Senate Budget and Fiscal Review Subcommittee No. 1 on Education

The Senate Budget Subcommitee number one on education will come to order. The Senate continues to welcome the public in person and via the teleconference service for individuals later, after we hear four items that wish to provide public comments. Today's participant number is 877-226-8216 you can see it on your screen if you're watching, 877-226-8216 and the access code is 621-7161 we're holding our Committee hearing here in the O Street building.

I ask that the remaining Members please report to room 2100, and when they do, we will establish our quorum. This is our first hearing as Senate Subcommitee one on education for the 2023 year. We expect to meet every Thursday through April, except for the Thursdays of the spring break. And while California's economy remains sound, economic challenges from high inflation to the slumping stock market have resulted in modest proposed reductions in revenue projections. However, we're prepared to withstand these challenges without cuts to core programs.

Due to the past decade of responsible budgeting. These past few years, we have been able to secure a record level of discretionary funds for local schools, stabilize funding for school transportation, provide universal school meals regardless of income, and build the reserves that were established for Proposition 98 under Proposition one, passed by the voters in 2014.

This year, sub one will closely examine issues and challenges facing pre k to grade 12 community colleges and higher education and ensure that we protect our progress and ensure that our schools continue to thrive during these times. We'll start with the Governor's Budget as a framework for discussion, but fully expect to act on our own priorities as we move through the consideration of that budget. Today we have four issues on today's agenda.

I think the outside time for our hearing is 01:00 p.m. And so we will allow public comment at the end of the four issues, and I will judge the length of the public comment based on how many speakers are out there and what the time is available to. 01:00 p.m. But we do now have a quorum. So before we hear the presentations on the issues, let me ask the consultant to call the roll.

[Roll Call]

We have a quorum, although we don't expect to be taking any votes today, but at least we have a quorum for consideration of the issues. As I said earlier, we have four different issue matters today, and our consideration will be divided item by item, and the very first one is the State of Education, and it will be presented by the State Superintendent of Public Instruction, Tony Thurmond, who will provide his remarks on the State of Education.

We want to welcome him to the Committee and look forward to hearing what you say. Welcome, Superintendent Thurmond.

Thank you, Mr. Chair. And to the Members of the Committee, thank you for the opportunity to share a few remarks and thoughts about the State of Education, and thank you to your staff who have sent us very thoughtful points and prompts to help guide the conversation today I would open by saying that the State of education is hopeful. We certainly have many challenges as a system to overcome, and that's not limited to California.

The entire nation of schools is trying to overcome many challenges that were exacerbated during the pandemic. But there's so much good stuff happening in our schools. I'd be remiss to not point that out and to ask us to continue to celebrate those great things, not the least of which is our most recent celebration of the distinguished schools awards, where more than 450 school districts were recognized for various efforts in closing the opportunity gap and for other areas where they were recognized for their work in education.

I would also note that this week our schools continue to celebrate read across America Day and week, and that this is a great opportunity to support literacy and reinforce one of the most important skills for our students and perhaps one of the most important ways that our students will bounce back from some of the challenges set by the pandemic. To all of the Committee Members, we make the offer that we always do.

If we can help you connect with any of your schools or you want us to join you at school visits, we are always available to join you and to help in any way in addressing any issues that school leaders in your district may be looking for assistance with. I would also point out again that as our schools are overcoming these challenges, California has provided resources that are unlike what any other state is providing. The Chair noted the Universal Meals Program.

And if you think about where our schools were during the pandemic, where 800 million meals were provided to students through schools to help offset some of the disruption that many of our students and families were experiencing, we have a learning recovery block grant that's $8 billion allocated to our schools to provide them with the key resources for more tutoring, for more learning acceleration strategies to support our students.

Our community schools initiative, $4 billion already $650,000,000 of that has been allocated for planning grants and for implementation grants. The passage of dollars for arts, $2 billion currently funded. And then a new ballot measure that was successfully passed in November to provide additional funding for our schools. And then again on reading, $250,000,000 already being implemented for the reading coaches and specialist program. Another $250,000,000, as you all know, is proposed in this very budget. And, yes, we support that allocation.

We're happy to talk with you about that at any point that you should deem fit for us to do. Again, there are challenges, and these are being experienced nationwide. We've seen learning gaps exacerbated. We've seen chronic absenteeism grow. We know that there are many students who never checked in during the pandemic and that that trend has continued. We know that there's declining enrollment. We are working with our districts to find ways to offset that enrollment, and we're finding many things.

In some cases, students and families left the district, left the state. Some even left the country. And there are other challenges that impacted this. But we're busy working on ways to address chronic absenteeism for our schools. The teacher shortage continues to be a daunting challenge all across the state. Many of you know that we've introduced legislation this year that would provide a waiver so that retired teachers could continue to substitute in our schools. It is critical that we find more teachers.

I'm happy to share with you some other measures that we're working on. We know that this year, all across the country, we are seeing attacks on our schools as it relates to having discussions about racism. And there are overt and direct attacks on our LGBTQ-plus youth. We will not tolerate this, but these are the things that our schools are dealing with. And we have programs that we are implementing to train our teachers on how to support our LGBTQ-plus youth.

And we won't stand for any book banning. And we will support schools and students wherever they are. We've got a Bill this year in the Senate that would create gender inclusive bathrooms for all students to have access to safe bathrooms. And finally, our schools are experiencing weather challenges of unprecedented magnitudes that cause schools to have to close. Flooding, rain, you name it. Inclement weather has impacted our schools, and I just want to acknowledge our newly created emergency team.

In the last couple of years, that's all they do is help school districts and county offices of education counter the impacts of wildfire, rain storms, and other weather impacts that cause our schools to be closed. We call them the three J's. We have three people in that division who all happen to have the first name that starts with the letter J they become on a first-name basis with many of our school leaders.

As we go out to those communities, we bring vouchers to help pay for hotels, for food, for water replacement computers. I would also acknowledge Abel Guillen, one of our Deputy Superintendents who's visited many of these very school districts. We are working with our districts and showing them how to accelerate learning. One of the ways to do that is by providing what's called high-dosage tutoring.

We have 3000 tutors and mentors in our schools through our partnership with California volunteers, and we believe that this is a great way to support our students in terms of learning acceleration. Our schools, thanks to your help and the Legislature and the Governor, and all of our efforts have been provided with more than $4 billion in expanded learning resources to support our students. And so the resources are certainly in place. We're working with districts on how they implement them as it relates to chronic absenteeism.

I want to give a big shout out to one of our partners called attendance works. It's one of the leading organizations as it relates to research and best practices related to countering chronic absenteeism. They have worked with us and helped us provide guidance to our school districts on how to counter chronic absenteeism, which in some cases has reached as high as 30% for some students.

I want to thank the folks at Mount Diablo Unified School District who allowed me to come out and to do some visiting with their home visiting team of families who are chronically absent. We went knocking on doors to find out what are the barriers that are keeping students from returning to school. And they told us homelessness, lack of transportation, mental health issues, eviction, and other threats to the family are all contributing to the challenges that our families face.

And finally, I just want to share on the note of chronic absenteeism, we will be providing some mini grants to our school districts to help them expand the school year specifically for students who've been chronically absent. By providing what we call ESTEEM Academy and an opportunity to lengthen the school year for those students and to give them access to an incredible career pathway that can lead to a great career opportunity for them in the future.

We are excited that we are the only state that has the resources to provide universal preschool for every four-year-old, and really every three-year-old. If you think about the range of options that are now available, transitional kindergarten, state preschool, our head start programs, our childcare programs, we have many ways to meet this. Again, our universal meals program. We have incredible programs.

We are working to recruit 10,000 counselors and mental health clinicians to work in our schools utilizing a grant that you all worked with us to help secure the ability to use the Golden State Teacher Grant, a $20,000 scholarship for anyone who wants to become a mental health clinician and commit to working at least two years in our schools. This work is underway. That same grant is available to anyone who wants to become a teacher in our schools. And we are actively working to recruit teachers.

Historically, the California Department of Education has not engaged directly in recruitment. We don't have recruitment staff and districts have typically led recruitment. But recognizing the challenges that exist, none of these great programs can be successfully implemented if we don't recruit more teachers and classified staff. And on that note, I just want to acknowledge our great teachers and classified staff and administrators and students and parents for their resilience and the great work that they are doing under difficult circumstances.

