The 2025-26 Budget: Transitional Kindergarten

2025-26 BUDGET The 2025-26 Budget: Transitional Kindergarten GABRIEL PETEK | LEGISLATIVE ANALYST | FEBRUARY 2025 SUMMARY Governor Proposes $1.8 Billion in Additional Funding for Final Year of Transitional Kindergarten (TK) Expansion. This brief provides an overview and analysis of the Governor’s proposals for TK. The Governor’s budget increases funding by $1.1 billion to implement the final year of TK expansion. This would provide additional funding through the Local Control Funding Formula (LCFF) for the anticipated increase in TK students and the higher add-on costs associated with maintaining a 1-to-12 adult-to-student ratio. The Governor also proposes to increase funding by $746 million for school districts and charter schools to meet one-to-ten staffing ratios in TK classrooms, a requirement set to start in 2025-26. (For brevity, we refer to both school districts and charter schools as districts throughout this brief unless otherwise noted.) Recommend Providing a Lower Amount of Funding for Add-On Costs. The Governor’s proposed add-on funding to meet the one-to-ten staffing ratio is likely higher than the costs of the requirement. We developed two estimates of staffing costs aligned with the two main ways districts are likely to adapt to the new requirement. One estimate assumes that districts keep TK class sizes at 24 and add a third adult in the classroom, which would effectively result in a staffing ratio of one adult for every eight students. We estimate this approach would cost $196 million less than the administration’s proposed funding. A second estimate assumes districts reduce TK class sizes to 20 and keep two adults in each classroom. We estimate this would cost $410 million less than the administration proposes (though districts may have some associated one-time costs to increase the number of classrooms). We recommend the Legislature adopt one of these two alternatives, which would free up Proposition 98 funding the Legislature could use for other school priorities. Background TK Enrollment Has Grown 70 Percent Since 2019. In 2023-24, 151,500 students across the State in Final Stages of TK Expansion. state were enrolled in TK. This reflects an increase Under state law, TK is the first year of a two-year of 76,000 students (101 percent) from the 2021-22 kindergarten program offered by public elementary school year, the year prior to expansion. As another schools. From 2014-15 through 2021-22, students point of comparison, this reflects an increase of were eligible for TK if they had their fifth birthday 62,600 students (70 percent) from 2019-20, the between September 2 and December 2. As part of the Figure 1 2021-22 budget agreement, the state established a plan to Transitional Kindergarten Expansion Schedule gradually expand TK eligibility from Year Eligibility 2022-23 through 2025-26. Figure 1 2021-22 Must have fifth birthday between September 2 and December 2. shows the expansion schedule. 2022-23 Must have fifth birthday between September 2 and February 2. At full implementation in 2025-26, a 2023-24 Must have fifth birthday between September 2 and April 2. child who has their fourth birthday 2024-25 Must have fifth birthday between September 2 and June 2. by September 1 will be eligible for 2025-26 Must have fourth birthday by September 1. TK, making the grade available to Note: Some school districts chose to allow younger students who did not meet the criteria above to enroll in transitional kindergarten. Those students do not generate state funding until their fifth all four-year olds. birthday. www.lao.ca.gov 1 2025-26 BUDGET year prior to the pandemic. As Figure 2 shows, receive LCFF supplemental and concentration TK enrollment declined during 2020-21 due to the grant funding for eligible TK students who are an pandemic, then started to increase more quickly in English learner, foster youth, or from a low-income the expansion years. family. We estimate the state will provide $2.3 billion TK Funded Through LCFF. Similar to all other Proposition 98 General Fund for TK through K-12 students, eligible TK students generate LCFF base (including base grant adjustment), attendance-based funding through LCFF. The LCFF supplemental, and concentration grant funding includes a per-student base grant that varies by in 2024-25. grade level. In 2024-25, the base grant for students State Has TK Adult-to-Student Ratio in TK through third grade is $10,025 per average Requirements and Provides Associated daily attendance (ADA). The LCFF also includes a “Add-On” Funding. In addition to setting a grade span adjustment for students in TK through maximum TK class size of 24, the 2021-22 budget third grade that is equal to 10.4 percent of the base agreement set minimum requirements for the grant ($1,043 per ADA in 2024-25). To receive this number of adults required in a TK classroom. adjustment, districts must maintain average TK These requirements bring the adult-to-student through third grade class sizes of 24 students or ratio closer to the ratios in State Preschool fewer for each of their school sites—unless the and other programs that serve four-year olds district has a collective bargaining agreement for (typically one adult for every eight students). a larger class size. Beginning in 2021-22, districts Beginning in 2022-23, districts must maintain, can no longer collectively bargain larger class on average, 1 adult for every 12 TK students at sizes for TK and must maintain average TK class each school site. In 2024-25, districts will receive sizes of 24 or less. (Charter schools receive the $3,077 per TK ADA as an add-on to the LCFF K-3 adjustment and are exempt from the class size base grant to cover the associated costs of this requirement in grades K-3, but must comply with requirement. We estimate