Governor Releases Proposed State Budget
This morning, Governor Newsom released his proposed State Budget for the 2020-21 fiscal year. The Governor’s Budget focuses on health care affordability, homelessness, housing affordability, as well as addressing the issues of climate change, which includes wildfires. This is a conservative budget with few large ongoing new programs and significant contributions to the State’s reserve accounts.
The Budget capitalizes on additional revenues, but recognizes a decline in the most recent economic expansion. The Budget proposes to increase overall reserves, which are projected to total $21 billion. The Budget also projects that if there were a moderate recession in the next three years, there could be an up to $70 billion General Fund revenue loss during the same period. If this were to happen, the General Fund budget deficit, however, would be only approximately $40 billion because of automatic spending cuts to programs such as Proposition 98.
Proposition 98 and Local Control Funding Formula
The Proposition 98 funding for K-12 schools and community colleges for 2020-21 is $84 billion—an all-time high. When combined with more than $819 million in settle-up payments for prior fiscal years, the Budget proposes an increased investment of $3.8 billion in schools and community colleges.
The Budget proposes a $1.2 billion Proposition 98 General Fund increase for the Local Control Funding Formula (LCFF), which reflects a 2.29 percent cost-of-living adjustment (COLA), and brings total LCFF funding to $64.2 billion.
This means local education agency (LEA) operational funding for the next budget year will remain at essentially the same level as in the current fiscal year when adjusted for inflation.
The Governor’s Budget continues to allocate $1.5 billion in Proposition 51 bond funds in 2020-21, as was done in the current year.
The Budget Summary outlines the new resources that would materialize when voters approve Proposition 13, the Public Preschool, K-12, and College Health and Safety Bond Act of 2020 in March of this year, and states that the Administration will revise its proposed K-12 bond investments to address school district lead in drinking water testing and remediation, districts recovering from a natural disaster, and other priority areas not reflected in prior bond acts.
CASH staff will attempt to obtain additional information about how the Administration might revise its K-12 bond investment strategy, but this information may not become available until after the March election or until the May Revision is released.
Full-Day Kindergarten Facilities Grant Program and Preschool Facilities
The 2018 and 2019 Budget Acts included a total of $400 million one-time non-Proposition 98 General Fund for eligible school districts to construct new, or retrofit existing, facilities for full-day kindergarten programs. Of this amount, roughly $300 million remains available to support the goal of converting existing part-day kindergarten programs to full-day programs.
Funds in this program are prioritized for school districts with high rates of students receiving free and reduced-priced meals, and enable eligible school districts to qualify for financial hardship funding similar to the traditional K-12 facilities program. The Budget proposes dedicating a portion of these funds to support the construction of preschool facilities on school campuses. The Governor highlighted the Legislature’s interest in this issue, which suggests the size of the set-aside will be subject to negotiation in the Budget process.
When the Public Preschool, K-12, and College Health and Safety Bond Act of 2020 is approved by voters in March, the Administration will propose legislation authorizing the State Allocation Board to provide a new construction or modernization per-pupil grant enhancement to local educational agencies proposing to construct or modernize facilities to expand preschool programs on school campuses. Participants would be required to use the applicable facility to expand the number of preschool students served by the local educational agency consistent with current preschool staffing standards.
Inclusive Early Education Expansion Program
The Budget proposes $75 million Proposition 98 General Fund to expand the Inclusive Early Education Expansion Program. This program was created as part of the 2018 Budget Act and provides funding to local educational agencies to construct or modify preschool facilities to serve students with exceptional needs or severe disabilities. The program received a total of $177 million in the 2018 and 2019 Budget Acts.
Broadband in Education
The state-sponsored K-12 High Speed Network provides local educational agencies with broadband network connectivity and Internet services, as well as videoconferencing coordination and support. The K-12 High-Speed Network also administers the Broadband Infrastructure Improvement Grant Program, which has a proposed funding allocation of $51.4 million Proposition 98 General Fund over the next five years, to improve LEA broadband connectivity to ensure schools can administer computer-based assessments.
Climate and Wildfire
The Governor’s Budget proposes to invest $12.5 billion over the next five years to meet the state’s priority climate goals of reducing climate risk while achieving carbon neutrality. A key component is a new $4.75 billion Climate Resilience Bond, proposed by the Administration for the November 2020 ballot, to address near-term risks like floods, drought, and wildfires while also addressing long-term risks like sea level rise and extreme heat.
To address wildfires, the Budget proposes $750 million for public infrastructure in high fire-risk communities (such as drinking water infrastructure, emergency shelters, and public medical facilities) and forest health. The Budget also proposes $50 million (one-time General Fund) to support preparedness measures to bolster community resiliency, to build on the state’s 2019-20 power-resiliency investments. These measures will support critical services still vulnerable to power outage events, including schools, county election offices, and food storage reserves, with a matching grant program to help local governments prepare for and respond to the impacts of power outages.
The Legislature will now begin reviewing the Governor’s proposal in-depth at hearings over the course of the next few months, as they work to meet a constitutional deadline of adopting the Budget by June 15. CASH will engage to inform the development of these proposals.