And so we've entered into the lane of recruitment to support our schools. We have created a public service announcement that highlights award winning teachers to talk about the importance of the profession. The PSA reminds folks about the scholarship that's available. We've created a whole teacher recruitment career fair series where we're helping families. I'm sorry. We're helping future teachers find out how to become a teacher. The resources are spread out in different agencies.

So we've created a one-stop that someone can go to to learn about how to become a teacher, how to get the scholarship, how to get into a teacher credentialing program. And we're doing this work. And we've created a whole series of career fairs. We started with outreach to 10,000 people who were serving in the California Volunteers Organization. This is our service Commission, and 3000 of those 10,000 are already working in our schools. And so we've created a way to prioritize them for recruitment.

We're going to do the same thing for classified staff and for staff who work in after-school programs. And I would just say that anyone who wants to become a teacher can send us a note at any time and we'll call back and provide the kind of customized support you need to get the info you send us a note at Teachandca, at CDE CA Gov and so I would simply close with how I started that. Our situation in California, the State of Education, is hopeful.

Even though we are working to overcome challenges that are being addressed nationwide. I would say that we should also give thought to things as we pursue this budget year to address the needs of homeless students. There are some who have estimated there are 200,000 homeless students in our state and maybe 8000 homeless students who are on their own with no support. I think we have to give thought to how we help them.

The Department of Education is working on some ideas to do such and would love to work with Members of this Committee. We have to continue to expand our efforts to provide educator housing. In 2019, we sponsored a legislation that became part of the budget that provided tax credits for the development of educator housing, teaching, teachers and classified staff. And they used surplus property on school districts, and then the tax credits made the financing possible with the developers. Those tax credits have all been used up.

Now is a great time for us to look at renewing that funding or other strategies to provide educator housing so that we can offset the high costs of housing, which we know is a barrier to every profession and certainly to those who work in education. And of course, we must continue to work on things to support many students, like Black and Native American students and disabled students who have experienced high rates of disproportionate discipline.

And I invite you all to join us if you are able to or have your team join us. At 11:00 a.m. We're doing a webinar for school districts on how to reduce disproportionate discipline. We're making it a priority to accelerate the success of students from underrepresented groups who have been deeply impacted by the learning gap and opportunity gap. And we're excited to work with you in this new budget year as we go. Thank you and I'm happy to answer any questions that you may have, Mr. Chair or the Members of the Committee.

Thank you, Mr. And Superintendent, I really appreciate your comments. I have a few comments, and then we'll have a question and see if other Members have a question. And under comments, I just wanted to do a couple of things. One, to announce that we've been joined by Senator Min. So he is here. I was remiss, and your comments reminded me in not announcing that we are doing oversight this year as well as part of the budget process.

And on March 15, at 09:00 a.m. In this very room, room 2100, we will have the Senate policy education Committee join with us and do an informational and oversight hearing on the State of the educator workforce. And you mentioned that. And I also wanted to thank you and congratulate you. This j is happy. There's three J's that are working on storms and other things. And as the person that represents the Senate District that was ground zero for the storms.

Our school in Big Sur is still, I believe, maybe they finally moved the last road closure behind the road closure, and staff couldn't access it. And the Pajaro Valley school district had various schools closed for weeks and in its entirety was closed for a period of time and all throughout the central coast. That was true. And so we appreciate the fact that there would be help to the locals as that happens. And then leading to a question, and you mentioned one in your comments.

I know there have been at least three initiatives that you have announced. You've launched a work group to address school staff shortages, and you mentioned the subject. You've released a new publication on equitable learning environments for young boys of color, and you've announced programs to tackle disproportionate discipline in schools. And we will be in the hearing at 11:00 so we won't be able to log on your webinar.

But I just thought about one of them I would ask, which is you've launched the work group to address school staff shortages, and we will be having that oversight hearing on that general subject in two weeks. I wondered if you could just comment on what you expect to come from the work group process and if there's anything you've learned already that you'd like to share with the Committee.

Thank you, Mr. Chairman. We have four J's, not just the three j's helping our districts, and we'll ask our emergency team to circle back with the folks in Pajaro Valley to make sure if there's anything else that can be done to support work, that we will do that the work group was created to give us a way to just hear from all of the different entities that are involved in some way of addressing the workforce shortage.

And there are strong partnerships that we already have with the Commission on Teacher Credentialing with the Tulare County Office of Education. They're historically some of the lead organizations as it relates to recruitment of teachers. And, of course, we've worked very closely with our Association of Administrators, AXA, the California Teachers Association, California Federation of Teachers. We brought groups together so that we're all working together because everyone's impacted by these challenges.

What we've learned is that California is different than other states and that we are not saying that we should weaken the quality of what we expect for teachers in training. As our state board education President, Dr. Darling Hammond, always points out, California invests more in teachers and teachers who get a credential, stay longer and have a better experience. Other states are essentially saying we'll take anyone, even without a degree, to just become a teacher. And we think that we should provide teacher training and credential opportunities.

And California has an incredible program to do that. We offer a residency program, which is just another way of saying that teachers can be in training and be coached and mentored while they're learning, while they're getting their credential, and they can get a stipend. The stipend has not been enough to retain our teacher residency candidates.

And so we also are sponsoring legislation this year in the Senate with Senator Portantino, SB 765 a Bill that would expand the amount of the stipend that residency participants can receive. And so what we're learning is while the whole nation is experiencing the shortage of a workforce, California has resources that can be helpful.

Many of those resources have to be deployed in a long term kind of way, that we build a pathway for someone who's thinking about becoming a teacher, that we're focusing on folks who may be even in high school to think about becoming a teacher. But at the same time, because we feel the pain of our school districts, we're also focusing on those who are in college prepared to graduate or someone who's a career changer who'd like to become a teacher.

And it is these experiences that led us to create this, what I'm calling a one stop kind of recruitment method for how to become a teacher. We're stretching ourselves, Mr. Chairman. We just don't have recruiters at the Department of Education, and we're working to build our capacity to be able to do more. But every week, myself and the members of my team are literally calling the applicants that have reached out to say, how do I become a teacher?

And so the way that we can support teacher recruitment in the near term is to make sure that those who are about to graduate college are aware of the resources that are available, and we're making them available to many of our teacher candidates and career changers. Our public service announcements should be out shortly. Again, this is going to give us, I would say, certainly statewide reach and maybe even national reach to how we can attract more teacher candidates to the state.

And I would commend the Commission on Teacher credentialing and the Legislature for having created so many waivers to reduce fees that teacher applicants have to pay to become a teacher. This has been a barrier, and I would just commend the CTC and others who have said that we've paused those fees. Well, the fees still have to get paid, but the State of California is paying those fees for our candidates.

And so the work group has led us to creating this effort, and we're working in these ways that I've described, and we're open to any feedback you have or any other questions you have about how we're approaching teacher training.

Well, thank you very much for that. And we sort of struggled with this issue the last couple of years, and some of the data has a two year delay. So we were trying in the middle of COVID to understand what the teacher retirement level was, and those statistics weren't readily available. And I think we catch up this year.

So when you do your work group and we do our hearing, we hope to have those statistics to be able to then look at what the impact has been in the last two years as well as the ongoing trend with regard to the teacher shortage. Senator Min had a question. Senator Min.

Thank you, Chairman Laird. I first just had a couple comments I wanted to make. First is that I know we proposed a number of new programs over the last couple of years, and therefore, I think causes that we all agree with, including expanding access, dealing with learning loss, et cetera. But I do just want to state my base view that when push comes to shove, should we be in a position where we need to make cuts?

I think that we need to protect base funding as much as possible. That needs to be our top priority when it comes to looking at the budget. I also want to mention, and first of all, I want to thank you, Superintendent, for all of your great work in trying to get us through a pandemic, trying to make sure that we are dealing with a lot of challenges responsibly.

One challenge I want to note, and you and I have talked about this, but in my district, in Orange Unified School District, we just had a new school board take over, a new majority, and they immediately fired in a very special meeting called Ad Hoc, the Superintendent and Assistant Superintendent. And I'm concerned about this happening more broadly across the state.

This has caused a lot of disruption to the students in my district, and I'm wondering if you have seen this happening in other parts of the state, if you have concerns about it, and if there are steps that you think we in the Legislature or you as the Superintendent of public instruction can take to try to prevent this type of disruption. It seems very irresponsible. It seems like a violation of fiduciary duties. But I just was wondering if you'd comment on that.

