Assembly Budget Subcommittee No. 3 on Education Finance, Tuesday, February 24, 2026
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Assembly Budget Subcommittee No. 3 on Education Finance California State Assembly
Follow its sittingsSpeaker 6
morning, chair and members. My name is Deborah Bautista Sabal on behalf of the California Suburban School Districts Association. We respectfully urge to protect full funding for LCAP formula, including the statutory cost of living adjustment. We also support maintaining the discretionary block grant on an average daily attendance basis. Finally, we support the governor's special ed proposal to improve funding stability, credibility for districts serving students with disabilities, and we urge align our urgencies align with the Central Valley Education Coalition, and we respectfully ask for your support.
Speaker 1
Alright. Thank you for those who took the opportunity, especially those who provided specific guidance. I I know I've gotten some questions now as a result of your testimony. So that was the goal of the exercise, and appreciate that. Very helpful.
So with that, let's get started with our hearing. Today's hearing will cover some of the largest proposals in the January budget, 2,700,000,000.0 of ongoing adjustments to existing programs, 3,550,000,000.00 in onetime augmentations, and 1,500,000,000.0 in the bond, funds for facilities. So the theme that you'll certainly hear from me and my questions throughout the four panels to be you should expect to hear is how are we measuring overall funding sufficiency? And for the outcomes that we expect for our students, are these is this being sufficient? Are we funding to the levels of the outcomes that we have in terms of expectations in each of these core programs?
And then how are we trying how are we tying accountability of the use of onetime funds? This is becoming a recurring theme now, and, wanna make sure that there's accountability to that towards the state's ongoing goals on student performance, student outcomes always. And lastly, how are these proposals addressing the reality of declining enrollment? A conversation you will hear time and again, certainly in this this year's, discussions of this committee, but it's something, I think we all need to really engage on. And how are we addressing how are these proposals addressing the reality of that declining enrollment for, our school communities, supporting the hard long term planning conversations that we all need to be engaged in?
So those three questions, if you're on a panel, expect to hear variation of those questions as it relates to the the each of those proposals. Alright. So with that, let's bring up our issue one panel, please. We will hear from the Department of Finance, and then we will hear from the legislative analyst office. And the panel will provide an overview on the local control funding formula, the governor's budget proposal for cost of living adjustment for the LCFF and for categorical programs, and a related trailer bill proposal to increase necessary small schools and adjustment.
With that, let's, kick it off with the Department of Finance. Welcome.
Speaker 1
Guys to get really close to these microphones. For some reason in this room, they don't capture. Thank you.
Speaker 8
Okay. Good morning, chair and members. My name is Katie Lagomarsino with the California Department of Finance, and I'll be covering the Local Control Funding Formula and our Necessary Small Schools proposal. As noted in the agenda, the bulk of unrestricted funding for local educational agencies is provided through the Local Control Funding Formula or LCFF and it's distributed based on the number of students served and includes additional funding based on the enrollment of low income English learners and foster youth. The state fully funded the LCFF in twenty eighteen-nineteen and has annually adjusted the grant amounts via Cost of Living Adjustment LCFF base grant amounts are calculated on a per student basis measured by average daily attendance of students according to Gradespan with adjustments that increase the base grants for grades K through 10.4% of base rate, and grades nine through 12, which is 2.6% of the base rate.
For school districts, funded ADA is equal to the greater of current, prior, or the average of the three most recent prior year's ADA. As a result, LEAs experiencing short term or single year declines in ADA are largely protected from sharp funding impacts through the formula because they would be funded on the basis of whichever year is greater through the calculation. So moving on to for districts and charters in the budget year, the Governor's budget includes an increase of roughly $2,200,000,000 in LCFF funding for school districts and charters in twenty six-twenty seven and this is compared to the revised current year funding levels and this also reflects the 2.41% cost of living adjustment and 88% change adjustments. This brings the total LCFF amount for districts and charters to 85,300,000,000.0. Moving to the County Offices of Education, the budget includes a decrease of $25,800,000 for twenty six-twenty seven when compared to revised current year funding levels to reflect ADA changes, the cost of living adjustment, as well as other expenditures including differentiated assistance figures and home to school transportation.
This brings the total County Office of Education, LCFF entitlement, including minimum state aid, to $1,400,000,000 Lastly, I'll cover our necessary small schools augmentation. The budget includes an ongoing increase of 30,700,000.0 prop 98 general fund to support a 20% increase in LCFF funding for necessary small schools. This is the funding formula for schools that serve a small population of students and are geographically isolated. These schools are heavily impacted by enrollment declines and attendance fluctuations. This additional funding will help them maintain instructional programming when the student population fluctuates.
Eligible schools have the option of selecting necessary small school funding in lieu of their LCFF base grant funding. Trailer bill updates oh, yes. So we're updating trailer bill, updating the necessary small school funding tiers to implement the proposed 20% increase, and then we'd continue adding COLA as has been done in the past. As noted in the agenda, small school districts tend to have higher per student costs and less flexibility to distribute any fixed costs across a larger student body. Small schools and districts are also less able to absorb declines in enrollment as the loss of even one single student can have a greater impact on their overall funding than larger schools.
This is somewhat mitigated for those opting into necessary small school funding as long as they remain in the same enrollment band, but enrollment declines can impact other categorical funding sources. And that concludes my presentation. I also have Patrick Richel with me from the Department of Finance, and we're happy to answer any questions at the appropriate time.
Speaker 1
Okay. Thank you. I'll turn it over to the legislative analyst's office. Office.
Speaker 9
Thank you, mister chair. Good morning, mister chair and members of the committee. Michael Alferez for the legislative analyst office. I'll be sharing our comments specific to the COLA and the necessary small schools proposal. So regarding COLA, we are recommending prioritizing the COLA over other ongoing spending and funding the final statutory rate, unless revenue estimates decline significantly by May.
Funding the COLA would help districts address the various cost pressures that they face, would help them, balance their budgets, and then sustain local programs. We'd like to note that based on recently updated federal data, that the COLA appears to be tracking slightly higher than the 2.41% estimate that's included in the governor's budget, though the, final data used to calculate the COLA will be released in April. For, necessary small schools, we find that the governor's proposal has some merit. We looked at spending data that showed smaller school districts tend to have higher fixed costs relative to larger districts, which can make declines in enrollment challenging to absorb, particularly for small rural districts as my colleague, miss Locar Marcino, mentioned earlier. Increasing funding for necessary small schools with target funding to, very small districts, in the that serve students in very small schools in geographically isolated parts of the state.
Though we, like to highlight that the 20% proposed increase isn't tied to any particular assessment of costs. So if interested in adopting the proposal, legislature could consider providing a different level of funding based on its priorities. Additionally, the legislature may wanna weigh this part this proposal among its other priorities, such as, building proposals that build, fiscal resiliency or, providing increases that kinda benefit more school districts statewide. For example, we note that only one fifth of the state school districts with less than 2,500 ADA have a necessary small school and would receive additional funding under this proposal. If the legislature, was interested in providing a funding in a way that would benefit more schools sorry, small school districts more broadly, it can consider, various options to do so.
For example, it could explore modifying LCFF or establishing an LCFF add on that could take into account, the density of the school district's population where the schools, where school schools are. However, we would note that this would be complex to design and would require, analysis to ensure that any increase would be commiserate with the, cost structure of of small schools small school districts. In addition, any, funding increase that would be more kind of, beneficial to small school districts statewide would result in, higher costs than the governor's proposal. Lastly, if adopting an increase to necessary small schools beyond the statutory COLA, we recommend addressing what we call a fiscal cliff issue on our recently published report that you have in front of you. If I can direct your attention to figure 12 on page 20.
And for those listening in, the report is titled the twenty twenty six, twenty seven budget k 12 proposals and can be accessed on our website at lao.ca.gov. So this figure here, as you can see, it compares the, base LCFF rate for high schools in this blue bar. It's kinda horizontal bar. It's flat. It doesn't change whether districts have one ADA or or 200 ADA or or more.
This compares the base LCFF rate with the per student funding rates under the current law in the red bar and then the governor's proposal in the green bar. As you can see, as, schools, ADA increases, they gradually receive, less funding per student at the higher, funding bands, eventually phasing out close to the LCFF base rates. As shown by the green bar, the 20% increase results in necessary small high schools that have 286 ADA receiving 2,637 more per student compared to a similar high school that has 287% or sorry. Two hundred and eighty seven eighty eight. So just that one eighty eight difference can mean a reduction in two two thousand six hundred thirty seven per student.
So, our recommendation is just to modify the proposal to kinda avoid this large difference in funding above and below the ADA thresholds. We lay out two potential options in the report. The first is either by adding a new funding band with a higher ADA threshold or extending the ADA threshold for the, final funding band to allow, districts with or schools rather with more ADA to receive funding from necessary small schools, and then the rate would be gradually decreased over time as they kind of approach the, eligibility thresholds and then would kind of receive the base LCFF rate per student. By increasing the ADA threshold, though, this, will push likely would have higher costs compared with the governor's proposal. Alternatively, the legislature could modify, the proposal in a way or the increase in a way that minimizes this fiscal cliff and has similar cost to the governor's proposal, but this would likely re require, kind of disproportionate increases, higher increases for lower funding bands.
So more increases for the schools that have the smallest number of students and then lower increases for the higher funding bands and even minimal for the ones that are closest to the threshold. So with that, that concludes our comments. Happy to answer any questions at the appropriate time.
Speaker 1
Thank you. And I note that we have Department of Ed here for any questions that members may have. And, also, we have Fikmat here as well. Yeah. Right.
So I think I think I'll definitely have questions for Fiqmat on on this item. So COLA, obviously, is important and needs to be consistent for districts to do their planning and to make sure that they are operating in a way that allows them to serve their their respective communities. And I know that there's been some years in the last several years or some years where, COLA increases were above the, statutory requirements, but for the most part, consistently remains under 4%. This year, as noted, two point plus and potentially more depending on what the final figures show, in April, and, obviously, we will do as, required statutorily. I I guess my question is really around the sufficiency of COLA, and this is probably where, certainly, FICMAT can help us.
But maybe turning first to the LAO. We've we've had a little bit of conversation of this over the last couple of years, but where where does a COLA and what amount makes sense given changes that we're seeing? You noted declining enrollment is a reality that is almost universally faced, although there are some exceptions to that. But costs continue to grow. There are some costs that aren't related to perhaps bigger schools, but schools still remain with needs and the expenditures of those sites.
Can you share in your analysis just of COLA just generally? Because I know you've done a lot of work over the years of what your what your just what your thoughts are on adequacy of that.
Speaker 9
Yeah. We we don't have we haven't done a specific kind of analysis that kinda looks at inflationary cost pressures felt by districts and compares that with the COLA. I do recall that we kind of noted that since '20, 2021, '22, the state has increased LCFF by over 30%. Whether that tracks with inflation is something that we haven't necessarily looked at. Though, if, you know, we would note that this legislature could consider providing, increases beyond COLA as it has done in the past, I believe, in the 2122 budget and the 2324 budget, if I recall.
I don't know if my colleague might have, additional comments.
Speaker 10
Yeah. Edgar Cabral with the with the LAO. I think I would just add, I think some of the I would distinguish a little bit between inflationary cost pressures and then some of the cost pressures that you're talking about. I'm I'm not aware, for example, some kind of inflationary adjustment that adjusts for declining enrollment because that's not actually a that's not actually a decline in costs. Right?
That's your costs are, in some ways, the same, but your revenue is lower because you have fewer students. And so I think for to what my colleague's point, I I I'm I don't know that we can find a an alternative COLA calculation that's gonna address that problem for for you on an automatic basis.
Speaker 10
I think from our perspective, it's you you wanna have a COLA that's addressing those price increases. And then if things like, changes in in declining enrollment or maybe other policy changes or other expectations in terms of what cost pressures districts are facing, that can be addressed through the legislature providing an increase above what's the statutory quote. The statutory quote is sort of the minimum to keep up with base costs.
Speaker 1
But let me ask Mike Figmat. I think you can maybe take that seat at the end up there. That way oh, okay. Thank you. Appreciate that.
So 30% increase in the LCFF over the last, I think it's six years, maybe, five since 2020. Right? And and you can correct any of those figures. So there's been an increase per ADA, but I'm curious if you've you've given all the analysis you do statewide. What does that mean for a school or a district with a declining enrollment?
So there's a there's growth. Like, how much declining enrollment does it take for that 30% essentially to be eclipsed? That's probably not the right way to phrase that question, but I think you understand what I'm trying to get at.
Speaker 11
Yeah. Thank you, sir. Mike Fine, CEO at the Fiscal Crisis and Management Assistance Team. For many districts, and I think this is important, COLA is added to the per student rate, right? But when we lose students, we can easily wipe out that year over year increase in revenue.
And so while we we give an appropriate COLA based on on the constitutional and and our statutes and can say we fully funded that, the reality is with declining enrollment, a district could actually have less revenue in the subsequent year than they do in the current year, despite the fact that they had COLA.
Speaker 1
And to Can you give us a picture of since you look at statewide, like, how many the districts may be facing that dynamic?
Speaker 11
Well, so we have declining enrollment in every region of the state. When it first really started during the pandemic. We had, islands of regions, that were not experiencing declines. They actually were experiencing increases. But I would say it's fair to say that almost every county at this point and every region has declines.
We have individual districts that are flat or even growing. But overwhelming, there's declines. Declines, for our tiny and smalls. And so I appreciate the administration's proposal on necessary small schools, although it's very, very, as Michael said, very, very focused. Right?
We're worried, and you'll see that in our outline today in our presentation. We're very concerned about our tinies and smalls. So it's fair to say the majority of districts are in declining enrollment, and thus, COLA does not have the same dollar impact. It's certainly, as already mentioned, it's it's not even covering inflationary, increases, in in the current trend. And I would say for districts, I'll use this analogy.
Go to bed on June 30 and you wake up on July 1, new fiscal year. Nothing's changed, but your costs have gone up on average five to 6%. When COLA is below five to 6%, then you're actually moving backwards, right? Not moving forward. Then you add declining enrollment dynamic to that.
And and the LEO has already mentioned, I think this is really important. When we lose a given student, there are few cuts to make for a student. And students don't come in nice neat packages at twenty four to one in k TK through three. Right? And so we get a couple first graders, a couple second graders, a couple fifth graders.
Let's just say it's a k eight, so I can have one more data point. A couple eighth graders leave us because it's spread across the grades. There are really no cuts to be made. We we can't eliminate a single teacher or an instructional assistant type of thing based on that spread. If we lost twenty four second graders, that'd be a different story.
