Facilities, Budget and Audit Committee

Tuesday, October 2, 2012

AGENDA

California Budget LAUSD Budget Comparison of Propositions 30 and 38

The California Budget

Current budget assumes passage of Proposition 30 If passes, funding for K-12 education is basically flat.

Proposition 98 goes up, but most of the funding is to repay cash deferrals.

If fails, funding for K-12 education is reduced by an estimated $441 per student, statewide.*

Equates to approximately $255 million to LAUSD*

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* Please note, the average cut per student statewide is $441 per student. The LAUSD specific cut would be $439 per student.

LAUSDs Unrestricted Revenue Per Child

LAUSD Revenue Limit per Student
1 $6,718
$6,700

$6,506 $6,388
$6,200

$6,363 4 Loss of COLA

$6,126

$5,797
$5,700

$5,797 $5,645 5

Loss of baseline dollars

$5,200

$5,220 $4,962
$4,700 2007-08 2008-09 2009-10 2010-11

$5,165

2 $5,221 3 $4,782

6 Loss due to potential

failure of Prop 30

2011-12

2012-13

Projected Statutory COLA

Flat Funding

Actual Funding

Midyear Cut
4

Source: School Services of California, Inc. http://www.sscal.com/brl_calc.cfm *Note the above does not include categorical

California Per Student Spending Has Fallen by Over $1,100 per Student Since 2008
Californias per student spending has been cut by $1,105 per student since 2008. This chart assumes that Proposition 30 passes. IF Proposition 30 fails to pass, California will rank #1 nationally for cuts to school funding. California will further reduce per student spending by an additional $441 per student. Cuts to per student spending will rise to $1,546 per child since 2008.
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Source: http://www.cbpp.org/files/9-4-12sfp.pdf, page 3.

The November Elections

Proposition Proposition

30

38

The Schools and Local Safety Protection Act of 2012

Our Children, Our Future: Local Schools and Early Education Investment and Bond Reduction Act

Proposition 30 The Schools and Local Safety Protection Act of 2012

Supported by Governor Brown Designed to provide additional revenues to the state general fund to avoid further cuts to public education.

The revenues would be part of the states general fund budget and administered according to state law. New income taxes heavily weighted toward highest earners.

Sales tax increase would affect all taxpayers

This funding would be part of the states normal funding to schools, not additional. The additional revenue could prevent deeper cuts to public education.

This initiative helps the state to meet its commitments, but in the near term does not provide additional funding for public education.
7 Source: http://www.lao.ca.gov/ballot/2012/30_11_2012.pdf

Proposition 38 Our Children, Our Future: Local Schools and Early Education Investment and Bond Reduction Act

Supported by Molly Munger and California PTA. This measure is designed to provide a significant amount of funding directly to school sites and early childhood education.

With a minimum of administrative cost and influence. New taxes are broad-based, but high earners pay more. Separate and above any other state or local funding. It provides funding for retirement of state-level debt during the first 4 years.

This initiative is clearly intended to provide supplemental funding for public education to improve Californias comparative standing with other states.

8 Source: http://www.lao.ca.gov/ballot/2012/38_11_2012.pdf

Comparison - Description of Tax Proposals

Proposition Proposition

30

38

cent sales tax increase; up to 3% increase in personal income tax for high-income earners (>$250,000). Generates $6 billion in 2012-13 through 2016-17; with smaller amounts in 2011-12, 2017-18, and 2018-19. DURATION: Sales tax for 4 years; Income tax for 7 years.

Increase in personal income tax for all but low-income earners, from 0.4% for lowest income individuals to 2.2% for individuals earning >$2,500,000. Generates $5 billion in 2012-13; $10 billion thereafter.

DURATION: Income tax for 12 years.

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Source: http://www.lao.ca.gov/ballot/2012/30_11_2012.pdf

Source: http://www.lao.ca.gov/ballot/2012/38_11_2012.pdf

Comparison Increase in Personal Income Tax Rates

Proposition Proposition

Single Filers Taxable Income $0 - $7,316 $7,316 - $17,346 $17,346 - $27,377 $27,377 - $38,004 $38,004 - $48,029 $48,029 - $100,000 $100,000 - $250,000 $250,000 - $300,000 $300,000 - $500,000 $500,000 - $1,000,000 $1,000,000 - $2,500,000 Over $2,500,000

Joint Filers Taxable Income $0 - $14,632 $14,632 - $34,692 $34,692 - $54,754 $54,754 - $76,008 $76,008 - $96,058 $96,058 - $200,000 $200,000 - $500,000 $500,000 - $600,000 $600,000 - $1,000,000 $1,000,000 - $2,000,000 $2,000,000 - $5,000,000 Over $5,000,000