Thank you, Senator. I would first note that I'm excited to share that every year for the last four years, I've been able to spend my read across America Day in Orange Unified at Jordan Academy in your district, an incredible school that offers STEM education and dual language immersion.

Programs, incredible teachers there. And I certainly hope that the school will not be impacted by the changes that you've indicated have happened at the district. I have to say that at this school, and I'll be there tomorrow, as a matter of fact, for read across America Day, continuing the tradition, the incredible tradition that has been started by the former principal, principal Rubio.

She's been an incredible leader, and I want to thank Denise Acosta Fletchoff, who has invited me to come to Orange, I mean, to Jordan Academy every year, an incredible teacher and all the great teachers and staff there have been remarkable. As you point out, Senator, this trend is unsettling where a school leader will lose their position simply because the board majority has changed.

It has been unsettling that districts would fire a superintendent at a time when superintendents are retiring in the country at a very high rate. And it is a difficult job. And for any district board to fire a superintendent who's a good superintendent simply because they have some disagreement or frustration about some policy, whether it's masking or something else, I cannot see how that kind of churn, in turn, is helpful to a school district and to the students.

At the end of the day. I appreciate the leadership that you've shown on this issue. We continue to look into it and we continue to be available to help in any way that we can.

Thank you, Superintendent. Switching gears, and I should just note that the particular Superintendent in question had never received anything but exceptional ratings. So this was very surprising. It was done in the middle of school year. And I want to thank you for your leadership on this as well. Switching tax the governor's proposed $250,000,000 in new discretionary funding for reading coaches.

And I guess I wanted to get your thoughts on spending that money there visa vis spending it in other places, including on teacher attention or anything else. And if you had any thoughts on.

I mean, I would say that, as you've sort of hinted in a year where, as Chairman Laird points out, that there are fewer resources and California has funded so many programs at such a high level, we're talking lifetime investments that you all have contributed to universal tk and universal meals, community schools at $4 billion, and the Governor has the children's mental health initiative. That's upwards of 4 billion, almost 5 billion.

There are once in a lifetime investments that we are seeing, and the reading coaches and specialist grant is one of them. And in every state in this country for decades, advocates have been saying that we should help our students reach literacy by third grade, and that has evaded many of our districts. And so I happen to think that this new proposal for an additional $250,000,000 is critical.

I happen to think that the proposals in the budget that focus on literacy and that focus on teacher recruitment are the ones that should not only be preserved, but if there's going to be any additional spending, it should be in this area. What I'm saying is if you look at the funding that California has for education, and we note that the per pupil amount that is proposed in this budget would be the highest ever at well over $17,000 per pupil. We're seeing dramatic shifts.

In many ways, we've covered the base of what's needed. I do note that there is some discussion of possible statewide legislation that would help schools increase teacher salaries, and I think that is critical because school districts have a lot of funding right now, but a lot of it is still one time. And I think that if we're going to really change the conversation about teacher recruitment and classified employees, we have to pay them better.

We have to end this era where someone who's a one on one aide says, I can't do the work anymore because I can make more money working in fast food. And that is not to impute anyone than fast food. That was my first job. And I'm just saying. But we show our values by what's in our budgets in this country. We say that we value education.

We have to fund it like we mean it, and we have to figure out a way to finance our districts in a way where they can provide more funds to pay teachers and classified staff at a better rate. I think that all that to say that I think that the reading coaches and specialist grant is particularly important in this current budget proposal because $250,000,000 is significant.

But it goes so far, and I'll ask my staff to get a number of the number of districts that have been selected to receive the grant in the first round. But I can tell you it falls short of the need, and research has shown that this is one of the most impactful ways to affect literacy in the right direction. And there are many things that are going to be important in helping our students bounce back from learning gaps.

But literacy is probably the best if you think about what it means to learn to read and how you can read to learn anything as a gateway skill, it is so critical. I'm thinking about someone who just yesterday was sharing with me how she has seen accelerated literacy for a student help them even improve their math proficiency. But because they didn't have the basic fundamentals around reading. They struggled. And once they did get those supports, they improved.

And so absolutely would recommend and hope that this Committee will support this new allocation for reading coaches and specialists, that it will be deeply impactful for the students of California.

Thank you, Superintendent. And I will not be able to join you tomorrow, but maybe next year at Read Across America Day. Enjoy Orange.

Thank you, Senator. Senator Smallwood-Cuevas.

Thank you so much, Mr. Superintendent, for that very in-depth overview and appreciating the spectrum of work that is happening in our school system and the priorities that are being set. I'm a proud mom of a public school student who's probably cringing if she's listening to this hearing. She had shared with me last night, her course load for next year, and on it was her AP African American Studies course. So I was very excited to see that.

And we know there's been quite a national debate and discussion about the level of education that students are being denied in places like Florida, other parts of the country where the education isn't keeping up with the scholarship and the lessons of history and other important educational tools that our students need to help not just them understand themselves and the communities that they are going to lead, but also to really fully participate in this democracy because they have a full and relevant and fact-based learning and education.

So I'm very proud of her school district for offering that. But it does raise the question for me, to what extent are we investing in the kinds of relevant education that helps our students understand themselves and the world that they're in? And I'm particularly looking at the issue of vocational education.

I come from working in community and labor partnerships where we are building pathways into quality jobs and the tools that students need to be able to navigate this economy and to really lean into the world of work certainly needs to start sooner. And I wonder what kind in the kinds of priorities, where does that vocational education fit in, and particularly vocation that is linked to high road, union, apprenticeship, pre-apprenticeship and those kinds of partnerships. I'd love to hear more about what is being prioritized in that area.

Thank you, Senator, so much. Great stuff there. And when you said that your daughter would cringe about you talking about your daughter, I thought of my daughters are the same way and they never want any reference or mention. But I hope that your daughter watches this hearing and knows that her mom is proud as it should be. A lot of great stuff there.

I should note, too, that as an answer to the last question by Senator Min, the reading coaches and specialist grant, and this is for the whole Committee. Currently, we have 124 school districts that have received a reading coaches and specialist grant. And so should this next round of funding be approved, we would be able to have another 100 and 2425 districts. And so thank you to our government affairs team for sending that information. Amy Tank Paterno, the leader of our group. Thank you, Senator.

Back to your know, it's disheartening that outside of California, there are those who are literally trying to criminalize the ability to talk about race or the impacts of race or banning books around how we support LGBTQ-plus students. And we have to be vigilant because there may be some in California who will raise this. And we think that this is a know.

California's tradition has been that in recent years, we highlight the contributions of African Americans and other groups of color because we know that it benefits our students. And we're doing that in ways we have an ethnic studies graduation requirement in California. We work to create a model curriculum guide to help school districts learn how to create their own ethnic studies curriculum.

And that does give a way to highlight the contributions of the ancestors of our students who are African American, who are Latino, who are Native American, or who are Asian American and Pacific Islanders. And what the research shows us that when you highlight this history for our students, students of color do better academically, but students from all backgrounds do better. And so, as we have said this past month, that black history month shouldn't be just limited to the one month.

And we've talked about how Black History is everyone's history because every student benefits. And we have to have these broad and brave conversations about diversifying our workforce because the research shows, again, that if there's at least one Black teacher in a school, that African American students do better, but students from all backgrounds do better. And so we have been very explicit in wanting to continue to use education to end hate to talk about concepts in African American history and other history.

We've sponsored legislation that passed last year to highlight appropriate and culturally appropriate history of the first people of the State of Native Americans in California and to undo some of the things that are still being taught in our schools that have prejudice in them and stereotypical content. And so we have work to do, but yet we are actively doing that.

We've provided grants to our school districts, thanks to the Legislature, to be able to have implicit bias training for our educators to help check the biases at the door so that we can provide the best for our students. To your points about vocational education. Again, California continues to find at a very high level our career technical education paths. Our students are getting on pathways to learn about all opportunities. We always say college and career.

We don't choose one because we recognize that there's a path that's right for every student and that they and their family will choose that path. And we recognize that there are many, many jobs that may not require a college degree that will provide a great profession and a great service to those in California.

It's my honor to serve as a Member of California's state apprenticeship council and as a former labor chair in the know, having authored legislation to teach about labor studies and would love to work with you, given your work in labor and the Black Labor Movement, to really make sure that people understand labor history, and unfortunately, many don't, and for them to understand that access to these labor opportunities means opportunity for good paying jobs and workplace protections.