the state will provide the requirement for TK.) In 2024-25, TK students about $500 million Proposition 98 General Fund generate a total of $11,068 per ADA from the base for this add-on in 2024-25. Due to the class size grant and grade span adjustment. Districts also and staffing ratio requirement, TK classrooms typically have 24 students or fewer, Figure 2 with one credentialed teacher and one instructional aide. Starting in Transitional Kindergarten Enrollment 2025-26, state law requires the Census Day Enrollment adult-to-student ratio be reduced to, on average, one adult for 160,000 every ten students. State law also specifies it is the Legislature’s 140,000 intent to provide additional funding 120,000 for districts to meet this reduced staffing ratio requirement. Districts 100,000 incur penalties if they do not 80,000 comply with TK class size and the staffing ratio requirement. In the 60,000 nearby box, we describe the TK 40,000 penalties in more detail. 20,000 2019-20 2020-21 2021-22 2022-23 2023-24 2 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET State Has Several Penalties Related to Transitional Kindergarten (TK) Program Requirements The State Has Three Penalties for TK. Since 2022-23, districts can incur penalties for noncompliance with TK program requirements related to the maximum class size and the minimum number of adults in the classroom. Starting in 2025-26, districts will also incur penalties if they do not comply with TK teacher education requirements. The figure below explains these penalties in greater detail. Each penalty targets a specific aspect of the Local Control Funding Formula; however, the class size penalty is unique because noncompliance results in loss of the entire grade span adjustment. The other two penalties are based on the rate at which noncompliance was observed. Summary of Transitional Kindergarten (TK) Penalties Type Requirement Penalty Class Size Maintain an average TK classroom enrollment of Noncompliance results in loss of grade span no more than 24 students at each school site. adjustment generated by TK attendance. Adult-to-Student Ratio Maintain, on average, 1 adult for every 12 Penalty applied to TK staffing ratio add-on. students at each school site. Beginning in Penalty amount based on the number of 2025-26, this requirement will change to one staff needed to comply. adult for every ten students. Teacher Education Requirements Beginning August 2025, TK teachers must have Penalty applied to Local Control Funding a Child Development Teacher Permit, at least Formula base funding. Penalty amount 24 units of early childhood education or child based on the share of school days and development, or comparable experience. number of classrooms that were out of compliance. The State Monitors District Compliance Through Annual Auditing. The state monitors district compliance with TK program requirements through the annual auditing process. Auditors will review a representative sample of schools within a district to determine if it has complied with the statutory program requirements. As an example, for a district with 15 school sites, auditors may review the TK program at four schools to determine compliance for the entire district. Current Penalty Structure Has Trade-Offs. Compared with other elementary grades, the state provides higher levels of funding for TK, as well as stricter requirements with relatively stringent penalties for noncompliance. Higher penalties may put pressure on district budgets, but also create a financial incentive for districts to comply. In some cases, this could have the effect of encouraging districts to prioritize TK staffing over other grades. For example, districts with challenges hiring instructional aides may reduce the number of aides in other grades to ensure compliance with TK staffing ratios. As TK fully expands, the Legislature may want to continue to monitor these various trade-offs to ensure that the current structure aligns with the Legislature’s priorities for staffing at schools. www.lao.ca.gov 3 2025-26 BUDGET Additional Requirements for TK Teachers Governor’s Proposal Scheduled to Take Effect Next Year. Starting Increases Funding by $1.1 Billion for TK August 2025, state law requires TK teachers to have Expansion. For 2025-26, the Governor’s budget either 24 units in early childhood education and/or provides $1.1 billion to fund the additional students child development, a child development permit, an anticipated in the final year of TK expansion. The early childhood education specialist credential, or budget assumes that the statewide attendance comparable experience in a classroom setting with for TK students will be 229,200 in 2025-26, an preschool-aged children. (These requirements are increase of 60,000 (37 percent) compared with in addition to the credential required for elementary attendance in 2024-25. This $1.1 billion increase school teachers.) Districts will incur penalties if consists of two parts: (1) $860 million to support the they do not comply with these requirements. These LCFF funding generated by additional TK students additional requirements were initially set to start and (2) $206 million for the add-on associated August 2020, but have been delayed several times. with maintaining a 1-to-12 adult-to-student ratio. State Has Supported TK Expansion The budget assumes this add-on is $3,152 for Through Several Initiatives. In 2021-22 and each student. 