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©2017 School Services of California, Inc.
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Themes for the 2017 May Revision
© 2017 School Services of California, Inc.
The May Revision is Governor Jerry Brown’s last statutorily required revision to his 2017-18
proposed Budget, prior to adoption of local educational agency (LEA) budgets and the
enactment of the State Budget in June
The Administration has this opportunity to modify its revenue and other forecasts based upon
the updated economic news and state tax collections
This year, the Governor lowered revenue expectations for 2016-17
But for 2017-18 the Governor raised his revenue forecast
Meanwhile, expenditures continue to rise, causing a huge squeeze for LEAs
In response, we are seeing many LEAs deficit spending and making expenditure reductions,
including layoffs
We are also seeing, for the first time, LEAs reducing programs funded by targeted dollars
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Statutory COLA at 1.56%
© 2017 School Service of California, Inc.
Categorical programs outside of the LCFF will see a 1.56% COLA increase
As costs continue to rise, these programs will see adjustments only for COLA and ADA:
Special Education
Foster Youth
American Indian Education Centers
American Indian Early Childhood Education Programs
Child Nutrition
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2017-18 Local Control Funding Formula
© 2017 School Services of California, Inc.
May Revision proposes more than $1.4 billion for continued implementation of the LCFF,
$661 million above the January level
New funding is estimated to close the gap between 2016-17 funding levels and LCFF full
implementation targets by 43.97%
93% of the gap closed in the first five years
Reaching to 97% of the targeted funding levels in 2017-18
1.56% COLA on the LCFF base grant targets
2017-18 LCFF growth provides an average increase in per-pupil funding of 2.69%, or $249 per
ADA
Individual results will vary widely
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Cap on School District Reserves
© 2017 School Services of California, Inc.
The cap on school district reserves is triggered if four conditions are met:
Proposition 98 funding based on Test 1
Full funding for enrollment growth and COLA
Capital gains exceed 8% of total General Fund revenues
Full repayment of the Proposition 98 Maintenance Factor as it existed in June 2014
The January Governor’s Budget showed that two of the four factors would have been met by
2017-18, leaving:
Test 3 projected for 2017-18
Of the $6.6 billion Maintenance Factor as of June 2014, $543 million would have remained
unpaid at the end of the current year
The May Revision is proposing a total repayment of $614 million in 2017-18 satisfying the full
repayment of the Proposition 98 Maintenance Factor that existed in June 2014
This only leaves one condition to be satisfied – a Test 1 year
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Supplemental One-time Funds to CalPERS
© 2017 School Services of California, Inc.
The May Revision includes $6 billion for a
supplemental one-time payment to CalPERS
Purpose is to reduce the unfunded
liability and help lower and stabilize the
state’s annual contributions through
2037-38
Sources of this supplemental payment are
from Proposition 2 funds and the state’s
Surplus Money Investment Fund
No direct impact on or benefit to schools
Source: 2017-18 May Revision, pg. 67 and 68
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Multiyear Projections
© 2017 School Services of California, Inc.
Multiyear projections (MYPs) are required by AB 1200 (Chapter 1213/1991) and AB 2756 (Chapter
52/2004)
Recognize that MYPs are projections, not forecasts
Projections are expected to change as various factors change – they are not predictions
Projections are the mathematical result of today’s decisions based on a given set of
assumptions
Forecasts are predictions of the future – there is a higher implied reliability factor than for
projections
Projections will change any time the underlying factors change – therefore, plan to adjust as
conditions change
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MYP for 2017-18 Budget
© 2017 School Services of California, Inc.
Sample School District
2017-18
LCFF Target
DOF Projection
DOF Gap Percentage
SSC Recommends
SSC Gap Percentage
Net Change Per ADA
Net Change Percentage
$9,842
$9,525
43.97%
$9,525
43.97%
$250
2.70%
2018-19
$10,049
$9,900
71.53%
$9,730
39.03%
$205
2.15%
2019-20
$10,280
$10,179
73.51%
$9,959
41.51%
$229
2.35%
Sample School District
$10,500
$10,000
$9,500
2017-18
2018-19
DOF Projection
SSC Recommendation
2019-20
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One-Time Discretionary Funds
© 2017 School Services of California, Inc.