We could reduce our second grade teaching staff by one and have some offset savings. But even then, it's important to note that those direct service of a teacher and a paraprofessional only account for about 40¢ of the dollar loss. Mhmm. So if we lose a dollar due to ADA dropping or enrollment dropping, only about 40% of it's recovered in that direct service. Then there are other things like textbooks and so on that you would add to that.
And and that's why districts are struggling a bit. But it is the majority of districts across the state that are in this dynamic that you're expressing, I think, some concern and questions about.
Speaker 1
Appreciate that. I I have some questions on the justification of the, 20% for but we have that panel. So maybe maybe I'll I'll wait to ask those questions then, and I'll turn over, questions now to my colleagues. Doctor Patel.
Speaker 12
Thank you for being here as always. These conversations are always very interesting to me. I do have questions on the 20%. You had mentioned from, Elio's office that that was a a percentage picked in in the range. What would be the actual cost if we were to cover the cost?
Do we have a good sense or a calculation of what that might be? It might even be more than 20% in Yeah.
Speaker 9
No. We we haven't done any analysis. We just were noting that the 20% wasn't tied to a specific or specific assessment of cost. So
Speaker 12
Okay. Thank you. That that's very helpful. And then when we're talking about ADA, do we know ADA loss? Do we have a good sense of how much of that is, lost due to after effects from the pandemic, people just leaving the public school system versus trends, over the years and declining enrollment?
So what I'm trying to imagine is is some of that ADA loss recoverable if we were to perhaps go back to those families and say, hey. Why don't you come back to public school? It's just like it used to be, better than it used to be, so to speak. Or is this really just the future of California and we really need to tackle it head on?
Speaker 11
The number one factor in enrollment decline so I wanna separate enrollment from ADA for a second. The number one factor in enrollment decline is lower birth rates. So our population is is at the young at the lower age bands that that k 12 and k 14 serve, it is in lower birth rates. So while our population has gone up and down the last couple years as a state, we're currently growing again. But it's in it's in the upper bands.
I like to say it's in the band I'm in now as opposed to the band as educators we want it in. Right? The zero to five and the and the five to 17. That's the number one factor. The second factor, I think, would be the the issue of migration and immigration.
Migration to other states, immigration in and out of or into California. We don't have the immigration that we once had that offset historical ins and outs. We do have, since the pandemic, higher rates of migration out than traditionally we have seen. But the number one by far factor in declining enrollment is lower birth rates in the populate the population in that age group dropping. Now let's move to ADA.
Yeah. So as enrollment declines, ADA is going to naturally decline because they go together. But we have the other factors really that are lingering from the pandemic. And that is as a parent with a sniffle, I sent them to school. Right?
Today, parents think twice about that. We all think twice about that because we no longer trust the sniffle as just being a sniffle. Right? We also have other factors going on, including immigration enforcement and other external factors that are influencing actual attendance, and those vary widely by district. But overall, again, back to the chair's question, declining enrollment as across the state, thus declining ADA.
And I've forgotten the factor we're using in prop 98. Is it one point is it 1.4? Am I remembering that right? Around 1.4 is the ADA decline, assumed in the budget, proposals, the January 10 budget proposals. I think somewhere finance can correct me.
Speaker 12
And thank you for distinguishing between enrollment and ADA. I was merging those, mashing them up in my head. And I appreciate you, you know, teasing those apart because that's important to think about different strategies to address both sides of
Speaker 11
We often argue that you can't control enrollment. I tell school folks, don't don't think you can control birth rate. That's not our job. Right? But once we have a student enrolled, we do have influence on attendance.
It is it depends on how we wanna exercise that and so on, but there's both carrots and there's sticks, right, with regard to getting a student there. The other factor that I think we haven't fully come to terms with is since the pandemic, we've added a grade level, TK, transitional kindergarten. Transitional kindergarten though and kindergarten have the highest absentee rates. I mean, double dip way above any other grade. I mean, what, four or five times, I think, above any other grade level.
Right? In some cases, the 3040%
Speaker 11
Of absentee rates of our youngest kids that we're serving. So we're not getting the full revenue bang, if you will, in a district as a result of adding that grade level.
Speaker 12
Yeah. Especially with kindergarten being optional. Right? Families do see it as optional.
Speaker 11
Yes. But that in my mind, and I think it's some of the data plays out here, that's a decision about enrollment. But once enrolled, they are also our most absent. The the our youngest children are our most absent.
Speaker 12
And I would say even when they're enrolled, families feel like kindergarten
Speaker 12
Is optional. Yeah. And, of course, getting back to what you touched upon with absences, a lot of families misunderstand and excused absence for health reasons as being covered by ADA. And so, of course, post COVID, families are being more cautious, and they'll keep their children home when they're sick. They'll call in and saying, I'm excusing this absence, not quite understanding that that will impact ADA.
Speaker 11
And those are policy decisions that are worth talking about instead of a full shift to enrollment based or membership based. Could we look at policies that look at average absences and adjust for that? We did that, oh my goodness, twenty five years ago when we eliminated excused absences. We adjusted everybody's base Edgar, you're gonna have to help me. The base ADA for the at that time, the statewide average rate when we eliminated excused absences from the funding model.
Speaker 12
Yeah. That is an area that I'm interested in looking at going forward just to see revisit. Is it an opportunity to revisit that considering our current approach to health care and well-being for our young? If One more question that's slightly an uncomfortable one. Is there has there been a statewide analysis around districts that are small districts merging or coming together?
And the reason why I'm asking this, it it's not to necessarily consolidate schools because in a lot of our school districts, our small rural school districts, you've got 400 square miles of attendance boundary, and I'm not gonna ask a family to try to track that over mountains and through snow, to get to school every day, but the administrative costs. So when we're talking about the base you know, when we're funding at the LCFF base for some of these school districts, some of that is administrative cost. So does if a school district were to merge its administration, because that's the only cost we would really save.
Speaker 12
We wouldn't be saving the electricity on each individual school site or the maintenance on each individual school site. Is that impactful enough on the budget side to make it worth, obviously, the heartache that would come to our families?
Speaker 11
I think it's fair to say we think in most cases, would be impactful and worthy of consideration. Again, I'm gonna turn to the LEO to double check my history, but I think it's been since the mid sixties that the states offered a financial the last time the state offered a financial incentive for districts to unify Mhmm. Or merge. Not merge, but unify. Right?
I'm looking at where I I I'm pretty sure
Speaker 12
You say unify just to clarify. Sixties. That's for elementary and secondary to come together. Come together. Okay.
Speaker 11
There are some rigorous formulas that you have to consider both on the revenue side and on the salary side when two disparate, if you will, districts merge together or unify that can provide both incentives on the cost side, but it can also provide disincentives on the cost side because of the salary adjustment that has to be made to blend those from a low to a high if the two are not if the two are not similar. But, yes, you would be eliminating doctor Patel, you'd be eliminating a superintendent and a the extra board. And you, as a former school board member, know this well.
Speaker 11
The the hurdle there is probably less financial, and it is a board giving up their seats. Right? It's a political consideration more than anything.
Speaker 12
Yeah. And I remember reading a report, maybe you could trigger my memory a little bit more, somewhere from a county north of San Francisco. The county, office of education did an assessment around how unification would impact LCFF funding to those individual school communities, and it turned out that they would see a decrease because they would lose concentration. And so they ended up making a fiscal decision to not do that because there was no hold harmless policy in place for that.
Speaker 11
Yeah. I'm I'm not remembering that study specifically, but I do think Sonoma County, has something like 47 districts in its county. So very lots of including including one district, I think, has six kids at it. Right? And we're seeing some of that play out even in the financial difficulties that the two Santa Rosa districts are experiencing.
Speaker 11
Let me give you another alternative. Speaking of Santa Rosa and Petaluma, both Petaluma City and Santa Rosa City, both in Sonoma County, they are two different districts, an elementary district and a high school district with a common administration and a common governing board.
Speaker 11
So they have achieved that efficiency without the merger of the two districts. We have that scenario someplace else that I'm drawing a blank on as well. But right there in Sonoma are two examples of that where they have that that administrative layer has been, essence, eliminated.
Speaker 12
Thank you for that. I imagine that if we look at policies that encourage consolidation, merger, shared governance, we would wanna make sure that we wouldn't lose funding for those pupils because those pupils are still experiencing hardship. Thank you.
Speaker 1
Thank you, doctor Patel. Oh, did someone Elliot wanna provide further comment?
Speaker 10
Wanna add one one comment. I think my understanding, I think, to mister Frank said that these incentives have been a while since we've done them. But I think one you one difference from now to then is now we have LCFF, which has everybody gets the same rate per ADA per grade. In the old system, we had these revenue limit rates that were historical. And so part of what we did is we mod we would modify that revenue limit rate to create that financial incentive.
If you do that under this system, then that means they get more than everybody else. And so I think that's just something that you need that that's important to keep in mind. There is the blending. And so if it's an elementary school district, their purse ADA rate is different than a high school district if you're merging. But so that's just one one additional wrinkle is that that would require sort of having these districts if you create this incentive for them to receive some funding that's of a different a different rate than others.
And so that's that's just that's another comp a complicating factor in part of this.
Speaker 1
Yeah. It it just reminds me. I mean, we have complicated even in the last few years where ELOP is not high school districts are not eligible for those funds. But if you are a unified district, you can, and therefore, you can use it in your high school years or middle school years. So further complications there.
Mister Fong?
Speaker 16
Thank you so much, mister chair. And I wanted to follow-up on one of the chair's comments regarding COLA. So this is to the LAO. We know that the uncertainty in some of the data from the federal government administration. So it's created a little bit of uncertainty around the COLA.
I know you touched upon this here as well, but in terms of the projections for COLA, do we have a sense as to will be up, down, like, what
Speaker 9
Yeah. So there was, data released, just last week, and it shows the COLA. Part of it is also our revenue estimates, for the final quarter that is used to calculate the COLA, which is twenty twenty six quarter one. But it COLA's tracking slightly higher at 2.86%, I believe, our estimate currently compared to the 2.41 that's included in the budget.
Speaker 16
Okay. Thank you for that context. And we know that any point five increase is equivalent about $450,000,000 in the budget impact. So I really appreciate all the comments here today and the insights. Thank you, mister chair.
Speaker 17
Hi. Thank you. I wanted to just say thank you, for the 20% of, for necessary small schools. It's a huge huge factor for me as I represent 11 counties of very rural areas. I have 41 of those schools in my district that are struggling to keep their doors open because they have as their enrollment might decline, they still have a base set of bills that are still there, and everything's increasing.
So, and, unfortunately, I get
Speaker 17
far too far far too much, although I enjoy it, far too much about these issues. So, I just wanted to say thank you that that is really huge for for rural California. Our enrollment, declines are typically I I have nine of my 11 states, border another state, and they're leaving the state, for better opportunity, and then fires. So most of my schools that are in fiscal distress have been plagued by fires, and I think I've talked about that before. Or due to those fires, now the mills are closed.
So, that kills our our rural communities. So I'm very, very eager to see how this works and how this helps. So thank you.
Speaker 1
Thank you. Let's go back just briefly. I I was assuming we're gonna do necessary small schools later, but, this is the item. To the Department of Finance, what is how do we come up with a 20% figure? What is the justification there?
Speaker 8
So Katie Lagermercino, department of finance. We had looked at the cost small schools are facing and found that up updating what was in statute by 20% would really help these schools, and we also kept in mind the level of available resources in the overall 98 p 98 package. And Again, the cost pressures for these schools are, you know, inflation, higher per student costs, less flexibility to distribute, declines in enrollment, and they can't close sites in response to declining enrollment. So that is where we landed with the 20%.
Speaker 1
So it sounds like it was exercise of working your way backwards. This is how much we have and this is how much we can legally do. But was there an analysis of whether that 20% was gonna mean something to any size of those small schools? Is it gonna hit one school that's, you know, couple 100 students in a way differently than it would a school with 50 or less students. And it just it it just seems like there's, like, economies of scale, and I'm not sure what analysis was done to identify what that economies of scale would would be.
Speaker 19
Amber Alexander with the Department of Finance. So there were, to my colleague's point, several questions that we that we grappled with. We did recognize that this is an ongoing adjustment, so wanted to make sure that the amount that we were providing was a sustainable amount, in light of, you know, additional revenue changes that, may impact the guarantee going forward. In terms of, individual school sites, we did not look down at the impact on the individual school sites, but we did recognize that the last time the necessary small schools funding augmentation was specifically adjusted was 2223 and taking into account COLA COLA and cost increases, since that time, felt that 20% was a figure that we would be able to adjust justify going forward. Certainly, there have been since the proposal, was put forward, some comments and feedback received around whether or not the administration is open to adjusting things like the ADA tiers, which would get at, I think, some of the the points and questions that are making in terms of, impacts for those that are on the cusp, and impacts that potentially, declining enrollment or ADA has had since the program's inception.
And those are conversations that we look forward to in the spring, but those were not, conversations that informed, the projection that we put forward at governor's budget.
Speaker 1
Thank you. Appreciate that. I think, that that that that comment really is what I was talking about at the beginning of the conversation, which is, you know, with with budget, we try to solve for a number. We we do math. You've got revenue.
You've got expenditures. What can we do? And what we'd like to start looking more at, certainly at this committee, is looking at the outcomes and what what happens with those dollars when they go to specific programs. And so I I'm I'm grateful. Prudence here is certainly the right approach.
We've only got x number of dollars. Let's figure out what we can do. We haven't done an increase in a while, so we should. Those, however, should not be the only justifications for doing augmentations to programs. It's what are the outcomes of those resources that are going to those programs.
And so, I welcome that conversation that you just mentioned about revisiting, but I don't just wanna solve for a number in terms of dollars that are available to spend for this program as opposed to what does that policy do for a school that surely is deaf obviously is in need of resources to be able to continue its work. And so I just wanna make that point, as I said at the beginning, I'll make that point probably with every panel, but it just solving for the mathematical number for the dollar number is one thing. Solving for the issue of serving students best given those particular dynamics needs is is a different type of analysis that I think we don't do a good enough job of of of doing as a state, and I think we'd like to do more of. I don't know if the LAO has comments towards that or, Fikman has any comments so we can wrap this panel up. No?
Okay.
Speaker 11
Yep. I think, Chair, you've already mentioned this. The necessary small school, which is something that we had the opportunity to talk to finance about in the fall, because of our concerns about tiny districts, is a school based formula, not a district based I e. So it addresses schools within a district. It could be a very large district with a very outlined small school up in the mountains where the district is serving the valley or something like that.
