Senate Budget and Fiscal Review Subcommittee No. 1 on Education

The Senate Budget Subcommittee #1 on Education will come to order. This is our first meeting of 2024 as a Subcommittee, and we will be meeting many Thursdays between now and the May revise. We will not take action today. We are expecting Senator Min in a little bit, and when he arrives we will call a quorum to formally have one.

In the past few years, we've been able to secure a record level of discretionary funds for local schools, stabilize funding for school transportation, and provide universal school meals without regard to income. However, California is now facing a major budget deficit, and while the ranges are between 38 billion and 73 billion, we are facing decisions that will have real impacts on the things we fund. And these numbers quite possibly will change even more as we head toward the May revise and June decisions.

And unlike other parts of the budget, such as reductions to CalWORKS programs, foster youth, former foster youth programs, victim assistance, housing, and others, the Governor does not propose to reduce K-12 education. It proposes to do this by using a novel approach in accounting that we will discuss later today.

Revenue projections are coming in lower, and that means as we continue the budget discussions, we're going to have to consider almost every tool in our toolbox with as little disruption to learning and learning for kids as possible. And we are mindful that while the education part of the budget is a significant part, including higher education, gets near 40% to 45% of the total budget. If you protect that, there'll be even more major cuts in the other parts of the budget.

And those major cuts affect the very kids that are in school, in childcare, student aid, health care, transportation, and other things. So we are mindful of the decisions that we have to make. This year, we'll closely examine issues and challenges facing Pre-K to 12, community colleges, and higher education and ensure that we commit to California that our schools will continue to thrive during these challenging times. Excuse me.

As we have in previous years, we will not be taking action as we move through the hearings in the last day of February, March, April and into May. But we will be airing every issue in such detail that we start to understand the building blocks that we will have as we head to those tough decisions in May and June. And we'll be obligated to consider many options that we just would not consider in any other year. And, and those, to me, are the last resort.

But that's the reason we're having the hearings, to drive them to ground and understand exactly what they are. And on a personal note, I am finding that many stakeholders do not appreciate the situation we're in. In the last two weeks, I've been visited by representatives for hospitals, CRLA, childcare, different levels of education. And whether they use the same phrase or not, it's basically just don't cut us.

And if we have a deficit that charitably is 38 billion, but is more likely higher than that by possibly tens of billions, everybody in some way will have to take a haircut. The question is, can we do it with the absolute minimum disruption of services, particularly when with education and other services.

We are the safety net at state government, and I have been advising people who look at me in rather stunned silence that they should have conversations among themselves about what their most important priorities are and don't negotiate against themselves, don't lead with it, but at least have a sense of where people are on issues to know that when it gets to crunch time and tough decisions are made, there's a way to influence the outcome to your best advantage.

I would give everybody in this room that advice as well. And don't completely freak out because we're considering every option, but we need to know with every option how much it's going to cost or not cost and what it might do to the budget. So we at least know those building blocks and you know those building blocks. And so I was Budget Chair in the Assembly 15 years ago in very difficult times.

And I keep saying that is when you do your best work, because that is when you really protect things that you need to. So with that, we will start on the hearing. We have five issues today, and we are going to take public comment after the five issues. And because we have somehow moved past the processes for COVID, the only comment will be in person. So we will not be taking telephone or remote comments today. So with that, let's move to issue number one.

And issue number one is Mary Nicely, Chief Deputy Superintendent from the Department of Education here. On behalf of State Superintendent Tony Thurman, although I'm very confident in the first sentence, you're going to say that that's how you're speaking, and you'll provide an update from the Superintendent's view on the State of K-12 education. So welcome to the Committee. And I did see him last night at a reception, and he indicated that he would have liked to have been here, but he didn't have much choice today. So welcome to the Committee.

Thank you. Thank you, Senator Laird. And I do really appreciate. Yeah, it's Mary Nicely, Chief Deputy Superintendent here on behalf of State Superintendent, Public Instruction, Thurman, to talk about his priorities for California's education and the Governor's Budget. And I do appreciate your opening statements because I think you covered almost everything I need to talk about. So thank you very much. But no, I do appreciate this opportunity to address you.

And we do appreciate the fact that this budget does prioritize education and try and keep some consistent funding for our kids over these years. And despite all of that, we do have good news that there is some funding coming in for Prop 28 to support arts and music. So at least we have that as some new income to be able to look forward to, to ensure our kids have a well rounded education. But also, we also know that this isn't the time for new investments.

So we are grateful to be able to look at all of those investments that you spoke about, expanded learning, universal TK, our meals, learning recovery block grant, reading coaches and literacy specialists, all of those things. So this year really is something for us to look at and focus on maximizing how we are tracking those investments. So this is something the Superintendent is very focused on, being able to look at the measurable outcomes. And we really want to work with you all on.

How do we do that with this limited funding? How do we look at what we are doing to help our kids with these historic investments, to address chronic absence, to increase graduation rates, to address literacy, and some of his many big priorities around reading by third grade. So we want to be able to look at that and work with you on that.

And we're really grateful that last year the Legislature did fund the first ever department office for CDE around data analysis and visualization so that we could dig into the data and really look at how these investments are working so that when we do get more flush, we can continue on with those major investments to support our kids so that they thrive.

Some other things that we are continuing to do as well that we started last year, even though we don't have responsibility, is to work very, very hard on teacher recruitment and retention. So that is something that the Superintendent will continue on. We brought on a person full time to actually lead those efforts for us to be able to align some of the work that is in there.

And we're also grateful for the funding for the Golden State Scholarships that were expanded to include counselors because we also know school counselors, mental health professionals are also very important as we come out of COVID and that we have our teachers. One of the other big priorities for the Superintendent is around professional development.

