05/14/15

Today the Governor released the May Revision budget update.  His budget estimates an additional $6.7 billion in revenues above the January proposal, $5.5 billion of which will go to K-12 and community colleges under Proposition 98.  This increases the Proposition 98 minimum guarantee by $241 million in 2013-14, $3.1 billion in 2014-15, and $2.7 billion in 2015-16, for revised minimum guarantee levels of $58.9 billion, $66.3 billion, and $68.4 billion respectively.  The Proposition 98 maintenance factor is reduced to $722 million. 

The Governor continues to prioritize fiscal restraint and addressing long-term debts, while looking forward to preparing the state for the next economic downturn by funding the state’s reserve.  The May Revision does not include any additional information on the Governor’s policy recommendations for facilities as outlined in the January budget proposal, and it does not include a new state school bond or another mechanism to fund a state program.

 The May Revision does not include any modifications or additional comments on the following school facilities proposals made in the January budget:

•  Provide $273.4 million in one-time Proposition 98 General Fund resources for the Emergency Repair Program (ERP).  This would retire the state’s facilities funding obligation under the terms of the Williams settlement.
• Provide $100 million in one-time Proposition 98 funding to support additional investments in internet connectivity and infrastructure.

One-Time Funds

The May Revision increases discretionary one-time Proposition 98 funds to schools by $2.4 billion, for a total of more than $3.5 billion in total discretionary funds.  The funds are intended to further implement the state-adopted Common Core academic standards, for use in funding professional development, teacher training, and purchase of instructional materials and technology.  However because they are discretionary and intended for one-time purposes, the funds can also be used for maintenance and deferred maintenance.

Proposition 39

The May Revision decreases the amount of energy efficiency funds available to K-12 schools in 2015-16 by $6.7 million from the $320.1 million reported in the January Proposed Budget, to a total of $313.4 million in the May Revision.  This allocation will fund the per ADA grants for the third year of the Proposition 39 program, which remains focused on K-14 schools.  CDE will be posting the individual allocations for each LEA in the program once the budget is finalized.

The May Revision states that this adjustment is a reflection of “reduced revenue estimates” generated by corporate tax revenues, half of which go into the Clean Energy Jobs Fund for public energy efficiency and renewable projects.

Water

The May Revision includes an additional $2.2 billion of one‑time resources for 2015‑16 to continue immediate response to drought impacts. The acceleration of spending from Proposition 1 — combined with new dollars from the General Fund and Cap and Trade — reflects the Administration’s concern and desire to move quickly in responding to the drought.

Additional Local Enforcement Authority:  The May Revision proposes legislation to enhance local enforcement authority by providing all water agencies and local governments a consistent, minimum set of enforcement authorities to achieve required water conservation. Local water agencies with existing authorities to enforce against water waste can continue to use those authorities. Under this proposed legislation, any monetary penalties from this enforcement will be used for local conservation efforts.

Cap and Trade Expenditure Plan: Climate Change and Water/Energy Expenditures

Setting climate change as one of his top priorities for the state, the Governor issued Executive Order B‑30‑15 on April 1 establishing a greenhouse gas (GHG) reduction target of 40 percent below 1990 levels by 2030.   To meet the target specified in the Executive Order, the Administration is pursuing policies that by 2030 would, among other things, increase electricity derived from renewable resources to 50 percent and double energy efficiency achieved at existing buildings.

Through an auction, Cap and Trade establishes a financial incentive for industries subject to the statewide cap to make long‑term investments in cleaner fuels, more efficient energy use, and transformational technological and scientific innovations. A portion of the auction proceeds generated from the sale of allowances are available to the state for expenditure.

The May Revision includes a $2.2 billion Cap and Trade Expenditure Plan that will further reduce emissions by providing additional resources for clean transportation and mass transit, energy efficiency and renewable energy, waste reduction, and ecosystem restoration programs. Each administering agency will utilize a public process to engage stakeholders in the development and implementation of the programs.

Some items of note to be funded in the plan are as follows:

• $20 million for the Department of Water Resources’ (DWR) existing Water Energy Grant Program to reduce energy demand and GHGs through local projects that also support water use efficiency and conservation.

• $50 million Cap and Trade funds for the DWR to support state and local water use efficiency projects that save energy and reduce greenhouse gas emissions.

• $20 million Cap and Trade funds for the California Department of Food and Agriculture to invest in irrigation and water pumping systems that reduce water use, energy use, and greenhouse gas emissions.

• $43 million ($30 million Cap and Trade funds for the Energy Commission and $13 million Proposition 1 funds for DWR) to implement consumer rebate programs for the replacement of inefficient water consuming appliances, including dishwashers and toilets, to save water and energy and reduce greenhouse gas emissions.

Public Schools on Military Installations

The Governor is proposing to explore ways to help military base schools fund the local match requirement for the Federal Department of Defense school facility grant program for public military base schools, using a possible low-interest loan program:

The U.S. Secretary of Defense established a program to construct, renovate, repair, or expand elementary and secondary public schools on military installations to address capacity or facility condition deficiencies. The program is 80 percent federal funded, with a 20% percent local match requirement for a school district to receive funding under the program.

In 2010, the Department of Defense assessed the condition of 160 public schools on military installations in the United States and created a priority list of schools with the most serious condition and/or capacity deficiencies. California has 11 schools located in six school districts that are within the top 33 of the priority list. The majority of schools on this list have expressed concerns about raising the required 20% percent local match. In an effort to assist participating districts, the Administration is exploring several funding options to help the eligible schools establish their local match, including the provision of low‑interest state loans through existing programs.

Next Steps

The Legislature will consider the Governor’s May Revision proposals and continue to review his January proposals, working toward the constitutional deadline to pass a budget by June 15.

The full May Revision document is available here.

~C.A.S.H. Staff