We'd love to work with you on any thoughts that you have about what else we can be doing to support our students. But we will be going as deep as we can in career technical education to make sure our students learn about all career pathways, including access to vocational trends. I note that there is a Bill this year already beginning in the Legislature that would speak to how to bring back even more focus on shop programs that used to take place in some schools.

But our schools are working hard to do more around career technical education, and we'll continue to work closely with them in these ways and love to work with you in your office on ways to support it.

Great. Thank you very much. And I have one final question. In one of the school districts in my area, there is, there's been, as often is on school campuses, particularly at the high school level. I think going back to the years of west side Story where young people have conflicts and tempers flare and sometimes those punches will fly.

In the instance hearing, there have been a number of town halls and conversations between parents and the campus because so many of these instances have been recorded and on social media and have created a sense of concern, obviously, for parents. And one of the areas that I'm curious about in terms of investment is how are we investing in the training of security staff? I believe in having school campuses that without metal detectors, without armed police, without District Attorney Offices. I believe in having campuses of learning.

But I also believe that we have to have a trained security staff that is able to de-escalate, that is trained on how to deal with crowd control, that is trained on how to keep our children safe. What is the district doing to make sure that those staff members and many of these are often some of the lower paid positions, but certainly could be upskilled so that they can play a more relevant role in the protection of our students and the safety of our campuses? Can you share how the district is thinking about that kind of community safety that needs to exist on these campuses?

Senator, Smallwood-Cuevas. Thank you. That's a very important question, and I'm thinking about my own experiences years ago as a school board member at a district where I felt there was a very strong training program to support staff, security staff. And at this district, it was a unified district. And so that meant there were five cities, schools in five cities spread out. And so there were also school police.

But those school police were school resource officers who were trained in how to interact with youth in appropriate ways, with an emphasis on prevention and deescalation.

As you point out, last year we wrote and sponsored a Bill that would provide a new position in schools that we call de-escalation specialists, intervention specialists to do de-escalation and thank assuming Member Gipson, who was the author of that Bill, because we envision creating a new way to approach any kind of activity or behavior at a school, as you point out, that focuses on de-escalation and on prevention.

The Bill didn't prevail, and so we're coming at it again and looking for ways to promote the intervention specialist idea. We're providing some mini grants to help districts test out how to provide this work. And we have been providing dollars to school districts on how to use restorative justice and restorative practice.

To date, well over $100 million has been allocated on this subject, and I'm grateful to have had a chance to carry a Bill many years ago called AB 1014 that moved money from the criminal justice system into our pre k through 12 system in prevention programs. And so we know that things will happen, but we want to provide schools with the resources to support students in an appropriate way without pushing them out or pushing them into the criminal justice system.

And so we are still working on ways to promote this, and we're putting out another round of grants that will also be focused on restorative justice this month, as a matter of fact, and we'll share that information with your office. But I will tell you that the need that you point to is a need to create some uniformity across school districts. I imagine that some districts do it quite well and others may not have as robust a training.

I think if you did an audit that's what you would find. And I think in order to create the uniformity in training for school security, I think you would find that there will probably need to be some additional legislation to help create that uniformity, but to create the training, right, not just the mandate, but to create the training and resources for the training. I think districts are just improvising and doing the best they can with the resources that they have.

But this isn't a place where we help schools go beyond just creating a school safety plan, that much I'm certain of. Schools create a school safety plan and our office helps them write those out. But let's face it, these are complex times. To your point, we think that there could be a need, and we're happy to look into how it works for districts in terms of what they provide.

With 1000 districts, it might be buried what they're providing, but we'd be willing to work with your office and others to get that information and to explore some new ways to make sure that the training is being provided, the right kind of training so that the security personnel can respond in the best ways for our students.

Appreciate those responses and looking forward to working with you and digging more into the budget and the needs to keep our students safe in our communities united around the education of our children. So thank you for that.

Thank you, Senator.

Thank you, Senator Smallwood-Cuevas. That completes the questions from the Committee, and I want to thank the Superintendent for being here. And this was one of the more engaged questions periods we've had in the three years we've been doing this. So I'm very grateful and we're just going to have a lively year, and I look forward to working with you, as does the Committee, as we move through the budget. So thank you for taking the time to be with us today.

Thank you, Senator. Thank you. Members of the Committee.

We're going to move to issue two, which is the Proposition 98 overview and structure. We have two panelists to introduce this. The first one is Amanpreet Singh from the Department of Finance and then Ken Kapphahn from the Legislative Analyst Office. And we're going to hear an overview from them and then ask a few questions. So we will move to the representative from the Department of Finance. Welcome to the Committee.

Good morning. Chair and Members Aman Singh here from the Department of Finance. I will be going over the Proposition 98 guarantee for TK through 14 education. The Governor's Budget estimates that the Proposition 98 guarantee amount for fiscal year 2324 will be $108.8 billion, which is $1.5 billion lower than forecast at the 2022 Budget act. This represents a 1.35% decline over Budget Act.

Despite this decline, the per pupil spending amount remains at one of its highest years yet, and the overall size of the guarantee is not significantly different than at Budget Act. Across the three-year budget window from fiscal year 21-22 through fiscal year 2324 Proposition 98 shows a decline of $4.7 billion compared to Budget Act. All budget years remain in a test one, which means that Proposition 98, the amount is roughly equal to 38% of the state's General Fund.

The current cost of living adjustment, or COLA, is 8.13%, which poses a large cost pressure on the budget. The January budget proposes funding COLA in the full statutory rate of 8.13%, which will keep funding for education programs in line with the high rate of inflation. Despite the drop in the Proposition 98 guarantee level, per-pupil spending is at one of its highest-ever yearly amounts, with over $17,500 in Proposition 98 per student and over 23 $700 per student.

If all funding sources are included to address the Proposition 98 decrease, the Governor's Budget does contain multiple one-time solutions that offer a balanced and realistic approach to mending the budget gap. The state maintains a rainy day fund for education, and the balance of the rainy day Fund is currently $8.4 billion, which is $1.1 billion lower than estimated budget act. The reason for this downgrade is due to a decrease in capital gains revenues.

Despite the lower balance, the rainy day Fund will still be receiving a deposit in the amount of $338,000,000, and that's based upon a statutory formula. The Governor's Budget does not propose making a withdrawal from the rainy day fund as the criteria for withdrawal have not been met. Those criteria are generally if the Governor declares a State of Budgetary Emergency or if the formula for withdrawal is met. And if that formula is met, that means an automatic withdrawal occurs.

As for policy changes that impact Proposition 98, the guarantee has been re-benched to reflect the continued implementation of universal transfigional kindergarten. And when I say re-bench, I mean the guarantee calculation has been recalibrated to include that program, universal transitional kindergarten, permanently in the out years. The newly passed Proposition 28 Arts and Music in Schools Act requires additional funding to Proposition 98 equal to 1% of the previous year's guarantee level.

So, to rephrase that, Proposition 28 will require the current guarantee level plus an additional 1% of the prior year's level. The very first year of the Proposition 28 appropriation will be fiscal year 2324 and it will be in the form of a supplemental payment of $941,000,000. That's my overview of Proposition 98. I'll be available for any questions.

Thank you very much. We appreciate it, and we'll move on to the Legislative Analyst Office.

Thank you Chair and Members, Ken Kapphahn with the Analyst Office. We have a handout in your packet and online that covers our key points. I think the Department of Finance gave you a good overview of the moving pieces in this year's budget. I wanted to pick up on one important point that Aman mentioned, which is that Proposition 98 this year is determined by a formula called test one. And that's important because in test one years the main factor affecting the guarantee is state General Fund revenue.

Each dollar of higher or lower revenue, the guarantee would increase or decrease to about 40 cents. The reduction in the guarantee compared with last June's budget mainly reflects the lower General Fund revenues in January. Based on our most recent economic assessment, we think the state General Fund revenue has a roughly 70% to 80% chance of being lower than the Governor's Budget estimate. A couple of important leading economic indicators like retail sales and income tax withholding have been weak since January.

Our best estimate is that revenue is about 10 billion lower across 22-23 and 23-24. So if that transpires, the guarantee would be about 4 billion lower than a level in the Governor's Budget. Some portion of that drop could be mitigated by higher property tax revenue. Property tax revenue accounts for a little more than a quarter of the guarantee, and we think it could be several 100.0 million to a billion higher than the level in the Governor's Budget.