So we are putting in some legislation to ask for the funding to be able to train up to 160,000 educators in math and reading so that our students can continue to have high quality educators in every classroom. Because what is the use of a classroom without having an amazing teacher in there to support all of our kids? So we are looking at that as a priority.

Another priority that we are looking at is computer science, a computer science requirement, because we also know that our students in the heart of Silicon Valley, in the technology world, California, should be keeping up with the rest of the country. And for the future of our economy and the future of our state, our students have to be ready to thrive in this global economy that is so technology based.

We're also looking at the impacts of artificial intelligence using those tools in our classrooms, but also making sure that we have digital literacy and all the safeguards around how we ensure that artificial intelligence is used for good and not for evil. So that is another very high priority for us to work with.

And also just in preparation for our kids for the future, we've done some private fundraising to be able to look at some paid internship programs for our students to help them also look at bright futures. So as we look at the state not particularly having a lot of new expenditures coming, we are looking at different ways to continue to support our kids in their journey.

And so we are always grateful for the funding that comes in from the Federal Government and the state around career technical education and the pathways that are available to our kids. And so those of you that were in this Legislature with the Superintendent, know that he will never give up being a Legislator. So he'll cover and he'll carry. We have our amazing government affairs team here that will always say he wants to carry his own Bill package.

And so you know that he will be walking these halls to support his legislation that will support our kids and our families and our communities. And just in closing, I'm just grateful for everything that you have done to support us. And, Senator Laird, what you said at the beginning kind of encapsulated all of our feelings. We don't want to be able to cut into education. We don't want to take any steps backwards.

We do know that there are school districts that are coming to us and saying when we do have the ability to have more funding, please support COLA, please do not keep us whole. Keep education whole. So we do not step back. But I'm just really grateful to be here today. And if you have any questions, please let me know.

I appreciate your comments very much and look forward to working with you and I know that one of the things that's at risk is implementing bills that were adopted last year, and we have one on an LGBTQ Student Advisory Committee that you're charged with implementing. So we hope we can figure out a way that that goes forward and other similar things. But I just appreciate your comments, because we will just need to work together closely, and I also appreciate your acknowledging the Superintendent's relentlessness. Good thing.

Let me ask us. We've been joined by Senator Min, whether you have any comments or questions. Okay, well, thank you very much. We really appreciate you being here today.

Thank you. Thank you for your time.

And we're going to move to issue two, the fiscal health of school districts. Mike Fine is here, the Chief Executive Officer of the Fiscal Crisis and Management Assistance Team. In my war on acronyms, I need to say it first. It's FCMAT. And then while you're getting ready to present, I'm going to ask that we call the roll for a quorum. So please call the roll.

[Roll Call].

Okay. We have established a quorum. Even though we don't expect to be taking any actions, we have formally established a quorum. So welcome. And I know that we have a very detailed report that is in our agenda packet, and maybe if you just could give us some top lines of what's going on with the fiscal health of the school districts.

I will do so. Good morning, Senator Laird. Senator Min and staff. Michael Fine, Chief Executive Officer of the Fiscal Crisis Management Assistance Team. Your staff report is very thorough. I've given you a handout of both my comments and of some charts. The charts I will simply just refer to maybe two of them. The first one is slide two, the historical qualified and negative certifications. I think the Committee is well aware of school district certifications, of their budget.

Those are done at the school district level by their governing boards and then the County Superintendent or the State Superintendent, in the case of some districts and counties, validate those. And a qualified or negative certification. Qualified is, as your staff report explains, is they may not meet their obligations. Negative is that they will not meet their obligations in either the current or the subsequent years. The chart that I've given you on the far right is December data.

It compares to last spring, which is just right next to it. And you can see that for negative districts, we have doubled those from three to six. And while the total number doesn't sound like a lot, the fact that they've doubled is a leading indicator for us and that for our qualified districts, we've gone from 10 last spring to 31 in December, tripling the number.

And so we've had through this Committee's work and through the entire Legislature and Administration's work the last several years, a great deal of funding to support our programs in our LEAs and you can see that in the last couple of years we've had some very low qualified and negative certifications and we're now starting to see those tick up.

I expect they will tick up further at second interim, which is just a couple of weeks away that those are due, and I'll speak to the trends that are causing that. The next slide I would want to take you to in my materials is actually slide eight, I'm sorry, slide nine, which is lack of going concern. So similar to the certifications that happen at first interim and second interim report.

Lack of going concern is another way for the county to acknowledge that a district is having trouble bet at any time during the school year, not just at those official reporting periods. And we have six of those right now. So far this district so far this year. Noteworthy among these are some repeats from prior periods.

You can see the recent history all on slide nine and we are engaged with all of these districts or have been. The other notable thing that's buried in these slides and I won't take the time to highlight it because I'll make those comments here in my trends. But many of the districts that are experiencing problems are small and tiny districts. And as we see declining enrollment really in every region of the state, not every district, not every county, but every region of the state.

It's our smalls and our tinies that have less ability to deal with that when they only have 40 ADA to start with, average daily attendance, and two families move out that each have three kids, they've lost a pretty significant amount of their ADA and they already only have one teacher teaching kindergarten, 1st, second and third grade in a combo class. Right? So there isn't a whole lot of room for them to adjust their expenditures. And so we're seeing that in the data.

Many of the districts that are on the list in the charts fit that criteria. Back to my talking points, the near term trends, and I'll walk through these because I think while some of them are repeats from last year, some of them are new in a little bit more detail on one, declining enrollment, as I just indicated, is present in every region of the state.

And as I just indicated, small and tinies are really feeling that impact. Our largest districts, of course, are losing the majority of the kids, but they also have more flexibility to adjust in those scenarios. Attendance yield coming out of the low point of the pandemic has started to grow, which is good news. So we have declining enrollment, but the actual yield of attendance is going up.