So it it is a start though to address some of those concerns. Is it a hundred and forty one? Hundred and forty one or 144 are the number of schools impacted here. It is meaningful to them. Does it address all of their needs or bring them up to par?
I think is in part your question. But it is it is a meaningful adjustment.
Speaker 1
And to your point, I assume a small school in a small district is probably different than a small school in a large district in terms of impact. Absolutely. And so 20% across the board is not looking at those dynamics. And and so to to to the point earlier, glad to see that this is being revisited, but I I hope to see more justification as to what that is, not just because we have we think they need more money, which they do, and we have this much money to spend, so let's spend it. So thank you.
Appreciate that. Thank you to all of you on this issue. We will hold this open and look forward to staff working with the LAO on alternative calculations to these items. We will take on issue number two, please. We can have the panel come forward.
This is on special education equalization, another, augmentation in this year's budget. This is, certainly a challenge I've heard from a couple of my colleagues. I appreciate colleagues both on this panel and not on this panel or Siri on this committee who care about this deeply. So I appreciate that this is being addressed, but I think we wanna get into it a little bit more. And perhaps there is some room to make a little bit more improvement on something that certainly has come up as a common theme across the state, certainly across districts.
So with that, we will turn it over to Department of Finance, which will be followed by the LAO, and then CDE, I believe, has a presentation or available for questions. Finance, welcome.
Speaker 20
Thank you. Good morning, chair and members. Elena Powell with the Department of Finance. I'll be providing an overview of the special education investments in the 2026 governor's budget. So in recognition that there are often additional costs to serve students with disabilities, the budget annually appropriates special education funding outside of the local control funding formula.
The special education funding stream receives growth in cost of living adjustments. The governor's budget currently proposes an increase of 144,900,000.0 ongoing Proposition 98 General Fund to reflect a cost of living adjustment of 2.41%. The budget proposes a decrease of $35,100,000 ongoing Proposition 98 General Fund to reflect a growth adjustment of negative 0.592%. Additionally, the governor's budget proposes an augmentation of $5.00 9,000,000 ongoing Proposition 98 general fund to increase the special education base rate. This infusion of funding, along with the proposed cost of living adjustment, equates to a new statewide special education base rate of nine ninety nine per eight per average daily attendance or ADA.
At this level, special education rates across the state will be fully equalized, meaning every special education local plan area or SELPA will receive the same base rate per people for state special education funding going forward. And that concludes my remarks, I'm happy to take questions at the appropriate time.
Speaker 21
Good morning. Sarah Cortez with the Legislative Analyst Office. We do recommend the legislature adopt the proposal, to provide 509,000,000 to increase special education, base rate to 999 per student as this would help address district cost pressures. Based on our review of historical spending districts have to had have had to increasingly rely on local funds, which is largely LCFF, to cover special education costs. The legislature could adopt the governor's proposal, though, with less money.
This estimate will shift with updated cost of living and updated attendance data, but we currently estimate the cost to to bring the base rate to 999 would cost 325,000,000, so not the 509,000,000 currently provided in the governor's budget. And I'm available for questions. Thank you.
Speaker 22
Good morning, chair and members of the committee. Thank you for the opportunity to speak today. My name is doctor Rachel Heenan. I'm the director of the special education division for the California Department of Education. Equalization for special ed funding is not simply a technical adjustment.
It's a matter of equity and integrity in our system. Today in California, approximately 15% of our students are identified with a disability. Fifteen. A student with similar with a similar disability and possibly similar needs generates different level of base funding depend depending solely on where that student lives. That disparity is not based on cost, outcome, or student need.
It is a result of a historical formula that no longer reflects today's realities. As a state director of special education, a former SELPA director, and a district director of special education, I can tell you inequitable based funding directly affects staffing stability, service capacity, and program access. It affects student outcomes. Lower funded SELPAs rely heavily on local general general funds to meet federal obligations that create structural strain and limits on our ability to invest proactively in inclusive practices and early intervention. Equalization is about connecting a longstanding structural inequity.
It's about correcting that inequity. It establishes a fair, equitable baseline so geography does not determine opportunity. If we believe students with disabilities in California deserves equitable access, then equalization is not optional. It is necessary. Representing over 870,000 students with disabilities in California, I respectfully urge your support.
And that concludes my comments.
Speaker 1
Thank you all. Appreciate that. We will begin, questions on this panel with doctor Patel.
Speaker 12
Yes. First, I wanna share my thoughts with the Department of Finance. I wanna express deep appreciation for equalizing out the SALPA rates between school districts. That has been a long standing concern. I think all of our kids deserve more and deserve to have access to the resources and supports they need.
In fact, that is, in our constitution. So wanna make sure that we are able to address, the need for least restrictive environment and full inclusion as much as possible. When our students with disabilities succeed, all students succeed, it, reflects back on our whole student population and our whole public education system. So thank you for taking that effort and putting in that work to make sure we can get there. On the budget differential estimates, understanding now that we might be looking at a COLA of, 2.81% possibly, does that change Department of or LAO, does that change what we might see as, the budgeted delta?
Yeah.
Speaker 21
So the COLA is is the first adjustment, so that gets you to a certain place. And then to raise it to the $9.09 9, that's that's a different cost. So the COLA would bring it up just slightly, so you need a little less money to, to get to the $9.09 9 rate. But I haven't done an actual estimate of what but those that will be forthcoming, as we get finalized COLA estimates. We can kinda keep these estimates appraised.
Speaker 12
Wonderful. And so what that seems to me is there might be a 184,000,000 difference, maybe less than that depending on the COLA, and I would like to make some suggestions to consider for spending that money within special education. One of them is an interest area of mine because I've seen the impact of it, and that is the support inclusive practices program. There was budget for that in previous years. It is, coming to a close.
As a school district who was, part of a school district that was able to improve its practices, findings based out of a FICMAT report, and we were able to, be part of the Chapman's Support Inclusive Practices program. And we saw a dramatic significant improvement in our ability to have our educators prepared for the classrooms with least restrictive environment. That coaching was instrumental in our success, and I would like to see a little bit of money be directed towards that. Additionally, I would love to see some investments to, a policy that was passed a a couple years ago, the alternative pathways to diplomas. Some school districts are struggling with those implementing those alternative pathways.
And there might need to be additional coaching, best practices models, supports for those districts trying to move in that direction. Again, we wanna make sure our students have the greatest opportunity for success as they leave our public school system and enter the big wide world in front of them. And having a pathway towards, diploma, a high school diploma would be a great boost for them. And since that is policy in place, let's make sure we're able to implement that policy in the most effective way possible. And the third is, perhaps supplementing the extraordinary cost pool as, costs for delivering the specific supports and services for our students with disabilities shift and increase.
Some of our school districts are struggling and increasing putting some of that extra money into that extraordinary cost pool would be really, really helpful to alleviating some of the cost pressures that our districts are facing on the ground. And so those are kind of my three suggestions. The support inclusive practices, one is, I think that helps with educator training specifically and would be a robust investment.
Speaker 20
Well, we can't make any guarantees, of course, as there's many factors that are gonna be going into our estimates in May. We're happy to take these suggestions back as we head towards May revision.
Speaker 1
Thank you. Department of OCD, any thoughts on those specific programs and ensuring resources support those programs?
Speaker 22
Absolutely. I think as we see the data in the state regarding inclusive practices, there's a correlation between improving inclusive practices and student outcomes. CDE is definitely in support of continuing funding for supportive inclusive practices, but we also feel that, it is critical to have a central point of contact for accountability, in these programs, and CDE is really looking forward to continuing and ensuring that inclusive practices remain centralized in our state.
Speaker 20
Okay. Also briefly, just wanted to note that we are extending the SIP funding by one year, just as a as a brief side.
Speaker 12
Or It it does. Okay. But one year is one year. Yeah. And there are many districts that haven't had an opportunity to, get the training from institutions supporting those training programs.
So there's a long way to go still. We haven't even reached a significant percentage of districts
Speaker 12
Being able to be trained. So it's a program that's proven successful, and I would like to see it extended.
Speaker 1
Yeah. Again, additional resources, more of an eye on the accountability, make sure that the success exists. And so, certainly, we'd be looking at that favorably. I know that the LAO noted in the analysis that the number from the January budget to the potential available funding is roughly brings the rate up almost a 100 doll a $100 more per student, I believe. Can you remind me what your number is, LAO?
Speaker 21
The are you just just a clarification, the number to get the number to get to the nine nine nine base rate, is that what you're asking?
Speaker 21
Yes. The 325,000,000 it would cost under the governor's budget assumptions to get to 999 for a base rate for all students.
Speaker 21
the COLA? To do the opposite to add so we have the COLA, then if you put 509,000,000 towards the special education base rate, that would bring up the base rate to 1,030, almost $33 per student.
Speaker 21
Under the governor's budget assumptions. Things will shift slightly because of full on attendance, but under the governor's budget, that's how much. To get to the 1,033, it would cost the 509,000,000, and that's budgeted currently.
Speaker 1
Okay. Is there any feedback at the moment on the availability of those funds for this purpose?
Speaker 20
Just wanting to note that all of the amounts are going to be revised as of May revision because we'll need the updated average daily attendance estimates in COLA.
Speaker 1
Okay. But perhaps some, potentially resources available some of the priorities as were mentioned. So we'd be interested in your feedback at revise on that reflective of the comments of the committee. So the the issue, declining enrollment still, and you're not gonna you're gonna get tired of hearing that certainly for me. But also so that's the enrollment is declining, but yet the identification of students is growing.
So there's some dynamic there. I I wonder because I've heard from some of the local superintendents that there is a large number of TK students that is being classified or identified as special education. Do we have any trends? Does CD have any trends on what is happening by age group or any data that can help us identify what the the what you point to in your presentation of the growth, of almost 15% now, I think, of students in special ed?
Speaker 22
Yeah. We definitely have data, I'd be happy to share, share that with you. But, specifically, our trends are about an additional twenty five thousand students identified with disabilities per year. We can attribute that to early intervention, number one. And also, if you look historically at our students who were born with significant low birth weight, those students are surviving now where years before we didn't have the technology and the medicine to meet the needs of those infants.
Now we're seeing advances in technology. Our students, our babies who we are serving in early intervention are living. They are living, however, with the medicine and low birth weight, they are having additional disabilities. So we're seeing an increase in that. But we also are, our obligation is also child find.
So we are working with hospitals, our agencies, our regional centers to make sure that we are serving our students, from birth. And so we are catching students earlier as infants and toddlers, and so we're seeing that rise across I the
Speaker 1
I think I'd be interested in seeing where some of those increases you've maybe identified some data points of where it's happening.
Speaker 1
Again, just it's it's maybe anecdotal, but it's from, you know, trusted educational leaders that there's, in some instances, because of this new grade and, some, folks who hadn't worked with kids of this age, identification as special ed may be. While we wanna get that intervention done early, in some cases, wanna make sure it's also accurate. And so to the extent that we are providing more resources, which we should to special education and equalizing and and others above and beyond, I wanna make sure that there's also appropriate identification and of of the right students. So your data will be helpful for that. Great.
Thank you.
Speaker 17
As always, David asks my questions before me. He always knows what I'm gonna ask. I did wanna say, thank you. I feel like I repeat myself a lot, but the ZIP code of the child should never ask it never be why they're receiving that education or those opportunities or not receiving that. It's also one of the hardest positions to fill is our special education teachers in my district, and they often have high caseloads, and and they're they're are positions that aren't filled, so they're covering for other people.
So I think this is a huge supporter for that. So I, am excited to see it move through the process, but thank you. David asked all my questions. So
Speaker 1
Okay. Just a clarification for, finance. So the budget proposes 509,000,000. Right? So we're on the same page.
The LAO identifies that if that is the figure, then the rate should be higher. So this is more of a we can do the math. This one, we can figure out. Is your is is the proposal 509,000,000, or is it the rate of $990?
Speaker 24
Hi. It was Maya with the Department of Finance. So the the proposal is the rate of $999 because that is what we put into statute in in our proposed trailer bill language.
Speaker 1
Okay. Yeah. So we could potentially correct the trailer bill language to be reflective of 509,000,000, which would then increase the rate?
Speaker 24
Like, similar to what my colleague has said, we can't make any promises as we head into May as we get updated revenues and ADA, but it's something that we, can take back.
Speaker 1
But this is a difference of remind me again how many million dollars? If it was $9.99 as opposed to $10.30 Yeah.
Speaker 21
Yes. You would have so under to to keep it at $9.09 9, you have, currently, in governor's budget, a $184,000,000 excess.
Speaker 21
Yes. Excess. And then if you were to keep it peg it at five zero nine, instead of $9.99, you could raise the per pupil rate to a hundred and thirty two sixty two.
Speaker 1
So the governor's proposal, just so that you're all clear here, is the rates of nine ninety nine, not the actual 509,000,000, which is what's stated in the budget. So we now identified what that figure is of that difference, so we can take a an approach one way or the other. We can discuss that further, and we will leave the issue open to further discuss and, make a decision on this. Thank you. We will now go on to issue number three.
This is on the, learning recovery block grants. So I'd asked Department of Finance to please come forward and the LAO. Those are the two we've got on this panel. And, this is the proposal to restore 757,000,000 to the learning recovery block grants. So we will start with the Department of Finance.
Speaker 25
George Harris with the Department of Finance. The governor's budget proposes 757,300,000.0 one time proposition 98 general fund to to support the learning recovery emergency block grant, which provides funds to local edge educational agencies to establish learning recovery initiatives through the twenty twenty seven, twenty eight school year. This investment is expected to be the final payment to this program, which has received multiyear investments totaling 7 over 7,000,000,000 in past budgets to support schools and learning recovery efforts related to the COVID nineteen pandemic. Noting that while there was trailer bill language amended to remove the intent language from statute, there are no programmatic changes made to the existing program.
Speaker 18
Thank you, and good morning, chair and members. Ken Kapon with the analyst's office. I would recommend approving this proposal for four reasons. First, the underlying problem, learning loss and academic recovery, does remain a significant issue. State test scores have improved over the past couple years, but they are still not back to the, pre pandemic levels.
Second, the accounting data that we have, this is summarized on page 15 of your staff agenda, does show districts have allocated the bulk of these funds for academic construction. That's consistent with the purpose of this grant. When we talk to districts about this grant, they give examples of using funds for things like tutoring, supplemental instruction, early literacy for younger students. The state isn't collecting data that would allow a really outcome oriented analysis of those funds, but on their face, those activities do seem helpful. Third, as the Department of Finance mentioned, this proposal is accelerating the repayment or the restoration of the grant.