Another potential mitigating factor is the Proposition 98 Reserve. You heard a lot about state reserves in your full Committee hearing. What makes the Proposition 98 Reserve special is the more than 8.4 billion in the Reserve is only available to supplement funding for education. Unlike other state Reserve accounts, it's not available for addressing an overall budget shortfall. So if the guarantee is particularly weak, withdrawals might be required. The Legislature can also access the Reserve if the Governor declares a budget emergency.

Shifting to the governor's spending proposals, we have a few high level comments. Those begin on page five of the handout. Even though the guarantee is lower under the Governor's Budget, the state has about 5.2 billion available for K-12 program increases. As far as the structure of the budget, we really think of it in three parts. There is 6 billion in ongoing augmentations, mainly to cover an 8.13% COLA and a new funding stream called the equity multiplier.

There is 376,000,000 in one-time proposals, mainly literacy funding and a high school arts and cultural initiative. All of those proposals together add up to 6.4 billion. And because there's only 5.2 billion available, the budget proposes a 1.2 billion reduction to the arts and music instructional materials discretionary block grant page six in your handout has a list of all of the Proposition 98 proposals for K-12 schools in the budget. Turning briefly to our assessment, this is page eight of our handout.

We think a strength of this budget is that it prioritizes core programs and does not have too many new initiatives. We think that's a positive approach for the tighter fiscal environment the state is in. Directing increases towards existing programs could help districts address some of their local cost pressures and sustain the many program expansions they began over the past couple of years. We also think the plan to save the Proposition 98 Reserve, at least for now, is a prudent starting point.

Holding on to that Reserve gives the state a tool to protect programs from the possibility of a larger downturn that might emerge in the coming months or years. Turning to our concerns, this is page nine. The budget uses 1.4 billion in one time funds to cover ongoing school program costs, and that's a concern because it creates a deficit in the Proposition 98 budget. The following year, in 2425 those costs will continue, but the one time funding does not.

And that's probably even more of a concern this year, given our estimate that the guarantee is likely to be lower than the level the Governor anticipates. We also have a concern about the mid year reduction to the arts and music discretionary block grant. We think that's likely to be disruptive for districts that have already gone through a local planning process for those funds. The reduction might require districts to revisit those plans and potentially change even larger aspects of their budgets.

So, turning to page 10, we'd recommend building a budget that does not rely on one time funds for ongoing program costs, and also building a budget with a view to minimizing the mid year reductions to the arts and music discretionary agreement. The state has a couple of options to make that happen. One starting point one that we recommend is to not adopt the governor's proposals for the equity multiplier literacy grants and cultural enrichment proposal.

We'll talk about all of those proposals on their merits in later hearings, but we think two of those have a lot of overlap with existing funding, and one is premature given that we are still waiting on data from the previous funding round, rejecting those proposals would make more funding available to sustain existing programs. Another option could be funding a lower COLA rate. Each half a percent change in the COLA rate equates to about 400 million in ongoing costs.

If the state wanted to avoid relying on one-time funds only by adjusting the COLA rate and not changing anything else in the Governor's Budget, it could Fund a 6.4% COLA. Turning to the Kleino page, a third option would be to revisit a few previous augmentations. Two that we highlight in this report are the Expanded Learning Opportunities Program and state preschool for Expanded Learning. Some districts indicate that they are having difficulty running those programs at the scale the state envisioned.

Our understanding is that reflects difficulty ramping up the programs and hiring staff, as well as not all students being interested in the program. We think the state could reduce funding based on no longer assuming such high participation or accounting for the funds districts already receive through the existing after-school and 21st-century programs for state preschool. Some of the funding the state has allocated for recent slot increases remains unallocated, and we think the cost estimates for the COLA in the Governor's Budget are too high.

The state could probably reduce ongoing spending for that program while still maintaining its existing service level. Again, we'll cover more of those details and potential savings in future hearings. I think we'd also want to emphasize that for all of these options, you can do them to different extents, and the more you do with one, the less you would need of another. Thank you and that concludes our comments.

Thank you very much. And I know we're navigating the fact that the next item is on the Local Control Funding Formula, and yet we can't talk about the overview of Prop 98 and not get into it a little bit.

Let me lead off by asking a question, and I'll start with the LAO and you have to bear with me here because we had a number of people walk in the hearing room and our job is to try to explain coherently what's in this budget, rather than going through 32 line items and say, there you are, figure it out.

And what I wanted to do is maybe try to offer a very simple framework to explain the way the budget is proposed and see if you think it's true to the facts or you would like to add more. Because I think that the way I would explain it is the Proposition 98 money, which goes to K through 14, is flat, in essence, year to year. As was said, though, even though the funding is flat. There's an 8.13% COLA for the Local Control Funding Formula and growth.

And one of the ways to explain that is the one time money is lower than in the previous years, and that allows for the COLA while the money is flat. But there was also some one time money in last year's budget or the current years, that is over multiple years. So we still have a chance to realize the benefit. There's no draw on the reserves, as was said, 8.4 billion.

And there's some one time funding that is going into the annual cost in this year, which was just brought up. If I was trying to explain simply, those are the global ways that deal with the factors in this budget. Would you have a problem with that, or would you have something you would like to add to that to explain clearly what's in a very complicated budget?

Yeah. Thank you, Mr. Chair. I think you've hit on a key piece of it, which is the one time funds we have gotten this question, and it seems like a little bit of a mystery, how can we be talking about having any augmentations for programs in a year where the guarantee is lower than it was when we adopted the budget back in June? And I think there are three key factors that explain that.

One is the one that you mentioned, which is that last year's budget used more than 2.8 billion in ongoing Proposition 98 funds for one time programs heading into 2324. The cost of those programs go away, but the funding is still there, so we can repurpose it for COLA and other things. A second important factor is that costs for the Local Control Funding Formula are coming in lower than anticipated.

Largely that's because some of the changes the state adopted last June, like the three year rolling average on transitional kindergarten, aren't as expensive as the state estimated at that time. And the third factor is that because of the lower revenue and the weakening economy, we're not required to deposit as much funding into the Proposition 98 Reserve. And so the funding that would have been deposited into the Reserve is now available for e COLA and other sorts of programs.

So I think your answer gets to the key part. As far as the Legislature's decision, that was kind of an agreement between the Legislature and the Governor to have to set aside, use a significant amount of ongoing funds for one time programs. And I think this weakening environment shows the value of that decision because you're still able to support some augmentations even though the guarantee has dropped compared to last June.

Thank you very much. That's helpful. And does the Department of Finance have anything they would like to add to that?

Certainly. Chris Ferguson with the Department of Finance. No, I don't think we'd add much to that. Certainly, it's the architecture of past budgets in terms of how we expended some ongoing resources for one time purposes, as well as some of those costs being lower than anticipated or resulting in our ability to Fund what you see today, as well as there know that one reduction to the arts music and instructional materials block grant that we're also using to support some of the investments that we've proposed.

Thank you. Then let me ask another question on another subject, although Chris Ferguson just referred to it, and there's a little bit of controversy over the arts music, and instructional block grant, the voters approved a new amount of money last November, and so the new amount of money for arts is coming in the budget, and then this budget lowers what the existing fund level was so that new money is not a net gain of the total amount of money that the voters approved in November.

And there's one rub that we're hearing from districts, that some of the districts collectively bargained what was in the existing grant and would have to go back to the table if, as it's proposed, were adopted. And so I would ask the Department of Finance and then the LAO to comment on that subject.

Aman Singh, Department of Finance. The 2022 Budget act did prioritize the arts and music with a one time $3.5 billion in the arts Music and Instructional Materials block grant. However, as you mentioned, the voters approved another funding stream, which is Proposition 98 and Arts and Music in Schools Act. That was this past November, the Governor's Budget proposes a $1 billion reduction to the grant, and that will be a reduction from about 3.5 to 2.5.0 billion.

And local education agencies will see approximately a one third reduction in that initial allocation amount. However, the Proposition 28 new funding is a permanent funding stream, whereas that initial block grant amount was a one time amount. So while that initial amount is being reduced, we will see Proposition 98, the guarantee, permanently revenged.

Moving forward to include this new funding stream, with Proposition 98 sitting at over $100 billion a year in the budget window, that is a significant amount of new funding going towards arts and music in public schools.

I don't have any factual argument with what you said, but I think a lot of the school districts feel like it's a little bait and switch that the voters vote, and then things are taken away. And there were some things predicated on the way it was in the budget before the voters voted. I was going to ask why, but I don't think I'll get anywhere. So what I'll do is just acknowledge that it's an issue that we will talk about as we go through this. Other Committee Members, do you have questions on this item? Senator Min.