And so these two things are crossing each other as opposed to moving together right now that will begin to change next fiscal year on July 1. And that's because some of the mitigation measures that we put in place during the pandemic will begin to have less of an impact as we move into a more stable environment of both enrollment and ADA. We certainly had a large amount of one time funding, both from the state and the Federal Government during the pandemic.

The largest single pot of money from the Federal Government does expire in September, September 30. Either the funds have to be fully expended, or we'll return them to Washington. Have about 30% of those funds still unspent at this point in time. We had staff in many districts had staff tied to those funds. You're starting to see that in the headlines of the last several weeks around potential layoffs that districts are enacting.

Part of that is tied to those funds that expire in September, and they have to take those actions by March 15. Low to normal COLAs. You're certainly well aware of the COLA that's in the Governor's January budget, and I know that you hear from your constituents that's an unworkable number. The reality is any COLA that's probably below four and a half to 5% feels locally like a cut because their fixed costs are going up four and a half percent from year to year.

I like to say whether they get out of bed and go to work or they get out of bed and go to school or not, their costs are going up 4-5% a year. So a COLA that's below that always gets going to feel like a cut at the local level, and we all understand that dynamic.

Included in that are step and column for our staff that are somewhat automatic forecasted increases in retirement system contributions, utility costs, all types of costs are embedded in that four and a half to 5% year over year growth. Inflationary pressures, as you know, from just going to the grocery store remain. They may not be increasing at the rate that they were increasing, but cost of pencils are still at the $3 mark after being at $2. They're not rolling back to $2, if you will.

And so districts still feel that inflationary pressure as well. While it's been on my list for the last several years. We are starting to be able to quantify the impact of Assembly Bill 218 from several years ago. This deals with sexual abuse of minors. We are moving into, as these cases mature and go to trial, we are starting to see very, very large judgments. We have a recent judgment just this Fall of $137,000,000 for two victims.

There are four more victims from the same event that are pending trial. In many cases, the claims that we're seeing today that are being adjudicated today are either uninsured or underinsured. They go back 30-40 years. Insurance company that was in existence at that point may not even still be in business. It's a question that the district even knows who its insurance partner was 30 years ago. But today, most insurance for school districts is provided by risk pools that the school districts actually own and control.

Groups of districts pool their risks together, and those pools have to remain solvent. And so they assess a special assessment on their member districts to make up for those losses. So one way or the other, through premium increases, through special assessments, or through the payment of the claim or the judgment itself, those are coming out of current year LCFF funds for districts. Notably, what we expect different this year to next year is the premium increase for their basic liability coverage, assuming they can actually obtain it. The special assessments for prior claims, those two items alone, just growth this year over next year will eat up 100% of the current forecasted per ADA COLA.

So before we even get into those fixed costs I was talking about a few minutes ago, 100% of that will be eaten up as we move from this year to next year in just those two items related to liability coverage. On the good news as we enter into this period of contracting resources, if you will, districts enter this period very differently than they did entering in the Great Recession. For example, they have strong reserves, averaging around 22% greater than the 8% we saw in 07/08.

And they have strong cash reserves. And both of you will remember, in 07/08 of the issues was cash on hand. Both the state and the districts have strong cash reserves at this point, so that will help them mitigate some short term impacts from the discussions that obviously you're having today and over the course of the next couple of months. Those are my comments, Senator, happy to answer any questions.

Thank you. I really appreciate your comments. And let me just sort of concur in a couple of ways. I mean, first, if you look at the Governor's COLA, which I hope isn't in the end an optimistic one, but is a fraction of 1%. And the federal money running out and enrollment declining. I have a school district that's smaller, three, maybe two elementary, one middle, something like that, that just this week enacted major layoffs. There's a huge uproar. And yet it is that coming home to roost.

And it seems to me that as the federal money runs out, if you're making this report next year, we're going to have much more in it, and that's not good. But in that one, they enacted it because the County Superintendent was about ready to have to take some actions absent them doing it. Secondly, thank you for bringing up AB 218.

And the thing about it is, when I made my rounds in the fall, I had two school districts that brought it up vehemently, and they're both relatively small. And one of them, the insurance company, is long gone from the time the thing happened, and they're sitting here looking for some sort of redress.

I mean, what they were asking for, and I'm saying this because there's lots of people from the Legislative Analyst and Finance and others sitting here, they were asking for the redress of having their current insurance operator cover it since it was so far back and you couldn't figure out how to do it. I don't know if that's a logical thing, but something has to be done because they will just literally go under with one payment and not being insured.

That's right.

So we need to do something in some way. I'm just not sure I think what it is.

I think, and I'm happy. Not this morning, but if this Committee wants to explore some of those policy ideas, I would be happy to come talk to you about those. There are some simple things we can do that don't really interfere with the victims compensation, which I think would be a priority. And then there are some other things that we could look at that we model in other ways.

Earthquake coverage and some other things, such as victim compensation pools, that in this case, the state wouldn't be able to afford to contribute to it, but districts could contribute to it. Those often operate within set limits so we don't end up with judgments in the $137,000,000 that are uninsured type of thing. So several ideas that we.

The budget staffer is wearing a mask, and she's probably wishing she's wearing it over her eyes if I suggest another meeting in the middle of all these hearings. So it hides the eye roll, but it would be good to have a discussion about that, and it would be good at some point to involve Finance and others because there may be something that a budget trailer Bill could do. But this is enough of a policy that maybe we need a Bill. But nevertheless it can't go unaddressed.

It can't because at some point it does fall back to the state. If that district can't address it, then we're looking at receivership issues. And the state would be loaning them the money they say wouldn't be paying the Bill, but they would be loaning them money. But the baggage, and I'm going to use that term, the baggage that comes with the receivership historically is associated with poor management, fiscal management in a district. In these cases, that's not necessarily the case. Right.