That gives districts more certainty over their final funding levels, and it reduces the cost of making another payment, next year. And that's prudent budgeting because we have a lot of one time funding available in this year's budget. We may or may not have that funding available next year. And then finally, as your staff agenda points out, the state has kept the original spending deadline for this grant of 06/30/2028. There was some discussion last year about potentially extending that debt deadline.
We had a recommendation along those lines that ultimately wasn't part of last year's budget agreement. But if you are going to keep the original expenditure deadline, then accelerating the grant becomes even more important so that districts have enough time to make thoughtful spending decisions. That concludes our comments.
Speaker 1
Thank you. On on this topic, you know, certainly, the data is, is pretty clear on, what is happening with our students, and so there is more work to be done, and I'm not quite sure that, you know, there's a magic, deadline when everybody's gonna recover their learning, loss, and and we'll just be good to go. So I think we need to think about this as we have a conversation about coherence with all of our programs through this committee. Where does this fit into that? And I would say that, we we had the hearing on the, learning recovery practices, and there were some outcomes that proved to be more successful than others.
And so I'd like to, again, focus on accountability of where we're spending our resources, not just spending to say we spend money on learning recovery, but what are the outcomes of those investments? And so I'm just curious, for, Department of Finance, and I don't know if CDE would be also appropriate here. But, one time funds, what is the expectation of the outcome with these funds based on the different practices that we've seen, different results and outcomes from the different LEAs? Is there gonna be some differentiating happening there? Is there gonna be some more focus on some of the practices that have been more successful?
What what should we anticipate the use of these funds? How how will they be deployed?
Speaker 25
George Harris of the Department of Finance. I think the administration thinks that the the main focus of these funds is is definitely related to statutes. So there's statutory focuses on instructional time, providing additional resources to, evidence based learning supports, after school programs. I think it really is dependent on the individual needs assessments that each specific school district goes through and identifies what their students need and their specific districts need. And then from there, putting those funds placing those funds in the appropriate buckets per the statutory requirements of the block grant investment.
Speaker 1
Okay. Appreciate that. You know, utilizing those requirements, we've seen different outcomes with these funds. So, I think one of the themes you'll hear, consistently through this through this committee is how are we maximizing the use of those funds. So someone has just joined us and may have some more comments on this.
Please introduce yourself.
Speaker 14
Pardon me, Joshua Strong, California Department of Education. Specifically, in terms of the the LREBG, first of all, just a reminder that there is the requirement in between the 2026, '27, and 02/2728 to reevaluate assessment. So LEAs will be going back. They'll be looking at that needs assessment again, determining whether or not it's still relevant and and whether or not they need to make adjustments moving forward. And then those those adjustments would then be captured within their 2027, 28 L CAP, and and expending those those funds.
Also, just a high level, look at the use of LREBG funds within the local control and accountability plans, which is where they're currently captured, shows that LEAs are using those, LREBG funds in line with the statutory requirements. There's a lot of academic resources that are being provided. There's also a lot of school based mental health and attendance that's that's being addressed as part of that that ongoing work. And in a lot of instances, what we've seen is we've seen LEAs that are continuing initiatives that were initially funded with federal ESSA funding and and have been continued with this LREBG funds. I think in terms of of the, you know, earlier comment that that the LEO made in terms of the expenditure cycle, at this point in time, the current expenditure cycle is is set to end at with after the first year of the next three year LCAP cycle.
If the expenditure deadline was pushed out to 02/2930, That would cover the entire three year LCAP cycle and provide a little bit more flexibility for LEAs to use those funds. But as it as it looks at this point in time, a lot of LEAs are are ramping up the use of their funds and will probably have the majority of those expended by the 2728 deadline.
Speaker 1
Yeah. And it it sounds like thank you. That's very good context. It sounds like people may be I wanna say rushing, but given that there's a deadline, people need to spend resources that are made available to them. That that is our expectation.
And perhaps since we are requesting or expecting this reassessment that you mentioned, it may sound may be more prudent to align that with the ability for them to have enough of a runway to one with reassessment to then deploy those their initiatives in a way that are reflective of those needs. And so I think it's certainly something for us to to consider. And on a and and on a going ongoing basis, given the success that's been demonstrated by by the programs as compared to the federal programs as you just mentioned. So that's it for me on this item. Sadwick?
Speaker 17
I just have one. Do you have any more information how much actually went to, like, tutoring programs or not just
Speaker 17
The and then direct instruction. Do you know how like, do you have a percentage or data from that from any of the reporting? This is
Speaker 18
how much actually went to actual tutors, not not just adding an aide or another teacher. We looked at the data, and, it's not disaggregated down to that level. So I wish I had a better answer for you, but in the regular accounting data that we're looking at, it isn't at that level, unfortunately. Okay.
Speaker 17
And then some of the districts some of the LEEs had much more progress, I would say, and their their practices are working. Is are we continuing are are we looking at ways to continue funding for some of those programs or how how this funding is used for for recovery strategies or learning recovery strategies?
Speaker 25
So the statewide system of support does rely on the best practices measures throughout it. Geographic lead agencies have created a needs assessment template that they have created that kinda highlights some of these best practices that are going on across the entire state that other that all LEAs when they're doing their need assessments and acting accordingly on where they want to place funds, on how to spend and utilize those, how do you utilize those dollars. But, it's it's definitely something that the statewide system just in general focuses on is continuing to lean on those best practicing agency local education agencies and then trying to make sure everyone can do what's best for for their specific needs. And
Speaker 14
I'll add on to that. One of the things that that, you know, typically will go on on an annual basis is that the county offices of education will work with the LEAs as part of their LCAP needs assessment. That goes into the alignment of of what's being done. And so what we found is that with some districts, they've been able to align the work that's being done related to the the differentiated assistance support that they're receiving as well as the federal comprehensive school support and improvement that's that's required under ESSA in order to maximize the resources and and maximize the outcomes that are going on with the use of LREBG funds because they can all be used, in in tandem to support those ongoing initiatives.
Speaker 17
Okay. I just I I fear that that LEAs are using this not for the true intention or what they're being sold because of the title, if that makes sense. So that's just one of my worries that they're filling other holes because they're also underfunded.
Speaker 1
So so to help answer that question, because I think it's important, who the reporting mechanism, who is it to, and is there auditing associated with this? Who can help us understand that? Reporting of the use of the funds and
Speaker 14
So currently, based on the Kayla j settlement and and education code section five two zero six four point four, the learning recovery emergency block grant is captured within the LCAP. Given that the school districts, you know, would be the the county offices of education would be looking at school district LCAPs, and the department looks at the county office of education LCAPs and LCAPs for single district counties, such as San Francisco Unified. However, there's no specific, like, auditing requirements related to LREBG. There's also no specific requirements to evaluate the the ongoing performance specific to LREBG funds. There is the incorporation of the California school dashboard and and the analysis based on the annual performance that's reported on the dashboard, through the LCAP cycle and and looking at how, the the LEA needs to support identified student groups and schools, within the LEA based on that dashboard information.
But none of that ties in specifically with LREBG funding.
Speaker 1
Well, that's a very important point. No one is is making any assumptions that the funds aren't being used for that, but are they being used exclusively for that seems to be a question. So we're gonna have to work on on that. And if you have any ideas, miss Hadwick, welcome them. Doctor Patel.
Speaker 12
So my question, maybe it's more of a statement of more philosophical around funding. We're now close to six years out from, COVID, and it seems like there are compounding societal, cultural, federal policy reasons why children may be continuing to struggle in school, and it might not really be this may be the new normal that we're dealing with. And when we look at school funding and cohesion across our systems, whether we incorporate it into the base that all students need this funding or in combination with what we're doing with community schools and ELOP, maybe we need to have a better look at what is the actual cost of funding public education at the level that our students need that help. While that may be a conversation for another type of budget year, I do support the money being used this way, when it's, more of a one time, in nature, and I appreciate extending and supporting this program with the caveat of having some accountability that the money is being spent how it is intended to be spent. When it's rolled in and it and it's rolled up into dashboard, it's really difficult to tell whether or not it's those dollars that are making the improvements or whether the dollars aren't sufficient, and that's why we're not seeing improvements, or whether it's the lack of a a robust program or an effective program that's contributing to that.
So I think some accountability might be helpful, to make sure that the dollars are being used appropriately. So I wanna echo the the sentiments of my colleagues here at the dais.
Speaker 1
Thank you very much. Thank you all. We will hold the issue open, and you heard the feedback, and I'm sure we'll be in touch to work on some of these items related to this issue. We will now ask the panel from issue number four to please come forward. This is a student support discretionary block grant.
This issue will cover the governor's budget proposal to use this year, $2,800,000,000 in proposition I need funding for student support and professional development discretionary block grant. I do wanna start off this one by just being pretty clear about my position on this. Last year, we had $1,700,000,000 in discretionary block grant. This does seem to now become is becoming more common than not. But, however, the legislature was looking at something differently last year.
I think our our intent was certainly different. Now we're seeing a larger discretionary block grant, which is really surprising to me because there is no evidence to the points just made that these block grants are moving the needle on student outcomes. We don't know what the the use the uses of these block grants are for. Is it for student achievement? Is it for learning?
Is it for after school programming? Is it for well-being? What is it for? Whereas there's evidence that LCFF and other approaches, like what we just talked about, actually do be yield better outcomes as we've measured in in different instances. So with that said, the discussion on this will be on this fund, the use of it, and what the expectations are from the Department of Finance and any suggestions from the LAO.
We'll start with Department of Finance.
Speaker 26
Thank you, mister chair, members. Alex Shope, Department of Finance. So the governor's budget provides 2,800,000,000.0, in new one time proposition 98 general fund for the student support and professional development discretionary block grant. 2,100,000,000.0 of that is in 2627. The funding is fully discretionary, allocated on a per ADA basis, same as last year.
And as you mentioned, with the $1,700,000,000 from last year, that would bring the total funding for the block grant between the two years to about $4,500,000,000 That concludes my remarks.
Speaker 18
Thank you. Again, chair and members, Ken Kapon with the analyst's office. The strongest argument for including some kind of discretionary block grant in your budget plan is that districts do face different cost pressures and local priorities, and a discretionary grant allows them to tailor some of their budgets and their funding to those individual circumstances. You might have one district that wants to pay for new curriculum, another district that's replacing laptops, a third district continuing a program they started during the pandemic, a fourth district facing some kind of insurance surcharge, and a block grant allows all of those things to be addressed without requiring the state to establish a new program for every individual spending priority. The overhead costs of a grant like this are low.
Funds can be allocated fairly quickly and efficiently. It gives districts a little bit of control over their budgets. But with that said, you have many ways to refine this grant to reflect your priorities. Your staff agenda outlines some of them. You can change the amount.
You can modify the allocation formula. You can adjust the suggested expenditures, still giving districts some flexibility over how the funds are used. If you do proceed with this grant, one change we suggest is is to specifically call out fiscal liabilities, infrastructure, and onetime costs as priorities for the grant since those are the types of costs that a onetime grant is well suited to address. On the dollar amount, there's no magic number here, but if you think about the governor's overall plan, the budget would put about two thirds of the available funding towards flexible purposes and about one third towards, targeted programs with specific spending requirements. The grant is a large component of the flexible portion, and some ratio roughly along those lines, we think would allow districts to address their, local cost pressures and priorities, some states, state priorities that you likely have, but without becoming overwhelmed with too many new spending requirements.
The 2,800,000,000.0 can and probably should change in response to revised estimates of the proposition 98 guarantee and the other actions you take in the governor's spending proposals and the other priorities you wanna see included in this budget, but we think it's a reasonable place to at least begin the conversation. That concludes our remarks.
Speaker 1
Thank you. Let let's start by, asking about what happened this year with the funds. To Department of Finance, what were the use of the discretionary block grant funds this year from reporting from districts? What what were the uses of the funds?
Speaker 26
That is not something that we have information on at this time. I would defer to the department if they had any additional information. It is you know, I would note it's it's a little bit early. I know that at least 25% of the funding is either about to go out or has just gone out. But
Speaker 1
And so then given that sounds like we don't know, and I'll ask others to provide their input on what the use was, what what is the justification of going from 1.7 to 2.8 this year? Was there a feedback that that was not enough, or was this a mathematical issue where you gotta get to a certain number?
Speaker 26
Yeah. I think that, you know, I think as colleague from the LEO noted, you know, there's not, you know, a magic you know, it's not a magic number. It's not like a specific formula behind the amount. I I I think that, you know, the administration, right, acknowledges the challenges that are being faced by locals, you know, the the issues of rising costs and all the, you know, the many many, you know, countless forms that can take. And, also, I think with the, you know, understanding of maybe going back a little to our, you know, the prop 98 hearing a couple, weeks ago, you know, is that we want to be able to provide, these discretionary funds, while we can, understanding, you know, there is some, you know, you know, uncertainty, with revenues, right, from being able to, you know, provide, you know, an additional one time amount to the locals, right, but still not necessarily obligating, you know, the state to, you know, have to provide, you an ongoing amount.
Speaker 1
Do do you feel confident enough that the grant the the this grant in particular is being used not to incur ongoing costs or to pay for ongoing costs, or do you expect there there are some ongoing costs that are being paid for by by these funds that are not one time in nature?
Speaker 26
I mean, without, you know, in, you know, the sort of specific breakdown of how the funds are being used, you know, I'll just say again, you know, since they are fully discretionary, you know, it is ultimately a local decision on how the funds get used. You know, I I I I don't think we message this, you know, as sort of an ongoing solution to to issues districts might be having. I I think that, you know, if if ultimately, if it is, you know, their decision to potentially use this as maybe, you know, as part of a broader strategy, for addressing longer term solutions, I think that that is up, you know, to LEAs and I'd be able to do that. But I think, you know, any of those decisions would need to be made with the understanding that this is, you know, onetime funding with the limited term expenditure window.
Speaker 1
But that understanding would be limited to their own interpretation and decision not tied to this funding.
Speaker 26
Yeah. I I think so. You know, I I you know, again, I think we're not we're not trying
Speaker 1
to And I'm just I'm asking these questions because I think overall, you know, there's a lot of prudent suggestions by finance overall, and and this is one where I'm concerned about the discretionary the discretion being used is an ongoing with an ongoing expectation that may or may not materialize. And so I kind of wanna ask the same the same questions to to the LAO next. Do we do you have any sense of where the current year's discretionary block grant was used?
Speaker 18
Thank you, mister chair. We should, we think within the next few weeks have some preliminary accounting data from districts, what they submitted for their first interim reports, and we'll be able to look in broad categories, what they used on instruction, for example, staff, other sorts of things. We hope to be able to have some sense of that, before we get to the May revision. The other question you were asking is about, the use of these funds for ongoing purposes. And candidly, this is a little bit of a double edged sword because if they these one time funds do help districts manage and implement a plan to, adapt to lower enrollment, that's a positive development.