I just have one question, really, for the Department of Finance could weigh in. When we had our Budget Committee hearing last week or two weeks ago, I think that the analysts there, I think there was consensus that we may see stagnation in our revenues for a period of three years or longer. And I guess I'm wondering, do any of your recommendations change if we're looking at a longer term decline in revenues?

Yeah. Thank you. Senator Min. That is a consideration, an important one, that went into the recommendations that we have before you. Looking ahead over the next couple of years, I think under either the governor's revenue estimates or our revenue estimates, the state would also have difficulty, if it approved all the proposals in the Governor's Budget this year, it would have difficulty maintaining those and providing COLA in subsequent years.

So one reason that we have a concern about the amount of spending on ongoing programs this year isn't just a one-time issue related to revenue weakness right now. It's that even if the economy does continue to grow at a moderate rate, those challenges are likely to reoccur, and we'll be having similar discussions along these lines a year from now. So, yeah, the long-term picture, we think economic growth eventually will return.

By the end of our four year outlook period, we'll see growth more in line with the historical average. But for the next year or two, things do seem to be following a weaker trajectory right now, and that will have a direct effect on the funding available for schools under Proposition 98.

Thank you. Any questions, Senator?

No, just more of a comment. I think our commitment to investing in our teachers, our educators, our classified workers, given still, in many of my communities, the COVID recovery is far from over. In some communities, there's research that's showing that there's a 10-year recovery period, particularly for Black and immigrant residents of my district.

So I'm appreciating, maintaining, really the basic investment of the COLA that keeps our cost of living and these workers able to continue to contribute and to keep themselves afloat in this period of high inflation, high housing cost, how? Transportation prices, high food prices. I think it's important for us to know that these are economic engines. School districts are economic engines in every community. And there are some areas in my district where the school is really the only place where there is a good job in sight.

So I just want to just make the comment that as we're going through this process, as we're talking about the ebbs and flows of resources and what is delayed and what is triggered, I think it's so important for us to always prioritize our education workers who are being that economic engine for so much and for so many of our communities and those families. So thank you for that.

Thank you. We really appreciate your comments, and I'm sure that what you just referred to will come up through a lot of different hearings, and we'll just make sure that we acknowledge it with the people as we do that. Let me thank the panelists for issue number two for being here. We really appreciate your contribution. We're going to move on to issue number three, which is the Local Control Funding Formula.

We started to get into it in the discussion at the last item, and so we have three people on our panel, Michael Alferes from the Legislative Analyst Office, Katie Lagomarsino from the Department of Finance, and Mary Nicely from the Department of Education. So let's begin with Mr. Alferes, and we'll go in that order. Welcome to the Committee.

Thank you, Mr. Chair. Good morning, Mr. Chair. Members of the Committee, Michael Alferes with the Legislative Analyst Office. We were asked to provide a brief overview today of the Local Control Funding Formula, known as LCFF for school districts and charter schools. In this presentation, I'll cover the main components of LCFF, the mechanics of how the formula works, and highlight some recent policies changes from the last few years. Our office recently published a primer on LCFF, which should be available in your packets and for folks online.

The perimeter covers more detail than what I'll be covering in today's presentation, but I'll reference a few figures to help walk through certain aspects. So just a little bit of background. The LCFF was first implemented in the 2013-14 fiscal year and marked a departure from the previous funding system at a high level. LCFF was aimed at simplifying education finance, giving schools more discretion on how to spend their funding, and providing more deep, dedicated funding based on student demographics onto the main components of LCFF.

If you're following along on the report at the bottom of page two, figure one has the three major components, LCFF being a base amount of funding for all students, as well as supplemental concentration grants that provide additional funding for proportion of students that are low income English learners or foster youth. In addition to these three main components, there are also several smaller add ons to the formula. Almost all of the LCFF funding, about 98%, is allocated through the main components.

I will just cover the three main components. I won't go into much detail on the add ons. One important thing to note about all these main components is that the way that students are counted through LCFF for funding purposes is through average daily attendance, which is the average amount of students that attend class every day throughout the school year. For school districts, they're credited with the greater of average daily attendance in the current year prior year or the average of the three prior years.

The 22-23 year is the first year that the three-year average policy is in effect. Charter schools continue to be funded with their current average daily attendance only. So the majority of LCFF, about 80%, is allocated through a uniform base grant and different grade spans. On page three you'll see Figure Two shows the four different grade spans. The base rates are generally higher at the higher grade levels to acknowledge the higher cost of education.

At the higher grade levels, there are two-grade span adjustments, one for kindergarten through third grade to have lower class sizes of generally 24 to one, and a greater span adjustment for high school to acknowledge costs associated with providing career technical education. The figure does not include the recently implemented transitional kindergarten add on that provides about 2800 per student in transitional kindergarten to reduce class sizes to 12 to one in the current year.

For the supplemental concentration grants, they're allocated based on the proportion of students at school district and charter schools that are English learners, low income students, or foster youth. These students are often referred to as unduplicated pupils since when students are in one or more of these subgroups, they are only counted once for funding purposes. For example, a student that is Low income and an English learner, they are only counted once.

The share of unduplicated pupils at a school district or charter schools is often referred to as the unduplicated pupil percentage. So, for the specific calculations, the supplemental grant provides 20% of the adjusted base rate for every English learner or low income student. For schools with high shares of English learners and low income students about 55%, they receive a concentration grant amount of 65% of the base rate for these students above 55% of their enrollment.

For 21 prior to 21-22 this concentration grant rate was 50% of the adjusted base rates with the increase to 65% in 21-22. Districts were expected to use the increased funding to hire certificate and classified staff at schools with high shares of English learners and low income students. Districts pay for most of their general operating expenses using LCFF. The base grant is flexible and is to be used for any educational purpose.

For supplemental concentration grants, districts must use their additional funding to proportionally increase or improve services for their unduplicated pupils. The 21-22 budget introduced a new requirement that districts track their unspent supplemental concentration grant funding and use the funding to increase or improve services in future years. Prior to this change, unspent funding in one year could be used for any educational purpose in future years similar to the base grant.

On page six, figure four shows the effect of supplemental concentration grant funding on the effective per student funding rate. You see that no matter the share of students or English learners or Low income, they receive about $10,119 per student in kindergarten through third grade. And the higher you go up in terms of the English learner low income share that you get more of an increase, especially when you get to above 55% of enrollment being these students.

So with these main components, I'll share some just additional context around LCFF. On page eight you see figure five shows the LCFF was implemented over a multi year period, being fully implemented in 2018-19. Since 2018-19 the state has provided an annual statutory cost of living adjustment and in three instances has provided additional funding to the increased LCFF rates beyond about 570,000,000 in 2018-19. 520,000,000 in 21-22 and most recently 4.2 billion in 2223.

In the context of Proposition 98, as figure six shows on page nine, a majority of Proposition 98 funding is through LCFF. About 80% of all the funding that is allocated through publication 98 in regards to where students are across the state. Of all students enrolled in public schools, 62% are classified as English learners, low income students, or foster youth. And figure seven shows kind of where these students are in terms of whether they're at concentration grant districts.

So having student populations that have 55% of their more of their students being English learners or Low income, about 64% of statewide enrollment is all in concentration grant districts. And when looking specifically at English learner and low income students, about 80% of these students are in concentration grant districts. And with that overview out the way, I just want to highlight one thing about the governor's proposals. The Administration estimates that the 2324 COLA will be at 8.13%.

Our current estimate is that the COLA will be about 8.4%. We will have the final number later in the spring, but we expect the COLA will likely be higher than the amount included in the January budget. If it is 8.4%, then that would translate to about $220,000,000 in additional costs. And with that, happy to answer any questions appropriate time.

We'll hold all the serious questions till afterwards. But let me ask you a non-serious question. What Senator gave you the certificate that's on the wall behind you?

Senator Skinner.

Okay, I'll compliment her the next time I talk to her. We'll move on to Katie Lagomarsino from the Department of Finance.

Morning. Chair and Committee Members, Katie Lagomarsino with the Department of Finance. I'm going to provide a brief overview of the Governor's Budget for the LCFF. So in the past year 21-22, we have a slight decrease. That's primarily aligning with actuals and seeing. This is typical. In the current year 22-23, we see a bigger decrease. This reflects updated caseload, updated projection of the initial impacts of the 2122 Ada yield protection as well as a three-year rolling average.