Well, another thing is, I look at your list every year and the school district that I grew up in, in Vallejo is on that list. Every year. We as school kids were just counting on the adults to take care of things and have a classroom for us to show up to. So it is something that we just have to make sure. And this whole thing triggers one thing that may be more logical in the next discussion.

But there was a budget slight carve out or allocation for two school districts last, I think two, due to fire. And I have a school district in Bonny Doon where 27% of the enrolled students lived in a house that burned down. And the only thing that has saved them has been the rolling average that we've been done on ADA. But that's going to get to the other end of it. And they came to me and said, were you sleeping through that? Why weren't we added to that? So I will be vigilant this year that if there's anything that Bonny Doon is included. But that's another thing that we all need to think about because.

Proportionate impacts for things like that.

Yes. And we've actually, recent history, especially with fires, we've got some decent history buying policy and fiscal things to look at to model after the Camp Fire and Paradise, Pioneer School District in Butte County as well. We have some examples we can.

Well, I had the misfortune of still being Resources Secretary and having CAL FIRE during the Camp Fire. And when the Governor and I went up two or three days after, the place we were was an elementary school playground where the only thing that survived from the entire elementary school was a couple of jungle gyms that were out on the pavement. And it was just gone. Well, I was going to ask Senator Min if he has any questions and he probably feels rescued by the fact that I took so long. So I appreciate you being here and look forward to continuing some of those conversations.

Thank you, Senator.

Then we are going to move to issue three, which some people think is the main event. It's the Proposition 98 overview and structure. We have Alex Shoap from the Department of Finance, Ken Kapphahn from the Legislative Analyst Office, and I'm sure there's other people that will be here for this. And let's start with opening statements on this. And Department of Finance, welcome to the Committee.

Thank you, Mr. Chair. Alex Shoap with the Department of Finance. So I'm going to provide an overview of the Prop 98 Guarantee, including proposed Reserve withdrawals, an accounting proposal related to the 22-23 Guarantee, and other solutions and investments in the Governor's Budget for tk to 12, and community colleges. So the Governor's Budget forecasts that the Prop 98 Guarantee amount for 24-25 will be 109.1 billion. So 800 million more than forecast at the 2023 Budget Act. All budget years remain in test one.

In the three year budget window, the Governor's Budget shows a decline of 11 billion compared to the Budget Act, with about 8 billion of that attributed to 22-23. The budget also proposes statutory changes to address the roughly $8 billion decrease in 22-23 to avoid impacting existing school budgets in the past year and subsequent years. We'll provide more details on that later in the presentation.

So, to fully fund the Local Control Funding Formula, LCFF, and the Student Centered Funding Formula, SCFF, the Governor's Budget also includes withdrawals from the Rainy Day Fund for schools of roughly 3 billion in 23-24 and 2.7 billion in 24-25, resulting in a revised account balance of more than 3.8 billion in 24-25. And again, I'll provide more detail on that later in the presentation.

So despite the drop in the Prop 98 guarantee level, per pupil funding is at one of its highest ever annual amounts, with about 17,600 Prop 98 per student and over 23,500 per student when accounting for all funding sources. So moving to attendance, the percentage change in average daily attendance, ADA, from 23-24 to 24-25 is expected to be negative .03%, so indicating a slight decline.

ADA continues to be a lower share of enrollment than before Covid-19. However, a reduction in Covid-19 related absences is assumed starting with 22-23 and is anticipated to continue. So for the Prop 98 rebench, the Guarantee was rebenched to reflect the continued implementation of universal transitional kindergarten and Proposition 28. Specifically, the Guarantee was rebenched in 24-25 to include an increase of 938 million for Prop 28 and about 1.8 billion to reflect continued universal transitional kindergarten implementation.

The rebench Guarantee increased as a share of General Fund revenues from 38.6% to about 39.5%. So the Governor's Budget proposes several budgetary actions, including solutions to avoid negatively impacting school funding due to the revised Guarantee amounts. Given the current fiscal outlook, these solutions were carefully considered and are intended to mitigate disruption to education programs based on available resources.

So on the K-12 side, this includes an ongoing reduction of 1.4 billion for the LCFF to reflect downward growth adjustments due to decline in enrollment in prior years and a .76% cost of living adjustment, an ongoing increase of roughly 796 million for the LCFF to support transitional kindergarten expansion and adult to student ratio reduction, an increase of 122.2 million for universal school meals, and an ongoing increase of roughly 65 million to fund a 0.76% cost of living adjustment and caseload adjustments for various categorical programs.

For solutions on the K-12 side, these include savings of 445.7 million one time Prop 98 General Fund for the California State Preschool Program, a Rainy Day Fund withdrawal of approximately 5 billion, and a roughly $7 billion past year accounting solution that, again, we'll get to shortly, and then reappropriation and reversion funding totaling 36.6 million to support ongoing LCFF costs in 24-25.

On the community college side, some of the top items include an ongoing increase of roughly 69.1 million to fund a 0.76% cost of living adjustment for the Student Centered Funding Formula, a one time increase of 60 million to support community college nursing programs approved at the 2023 Budget Act, and then an ongoing increase of roughly 29.6 million to support enrollment growth within the SCFF.

So, similar to K-12, solutions on the community college side include a Rainy Day Fund withdrawal of approximately 722 million and roughly 910 million for the past year accounting solution. So now I'll talk a little bit more about the proposal and the Governor's Budget related to the public school system stabilization account, the state's Proposition 98 Rainy Day Fund. So deposits into the Rainy Day Fund are required when capital gains revenues are equal to 8% or more of General Fund revenue.