If it just becomes a rationale to ignore long standing structural problems, then that's poor fiscal practice. At a minimum, we think you can you can tweak some of the intent language to promote that first outcome, but it's also the reality that it's hard to write language up at the state level that prevents districts from making bad decisions. And addressing some of the risks that you're talking about, I think, probably is going to come down more to maintaining the state system of fiscal oversight, which does include a strong focus on deficit spending and balanced budgets. And that means sending clear signals that districts need to do their multiyear projections, take those results seriously, make adjustments as needed. The state's whole relationship with school districts is based on the idea that they have some they get to make local budgeting decisions in exchange for some responsibility for developing balanced budgets and remaining solvent.
And I think you'll hear more about some of the deficit trends and the solvency trends from FICMAT, but probably, we we would advise that maintaining the fiscal oversight system is probably even more important than the specific language that accompanies this grant or some of the other budget proposals.
Speaker 1
Even with your feedback there of waiting to see what the numbers show in a couple weeks, so you did, in your comments anyway, mention perhaps the one third versus two third discretion versus targeted. You still feel confident in that suggestion to us?
Speaker 18
The two thirds, one third, there's also nothing really magical about that, and you could certainly consider a slightly higher or lower ratios that would be reasonable. When we talk about that being reasonable, some of that's based on our past experience with what the states done in the past few budgets. For example, in, 2122 and 2223, there was a much more of an emphasis on more targeted funding. And what we heard from districts is that ended up meaning they were trying to create so many new initiatives that you've had a tough time hiring people, tough time launching those things. They were going through the motions in some cases instead of really implementing the program the way the legislature intended.
On the other hand, you also have your priorities each year, and some spending requirements are one way to make sure districts address those. So you could certainly consider a little bit more or less than the one third, two third ratio. But if you were to go a lot lower, there's a risk that districts on the one hand are struggling with some of their cost pressures while also not being able to implement all of the things that you'd like them to do.
Speaker 1
And and just to send a clear signal and nobody gets freaked out. You know, from my perspective, we're not talking about new new initiatives, but there are plenty of initiatives with needs that we've identified, whether it's earlier today, previous agendas, and future agendas that we've seen some results in that are, you know, good indicators. And so perhaps funding those, may be something this committee, and and the legislature would like to
Speaker 18
to we if I may as well, you also have it's this isn't necessarily a binary decision. You have options to do some kind of, grants that give districts a fair amount of flexibility while still targeting to get in certain ways. The learning recovery block grant is a good example of that. That's a pretty flexible grant, but it is very targeted towards low income students and English learners, and it does have a very strict set of, community engagement requirements. So you're not locked into all discretionary or all very narrow categorical programs.
Speaker 1
Thank you. That's very helpful. Did you wanna say something from Citi? Or you're just here for questions?
Speaker 27
Just here for questions. Tammy Pearson from the California Department of Education.
Speaker 12
Having just come out of a school board land, I wanna express support for the learning recovery or for the, discretionary block grant. I was president of the San Diego County School Boards Association. It's a large county with many different school districts with varying needs, and having some discretion helped address a lot of the different types of cost pressures that our districts across San Diego were facing. I imagine that kind of range of need is what we see across the whole state of California. So just expressing support for this, I understand my chair's position for wanting to see some accountability and targeted supports for that, and I'm open to discussions about how we will approach this distribution.
Speaker 1
Yeah. We will hold the issue open for that, but, also, I I do wanna note because people made comments and they were helpful. The needs based approach to this, this is something I know the assembly is interested in. The proposal currently is just ADA as opposed to the needs of schools that are identified through through the LCFF formula, through concentration, and those needs that are you know, if we believe those are needs and that's why we have a formula, then perhaps funding that we send out to school districts should reflect those values that we have. And so, that is something that we will hold open the issue to discuss.
Oh, one more thing, doctor Patel.
Speaker 12
And just to put a fine point on it, I know several school districts, because COLA is not keeping up with their increasing cost, they're making decisions right now between keeping their librarians, whether it's LMT or teacher librarian or, letting go of counselors. And when we look at literacy rates and we look at youth mental health issues and challenges that we're facing, these kinds of decisions are truly, heartbreaking and challenging in communities and local districts. And having a little bit of discretionary money, even though it would be one time and not necessarily ongoing, it could help, you know, sustain those essential, services for our students. Alright.
Speaker 1
Thank you, everybody. Thank you. We'll hold the issue open, discuss those finer points that we just made, and appreciate the work with Department of Finance, LAO, and our staff on this matter. We will now take up issue five. This is on school facilities.
This panel will hear the governor's budget proposal for facilities, from proposition two, which the voters, gave us the opportunity to now fund school facilities as a result of prop two and a b two four seven from 2024. So we will have Department of Finance first, then the LAO, and we will have the Office of Public School Construction as well. Give us a presentation. Finance, welcome.
Speaker 13
Good morning, chairman members. Ethan Schroeder with the Department of Finance. I'll be providing a high level overview of the school facility proposals within the governor's budget. The governor's budget continues to allocate 1,500,000,000.0 in proposition two bond funds for the school facility programs in 2627. Proposition two was a bond measure passed by the voters in 2024 to pay to renovate and build a new t k twelve public school and community college facilities.
The proposition authorizes a total of 10,000,000,000 and state general obligation bonds. Of this amount, proposition two provides 8,500,000,000.0 specifically for t k twelve school facilities to be allocated through the school facilities program, which is administered by the Office of Public School Construction.
Speaker 21
Good morning. Sarah Cortez, LAO. We don't have any prepared remarks today, but I'm available for questions.
Speaker 29
Good morning. Thank you, mister chair and members. Rebecca Kirk. I'm the executive officer for the Office of Public School Construction, and I'm here accompanied by Michael Watanabe, our deputy executive officer. We're pleased to address any questions from the subcommittee.
Speaker 1
Thank you. I I guess the first question is just the most basic question is, when will the total of the prop two funds be awarded based on the current projection that you're seeing with the applications that you're funding? I know the need always exceeds, the resources, but what is your projection to Office of Public School Construction?
Speaker 29
Yes. Thank you, mister chair. As as my colleague with the Department of Finance indicated, the governor's budget proposal plans on maintaining $1,500,000,000 in the upcoming fiscal year as our processing rate of applications under the school facility program. That's been the rate in recent years. So assuming that rate continues at about 1,500,000,000.0 annually, we would anticipate specifically for all of the proposition two funds, around 2029, 2030 would be exhausted around that fiscal year.
Speaker 1
Great. And, obviously, the need exceeds that. I've I've personally been a member of the board and have seen the, the list of of requests. But the interesting thing that's happening in this question is to to to OPSC again is, as declining enrollment is occurring, are we seeing any withdrawal in app like, is is there any behavior that you're noticing from your end as it relates to needs at schools, changes in applications, withdrawals perhaps in applications? Anything that you can share with us in terms of dynamics that you're seeing as it relates to declining enrollment?
Speaker 29
Yes. We're certainly seeing more of a shift in recent years toward demand on the modernization side of our program in particular. So when the school facility program was initially established in 1998, kind of in those very latter nineties and early two thousands, a lot of the demand was on the new construction side as we saw growth and a need for additional capacity in school districts. Now with a trend more toward declining enrollment in many areas of the state, as you'd heard earlier, we have a lot more demand on our modernization program than on new construction, although there certainly are still some districts within the state that are are growing as well and applying for new construction.
Speaker 1
And and curious also on your thoughts. I represent an area where I have a school district that is actually closing, made the very, very, very difficult decision to close schools that I know a lot of folks are fearful of making those decisions, and they're not they're not easy. They're not great for anybody. Communities now have an asset sitting in the middle of neighborhoods, which will no longer have any activity. And so just curious if you've given any thought on the almost like the one eighty of what you do, which is not building new schools or re modernizing new schools, but the re the utilization of an asset like a school facility.
And I'm sure you're you're you're in your network of of conversations or of of publications. Maybe you're seeing what other states may be doing. I'm just curious if you have any thoughts on on that and what what is happening with maybe other areas that are, seeing school closures.
Speaker 29
Yes. Thank you, mister chair. We don't collect data on a statewide basis about school closures or reutilization of excess school property. However, we do, on behalf of the state allocation board, administer an unused sites program. And through that program, school districts self certify on an annual basis whether they have any property that falls under those statutory parameters of an unused site.
And if so, whether they are subject to paying fees on those unused sites under the provisions in statute. The statute also provides certain different reasons or, cases in which a school district is exempt from paying those unused site fees, and those can include, among other reasons, they can include, factors such as if the property is occupied for childcare purposes, if the if the property is occupied for a community use, or also if the property has been leased to an entity that pays property taxes essentially on that site. Those are all factors more on the reuse potential side of of surplus property for which a school district can be exempt from paying what they may otherwise be assessed in an unused site fee.
Speaker 1
So if a site is listed on your, on on this list of unused sites but then gets repurposed, it just falls off the list, and you just keep an accounting of an unused sites?
Speaker 29
We have an annual item that we prepare for the state allocation board to indicate the annual kind of self reporting by school districts regarding unused sites. School districts do also report any unused sites that fall under those parameters, whether they're exempt from the fees, they have new property to add to that list of unused sites, or if they have property to to, have us remove. For instance, if they've sold a parcel since the last reporting. And then we present that to the board annually because there are those assessments of fees charged on an annual basis in some cases.
Speaker 16
Thank you so much, Mr. Chair, thank you everyone for the updates on the facilities. Just a quick question on the so there's 8,500,000,000.0 for the K-twelve and then 1,500,000,000.0 for community colleges. Do we have a sense as to the uptake on the community college space and how we're doing on on that?
Speaker 13
I think so to answer your question, the chancellor's office administers the 1,500,000,000.0 in proposition to bond funds for them. Okay. So I think we probably might hear that later on. I appreciate your question, but yeah. Thank you.
Speaker 17
I I have a lot. This is an ongoing problem in my district. Most of them for Rebecca first. Can you share more about how the applications for the funding are scored and distributed under the new construction funding program, career technical education program funding, and the small district, small school district program, and what the timeline for rollout of the small school district program looks like.
Speaker 29
Yes. I'll start with the small school district program, if I may, Ms. Member, and then I'll probably turn over to my colleague for the career technical education piece of your question. For the small school district programs, you've alluded to a new program that was established with voter approval of proposition two in November 2024. We're actually, tomorrow, yes, tomorrow, holding a state allocation board meeting in which the board will consider our proposed regulations for that particular program established by proposition two.
So I can speak to, your questions a little bit in that context of them being proposed regulations at this point that will be considered by the board tomorrow. We have proposed in those regulations that we would start accepting applications for modernization specifically under the small school program, on 11/01/2026, and that we would start accepting applications for new construction for the small school district program specifically on 01/15/2027. And part of the rationale for those dates still being a little bit into the future, firstly, of course, we did have to actually develop the regulations and bring those through the board and then subsequently pending board approval through the Office of Administrative Law Administrative Procedure Act process to have them in effect and have the forms and and such for school districts to apply to the new program. We did hold four stakeholder meetings leading up to this point in helping to inform the proposed regulations that'll be before our board tomorrow. The other reason that we've proposed starting to accept applications a little bit into the future is that we really want to have a concerted outreach effort for small school districts statewide so that they're familiar with this new program and the opportunity to apply for what has been set aside as small school district funding from proposition two before we start accepting those applications.
We wanna make sure, in particular, some small school districts that maybe have never participated in the school facility program are aware of this opportunity in time to work with our office on establishing eligibility and having application in time as well so that we kind of level that playing field among all of the eligible small school districts. So we actually just yesterday announced a series of workshops coming up throughout March and April in conjunction with the Department of Education reaching out and going to different areas of the state, in particular, some of the more rural areas where we have a lot of small school districts concentrated so that we can try to do more of that concerted outreach leading up to accepting those applications. And and your question about prioritization for the career technical education facilities program?
Speaker 31
Yes. So we don't actually do the scoring. CT is a two step process. The first step is they go to the Department of Education where they submit an application that's scored. For the CT program to receive funding, there is a 147 points possible on the application through the c CDE.
You need at least a 105 to be funded under our program, or we funded in a kind of a round robin system where we try to hit different parts of the state. The 147 points by CDE, they can they'll have to speak more to that, but the basics are you get some point 30 points for your CareerTech plan, what you've written out. They have to write a comprehensive plan for this program they're applying funding for. You give information on your projected student enrollment in the CT program. You identify your feeder schools and partners, how you hold your program accountable.
Speaker 31
Your ed specs, your classroom environment, how you're using those facilities. Budget justification is large part. 42 points is tied to that. And then you get three points just for this in other category under CT. So they take care of the scoring.
For the current round, that was already done for the current round for 300,000,000 out of prop two late in 2025. CD is currently scoring those applications now. We expect those scores to come out in around March. And then once those scores come out, anyone with a 105 points or more can apply to our office for funding, and they'll have until, I believe, June 30 to do that in our office. And then we take over for all the other funding components for what they're actually billing from a facility standpoint.
Okay.
Speaker 17
And one of my questions was how I could share information with my small schools. So we would love to help with that with 11 rural counties. We have people in every county that would greatly are greatly in need. I did wanna tell one story of one school, the Walt Tyler Elementary School. So, the twenty twenty one Caldor fire burned 221,835 acres spanning three of my counties, El Dorado, Amador, and Alpine.
At its peak, 5,000 personnel were fighting the fire, and over 50,000 people were evacuated. It almost spread into South Lake Tahoe before it was stopped. In that fire, twenty five twenty one people were injured, and a thousand and three structures were destroyed. The economic impact of the fire was estimated at $268,000,000. Tragically, the small community of Grizzly Flats was completely decimated.
Most of the community burned along with Walt Tyler Elementary School. It's been almost five years since this fire, reduced this small two room schoolhouse to ashes. Children in Grizzly Flats are bus are bused to Pioneer School in Somerset, a commute that can take up to two hours each way. Since then, the first barrier to rebuilding was insurance, creating discrepancies and cost estimates. After three years, they received 45% of the funds needed to rebuild from insurance.
Immediately following the insurance settlement, the Office of Public School of Construction contributed 1,600,000.0 in new construction funding, which they're very thankful for. However, Pioneer Union School District's rep request for prop two funds for disaster response were denied because there was no longer an active disaster declaration. The situation is urgent for Walt Taylor Elementary School, and the community has been waiting for their school to be rebuilt. Their FEMA funds are expected to expire, with the and the funding from the Office of Public School Construction could be revoked if the district doesn't show substantial progress in rebuilding. So to Rebecca, my understanding is that two school districts submitted an application for natural disaster assistance to rebuild their schools under their interim policy.