The May Revision proposes a total of over $1 billion in one-time funds for school districts,
COEs, and charter schools in 2017-18
This equates to approximately $170 per ADA
Funds are made available to further the implementation of academic standards, professional
development, beginning teacher induction, infrastructure, technology, instructional
materials, and deferred maintenance needs
As in prior years, these funds will offset LEAs’ outstanding mandate reimbursement claims on a
dollar-for-dollar basis
This funding will reduce the outstanding mandate debt to $1.3 billion
Because all LEAs receive these one-time discretionary funds, regardless of their outstanding
mandate claims, in our view, these funds should not be counted as meeting this state
constitutional obligation
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One-Time Discretionary Funds
© 2017 School Services of California, Inc.
Unlike previous years, the disbursement of the one-time funds proposed for 2017-18 is not
scheduled until May 2019 (2018-19 fiscal year)
LEA revenue recognition rules are governed by the California School Accounting Manual
Procedure 101
To recognize revenue, it must be measureable and available to pay for expenditures of the
current period
Governmental accounting typically defines available as received within 90 days of year
end
CDE has defined available for state apportionments as one year
If the Proposition 98 guarantee decreases before the 2018-19 fiscal year, these funds may never
materialize
SSC recommends that these funds not be recognized in the 2017-18 budget or MYP due to the
uncertainty around collectability
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Routine Restricted Maintenance Account
© 2017 School Services of California, Inc.
2016-17
Lesser of:
3% of total General Fund expenditures
The amount deposited in 2014-15
2017-18 to 2019-20
2020-21 and beyond
Greater of:
At least:
Lesser of 3% of total General Fund
expenditures or the amount
deposited in 2014-15
3% of total General Fund expenditures
2% of total General Fund
expenditures
Legislative intent:
Comply with minimum 3% deposit at
full LCFF implementation
Note: COEs calculate their Routine Restricted Maintenance Account contribution based on the General Fund, less any restricted
accounts. Flexibility goes away and the requirement becomes 3% in the year after a local agency receives its first apportionment
from Proposition 51.
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CalPERS Employer Contribution Rate Increases
© 2017 School Services of California, Inc.
CalPERS Board adopted an employer contribution
rate of 15.531% for 2017-18, almost 2% higher than
the current-year rate of 13.888%
While the new projected rates are slightly lower
than those previously released by CalPERS, they
are still significant annual increases that will add
to the squeeze on base revenues
CalPERS Board also adopted the contribution rate
for employees subject to the Public Employees’
Pension Reform Act (PEPRA)
Currently, PEPRA members are contributing
6%, which will increase to 6.5% for 2017-18
“Classic” members continue to pay 7.0%
Year
Previously
Released Employer
Employer
Contribution Rates Contribution Rate*
2017-18
15.8%
15.531%
2018-19
18.7%
18.1%
2019-20
21.6%
20.8%
2020-21
24.9%
23.8%
2021-22
26.4%
25.2%
2022-23
27.4%
26.1%
2023-24
28.2%
26.8%
2024-25
N/A
27.3%
*Actual for 2017-18
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Funding CalSTRS
© 2017 School Services of California, Inc.
Employer rates are increasing to 14.43% in
2017-18, up from 12.58% in 2016-17
No specific funds are provided for this cost
increase
Under Education Code Section (E.C.) 22950.5,
once the statutory rates are achieved,
CalSTRS will have the authority to marginally
increase or decrease the employer and state
contribution rate
CalSTRS cannot increase rates by more
than 1% in a year and cannot exceed 12%
overall, until the remaining unfunded
actuarial obligation is eliminated
PostPEPRA**
Employees
Employer
Pre-PEPRA*
Employees
2016-17
12.58%
10.25%
9.205%
2017-18
14.43%
10.25%
9.205%
2018-19
16.28%
10.25%
9.205%
2019-20
18.13%
10.25%
9.205%
2020-21
19.10%
10.25%
9.205%
Year
* First hired on or before December 31, 2012
** First hired on or after January 1, 2013