The 2023 Budget Act projected a total balance of 10.8 billion into the Rainy Day Fund. So the Governor's Budget reflects revised deposits based on updated lower capital gains revenues. So revised deposits into the Rainy Day Fund of 339 million in 22-23 and 288 million in 23-24. Additionally, the Governor's Budget also includes a mandatory deposit of 751 million into the Rainy Day Fund in 24-25.

So the Governor's Budget also includes discretionary withdrawals from the Rainy Day Fund of roughly 3 billion in 23-24 and 2.7 billion in 24-25, resulting in a balance of over 3.8 billion in 24-25. So these discretionary withdrawals would be used to fund Local Control Funding Formula and Student Centered Funding Formula cost in the fiscal years in which they are made, so maintaining predictability and stability for funding that supports teacher salaries, instructional materials, transportation, other critical educational costs.

Then finally, the revised reserve balance of 5.7 billion in 23-24 continues to trigger School District Reserve Cap requirements in 24-25. These requirements limit the amount of funds districts can maintain as discretionary reserves from one year to the next, but we don't anticipate this creating a significant hardship for most districts. And then finally for the Rainy Day Fund, we just note, or the Administration would note, that the proposed discretionary withdrawals would require the declaration of a fiscal emergency by the Governor.

Okay, so finally, I will move on to the accounting solution in the past year. So just a little context. Due to the winter storms in 2023, the Internal Revenue Service extended the tax filing deadlines for the 2022 tax year from April 15, 2023 to November 16, 2023.

Because of these extensions, actual 2022 tax data was not available at the time that the 2023 Budget Act was determined, and due to this lack of actual data, the estimated minimum funding obligation for 22-23 appropriated in the 2023 budget was roughly 8 billion above the actual minimum funding obligation. So the Governor's Budget proposes an accounting solution for the 8 billion Prop 98 problem in 22-23.

The intent of this solution is to avoid negatively impacting existing school budgets and would not require LEAs to return any funding that was already allocated in 22-23. So I think this proposal can be understood as having three main components, the first accounting for 22-23 at the state level, second accounting for 22-23 at the local level, and third solving this problem should taxes be delayed in a future year.

So with regards to the first component, the budget proposes to recognize the reduced 22-23 funding at the state level beginning in 25-26 in equal amounts non-Proposition 98 General Fund for five consecutive years. So this will be about 1.4 billion each year for five years for K to 12, about 182 million each year for five years for community colleges.

Because all three years in the budget window are in test one, the reduction in 22-23 does not impact the guarantee calculation for 23-24 or 24-25. And then under this proposal, no additional cash allocations will go to local educational agencies or community college districts in any of the out years, and LEAs will not have to return any cash to the state.

So for the second component, this is language to allow LEAs and community colleges to continue recognizing the excess cash received in 22-23 as received in that fiscal year, so as not to require them to reopen their books, make additional prior year accounting changes. And then third, finally, should this specific situation arise in the future, this language also provides a general methodology to account for funding appropriated above the minimum Guarantee in a similar manner as I just described, provided that certain requirements are met.

So, just to conclude, the solution is intended to mitigate harm to school districts, community colleges by using accounting mechanisms at the state and local level. The proposal avoids significant cuts to education programs, allows school districts to keep prior year budgets intact, and provides a framework to solve for this issue if tax filing extensions are delayed in future years. And that concludes my comments. Happy to take questions at the appropriate time.

Thank you very much. Then we'll move to the Legislative Analyst.

Thank you, Chair. Ken Kapphahn with the Analyst's Office. We have a handout that covers our key points. I think the Department of Finance gave you a good overview of the major moving pieces in this budget. For just a little bit of historical perspective, the reduction in the Guarantee in the prior year really is unprecedented. The last time the state experienced a drop in the prior year, the Guarantee declined 379 million in 22-23. We're now talking about 9.1 billion.

The Governor's Budget does recognize that shortfall, but we think revenues are likely to come in even lower than the state anticipates in 23-24 and 24-25. If you turn to page three of our handout, the Governor's Budget had anticipated a strong rebound in state tax collections this year, but we're not seeing those increases materialize. Two weeks ago, we released our latest estimates of revenue. They're 15.3 billion below the Governor's Budget estimate in 23-24 and another 8.4 billion lower in 24-25.

Those lower revenue estimates reflect not only the recent tax collection trends, but weakness in some economic indicators that are important for state revenue. If you turn to page four of our handout, based on those revenue estimates, we anticipate the Proposition 98 Guarantee is 5.2 billion lower than the Governor's Budget this year and 2.5 billion lower in 24-25. Those reductions reflect our estimates of General Fund tax revenue as well as a small offsetting increase in local property tax estimates.

The figure at the bottom of that page shows how those estimates have been changing. So the Governor's Budget brought down estimates of Proposition 98 significantly compared to June, and then our estimates are down an additional 7.7 billion. The really key difference here, if you like to think in terms of year to year percentage growth, is that under the Governor's Budget, the guarantee in 23-24 would grow 7.4%, whereas we're anticipating growth of only 2.1%.

Turning to the spending proposals on the overall architecture of this plan on page 5, 13.7 billion in reductions in solutions affecting schools. The two biggest ones are that cost shift maneuver and the discretionary withdrawal. Turning to page six, this budget, even though the Proposition 98 Guarantee is dropping, the budget has 1.4 billion in new spending on K-12 programs within the Proposition 98 Guarantee. More than half of that is ongoing, largely for the cost of living adjustment.

The other portion is one time largely for a second round of zero emissions school bus grants. Page seven is a list of all the individual solutions and proposals. You'll cover all of those, I think, in future hearings, some today. Turning to our assessment on page eight, there are a few elements of this budget plan we think are positive. The budget does align General Fund spending on schools with the lower estimates of the Proposition 98 Guarantee.