2022-23, the state provided a total of $1.2 billion Increases Funding by $746 Million to Meet in one-time funding to support TK expansion. One-to-Ten Staffing Ratios in TK Classrooms. These augmentations include: In addition to covering the cost of additional • Facility Support ($590 Million). In 2021-22, students, the Governor proposes to increase the state provided $490 million one-time funding for the requirement in 2025-26 that districts non-Proposition 98 General Fund to implement a ratio of at least one adult for every ten construct or retrofit early education facilities. students in TK classrooms. The budget proposes Projects could be used to support full-day to increase the add-on amount to $6,404 per kindergarten, TK, or district-operated State student, an additional $3,252 above current law. Preschool facilities. In 2022-23, an additional This would increase total funding for the TK add-on $100 million was provided. by $746 million, for a total add-on cost of $1.5 billion (this includes $206 million described above and • Planning Support ($500 Million). In 2021-22, $500 million included in the 2024-25 budget). the state provided $200 million Proposition 98 General Fund to all local education agencies Assessment (LEAs)—districts, charter schools, and Budget-Year ADA Assumption Is Optimistic. county offices of education—that operate The Governor’s estimated TK growth of 60,000 ADA kindergarten programs. Funds could be used is about twice the amount we project when for a variety of purposes such as recruitment, considering current take-up trends and estimates of training, and materials. In 2022-23, an the number of four-year olds in California. The state additional $300 million was provided for could plausibly see this higher level of ADA through these purposes. a combination of higher rates of enrollment in TK • Teacher Support ($100 Million). In 2021-22, and better attendance of those students. However, the state provided $100 million Proposition 98 this assumption is optimistic given historical trends. General Fund for a competitive grant that In the coming weeks, the California Department of LEAs could use to increase the number Education will have preliminary attendance data of highly qualified State Preschool and for the current year that will help the Legislature TK teachers. determine whether or not the state is on target to meet the Governor’s budget assumptions. Two Main Ways Districts Likely Would Adapt to New Ratios. Under the existing class size and staffing ratio requirement, a TK classroom typically has at least 2 adults for at most 24 students. 4 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET Districts have two main ways they can adapt to Our estimates are intended to capture the ongoing the new one-to-ten staffing ratio requirement. costs of meeting the required ratios. As such, our One option is to keep TK class sizes at 24 and add a estimate does not capture one-time costs districts third adult in the classroom, which would effectively may incur, such as constructing or modifying result in a staffing ratio of one adult for every eight facilities. The first option assumes TK classrooms students. This option would require hiring more will have 3 adults and maintain class sizes at instructional aides to adapt to the new ratios. 24 students. This option would cost $196 million A second option is to reduce TK class sizes to 20 less than the Governor proposes. The second and keep two adults in each classroom. This option option assumes TK classrooms decrease would require hiring additional TK teachers and from 24 to 20 students and include 2 adults. would require additional classroom space, as the This option would cost $410 million less than the smaller class sizes means more classrooms would Governor’s budget. This second option would be needed. A district that has constrained facilities result in additional savings compared to the first or challenges hiring TK teachers, but could more option because it assumes fewer staff statewide easily hire instructional aides, likely would find the (roughly 7,600 fewer instructional aides, offset by first option more feasible. 1,900 additional teachers). Governor’s Proposed Add-On Likely Higher Recommendation Than Costs of Requirement. To calculate the ongoing cost of meeting the one-to-ten staffing Recommend Providing a Lower Add-On to ratio, we developed two estimates of staffing Cover Additional Staffing Costs. Based on our analysis of the two main ways districts can adapt costs aligned with the two ways districts are likely to the reduced staffing ratio requirement, districts to adapt to the new requirement. As Figure 3 could cover required staffing costs with less funding shows, both of these estimates are lower than the than the Governor proposes. We recommend the administration’s proposed add-on. (We are working Legislature adopt one of these two alternatives, with the administration to better understand the which would free up Proposition 98 funding the details of its methodology.) In both of our estimates, Legislature could use for other school priorities. the add-on is intended to cover the cost needed If the Legislature opts for the costlier first approach, for staffing beyond 1 teacher for 24 students. districts that choose to meet the Figure 3 new requirement with less costly options will have excess funds Comparing LAO Options they could use for any purpose. Option 1 Option 2 Alternatively, if the Legislature opts Staffing Assumptions for the second approach, districts Class size 24 20 that take the costlier approach of Number of adults 3 2 adding a third adult would have to Cost Estimates fund the higher costs through their Total add-on amount per average daily attendance (ADA) $5,550 $4,614 Incremental costs of moving to 1-to-10 staffing ratio (in 550 335 general purpose funds. millions) Savings relative to the Governor’s budget (in millions) 196 410 Note: Assumes transitional kindergarten ADA of 229,000. www.lao.ca.gov 5 2025-26 BUDGET 6 LEGISLATIVE ANALYST’S OFFICE 2025-26 BUDGET www.lao.ca.gov 7 2025-26 BUDGET LAO PUBLICATIONS This report was prepared by Sara Cortez, and reviewed by Edgar Cabral and Ross Brown. 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