Pioneer Union was, Pioneer Union's elementary school district in Butte County after the North Complex Fire and Los Angeles Unified School District. Those two application applications were approved on 08/19/2025. You received a third application for natural disaster from my school in El Dorado County on 09/18/2025, but my understanding that it was denied. Can you explain why? And then what changes necessary in law or regulation to make sure that my school district can be eligible after burning to the ground?
Speaker 29
Yes. Absolutely. Thank you for the question, and we are absolutely familiar with that unfortunate circumstance that, and the destruction of Walt Tyler Elementary School as a result of the Caldor fire in 2021. Our office, as you mentioned, has worked with the school district for a number of years on the impacts coming out of the Caldor fire. As you alluded to, they did receive new construction funding from the school facility program back in 2025, about 1.6 and change million.
They did submit, as as you mentioned, an application or request for natural disaster assistance funding, taking perhaps a a step back in my narrative too or in my response. Proposition two establish new natural disaster assistance provisions within the school facility program that allow our board to consider providing natural disaster assistance funding either for interim housing, which is really interim school sites, or for any other purpose, essentially, for school districts impacted by a natural disaster for which the governor declared a state of emergency. So proposition two, of course, was, approved by voters in November 2024, And then we expeditiously were working among other provisions in proposition two to develop regulations to implement those new provisions. We also found ourselves in the unique circumstance, you know, of course, knowing that we had a number of school districts, including Pioneer Union in El Dorado County, also Pioneer Union in Butte County, as you mentioned, that had been impacted and were still struggling, as the result of losing facilities and fire. And then in January 2025, of course, also saw the destructive Palisades and Eaton fires in LA County, just a couple of months after passage of proposition two.
So we did hold a series of stakeholder meetings to inform regulatory development around those new parameters. I think we held four on that particular topic. In August, as you mentioned, of last year, we presented the proposed regulations around the natural disaster assistance provisions to the state allocation board, and concurrently, we presented the first, I guess technically three, requests that we had received under those new provisions. Two of those were for interim housing assistance coming from Los Angeles Unified School District as a result of the Palisades impact, at two of their three schools that have been impacted there. And then the third was a request from Pioneer Union in Butte County related to their school as well.
Prior to passage of those or approval of those regulations, our board actually in the intervening period in December 2025 had taken an action to approve staff recommendations for adoption of interim policies to implement certain pieces of prop two right away. And one of those was establishing sort of an interim practice where school districts could request natural disaster assistance under that statute using our existing appeal request while we concurrently worked on developing the actual regulations and forms necessary. So those requests from Los Angeles Unified and, Pioneer in Butte County came in using that process in the intervening period. Ultimately, in August, we were able to present the proposed regulations for natural disaster assistance and then also those first requests from the other two school districts for natural disaster assistance funding. In that discussion, we also mentioned to the board that those requests from LA Unified and, I'll just say, Berry Creek Elementary since
Speaker 29
those particular requests did meet all of the parameters within the proposed regulations that were also up for consideration by the board on that day. So, ultimately, the board and its actions on, in August 2025, they did approve the proposed regulations that we developed to implement the statutory provisions. They also approved the, three technically requests in front of them, two from LA and then one from, Fort Barry Creek Elementary School. About a month later, as you mentioned, we did receive a request for natural disaster assistance from Walt Tyler Elementary from their school district. As you know, and I'd mentioned we'd been working with them for some time, they had received funding, in '20 earlier in 2025 under the new construction program.
At first, quite frankly, when they applied for natural disaster assistance, we were expecting it would sort of proceed under, some of the same review that we had some started to establish under those those regulations that had just been approved by our board as well as the kind of precedent with those other three applications that have just been approved. When we were working with the district in the course of review, it was determined, actually, initially when the district submitted, they they noted that there was an outstanding question on this. There is a provision, which you kind of alluded to in the regulations, that requires the state of emergency that caused that natural disaster to be open at the time the application was submitted. And what that refers to is essentially the governor's office of emergency services maintains a list of open states of emergency on their website. We understood that the representative for the district reached out to the governor's office of emergency services, not seeing the Caldor fire on their list and inquired.
Ultimately, they did end up providing documentation that was obtained through Cal OES indicating that actually on 07/01/2024, the governor had signed a proclamation that ended a number of states of emergencies, and the state of emergency declaration associated with the Caldor fire was one of those. So that had actually been closed and considered closed as a state of emergency as of July 2024, predating voter approval of, proposition two and predating the district's submittal of the application. Based on that particular issue with not meeting that requirement in the regulations for natural disaster assistance funding, our office did have several additional meetings with the district to see what options might be available. Ultimately, the district ended up withdrawing their request in December. So, technically, we did not fully process it or bring it before the board.
So it was not technically denied, but they did end up withdrawing that request based on discussions with our office in which we did indicate. Unfortunately,
Speaker 29
did not meet that requirement in the proposed regulations due to the state of emergency having closed.
Speaker 17
And was Berry Creek still declared or it was still an active emergency that was approved? What fire was
Speaker 29
Do you recall the name? Oh, North North Complex Zone Fire. It was the North Complex Zone Fire.
Speaker 17
So, honestly, that rule is never gonna work because most you have to I I have a weird background. So I was a teacher, and I was an OES emergency manager. So you have to declare every 60 days and re redo that with the board of the county board of supervisors to ratify it every sixty days. And after the fire is out, it stops. You'd never keep that going through recovery because recovery takes, obviously, four to five years.
So you would be in an active state of emergency for five years, and that that doesn't do anyone any good. So that policy or protocol should absolutely be changed because it's gonna it's gonna really affect all these schools that were burned in LA, and and we're gonna continue to burn in the North State. I obviously am frustrated because we have a funding stream, and now I'm doing a budget request for Walt Tyler because we failed them for the last four years and that it's an equity thing, in my opinion. So we're giving all this money to Southern California when Northern California has been burning down our communities, for a decade. It's very frustrating because this small town I mean, these kids are spending four hours on a bus every day.
Like, that is not okay, and their ZIP code should not determine that their educational opportunities. We've already said that three times in this this hearing alone. Is there a law or regulation that we can present that will fix this so that Walt Tyler does qualify? Because we've failed them as a state. Like, that's why this proposition passed.
Speaker 29
So to your question of whether there's a law or a change, that particular requirement around the state of emergency being open at the time of application submittal is in the regulations. So, you know, that that doesn't wouldn't necessarily require a statutory change, because it is in the the regulations implementing that statute.
Speaker 29
I would just speak to as I mentioned, we had a series of four stakeholder meetings to gather input in the regulatory development for those particular provisions in prop two for natural disaster assistance. And at those stakeholder meetings, we did talk about that proposed provision, including indicating sort of the rationale behind that, which was essentially putting some sort of parameter around a timeline for districts that have been impacted by a natural disaster to come forward with the funding request Mhmm. And essentially trying to consider that through an equity lens as well of trying to balance the needs of those districts that have been through terrible, horrible circumstances in losing entire schools in in this case and in other cases, and those needs. And then also balancing the needs of and priorities of all other school facilities funding statewide as well. Because the natural disaster assistance funding, there's not a specific amount or carve out authorized.
It's all the same
Speaker 1
I don't I don't mean to cut the compensation off, but I also having served on the board, the board can make a decision based on an application that is submitted, and there's a staff recommendation. And the board would have to override that if they chose to fund that particular school. Is that correct? That's an option available to the board.
Speaker 29
It is. Yes. And the board authorizes or approves regulatory changes as well.
Speaker 17
Well, in this it's $2,600,000, and they're gonna lose all of their funding because they have this this gap, which in the grand scheme of things in California budget is very small. But in their little county is life changing. So I would love to see that fixed. We are moving forward with the budget ask that we're gonna, be bringing forward, but, it just it it's frustrating to see. And that rule doesn't work with the way disasters work, So, it definitely will affect future schools as well.
Speaker 1
Thank you. Thank you. Thank you for pointing that out. And thank you all for, being here on this item. We will hold it open, and we will have staff work on this.
Thank you very much. We are gonna move on to issue six, which is an informational item. So I'd ask mister Fine and miss Riley from FICMAT to please come forward. This is the fiscal crisis management assistant team informational item. Thank you for being here.
I think there'll be some questions here following up on the previous conversation, but welcome, and please begin.
Speaker 11
Thank you, chair and members of the committee. For the last eleven years, I've had the absolute privilege of representing FICMAT, in this annual hearing. This, though, will be my last one. I between now and the next time we have a proposed budget by the governor, I am going to retire. We, as a family, were blessed last week with our first grandchild, and that is one of my main reasons for moving on, other than my wife retired two years ago after teaching for forty years, and so, she's been sitting at home, waiting for this time as well.
We're very grateful to the administration and, the legislature for last year funding on a one time basis an additional position for us so that we could make a transition in leadership as an agency. The continuity of our leadership and the opportunity for extended transitions is very important. We've done this in the past. I enjoyed that opportunity when I joined FICMA eleven years ago. And so since July, my colleague, Megan Riley, has joined us.
Megan comes with a long history of school financial management leadership in LA Unified, both as longtime CFO, as deputy superintendent, as interim superintendent, and also with the Santa Clara County Office of Education. It has been, for about thirty five years, an absolute honor of a lifetime to serve schools here in California. So with that, Megan's gonna kick us off and refer to our charts that we've provided to you. And I've given you a lot of information in the outline just to help you. We don't intend to cover it all.
But then I will speak to some of the trends we're seeing and how they relate to some of your earlier questions. So thank you again. Megan?
Speaker 7
Great. Thank you, Mike, and good morning, everyone. It's an honor to be here and to give this update on where we stand and what the context of the seeing out in the environment of our schools. The very first slide I'd like to actually just focus on, it gives the historical, qualified, and negative certifications. And we really like to give the historical because as you see, the most recent first interim certifications from our schools, over a thousand LEAs, was really an uptick that we see 45 that are self certifying qualified or have been deemed as qualified.
It is trending upwards, but we also show that period of time, not necessarily as bad as the great recession back in the early two thousand, But certainly, in the most recent past, we haven't seen these numbers since pre pandemic, that we've gone up to the 45 level. 45 is qualified and then eight as negative. So it is a concern when we see the decrease of one time funds, the declining enrollment that you all have had a very lively discussion about. That pressure that it puts on school districts is reflected in their interim reporting. The qualified interim reporting, just to kind of talk about that, FICMAT is automatically triggered during certain instances.
And when there are a a school district goes and has three qualified certifications in a row, we are automatically, triggered for kind of going in and doing a financial health risk analysis. If a county office of education changes the certification from a positive to a qualified or to a negative, FICMAT will automatically go in and take a look at it. And when there are other situations, then basically either the county office steps in or FICMAT steps in as well. We have provided the list to some of you about the qualified certifications that are out there. Those that have four or above, three or above, we've again gone in and basically done a fiscal health risk analysis, are in the process of doing a fiscal health risk analysis, or are in scheduling for the fiscal health risk analysis for eight districts currently.
Speaker 11
would highlight on slide five the negative interim certifications, while Megan talked generically about qualified and negative together, I wanna highlight the negative. Negative, obviously, is a much greater concern to us. You see, districts on here, six of the eight. This is their first negative or at least nonconsecutive negative. But for two of them, this is their third consecutive negative.
Historically, we don't see districts set in the negative certification status for very long. They get a lot of intervention, a lot of assistance from their county superintendents and from us and from others, and they generally turn the corner fairly quickly. That is not the case for two of these districts, both of which I think this this committee is very familiar with. The first is Plymouth Unified in assembly member Hadwick's district, and I'll speak to them more specifically in just a moment. The second is Weed Union Elementary School District.
Their issue currently is not a general fund issue. It is a building issue where they bid off more than they could handle, frankly. And they have a half built school that is setting exposed to the weather and no ability to complete it. And we are all involved in that conversation on a regular basis. I know the state board state allocation board has been involved in the in it as well.
When they ultimately are faced with the consequences of that half built school, then that will impact their general fund. And that's what we are anticipating in this negative certification. I want to also point out to you on the very last slide, which gives you a quick snapshot of average reserves. You can see they are in that mid 20 range, but are starting to drop. So the data through 2425 is actual data.
The data for 2526 is what districts based on their adopted budgets. And so you start to see that decline in reserves, which is really a a cumulative effect of some of the trends we've been talking about the last couple years. And with that, I'd like to move back to page two of the outline I've given you and speak to immediate concerns and solvency trends. I won't hit each of these bullet points, but hit the the key ones. First, as I expressed earlier, Mr.
Chair, thank you for and committee members, thank you for your questions earlier. But you heard me say that we have a concern about small and tinies. We actually have a concern across the board. Things are difficult out there. Let me just summarize all this.
Why districts are Districts are feeling the impact of cumulative multiple years of enrollment decline, several years of, while absolutely appropriate COLAs, they are nonetheless COLAs less than the inflationary cost pressures and compensation demands, both of which are simply real. But small and tinies have more difficult mitigating declining enrollment. You lose three families in a small community, let's just say that six kids, there is no place to cut. You already only have one teacher teaching TK through three, and a teacher slash principal teaching four through six. There just is not the the margin, if you will, in a small district to absorb that revenue loss and so on.
And we've talked about some of that earlier today. As Megan indicated, the number of qualified certifications have more than doubled between last spring and this December. More than doubling is unusual, but the fact that they're higher at first interim, which is December's data versus the previous spring's data is not unusual. That is a typical trend. We will see them probably lower as we approach second interim report, which is due March 15, just in a couple weeks.
And that's because many of our school boards and team, district leadership teams, are taking the action they need to take at this point. If you pick up any summary of headlines, go to our web page each morning and look at the headlines on education across the state, you see boards taking the very difficult, difficult action of initiating the layoff process. And that will all be reflected in their second interim report. So you'll see a bit more stability at second interim. Solvency trends, we've talked about the first one declining enrollment across all regions.
We explored that quite a bit. It's been partially offset over the last several years by the full implementation of transitional kindergarten, and by recovery from the pandemic of ADA rates continuing to climb. But both of those factors are plateaued, are coming to a point where they won't see an increase, but they'll plateau where they're at. Transitional kindergarten this year is fully implemented. ADA growth, ADA yield, if I can use that term, compared to enrollment, is also starting to return to pre pandemic levels.