Given our estimate that the state faces a $73 billion shortfall, that seems like a necessary step for balancing the budget. We also think there's a few promising ideas in this budget. We share the Administration's assessment that this is an appropriate time to withdraw funding from the Proposition 98 Reserve.

Because that requires the Governor to declare a budget emergency, we think it's positive that the Administration is signaling it's open to that. And we also think the plan to find savings in state preschool is reasonable, given that the funding in that program exceeds the costs of existing rates and slots. Turning to our concerns, these start on page nine. Maybe a first concern is that we think there's going to be less Proposition 98 funding available by June. Our estimates, again, are 7.7 billion lower. We also have significant concerns with the cost shift maneuver.

Maybe perhaps the most notable is that it's worsening future state deficits. As you mentioned at the beginning, the state is looking at annual operating deficits of around $30 billion per year over the next couple of years. This proposal is contributing to that. We think this is bad fiscal policy. The state here is effectively creating a new kind of binding obligation upon itself. This proposal is different from traditional borrowing because we're not paying an external creditor.

But eventually the bill comes due and the state will have to repay itself with its future revenues. And we're also concerned by the precedent. Adopting this proposal could create even more budget pressure by setting up an expectation that the state would adopt similar maneuvers like this, either for schools or other programs in the budget in the future. Separate from that issue, we're concerned that the budget is proposing new spending when the state cannot even afford its existing programs.

Turning to page 10, as you know from your experience, the state historically has tried to contain spending during tight fiscal times. During the Great Recession, for example, it avoided new school commitments, it suspended the COLA, it reduced categorical programs. And the new spending that's proposed in this budget makes addressing this shortfall that we're facing now even more difficult.

Another concern related to the new spending is that this budget is relying on 2.2 billion in onetime funds to pay for ongoing program costs, and that's going to set up a shortfall in 25-26 when those ongoing costs continue and the one time funding expires. Our bottom line here is that the state is going to need significantly more reductions in solutions by the time you reach an agreement with the Governor on a balanced budget by June.

So turning to our recommendations on page 11, we're outlining an alternative approach, one we think that would preserve core programs at existing levels and also help stabilize the budget moving forward. As a starting point, we'd recommend rejecting the cost shift maneuver. As an alternative, we recommend using the Reserve withdrawal to address the shortfall in 22-23 and any other savings the state can identify. We'd recommend rejecting all of the new spending increases in this budget, including the COLA.

We understand the difficulty that creates for district budgets and the comments by Mike Fine earlier, but we think that reducing the COLA is the most straightforward way of acknowledging that the state is having difficulty sustaining its existing programs. As for the other increases, we think those may have merit in future years, but they seem unaffordable under our current projections. Adopting all of those recommendations, though, still leaves the state needing many more solutions, and I wanted to briefly highlight some of the tools in the toolkit.

First, the state has about four and a half billion in competitive grants that it has not yet allocated to schools. Those are on page 12 of your handout, and we have the specific programs and amounts. We'd suggest going through that list and rescinding any grant amounts that aren't your very highest priority. The state also has a few programs where it could make temporary reductions and expect districts to operate the underlying activities using unspent carry forward funding.

We'll have more information on that in a few weeks, but two of the programs we think that funding exists include the Expanded Learning Opportunities Program and the Special Education Early Intervention Grant. Third, the state's provided some significant increases to five major programs over the past few years. We've listed those on page 13. They include the Expanded Learning Opportunities program, state preschool, school nutrition, school transportation, and transitional kindergarten.

In all of those areas, we think you have ways of achieving most of your core objectives, but at a somewhat lower cost. And then finally, the state currently provides about 1.3 billion to fund three historical add ons to the Local Control Funding Formula. These are based on the size of programs districts operated decades ago, not the students or programs they have currently.

And if you were to eliminate or scale back those add ons, that would provide some ongoing savings and reduce some of the disparities in the LCFF. Adopting some combination of those options would both help preserve funding for your core programs and also set up better choices and a less difficult budget situation next year. So that concludes our high level assessment. Happy to take questions.

Thank you very much. And I'm going to have some questions. But I feel like on the funding maneuver, I should just make comments because it's understood fairly clearly what it is. And I was smiling when it was said that the schools kind of like it because of course they would.

Because it relieves schools from the deficit on the $8 billion and it shifts it to the General Fund, which is, as I said in the opening comments, is childcare, health care, other things for the kids, but it's not the schools that take the hit. The General Fund takes the hit, and it's a cash issue. It's really, we have the cash. We can spend the cash. We just hope to write it off three ways as a loan in a number of out years.

And I'm confident there's an unstated view that hopefully at some point things get a lot better and you can write it off and it's out far enough that that could come back to do that. But I sort of agree it's not a good precedent.

And part of our challenge in all five subcommittees is doing things that lower the deficit in the out year so that we're not facing the exact same situation because we just patched it together with one time funds to get out of this year. And so it just raises great concerns, and it's hard to see doing it.

But I've sort of privately made this edgy comment that when I was Budget Chair and Governor Schwarzenegger was Governor. He would propose all these things and then he would wink at us after January. And there just wasn't a wink this year to know whether if there was a recognized $38 billion deficit, which was lower than what the Legislative Analyst said, only 8 billion of the 38 billion are in actual reductions.

And so it does not really affect the out year in a way that we are not going to be back in the same situation. And so I would have grave concerns with this and would really hesitate doing it. But if the budget deficit goes up to 70 or 80 billion dollars, I suspect at that point everything's going to be on the table to try to figure out how we navigate through it.

So as much as I don't like it, don't want to do it, don't think we should do it, don't think it's good public policy, we'll see where we are in May or June. And then maybe two questions. The one thing that is, and I have to say, I followed everything that the Department of Finance said, and I understood it. And I think I'm maybe one of 10 people that did that anywhere.

