California faces large cuts to school district funding

by Leo Herbstman, staff writer

Santa Rosa City Schools will have to revise their budget in a dramatic way. As part of Governor Gavin Newsom’s revised budget due to effects from the COVID-19 pandemic, the $64.2 billion allocated for the state Local Funding Formula (LCFF) will be reduced by 10 percent for the 2020-2021 school year, meaning it will be slashed to about $58 billion. 

According to Deputy Superintendent of Fiscal Services Rick Edson, “If the Governor’s May Revision is adopted, with no other funding included, SRCS will have to decrease expenditures by approximately $9.7 million in the 2020-21 school year and $21.6 million in the 2021-22 school year.”

SRCS was depending on a projected $146 million for LCFF funding for the 2020-21 school year. They are already facing the possibility of dire cuts because of a deficit for the 2020-2021 school year of just under $10 million. However, they are also slated to receive some of the $4.4 billion allocated to the schools from the federal CARES Act funding passed by Congress in March.

According to Edson, “The majority of our school district funding comes from the Local Control Funding Formula (LCFF).” For the 2019-20 school year, 80 percent of the total revenue for the district comes from the LCFF, which “creates a funding level per student. School Districts receive funds based on the percentage of Average Daily Attendance (ADA),” added Edson. 

Funding for schools is required at a certain amount through Proposition 98, which passed in 1988, effectively requiring a minimal amount of funds from the state to go to K-12 schools and Community College in California. This year the formula calculated changes in the workload based on the increase in the state daily attendance, which raised the fund $3 billion for 2020-21. With what seems to be a recession taking place in California and in the US, the budget cycle could feel the effects for two straight years according to a presentation by Edson and Executive Director of Fiscal Services Joel Dantos at the school board meeting May 13. 

Edson explained, “There is great uncertainty with education funding in California right now. The proposed reductions to school funding will create a need to greatly reduce expenditures to align with significantly less school district funding [revenue]...At this time, we are waiting for the California State Budget to be adopted, and we anticipate major revisions to the state budget that will directly impact our funding later in the summer after the California tax revenues are realized in July.

According to the meeting report, “In the short term, schools will be asked to do more with fewer resources. For long-term fiscal solvency, SRCS will have to make significant changes to the organization to ensure fiscal stability during this downturn.” There is an expected decrease of two percent in daily attendance and a projected decrease of the Cost of Living Adjustment (COLA), another factor to state funding of two percent. Due to these predicted decreases, the state fund for SRCS is predicted to go from originally $145 million to $128 million, a $17 million decrease, but it could be as much as a $36 million decrease if the COLA decreases by 10 percent, which is a possibility.

SRCS depends on the daily attendance and cost of living for funding from the state. The daily attendance effectively means the average attendance of schools by students each day, which means it is affected by lowering enrollment in schools but it is lower since not every student attends school everyday. The cost of living is the average cost of everyday items per person’s increase or decrease from the year following. The daily attendance determines the needs for each school district while the cost of living contributes to higher or lower income tax, meaning as it increases there is more funding, but as it decreases, funding can dramatically drop.

SRCS is getting $2 million from the $4 billion CARES ACT funding, but that cannot nearly make up for millions of dollars in decreases from the budget. With no more help coming at this point, SRCS will be using different tools to direct how they spend their remaining revenue. This includes maintaining a minimum state-mandated three percent reserve for economic uncertainty which needs to be reported in the year end auditing statement, passing a resolution allowing the temporary transfer of cash from one fund to another while waiting to receive revenues, and taking out Tax Revenue Anticipation Notes (TRANS), which are short term loans districts can take out to address a cash flow issue created when there needs to be spending before tax revenues are received.

Before the pandemic,  $84 billion was allocated for schools in the state and $144 million specifically for SRCS. Due to over abundance of costs according to SRCS, a Fiscal Stabilization Plan was made to address the looming $13 million deficit, including $7 million in budget cuts for the 2020-2021 school year and an additional $3.7 million in budget cuts for the 2021-2022 school year. With the deficit going nowhere, that will also factor into decision making.

In a statement about the May Revised Budget from Governor Newsom, California State Superintendent of Public Instruction Tony Thurmond said, “While the measures outlined in today’s proposals are far from what our schools need, we also understand that our state is facing impossible choices under impossible circumstances. I will continue to advocate on behalf of our students and educators through each step of the Legislature’s budget adoption process in the coming weeks.” 

Thurmond also expressed his support for the $3 trillion HEROES Act that has passed the House of Representatives, led by Democrats, which among other things, provides $1 trillion to state, local, territorial, and tribal governments which includes money for teachers and schools. The bill is predicted to die in the Senate, however, due to the statement of Senate Majority Leader Mitch Mconnell calling the bill a “liberal wish-list” and many other Senate Republicans backing him up, saying there are provisions in the bill that do not relate to the Coronavirus. 

If no funding happens to come from the federal government, then California will deal with a predicted $54.3 billion budget shortfall, just one year after having a $5.6 billion surplus and $21 million in reserves. Now the budget deficit is more than three times the “rainy day” that they updated after the pandemic began. With all of these factors, Edson concluded, that “SRCS is preparing to significantly reduce expenditures in the following year.”