It will, in my judgment, not fully return to pre pandemic levels, because of an item we talked about earlier, that's transition kindergarten has been added since, and it has a very high absence rate, right? And so that will skew the numbers ever so slightly. Special education costs, we've a panel on it already. The only thing I would add is to be very clear. Costs in special ed are escalating much, much higher rate of escalation than our general ed costs.
And there are a number of factors there. The other factor, which I think this committee fully understands, is that as enrollment declines and ADA declines, that impacts local revenues on special ed. Because special ed isn't funded based on the number of students with disability. It's based on district wide ADA, right? Of general ed and special ed together.
And so as that drops, revenue drops, but costs are escalating significantly. And two main factors in the cost escalation. The first is we have growth in, as a percentage of enrollment, growth in our number of students with disabilities. But we also have what you read about regularly that is being the subject of collective bargaining negotiations, and that is a lot of contracting out for special ed services by districts. And that's because they can't find qualified educators and paraprofessionals.
Contracting out runs costs higher than if there are employees. Districts don't want to contract out, I can tell you that. They wanna hire the people and put them in place if they could find them. So one other element in here that I think we have to recognize, and I'm not sure what the driver is, CDE Special Ed spoke earlier and can add some color to this, but we see a lot of money being spent in the area of behavioral interventions and new staff titles dealing with just behavioral matters in special ed than what we've seen traditionally. So that is an element of cost increase being experienced.
I wanna tie so that, of course, ties to the administration's proposal on the equity or the equalization of the special ed rates, which you have explored. Ongoing expenditures related to pandemic and the expiration of the federal funds, this ties to the other panel that you had a discussion about, and that is the continued funding for the learning recovery emergency block grant. The the the requirements for expenditures there are a little bit more restrictor are a little bit more restrictive than what the federal dollars were, but they it is an important element to continue some of those added services that were introduced during the pandemic using the federal ESSER funds. We talked earlier today about kinda normal COLAs, and that's two to 3% range. If we look at history, that's a pretty normal COLA.
But our schools are experiencing five to 6% inflationary pressure, irrespective of compensation demands. And you don't hear this from a school business person very often, but the compensation demands are absolutely legitimate, in my judgment, in most cases. We are not going to be able to continue to do the good work in our classrooms without qualified good educators. It's really that simple. And the support staff that goes with them.
And so, to have a teacher not be able to live in the community they're teaching in is, I think, struggle for all of us to kinda cope with. There's really no other industry in our economy or that we're exposed to other than schools that have that need an employment literally in every neighborhood. Right? You don't get the opportunity to choose to commute somewhere else. And so that becomes important.
And those cost pressures are real to our districts, and they're feeling those. We've talked before here, but this is where the discretionary block grant becomes very important. We still have districts with AB two eighteen, childhood sexual assault claims, and dramatic retroactive increases in insurance premiums. And I want to emphasize that retroactivity nature. Insurance premiums are going up going forward.
They have gone up by almost 700% liability coverage in the last decade. But they also have retroactive increases going up as a factor that they were a member of a public entity risk pool. And that risk pool has to be protected, thus it can go back in time and make assessments on its members. You're all very familiar with federal HR one, House Resolution one back on July 4, and the impacts it has on the Medicaid side and the SNAP side. That, of course, has an impact on our number of kids that are eligible, both in the counts of unduplicated counts, in the free and reduced price meal categories, and so on.
And so I highlight those to you. And then one additional item on page three that I wanna highlight, since it is relatively new. Actually, two items that I wanna highlight. One is Plumas Unified School District, which on June 27, with the adoption of the current year's budget trailer bill, went into state receivership at their request. The forecast was that they would have insufficient cash to meet payroll in August, and that was the case.
The legislature and the administration agreed on a $20,000,000 emergency appropriation, or apportionment, rather, to be paid back over thirty years. In August, they drew down 8 and a half million, and they have stabilized. We believe that that will be all they'll need to draw of the 20,000,000. Now there's a lot of loose ends still there, but they are making great progress. They are going through a very difficult stage right now, where now is where they have to balance their budget.
So they are issuing layoff notices. They're proposing a whole variety of cuts, including the elimination of transportation and other types of budgetary mitigation measures. But they have stabilized, and the team that we have in Plymouth is doing very well. The other district among the receivership districts that I wanna highlight actually too. One is Vallejo City and the other is Oakland.
In both cases, they exited receivership last June 30, and so that is noteworthy. Both districts, though, are not currently financially stable. So financial stability is not one of the criteria in statute to exit receivership. The two criteria are you pass an internal control audit and you pay off the advanced apportionment. The financial stability is not one of the criteria.
Oakland is struggling, as they have historically. Vallejo City is under new leadership, and some of you, I think, have even met with Vallejo City even recently, has really taken the challenge on that post receivership, things that should have been done during receivership to right size and to upright the ship may not have been done. And so the new leadership in Vallejo City since exiting receivership is doing an outstanding job. But I think it highlights for us that that work should have been done in the latter years of receivership, so that district was stable, as we move forward. And, mister chair, those are my
Speaker 1
Alright. Because I know I have questions, and I'm sure others do as well. And I wanna get your thoughts on some of these. So I, you know, I I can't help but think about what you just just mentioned that some districts do things that then right size or whatever it is to sort of be on the right track. They don't need the 20,000,000.
They figured it out with 8. That that all sounds good. But that to me says that there's probably more need of that kind of of analysis and support to make some of those decisions more frequently than not, especially with your trends that you're showing us with the numbers going up. But there are no incentives to do that. I mean, the I I guess my question is, what what can we do to incentivize folks to try to make some of those difficult decisions sooner?
And, also, what are those difficult decisions? Because, clearly, you've been able to, when you step in to the role, identify things. Now in the case of I do wanna ask about Oakland, but because they were in, then they were out, but then, fiscally, they've got issues there, which doesn't make sense to me. But but I guess, overall, first, let's start with that. Overall, what what incentives exist for folks to make decisions that they should make before it gets to this point?
Speaker 11
So let me before I address incentives, let me start with responsibility. An elected school board, doctor Patel is a former elected school board member, in her community. They have a fiduciary responsibility. It's very clearly laid out to protect the district. And in so doing, they're protecting both employees and our students.
And one of the elements of protection is fiscal stability. You can't, you have to live within your means. There are opportunities in our system to kick the can down the road every once in a while, but it ultimately catches up to you. And so we have a very robust system in California of monitoring, of early warning system that was established under AB 1,200 back in 1991, that both CDE and FICMAT are kind of the guardian of and watch very carefully and monitor. And that's where this data that I've presented to you comes from.
CDE hasn't released their version of this data yet, but we go out and collect it kind of ahead of time. And that oversight task then is delegated for the most part to our county superintendents, to our 58 county superintendents. There are exceptions to that for county offices at CDE for the seven single district counties of which Plymouth is one of those. San Francisco is one of those. CDE is the oversight body.
So first, there's a responsibility. And in our view, there's authority. You, the legislature, have given them the authority to take the action, a local school board. And if they fail, then through the monitoring and inter progressive intervention process for the county superintendent to become engaged. We could call that incentive a little bit, but it's not the same, I think, that you're probably asking about.
It ultimately comes down to, are we gonna be stable? Are we gonna have be able to get close to a balanced budget or not? And what are our responsibilities? I wanna distinguish very importantly here between budget and cash flow. We don't talk about cash flow.
It's a it's a mechanical thing that happens behind the scenes. But cash is key. Cash is king. Cash shows no mercy. We say this all the time.
And that is if you run out of cash as Plumas did, then that is where the district is faced with asking the state for assistance. And so we budget deficits influence draws on cash. They influence ultimately a cash deficit. But there's timing differences. You can have multiple years of budget deficits, which is where this kick the can down the road process happens.
I share the LAO's view that when we talk about block grants and one time, and I think, mister chair, you were getting to some of this, that that sometimes presents opportunities for districts to kick the can down the road even further. And that has to be measured. And we look to the local leaders both at the staff level and at the elected governing board level to do that. Some do it very well. Some don't do it as well.
And so, but the system is fairly robust. And that robust system has been built up while a great deal of that was put in place in the original AB 1,200 legislation authored by Delaney Easton in the nineties. It has evolved over the last thirty, roughly thirty five years, right, to be a model. Megan and I just spent an hour plus with the state of New Hampshire yesterday, walking them through our system because they're experiencing. They've got districts experiencing these very small districts in their state.
No real large districts. Small districts, small towns. Right? They don't have a monitoring process in place.
Speaker 1
Let me ask you about, over the years, there's been several schools in different periods of interim or or Yep. Actual, being negative, qualified versus negative. I'm cons I I'm I'm interested in the outcomes of students post this work being done and whether there's I don't I don't know that you even track that, but do do we see any movement in what happens to student outcomes as a result of these fiscal decisions that get made to whether it's a cash flow issue? I understand the difference the differentiation but more of a structural So budget
Speaker 11
one of the things we encourage districts to do is not kick the can down the road, but deal with each challenge as it's presented and as you go. Because it is less it's less invasive when you do that. Right. Can you deal with attrition knowing that I'm going to have to lay off down the road? Can I take advantage of attrition today without doing layoffs?
I I can assure you, oh, I haven't been a classroom teacher. I've been married to one for a long time, forty plus years. Our son's a high school English teacher. Some of our closest friends are teachers. You give them a pink slip, if I can use that term, a March 15 notice.
Things in the classroom change between now and June when things may be finalized. There is an absolutely an impact. When we have to tackle, when we've allowed the problem to grow and become bigger, then there when you the local board ultimately makes the decision, there's more impact. As opposed to dealing with the problem when it's small early on, taking advantage of, in my example I just gave, attrition, other ways to balance the budget. So Okay.
I absolutely believe there is. I will say this, mister chair, When we talk about receivership, we we're approached every day with by districts that say, maybe we should it'd be better to go into receivership. No. It is never better. There is an absolutely adverse impact in the early years of receivership on kids.
And so we do not believe we we believe that's only an option as a last resort and not an option just to randomize.
Speaker 1
That just makes me think long term and congratulations on your retirement. But it'd be helpful long term to sort of have a conversation about as we are seeing declining enrollment, that's gonna create real demands on changing systems. Yes. And, to your last point, rather than get to receivership because it's much more painful, how do we incentivize and encourage and support districts and schools to adapt in the necessary ways to deal with those longer term impacts that are coming down. And I think that's where we are interested in having more conversations, and I think we need to make decisions as well in the next couple of years.
I'll turn it over now to my colleagues. We'll start with miss Hadwick.
Speaker 17
You just you knew I was gonna have questions. First, congratulations on becoming a grandpa. I'm a new Mima, and it's the best. I just want to give your your department a shout out because you are, by far, my favorite agency in the state to deal with.
Speaker 17
They are so responsive, and they have a very small staff, and they're asking for more, and they should get whatever they need. So if if you see the governor, tell him. I also am glad that I only have one in the triggered list this year instead of four, and I only have six of the 17 instead of last year. I think I had 14 of the list. So we're improving slightly.
I wondered with all of these school districts, are you seeing commonalities, or is it all different because they all have such different scenarios? Or are you seeing any patterns or trends that we can help on our end kinda get be proactive about it? Because I we just we tend to see more and more schools struggling. Obviously, they need more money.
Speaker 1
We don't wanna we don't wanna rush the responses, but I just wanna be cognizant of time if you can give some succinct answers to the questions, please.
Speaker 11
So That's my only question too. My comments about trends are really driven by what we see for the most part across the board. Mhmm. Lower COLAs, special ed cost escalation plus the the revenue dropping, utilities, insurance premiums, and then the need for compensation. Those those are driven those are common.
And if I didn't mention declining enrollment in there, for the most part, are common across. I try to avoid giving you a list of things that are unique to LA or unique to Plumas or what have you. Those are really driven by common across. So all of your districts are experiencing some element of that. What may be driving declining enrollment may be slightly different in some of your districts versus someplace else.
As you've already mentioned, the fires, the loss of jobs due to mills and other industries in your some of your remote areas closing may have a bigger impact than that those same kinds of activities in Los Angeles County, for example. But but the trends are the same.
Speaker 17
Yeah. Weed has been on this list for a while, and they do have some construction issues. The mill there just closed Closed. This year with their 80,
Speaker 17
Yeah. They they were the largest employer, so we're expecting enrollment to go even worse. Be worse, plus a lot of those spouses worked at the school as well. So, I'm hoping we don't have to engage, but, it's not it doesn't have a great outlook. So, thank you again for your guys' work.
Speaker 12
I have one really basic question. Again, congratulations on your retirement. You have been there with me my whole journey, and I can't imagine what it's gonna be like afterwards, but I'm sure we're in great hands with you.
Speaker 12
So I I am I'm happy to hear that. I have kind of a fundamental question, and I think, miss Hadwig hinted to that. With the increase in qualified and increase slight increase in negative, assuming that there might be a trend towards this considering our fiscal position and declining enrollment, what is your staffing capacity right now?
Speaker 11
I appreciate the question. We're we're small. So the FICNet that you all know about that we represent here is actually, you know, 23 people, including our clerical support and our writers and so on. About half of that are field staff, a little bit more than half of that are field staff. And we're doing okay.
We're we're feeling we're feeling all of this right now on our staff, but it it kinda comes ebbs and flow. The larger portion of the organization is actually the California School Information Systems and Services, which handles mission critical software applications for CDE, both the financial reporting software that is a product of ours that we support for them. CDE is the owner of that. And Calpads, which is what collects all data on students. We operate that for the CDE in partnership with them.
That's a much larger piece, and they are in good shape and fairly stable. The ebb and flow for us, we have met that challenge in the past by bringing experts in from the outside, maybe a retiree here or there. That has become far more difficult under PER's most recent interpretations of longstanding regulations that they used to, in my judgment, interpret differently, that prevents us from accessing some of those people. So one of our requests this year that you see in the governor's budget proposal is for two additional full time equivalents for us. One of those is very specifically driven by the fact we cannot rely on those outside folks as much as we used to.
And we rely on them for two things. One is workflow, peaks and valleys or soften the peaks and valleys. The other is expertise. I can I still have to turn to some of them for expertise?
Speaker 1
I just was reminded we also have a FICMAT pro budget proposal Right. Which we can get into more details in a couple of weeks. Yeah. Yeah. Yeah.
You. I I wanted to ask for your thoughts on one of the mechanisms or one of the concerns raised was from Vallejo. I don't know if you've seen this, recently. I my understanding, and I may have some of this incorrect, but that, when you are in receivership, you can you're allowed to deny charter petitions as a result of the issue of enrollment. O five.