And so trying to maybe explain some of this so that people understand the differences is what we should spend a little bit of time on. And the thing that's confusing to me is how, if you take 8 billion or 9 billion, depending on how you calculate it, out of what schools we're getting, and you have the Guarantee lower by 8 billion because of what we know about 22-23, how does the Guarantee go up year to year after taking out?

And I see the charts that I know the Legislative Analyst is flipping to the page to tell me what page his charts with the bars are on so that we know the difference. But I still find it hard to understand how the Guarantee goes up 10 billion. And maybe you can also answer, as part of that, the fact that property taxes are robust and that they are part of that. But how do you explain to somebody how you take 8 billion out and go down and yet somehow the Guarantee still goes up?

Alex Shoap, Department of Finance. So I think one of the, I guess, requirements within this proposal, in the language that I think relates to your question is that the year after the impacted fiscal year, so in this case 23-24, is in test one. So when the Guarantee is in test one, then that year's Guarantee amount is not dependent on last year's Guarantee amount. It's just a percentage of General Fund revenue.

For the totally uninitiated, there's three tests and Proposition 98 and different triggers that put you in each test.

Correct.

And you're saying we would be in that particular test, which does what you are saying it does.

Correct. Right. 23-24 would just be Proposition 98 would be calculated as percentage of General Fund revenues in 23-24. So the decrease in the prior year would not affect it in 23-24.

And the property tax revenues are robust to the extent that they fit into it, is that correct?

Right. In a test one year property taxes offset some part of the General Fund requirement for Proposition 98.

And then, I don't want to elevate, and I'll give you a chance to comment, but the Legislative Analyst, recent revenue estimate, which upped the problem by significant amount under test one, would that not have an impact? Or would the fact that revenues are estimated lower in the middle of this year affect how you look going forward on test one and how we budget under Proposition 98?

I guess I would first say that the Governor's Budget represents the Administration's latest forecast as far as revenues or the shortfall goes.

You mean as of January 10?

As of January 10. With regards to revenues for 23-24, our model finds that it's highly unlikely that the Guarantee would come out of test one, even with a hypothetical $25 billion decrease in revenues. Our model says the Guarantee...

It's only if we were in test two or test three that a drop in revenues would start to affect what happened in the school funding.

Right. If in test two or test three for 23-24, and those tests, then the Guarantee for 23-24 uses the prior year Guarantee amount as kind of like a starting point or baseline.

And Mr. Kapphahn is understated, but he has been chomping at the bit to comment in these. I can pick up the language. So how would you like to comment on this discussion in these questions?

Well, I won't disappoint you. I'll refer to a chart on page two. The two key factors that are really affecting these formulas are the assumptions about General Fund revenue and property tax revenue. So the reason the Governor has such strong growth in the Guarantee in 23-24 is that the budget is anticipating an 8% year over year increase in state tax revenue. We're anticipating state tax revenue is going to be roughly flat from 22-23 to 23-24.

And so that's why our estimates are so much lower. The other thing that's happening, and the reason the Guarantee is still growing a little bit under our estimates, is that the state is recalibrating the Guarantee up for the implementation of Proposition 28, the arts funding, and the expansion of transitional kindergarten. Those two adjustments are adding 1.6 billion to the Guarantee that wouldn't be there if we weren't making those adjustments.

But we are making the adjustments to bump the Guarantee up. But on the expenditure side, there's significant expenditures against those two items that might not even be covered by how much the Guarantee is going up. Is that correct?

That's right. That's why some of the increase in the Guarantee isn't really available to support other programs. Right. We have this new obligation to fund arts education. That's absorbing that portion.

Because in many ways, that would seem like just a pass through. If we were, and I don't know what the final number ended up being. If we're getting a billion dollars in revenue from the proposition that passed, it's going to be a billion dollars of expenditure. Then let me ask another question in relation to the initial discussion, and that's the withdrawals from the education Rainy Day Fund. Just for the uninitiated, what's the total balance in that right now? Do you know?

So our balance, as of the 2023 Budget Act, was about 10.8 billion.

Okay. So if you're proposing 3 billion in one year and 2.7 billion in another year, it actually would presume that the balance could be spread out over three years, roughly, or if there's little additions for things, even a little longer. So that dipping into the Rainy Day Fund is not, we're not disproportionately spending it up front. We're trying to cushion our way through three budget years, or could cushion our way through three budget years. Is that a correct way of thinking about it?

Yeah, I guess, the Governor's Budget proposes the withdrawals in 23-24 and 24-25 to cover costs for LCFF and SCFF. I think as far as in the three year window for 22-23, I think what we would just note is that the remaining balance after those discretionary withdrawals, after revised deposit amounts in 22-23 and 23-24 would not be enough to cover the full problem that we're looking at in 22-23.

And Mr. Kapphahn, in your statement and handout, you want us to reject the $8 billion accounting mechanism. And one of the ways is to do a higher withdrawal from the Rainy Day account. How would that fit with the out years?

Yeah, so just briefly on, there are a lot of numbers moving around on the Proposition 98 Reserve. The one we would, I think, encourage you to think about is 9.6 billion. That's the total, really resources available. The Governor's Budget would withdraw 5.7 billion, leave 3.9 billion in for future use. That's what you have. That's what's in play.

But his is over two years. The withdrawal is over two years.

So what we would suggest is, there's already a $5.7 billion reserve withdrawal in this budget. Put that toward solving the problem in 22-23. Use other solutions for 23-24 and 24-25. We also think that, regardless of what we might recommend about withdrawing additional amounts from the Reserve, it's quite possible, maybe likely, that under our revenue estimates, you would be required to take additional funding out of that Reserve because at a certain point, the Guarantee drops to a low enough level that withdrawals start to become required instead of just discretionary.

