need for reducing the discretionary block grant. 6 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET www.lao.ca.gov 7 2023-24 BUDGET LAO PUBLICATIONS This report was prepared by Jackie Barocio and Michael Alferes, and 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, California 95814. 8 LEGISLATIVE ANALYST’S OFFICE