Yes. But I think that's limited to some some time period. Have have you heard from other districts as you've done some of this work that they may need a little bit more of
Speaker 11
a runway to catch up on that front? So the situation that you're hearing from Vallejo is replicated in Inglewood and Oakland. Their approach may be slightly different. In the case of Oakland, they are very supportive and probably would never step up and use those safety provisions to deny a charter. Inglewood, that would be a little different.
Would say Inglewood's bit more aligned to Vallejo in how they would approach that. The issue is that if you're in receivership, as the chair has described, you can deny a charter petition or a material revision, not a renewal of an existing, but a new or material revision based on a financial impact, an adverse financial impact. When you exit receivership, that safeguard ends at the point you exit. So Vallejo Oh, it's immediately it ends. Immediately ends.
And the issue is should there be a longer runway for that safeguard either to go out three, five years or taper down right in some fashion to recognize that. It is absolutely legitimate issue that Vallejo has raised.
Speaker 1
But it sounds like if we gave a little bit more of the flexibility that locals would decide different things, Oakland may say we're ready to approve the minute we get out of receivership. Someone may say we need maybe a little more time.
Speaker 11
And and that is how AB 15 o five is written. It's not a mandate that you deny a charter. It is you weigh the fiscal impact and make a decision, and you can use that fiscal impact in your denial. Otherwise But only during receivership? Only during receivership.
Speaker 1
Yes. Okay. Alright. And can you just briefly I think colleagues from Oakland would appreciate just hearing what is what what is the dynamic in Oakland at the moment?
Speaker 11
question for me to answer because I don't think any of us, including the county superintendent who has direct responsibility for oversight there has a clear picture. It literally changes daily. We do not, at this point, have a 100% reliance on the accuracy of the data that's being reported. Remember that when they exited receivership last June, they had also just made a change in leadership at the superintendent level. And subsequently, their chief business official left them most recently in December.
Those are folks that we had very positive, good, open relationship with. And I think over time had built a mutual respect. We don't have that right now. Yeah. I don't think the county superintendent feels completely comfortable.
Okay. There are not just financial issues there, but there are governance issues there of, to your earlier point, of constantly kicking the can down the road, constantly over many, many years. So it's not a new it's not a new circumstance. But we I think we're all really worried about them. But we cannot we there are no actual triggers for any of us to go Okay.
Engage as part of
Speaker 1
the struggle. That is all helpful enough. I am sure that our colleagues represent that area will be in touch. But thank you for putting it on the record. Thank you.
Thank you very much again. Thank you to all. This was an informational item, which brings us to the end of our agenda. Good timing. If you did not speak at the beginning of the meeting, you are now given an opportunity to share, ask you to please come forward, step up to the mic.
You have one minute. Please identify yourself and, and provide your public testimony. We'll give you one minute. And at the one minute mark, I will say thank you, and it'll be time to move on to the next one. Welcome.
Speaker 32
Yeah. Thank you, mister chair members. John Winger here on behalf of the California Charter School Association on issue one related to LCFF. It wasn't discussed, but there's a big bump upwards of 600,000,000 on transportation funding, and we just continue to remind the legislature that we've historically been cut out of transportation funding, which has, been a real pain point for us, particularly with our SPED students who were required to provide transportation for us. That's a huge unfunded mandate for us.
On the, bond, for the $600,000,000 set aside for charter schools, we continue to ask for hardship exemptions so that more of our schools could be eligible for that 600,000,000. Wouldn't impact the number whatsoever. It would just make sure that more charter schools are, eligible for those for that funding, particular our smaller schools. And, happy to follow-up on the receivership conversation that just happened. We obviously, would have some difficulty with extending those provisions to where, we wouldn't be able to, have our parents access high quality charter schools in those areas.
Thank you.
Speaker 28
Good morning, chairman members. Cordova Hampton with the Association of California School Administrators representing over 18,000 school leaders across California, acts to support the governor's proposal to apply the 2.41% COLA to LCFF base as well as the small schools, necessary small schools augmentation. However, we remain strongly opposed to the governor's proposal to to LCFF base. Related to the special education proposal, we support the $509,000,000 investment. Districts are seeing increased identifications, and there needs to be aligned funding to help provide additional services.
Related to the learning recovery emergency block grant, We support the larger one time investment of or sorry, larger final investment of $757,000,000 and recommend that the expenditure deadline for districts be extended to for districts to sustain those improvements over time.
Speaker 28
lastly, support the, students' support, especially for both its structure in nature and its,
Speaker 33
Good morning, chair and members. Magali Segal with, Greenberg Chaurig on behalf speaking on behalf of self administrators of California in support of the special education equalization item number two in today's agenda. This proposal would help align state resources with current challenges in light of the increased cost pressures, recruitment and retention challenges, and the expansion of inclusive education environments. There are fifteen point one percent of students that identify with disabilities in the state, and more than thirty two percent of identified students now demonstrate significant needs. We stand ready to work with the administration and the legislature to secure the resources students with disabilities deserve a need and to strengthen California's commitment to access, opportunity, and progress for every learner.
Thanks.
Speaker 30
Good afternoon. Scott Turner, executive director of the East San Gabriel Valley SELPA. We are supportive of the administration's proposal to equalize funding across SELPAs and support the LAO's analysis of the ability to go beyond nine ninety nine per ADA. East San Gabriel Valley SELPA is a large multidistrict SELPA in Los Angeles County with 16 LEAs. Since the enactment of AB six zero two, our SELPA has been amongst the lowest funded SELPAs in the state in years where our SELPA ADA was approximately 100,000 students and our funding rate was 400 to $500 less per ADA than the highest funded SELPAs, our SELPA experienced a shortfall in state revenue of over 40 to $50,000,000 annually despite some of the highest cost of living and operation of programs in California.
The current proposal would bring an additional $7,000,000 to our SELPA. The LEA's estimate would increase the equalization to 10,000,000. While this increase would be positive to our SELPA, we still anticipate that LEAs would have to fund 60% of their SPED expenditures from their general funds. Lastly, our staff also greatly benefited from the work of supporting innovative practices, and we would like to see the continuance of this work through the statewide system of support Thank
Speaker 34
Morning, mister chair and assembly or committee members. I'm Patrick McGrew, assistant superintendent for Yolo County SELPA. I'm here this morning representing the 5,000 students with disabilities in Yolo County as well as the SELPA administrators of California legislative committee. Yolo County is currently experiencing what we've been talking about this morning, declining enrollment overall, lower numbers, so less money with an increase in the number of students with special needs and increasing needs for those students. That, of course, means that we have less money to serve more students with increasingly significant needs.
I am urging your support for the $10.33 dollars base grant that the LAO identified because I think that would equalize things across the state of California. Thank you.
Speaker 21
Good afternoon. My name is Michelle Kinner. I'm a program specialist with the small and sparse SELPA of Tehama County, representing 1,800 students with disabilities and 16 LEAs. I'm here to urge your support for the identified LAO amount of $10.33 as our base rate so that funding for SELPAs is equalized. Thank you.
Speaker 15
Hello. I'm Wunji Agili from Mount Diablo School District SELPA, which is in, Bay Area, and I'm here to support the $10.33 dollar amount per ADA for, special education. But please make no mistake, this is not a special education issue. Earlier on, you've cited things such as child find and inclusive practices. Special education services are mandated and as such, every dollar that's not funded for special education forces districts to make really difficult decisions about what they're not going to do in general education as they are making those contributions.
So we encourage you to fund special education because that will then put the money back to general education and increase opportunities for all students, not just those 15%. Thank you very much.
Speaker 20
Good morning. Good afternoon. My name is Anne Ragali and I am the SELPA director for the Elk Grove Unified School District here in Sacramento County. And I appreciate the support for the governor's proposal. Quick shout out to members Patel and Hadwick for acknowledging the staffing shortages that we experience in special education and the need for servicing students in the least restrictive environment.
And thank you all for your service.
Speaker 35
Hello. Paige Clark with the National Center for Youth Law. While we support the block grants discussed in today's hearing, we respectfully request the legislature consider a more targeted approach for our k 12 students experiencing homelessness. Research shows that discretionary funding is often inadequate to address the unique barriers faced by our students. While CDE's homeless student enrollment count totaled 298,000 for the 2425 school year, A PPIC report found that less than 1% of planned LCFF spending is used for homeless students.
A targeted state grant can best support services for our most vulnerable students. Thank you.
Speaker 36
Good morning. I'm Tara Turntine. I am the homeless liaison with the Sacramento County Office of Education. I provide technical assistance to 53 districts and charter schools in our state's capital, yet only eight are funded have dedicated homeless education funding. Last year, 16,500 k through 12 students in Sacramento County were identified.
That number is double from five years earlier despite declining enrollment. These students live in motels, shelters, over overcrowded overcrowded housing. They move frequently, and they lose school stability with each move. They're chronically absent twice as much as their housed peers, 49% as compared to 24%. Every three years, we compete for federal McKinney Vento funds, and the allocation has remained essentially the same for decades.
This funding level no longer supports sustainable programs. My own position is funded through six separate funding streams, which makes long term planning impossible. And after twenty years in this work, I can say clearly that if California is serious about providing a world class education for all students, then we must invest in stable, predictable state funding for students experiencing homelessness. Thank you.
Speaker 37
Good morning. My name is Marty Remmers. I am the director of the San Joaquin County SELPA. I'm here representing the nearly 12,000 students with disabilities that reside in our SELPA. In, San Joaquin County SELPA, nearly 73 of our special education revenue comes from local sources.
Today, I ask for your consideration in supporting the $1,032 base rate identified by the LAO as part of the special education equalization. Moving towards the recommended rate would provide us greater stability in our efforts to meet the increasing and diverse needs of the students and families that we serve in our community. Thank you for your time.
Speaker 38
Good morning. My name is Debbie Morris and I serve as the Sacramento County SELPA director supporting nine of our smaller elementary school smaller school districts. I'm here today to support full funding at the higher LAO level. For the small districts I work with every day, equalization isn't just a funding formula. It shows up in a very real budget sense.
For example, one of our districts, our COI, which is one of our smaller districts, would receive just under $18,000 which may not sound like a lot to some, but that accounts for more than two hundred hours of perhaps related services for our students with disabilities. In a small district, that amount often determines whether required special ed costs can be absorbed or whether districts have to backfill those costs from already limited general ed funds because there's no cushion or economy of scale. I respectfully urge you to adopt the full LAO supported equalization rate for this year. Thank you for your opportunity to speak.
Speaker 23
Good afternoon. My name is Natalie Shin on behalf of Californians Together. We align our comments with our partners in the LCFF Equity Coalition and want to emphasize the need for the discretionary block grant to be distributed in alignment with the LCFF's unduplicated pupil count ensure these funds are distributed with an equity lens and focused on serving our highest need students. Additionally, we hope to see more targeted investments towards English learners and high need students moving forward. Thank you.
Speaker 18
Good morning. I'm Troy Tickel, assistant superintendent of Placer County SELPA. I'm here to represent our 18 school districts of Placer County. Our districts range from, our smallest of 83 students to our largest of over 13,000. The one pain point they all have in common is special education funding.
Of all my districts, they're all between 2535% of their budget goes to special education to offset the cost of of special education not being fully funded. Here to encourage you to adopt the LAO, rate of $1,032 per student to help us support our students and to continue to build inclusive environments. Thank you.
Speaker 39
Good morning, chair Alvarez and members. My name is Ana Amcamides on behalf of Los Angeles Unified School District. We are in support of a higher COLA as mentioned by the, LAO. In particular, we would like to see the restoration of the three point o two COLA that was projected in June. We do make our budget projections based on those COLAs, so a lower COLA does have a significant impact.
And as mister Fine shared, we're looking at costs that are increasing at five to 6%, so 2.41 is not going to be adequate to meet our needs. In addition, we are strongly supportive of the proposed increase to base rates for special education, but more needs to be done particularly for students with severe moderate and severe needs. $999 on top of LCFF gives you about 12,000 to $13,000. Our cost for serving serving a student with severe needs is about $54,000, so we're significantly underfunded in that area and would like to see more work done. Thank you.
Speaker 40
Good afternoon. Dan Merwin from the California School Boards Association. We're in strong support of the LCFF COLA, the necessary small school adjustment, the special education equalization funding, and the block grants. We just note, though, that kind of the theme from today's hearing, and I appreciate staff for how they group these together, is it really highlights the lack of adequacy and funding. And so we have challenges for smalls.
We have challenges with an insufficient COLA. We have challenges for special education. And I think as mister Fine noted, you know, things are tough out there for everywhere. I think difficult was the exact word. And while there are certain common trends in those schools that are struggling, we're all suffering from declining enrollment.
We're losing those economies of scale. That just highlights the need for a fully discretionary block grant. Hope you'll retain that. Thank you.
Speaker 27
Hi. Michelle Warshaw on behalf of the California Teachers Association. We support the governor's proposed 2.4 COLA and urge the legislature to provide ongoing funding for the LCFF beyond the statutory COLA. We also support the governor's proposal to provide 509,000,000 to increase the special education base rate. And finally, CTA supports the 2,800,000,000.0 for the discretionary block grant.
We do believe that this should be allocated on a per per student basis and remain as flexible as possible so LEAs can have their discretion in addressing their unique needs. Thank you.
Speaker 41
Good morning, chair and members. Derek Lennox on behalf of the California County superintendents. I wanna start by appreciating the really good conversations on all the topics today. Our budget letter has been submitted and speaks to many
Speaker 41
For my comment here, I'll focus on three. First, strong support for the special education equalization for all the reasons mentioned by the committee members here today. Second, on the learning recovery emergency block grant, a really good conversation about accountability and how funds are being spent. I did pass along to staff some of the resources that currently exist for accounting offices help on the reporting and accountability of those funds. That's something that happens currently, so I wanted to share that with you all.
And then finally, for the reasons stated about the fiscal challenges districts face during panels one and five, strong support for the discretionary block grant and the ability that that has to help preserve services for students across the state as they address these fiscal challenges. Thank you very much.
Speaker 42
Good afternoon, chair Alvarez. Sarah Petrowski on behalf of the California Association of School Business Officials. Our members are really grateful for the conversation today highlighting the challenges that are affecting our school districts, challenges that look different for each and every one of them depending on their unique circumstances. As such, we think that there are conversations today that really, emphasize the need for supporting some of the proposals. We and specifically, we support the equalization of the special education funding across SELPAs.
We think more needs to be done here. Special education, as many of my colleagues have noted, continues to be underfunded, and students' needs are increasing. We also support a fully discretionary student block grant, the COLA, and the sale of bonds under prop two. Our facility needs are significant. Thank you for your time.
Speaker 1
Okay. I think, anyone else wishing to speak? Alright. Well, thank you very much. Appreciate you all being here.
Our, hearing is adjourned.
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