30
0% 0% 0% 0% 0% 0% 0% 1.0% 2.0% 3.0% 3.0% 3.0%
Source: http://www.lao.ca.gov/ballot/2012/38_11_2012.pdf

38
0% 0.4% 0.7% 1.1% 1.4% 1.6% 1.8% 1.9% 1.9% 2.0% 2.1% 2.2%
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Source: http://www.lao.ca.gov/ballot/2012/30_11_2012.pdf

Comparison Distribution of Funds

Proposition Proposition

30

38

Allocation of funds: Proposition 98 share of increase will be determined by formula (approximately 40%)

Allocation of funds: Years 1-4: 30% State Bond Debt Relief 60% K-12 Programs 10% Early Childhood Years 5-12: 85% K-12 Programs 15% Early Childhood

11 Source: http://www.lao.ca.gov/ballot/2012/30_11_2012.pdf Source: http://www.lao.ca.gov/ballot/2012/38_11_2012.pdf

Comparison - Revenues Generated for Education

Proposition Proposition

30

38

Limited additional funds offset State General Fund obligation; $2.9 billion increase in Proposition 98 in first year.

First 4 years: 60% K-12 schools 10% Early Childhood Education 30% State General Fund bond debt. Remaining years: 85% K-12 schools 15% Early Childhood Education.
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Source: http://www.lao.ca.gov/ballot/2012/30_11_2012.pdf

Source: http://www.lao.ca.gov/ballot/2012/38_11_2012.pdf

Comparison - Effect on California State General Fund Budget

Proposition Proposition

30

38

Revenues used to fund Proposition 98 guarantee, freeing up General Fund revenues for other priorities.

First 4 years: General Fund relief due to state bond debt payments of about $3 billion annually. Remaining years: Negligible, funds outside Proposition 98.
13

Source: http://www.lao.ca.gov/ballot/2012/30_11_2012.pdf

Source: http://www.lao.ca.gov/ballot/2012/38_11_2012.pdf

Comparison Impact on Local School Districts

Proposition Proposition

30

38

Indeterminate for first few years. Increase in Proposition 98 funding to be used to pay down inter-year deferrals, reduce deficits, fund COLAs.

Roughly $1,000 per ADA.

14 Source: http://www.lao.ca.gov/ballot/2012/30_11_2012.pdf Source: http://www.lao.ca.gov/ballot/2012/38_11_2012.pdf

Comparison - Allocation of Revenues to Local School Districts

Proposition Proposition

30

38

Increased Proposition 98 funding will be allocated to State budget priorities; remainder offsets state aid.

Funding formula will be based on CBEDS enrollment counts, and must be spent at school that generates the funds. Funds to be used to support locals schools:

Educational Program Grants (70%) Low-Income Student Grants (18%) Training, Technology, and Teaching Materials Grants (12%)
15

Source: http://www.lao.ca.gov/ballot/2012/30_11_2012.pdf

Requirement to supplement, not supplant. Source: http://www.lao.ca.gov/ballot/2012/38_11_2012.pdf

Comparison - Accountability
Proposition Proposition

30

38

Requires open meeting of the governing board to make spending determinations. Prohibits revenues from initiative from being used for administrative costs. Public display of how tax revenues are spent. Inclusion of tax revenues expenditures in LEAs annual financial and compliance audit.

Prohibits use of funds for administrative costs, or for increasing compensation for current staff. Requires at least two meetings annually for each school site: one for input on use of funds, and one for response to board recommendations prior to action. Public display of school-level budget Annual report on the use of funds.

16 Source: http://www.lao.ca.gov/ballot/2012/30_11_2012.pdf Source: http://www.lao.ca.gov/ballot/2012/38_11_2012.pdf

What if They Both Pass?

If provisions of two or more measures that are approved at the same election are in conflict with each other, the provisions of the ballot measure receiving the most affirmative votes goes into effect (Article II, Section 10(b) of the California Constitution). Both initiatives contain language deeming them to be in conflict with the other

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What if They Both Fail?

Current estimate is that LAUSD will lose approximately $439/ADA.

Equates to approximately $255 million in additional cuts to LAUSD

Law allows school year to be reduced to 160 days. Cuts will need to be made immediately, as cuts will affect the 2012-13 budget.
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Sources for Additional Information

California Secretary of State Online Official Voter Information Guide

http://www.voterguide.sos.ca.gov/propositions/

Legislative Analyst Office Summary

http://www.lao.ca.gov/handouts/state_admin/2012/Prop_30_31_38_39_Aug_8_12.pdf

LAO Detailed Analysis of Propositions 30 and 38

http://www.lao.ca.gov/ballot/2012/30_11_2012.pdf http://www.lao.ca.gov/ballot/2012/38_11_2012.pdf
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Questions?

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