No CSR Flexibility*, Categorical Flexibility
At the outset, I should qualify this analysis as saying that it could change in a final budget bill or could get thrown out the window if there is no budget deal.
For this year, the budget has a $2.4 billion reduction for what was budgeted in the 2008-09 Budget Act. It has a $5 billion reduction in Prop 98 Funding from 2008-09 to 2009-10. Cuts to Categorical Programs and Categorical Flexibility
The Governor proposes $1.9 billion in K-12 program reductions split evenly between revenue limits ($945 million) and categorical programs ($945 million) in the current year. These reductions continue in the budget year, growing to $2.4 billion, an increase of approximately $535 million. More than 50 categorical programs will be subject to across-the-board reductions that will be allocated proportionally and are estimated at roughly 15 percent. Deficit factors are established for revenue limit reductions in both years.
The budget provides comprehensive categorical funding flexibility over the next five years to mitigate program reductions. Specifically, the budget allows local educational agencies to transfer unlimited funds from more than 40 categorical programs to their general purpose accounts commencing in the current year. Another 11 programs are subject to reductions, but are not subject to categorical flexibility programs. [Eight major Proposition 98 programs are excluded from any categorical reductions or flexibility, including Child Development, Child Nutrition, Economic Impact Aid, Special Education, Home-to-School Transportation, After School Education & Safety, K-3 Class Size Reduction, and Quality Education Investment Act.]
This is the big one because it allows the district to have flexibility with left over categorical funds. However, it does not include flexibility with regards to Class Size Reduction (CSR).
*That said it does reduce the penalty for exceeding the maximum class sizes allowable under the k-3 CSR program for a four year period.
There will be no COLAs, which will save the state an approximate $2.5 assuming a COLA of 5.02%.
The bill allows prior-year categorical fund balance to be used in the general plan for the current year and the budget year. However it excludes access to fund balances from seven programs [Economic Impact Aid, Special Education, Targeted Instructional Improvement Block Grant, Instructional Materials, Home-to-School Transportation, CAHSEE Supplemental Services, and Quality Education Intervention and Achievement.]
The bill suspends the statutory requirement to purchase newly adopted textbooks and other instructional material.
It reduces Routine Maintenance Reserve requirement from three percent to one percent for five years.
It suspends reserve and reporting requirements for deferred maintenance for five years.
What Do This Mean For DJUSD?
One of the key questions here is what it mean not to have the CSR Flexibility but a reduction of the penalty for exceeding maximum class sizes for a four year period. I suppose this is a compromise to keep the provision on the books but to give districts a greater degree of flexibility. It will be interesting to see if this sticks in the budget and how DJUSD interprets it.
That point aside, I think this puts us back to the earlier budget assumptions.
Does this put us back to the budget assumptions from January 28, 2009?
That would add $1.1 million or so for the Categorical Allocation Transfer in 2009-10 and $400,000 in reduced restricted maintenance transfer.
The question then is what the district will do. Recall that without CSR, that is one million that the district does not have for 2009-10 and two million for 2010-11.
That gives the district probably four options for balancing the budget through 2010-11. Option one is to use the categorical flexibility and keep CSR as it is, and keep salaries where they are. According to the budget model from January, that would force the district to eat up the remainder of its fund balance.
Option two is to bring the CSR adjustment to 22:1 or 23:1 as some of the board members favor. That would free up $1 million at 22:1 or $1.5 million at 23:1. How many teaching positions would that mean would be lost? Does that require pink slips or can simply attrition achieve the changes? Part of this will depend on what the penalties are for being out of compliance? The other part will depend on the interpretation of Measure Q’s bringing down the ratio to 20:1 when the state’s requirement is 22:1.
Option three would be to keep CSR as it is and reduce teacher and classified employee salaries by 2.5%. The advantage of this would be that there would be guaranteed zero layoffs. The disadvantage of this is that with categorical flexibility, there is likely no way that DTA would submit to pay cuts.
Option four would be a combination of reduction in CSR with some pay cuts.
It is clear that DTA will push very hard for Option One. It will be interesting to see if these indeed are the options at this point and what the district recommends.
All of this assumes the budget eventually passes with these provisions. That is in doubt at the moment. If the budget remains unresolved, then all bets are off and the future looks far more bleak than it currently does.
—David M. Greenwald reporting