In the budget year 23-24 the LCFF grew by 4.1 billion. This compares the budget year to the revised current year. So over where we now know 22-23 landed, we're going to provide an additional 4.2 billion. This increase reflects our historically high COLA of 8.13%, as well as the continued implementation of expanded Tk.

The only policy piece to mention is that we're using one time resources in the amounts of 613,000,000 for the current year and 1.4 billion for the budget year to fully fund the LCFF. That concludes my presentation. I'm happy to take any questions at the appropriate time.

Thank you very much. And now we'll move on to Mary Nicely from the Department of Education. I see that she was. There you are. So we have to make sure she's turned up because she is muted somehow here. Do we know which side she's muted on? Is she muted herself or does she have to be on? Well, both of you are pointing at each other, so each of you try to unmute and somebody will be successful.

Yeah. Okay. They're chatting with each other. We hope we get to a little noise here in a momentum. Are we making any progress? Here's. There we go. Can you hear me? Yes. Welcome to the Committee.

Thank you. Good morning, Senator Laird and Committee Members Mary Nicely, on behalf of the State Superintendent of Public Instruction. As the Superintendent shared in his overview, our schools, students, families and educators continue to face extraordinary challenges. They are dealing with the lingering effects of the pandemic and the need to accelerate learning while simultaneously tackling those long standing issues that predate Covid-19 all in the middle of record inflation.

We have generally heard concerns around growing pension costs and staffing also remains a huge challenge in the field and there are concerns on being able to effectively implement programs while trying to attract qualified staff. And of course, there are continued concerns around declining enrollment, average daily attendance, and continued high chronic absenteeism rates of students compared to pre pandemic levels.

We are thankful for the work that has been done so far to address these issues, such as allowing school districts to use an average of the three prior years of ADA when determining their LCFF funding levels to address the extreme fluctuations in attendance that we have seen as a result of Covid-19 and overall declining enrollment. The recent Ada boost for leas that provided independent study as prescribed by the Legislature also significantly helped over 1600 leas maintain stable funding in light of pandemic driven absences.

The administration's proposal this year to fully fund the COLA of 8.13% continues those efforts to keep LCFF fully funded, and we sincerely hope that that level of COLA will be maintained during budget negotiations. Our leas, as well as our educators face significant cost pressures in this inflationary environment, and any reduced COLA only exacerbates the problem. In closing, we just highlight that there are other interconnected issues to address too, such as the supply of educators.

As we work through the budget this year, it is imperative that we work hard to protect education funding to ensure that our schools can do the best they can for our students. And I have with me Aaron Heredia from our School Fiscal Services Division to assist in answering any questions at the appropriate time. Thank you.

Thank you very much. We're glad you were able to join us. We're going to move on to questions and my question is of the Department of Finance and the legislative analysts could comment afterwards and it has come up in the two items and it's given the fact that the Administration is proposing using one-time funds to augment Local Control Funding Formula LCFF funds in 2022 and 23 and 23-24. How do you propose to address the ongoing costs in the out year once the one time funds are gone?

Katie Lagomarsino with the Department of Finance I'm happy to answer that question. So, given that the LCFF is continuously appropriated, the Governor's Budget estimates that the LCFF will be fully funded at the correct level in 24-25. The economic research team at the Department of Finance provides us with the most recent data available, which we then incorporate into our calculations, and available one-time resources from past year 21-22 were used to Fund the current year and budget year.

Given their availability given the fiscal situation and revenue picture that we're working with, the Administration built in this funding assuming that the guarantee would grow by the 1.4 billion amount in the out years. We also wanted to be clear in our budget that we weren't putting forward any ongoing reductions to any programs, and this approach achieved that goal.

So in the event that our forecasting team's revenue estimates are revised significantly downward, the Administration will carefully revise the proposals at the mayor revision to reflect the updated figures.

Then let me ask a clarifying question because I think you said it, but it just wasn't as clear. Are you saying that with your current revenue calculations in the 24-25 budget, after we've had two years of one-time funding support, the LCSF, you believe that ongoing revenues will fully fund the LCFF based on your revenue estimates in 24-25? Is that what you were saying?

I'd like to defer that question to my colleague Lena Grant if that's okay?

Hi, Lena Grant, Department of Finance. Thanks, Katie. Yeah. Just to echo what Katie was saying, the current forecast that we built in our funding for. We built this assuming that the guarantee would grow sufficiently to support this amount in the out years. And so unless, if that scenario changes in the out years, we would adjust that. But we're working with our current forecast and that is what we're.

I appreciate that, but the reason I asked the question. You just agreed with her. And the reason I asked the question is she wasn't clear what I am trying to get at here. You keep talking about the forecast and the whole business. Is what you're estimating that the ongoing costs will cover the full formula in 24-25 without any one-time monies necessary to augment it in that year? Is that what you're saying? The forecasts show you?

Yes, that is what we are estimating.

Okay, thank you. That was just the clarity that I was looking for. Let me ask other Committee Members if there's any questions on this item. Nothing from Senator Min, nothing from Senator Smallwood-Cuevas. Don't ever confuse the fact that we don't have any more questions with the fact that we're not going to have heavy scrutiny on this item as it goes through. But we really appreciate you being here today. We really appreciate you providing the background.

And we know this is going to be at the center of a lot of discussion as we move through the hearings. We're going to move to our last issue, which is the fiscal health of school districts. As the anti-acronym person, I apologize for the fact that our initial hearing, a notice in the Daily File said this agenda item was FCMAT. So at least we're clear it's Fiscal Crisis and Management Assistant Team. So we have one person on the panelist. We have Mike Fine, who's the Chief Executive Officer of nothing else but FCMAT. So welcome to the Committee. We look forward to hearing your report.

Thank you, Senator. Good morning to you and to your Committee. Michael Fine, I'm the Chief Executive Officer of the State's Fiscal Crisis and Management Assistance Team. You have additional handout material from us, including the outline of my comments, and I'm just going to follow that just to keep things simple with respect to school district stability. What we have available to us right now is activity for adopted budgets back in the fall and our first interim financial updates that districts all filed in mid-December.

And so I'm going to refer you to the attached charts to walk you through very briefly that status. As you know from your staff report, both knowledge that you have beforehand, but also as outlined in your staff report, districts submit budgets to their county superintendents or the state Superintendent for consideration and approval.

Each year, each summer, July 1, and those are reviewed and either approved, disapproved or conditionally approved. With respect to disapproved budgets, there were none this fall. That's a pleasant change from the one or two disapprovals that we've had the last several years with regards to first interim reports in December.

We are currently estimating that there are nine districts that have qualified certifications and I'll pause for just a minute, although this is in your staff report, I will pause for just a minute to indicate that there are three certifications available to a school district. They are self certifications, and then the county Superintendent or the state Superintendent is responsible for concurring or not concurring with those certifications. The first certification is a positive certification. Most school districts fall in this category.

This is an indication that they are able to meet their financial obligations for the current plus two subsequent fiscal years. A qualified certification is that they may not meet their financial obligations for the current or two subsequent fiscal years, and a negative certification is that they will not meet their financial obligations in either the current or subsequent one fiscal year. And as of December, again, we're reporting nine qualified certifications.

I've provided you a list of those districts and I'll talk in a few minutes about some of the common characteristics of these districts and why they may be qualified. Seven of the nine. This is a non consecutive qualified report, meaning their last interim report from last spring was not qualified. We take a deeper dive in looking at how long their qualification, consecutive qualifications last as one of the indicators of how much trouble or distress they may be experiencing.

One of the nine, this is their third consecutive qualification, and one of the nine, this is their 11th consecutive qualification with respect to negative certifications. At first interim, there are two districts. Both are first-time negative certifications and both are small districts. I will spend just a minute on both of those. Junction Elementary School districts in Siskiyou county and Ohio Unified School District in Ventura County.

In the case of Ohio, they did file a qualified certification, but their county Superintendent, in the review of first interim, did not agree with that qualified certification and they changed it to negative. FCMAC calls that a downgrade. We're currently working with Ohio. They are after a special meeting last night and another meeting scheduled for next week, we expect them to adopt a fiscal recovery plan that will be adequate to turn the corner for this district.

Both of these districts are small, both of these districts are experiencing a fairly dramatic decline in enrollment, and both of these districts have unqualified business office staff over a period of time where they have not been able to. Their governing boards have not had adequate financial reporting back to the governing board. In the case of junction, they actually are short on their governing board and so County Office of Education Board Members are in part serving as district board members.

With regard to downgraded interim reports, we're reporting to Ohio from qualified to negative and Oakland from positive to qualified. At first interim and then the last category is what we call lack of going concern. These are specific to statute in ED code 42127.6. These allow that at any time during the year, the County Superintendent or the State Superintendent can designate a district as a lack of going concern so they don't have to do it at just the first interim or the second interim report.

If conditions are justified, the County Superintendent can put them on this watch list and begin the process of interventions with that district. You can see that in the current year we have five of those. That's a pleasant change from last year where we had numerous we put the dates on the chart for you so you can get a flavor of when they happen.

Most of these have been earlier in the fall, but one of them just in the last couple of weeks, and one of them has two designations of lack of going concern I will say for West Contra Costa Unified School District, the former Richmond Unified School District that started the whole AB 1200 oversight process 30 years ago. They did take action earlier this week to adopt a resolution to meet their financial obligations, take all action necessary to meet their financial obligations.

So I would say that at least in the last several days they have begun to address their current issues. I think it's also important that the Committee know that at this point in time, the number of qualified districts, the nine, is our lowest level in over a decade. So very positive. And that reflects the fact that the fiscal health of school districts is strong.

With the couple exceptions that I've noted for you, the governor's January budget proposals will all start to be incorporated into the district's second interim reports, which are filed here in the next two weeks, and we'll have an additional look at those and the conditions of school districts.

We are not expecting at this point any significant changes from first, but also moving through my outline remind the Committee that while most of the work FCMAT does is at the invitation of a district, occasionally we are asked to go to a district by the County Superintendent, the State Superintendent, or through other authorities. But we do automatically engage with districts under certain conditions, and those conditions are when they have a disapproved budget, a negative certification, three consecutive qualified certifications, or a downgrade by the County Superintendent.

And in all these cases, we are engaged with the district in conducting a fiscal health risk analysis. Over the past roughly just shy of four years, there have been 52 of these triggers and we have completed 42 of those analysis. Four of them are in progress right now, two are on hold, and four were canceled because their conditions changed for the better almost immediately.

Also important to update the Committee on the additional apportionments that were authorized in 2018 in Assembly Bill 1841 of the budget trailer bills for that year. And this is for Inglewood Unified and Oakland Unified. We have now concluded the four year of additional appropriations for these two districts under this authority. For last year, Inglewood did not qualify for any of the funds because they did not project a deficit.

Inglewood Unified has a strong, healthy Fund balance at this point and is working to maintain a structural environment in their finances that do not have a deficit. In the case of Oakland, there was a forecasted 40 million deficit, and so they received a final payment of 25% of that, or roughly $10 million last year's budget. Bill AB 181 continues these two special appropriations.

Sir, if you could begin to wrap up, we have your outline and you're walking through it, and so just let us know anything significant you want to make publicly on the record. Before we move to any questions.

I will jump to the solvency trends which are also there, and just speak to those because I think those are very pertinent. Declining enrollment continues to be a common denominator across roughly 75% of our school districts.

The spend down of the one-time pandemic dollars and the expiration of those dollars are also going to be challenges for districts coming in the coming years, mainly because they have staff assigned to those services and they will need to either reduce that staff or find other funding sources for that staff, as you've already discussed, have the potential for slowing state revenues. Inflationary pressures on the cost side for school districts continues to impact them.

And as I think you all appreciate, we are starting to now see judgments in the case of child abuse cases that are exceeding insurance levels and those ultimately have an impact on district fiscal conditions. We have one district at this point in the state that has a jury judgment well in excess of their insurance coverage of 55 million, that if they lose on appeal, would put them into some form of financial difficulty. Among the qualified districts, declining enrollment is the common denominator. ADA is not rebounding.

As you have already heard from previous testimony and will continue to hear over the course of your hearings. There is some out year distress due to the expiry and one-time funds, as I've alluded to at the same time from 10 years ago, fund balances are much stronger in 78. As we began to enter a downturn, the average was around 8% in reserves. Today that average is closer to 22%. And cash reserves are also very strong districts. With that, sir, you have to answer.

Thank you very much. I think you were very clear, and you're very clear going through meticulously on the finances. But I want to ask more of a layperson's question, and that is that there are at least five of the districts in your charts of emergency loans that have been on it for 20 to 30 years. And you mentioned west Contra Costa. They came on in 1990. Coachella Valley came on in 1992. Compton came on in 1993. Oakland is 2003.

And my home school district, where I went to K through 12, the Vallejo district, has been on since 2004. If we have some of these that have been on for 30 or 32 or 33 years, when is it expected that they're going to get out of this? You mentioned one, but we just seem to get a report that has the same people there every year and for a very long time. What's the prognosis for getting people paid off and out of this status?

So I would draw your attention to the last column of that report in your staff report, which is the payoff date. So the district stays in a form of receivership until they fully pay the state back for the loan. And so the loan maturity date is key to that. There are provisions in statute that they can begin to phase out of that extra oversight, more intense oversight as they continue to make progress. But key is that they have made their final payment.

These loans typically run 20 to 25 years.

I think what's confusing is that of the five that I mentioned, three of them are significantly past the payoff date that's in the column. And so that's what confusing. In the column for Compton, it shows a 2001 payoff date, same for Coachella, and a 2012 payoff date for West Contra Costa Unified. So what does that mean? If they're significantly past the payoff date.

That's listed in this chart, they're out of receivership. They're only on the chart to give you the history since 1990, when the Legislature adopted AB 1200 and the provisions of the court, what ultimately was the court matter that began in Richmond Unified? Compton. So everybody on the list from West Fresno down are completely out of receivership and are doing well. Only Oakland, Vallejo, South Monterey County and Inglewood have loan balances and remain in some form of receivership.

Then I would suggest for next year you divide it into two columns, the ones that's the history and are done, and then the ones that are active so it doesn't look like it runs together. Just a stylistic thing. But thank you for those responses. Let me ask my colleagues if there's any questions.

I just have a clarifying question.

Senator Smallwood-Cuevas.

So you mentioned, and I noticed that districts have to do interim reports around the certifications. And I'm curious, when, when a district falls in that third column, the negative column, and there are resources and supports that are administered to that district, is there, I guess, ongoing support for those districts? I just wonder, how do you keep a district from coming back into the negative column once they've rectified and now they're qualified? Is there ongoing support for those districts?

This is really just a novice question new to the process, just trying to understand what are the ways to keep building the capacity of districts to stay in the qualified column. And then my other question is LAUSD, second largest school district in the nation. 80% of our students are living at and below the poverty level. And I noticed that the number of leas with qualified certifications have gone down in the last few years.

But I'm curious, how does the economic stabilities of communities correlate to whether folks end up in the negative column and will need. Additional example. You know, Inglewood is adjacent to my district, but also represents some of the poorest communities in our Southern California area. And I'm just curious, how does the community fiscal and economic health impact that school district, and particularly when you have high concentrations of students who are in tremendous overlapping need and their families facing a number of overlapping barriers?

So I had two questions in there. How do you help support those districts? And then what are those contributing factors to ending up in the negative certification?

So I will take those two questions, kind of in that opposite order, and first, start to talk about the resources that are available to districts. You just had the section of your hearing on the LCFF. Remember that the LCFF has two basic components to it. It has the base grant, which is a fixed dollar amount per average daily of attendance that varies by grade span. So certain amount for k through three, certain amount for four through six, certain amount 78.

It's the same across all districts in the state. Then you have a second major component of the LCFF that provides different levels of funding based on student characteristics. And there are three primary characteristics that are included in this definition. One is English learners. The second is students in poverty, or what we know of as students that qualify for free or reduced price meal programs. And the third is foster youth.

And while we don't call them out specifically, homeless youth are part of it because they are categorically eligible for free and reduced price. So, to your point, as the economics impact, a community, and a higher percentage of the students and their families in that community are in poverty or in one of those other characteristics, then the district receives more funds, and they receive more funds based on both the number and the concentration of students in those categories.

So, the supplemental grant within the LCFF provides funding for additional funding for all students in those characteristics that meet those characteristics. And the concentration grant provides additional funding, substantially more funding, for students. For districts that have higher levels of concentration, 55% or more of their student population meets one of those characteristics.

And so, understanding that the community may have less resources, the state aid calculation within the LCFF attempts to have this equity component to it to bring funding levels up for the communities that may have.