So that's something, again, that you might see in May, either from us, potentially from the Administration, too, that a larger withdrawal, not so much as a proposal, but just because that's what the formulas require.

Okay. Do you have anything you want to add? Then one of the other things is, to save Mr. Kapphahn the page number. They, on page 16, and he mentioned it in his statement. If 16 is the right page, I have a different thing. It's the unspent grant programs that totaled in one chart, I think something like 4.4 or 4.6 billion.

And I got corrected in a private briefing because it was like if we were trying to do the cash maneuver of 8 billion, I was wondering if we went anywhere on that list if it lowers the 8 billion that you would need to account for in future years. And it's why we just automatically accept the 8 billion and bump it to the out years rather than do some of the interim solutions.

I know that your January 10 budget is where you are, but why did you not consider some of the options of unexpended funds not going out the door as part of your solutions in the budget?

I think I would probably just sort of reiterate kind of at a high level the intent of the Governor's Budget, which was to solve for the budget problem we're facing while maintaining predictability and stability for schools. I think that the Governor's Budget reflects, we consider all of the Administration's priorities within the context of available resources, including the Rainy Day Fund or proposed solutions. So I think that is...

I would just comment on that for a second. And that is, believe me, I don't want to go to that list. They're all priorities. They're all things we value. We worked really hard to get them there. It's just that these processes sometimes take forever and it doesn't go out the door.

So it's unexpended money at the time that we're considering this monumental problem. And the challenge for us is to not patch this together with so many one time things that the deficit doesn't change much in the out year, and we just patched it to a worse problem where we're going to have to make real cuts because we didn't figure out ways to lower the out year this year. And it's a question of whether it's pain or less pain, but it's pain.

And it seems to me that doing some of that lessens the pain in a way that it lowers the out year deficits and allows us to be closer to it when we get there. And it's in the problem of the Rainy Day Fund. And I appreciate the fact that it will, I don't know if the word's automatic, it will be prescribed at a certain level if we get to certain points, but evening it out.

It's kind of like, as somebody that worked for Jerry Brown for eight years, he wanted you to make the cuts first before he'd ever talk about the revenue. And of course, I was not in the Legislature at the time, and if I was in the Legislature, I would have hated that. But that's how he got the political constituency to pass taxes and do the things that he had to do.

And it was not a bad way to proceed for the political part of it as well as the fiscal responsibility part of it. And I get the fact, wink or not, that this budget was just to get us to May and maybe some real things will have to be decided that weren't decided or proposed in Jan. 10. But I would just say this has got to be something that's on the table. As we talk, it's got to be on the table.

If it's really about cutting the COLA, even in a future year, as opposed to taking some of those hard decisions, we're going to want to hold the COLA as best we can. Because in the midst of all the other cuts and bad things we're going to have to do, at least there's that little bit of stability.

Although I recognize what was said in the previous item, with labor contracts, inflation, things that come every budget is going to go up four and a half to 5% with minimal amounts of action. And if we're doing a COLA that's less than 1%, it's going to inflict the pain and the cuts down to the local level as we're doing that. So I guess we talked in the abstract about the different levels of pain, and now we're just being very specific about it.

Normally, this is when I would turn to the other Committee Members and said, okay, I've dominated the questions. Do you have something else to say? But I think we've done a pretty good job of airing the issues. And I suspect there'll be some people making comments when we get the public comment at the end of this that will address some of this.

But it goes back to my opening comments about everything has to be on the table, and we have to think about how this all fits together to do the minimum amount of harm, but try to accomplish the fiscal situation that we need. I would ask, do either of you have any comments before we might move on? Yes.

I can just make one comment. This budget, like some budgets in the past, is a bit of a tale of two budgets. For the state budget overall, you are looking at a pretty big imbalance between revenues and expenditures, sort of like a structural deficit of about $30 billion. If there is a little bit of a silver lining, it's that within Proposition 98, the structural part of the deficit is a lot smaller. It's only about 2.2 billion.

And so that's sort of the, I guess, difference between the Proposition 98 Guarantee and your ongoing spending level. Most of the problem within Proposition 98 is more of a one time problem, particularly that drop in 22-23. And if you do, as you mentioned, rescind or pull back on some of these one time grants, you can use those funds as one time savings and, we think, put them towards 22-23. Obviously, a pulling back, a one time grant is just a one time solution. But in 22-23 you're only trying to solve a one time problem. And so we think that's a reasonable approach for all of the reasons that you mentioned.

Okay, thank you. I appreciate you all bearing with us. And I think one of the things is, as is obvious from this discussion, there's so many moving pieces that it's a question of which ones to try to impact as we go along here. And this discussion is just going to go till the last minute the budget is signed. It is hard because I am a strong advocate for public education and for schools.

And when I am lobbied, I always feel that people are not totally aware of what's going on in the other part of the budget. And that, particularly with the 8 billion, they're so excited that it's going to go to cuts in medical care and childcare and other things and that they will be held harmless. So it is just tough.

And I would remind everybody, as I do in the lobbying visits, that you're representing kids, and you might protect their education, but then you're going to get them with housing and health care and childcare and the other things, and that it is a balance of making sure that we still try to deliver everything to them as they need it. So thank you.

And thank you for surviving the questioning and the full budget hearing, because I was determined to get the whole $8 billion scheme on the table, and we finally got there. So thank you for bearing with that when that happened. Okay, we appreciate this panel. And we're going to move to our discussion on the Local Control Funding Formula. I have to go through every page here.

Katie Lagomarsino with the Department of Finance. I'll cover the local control funding form.

Is your microphone on? I can't tell. There it goes.

This is Katie Lagomarsino with the Department of Finance. I'll be covering the Local Control Funding Formula and my comments will be pretty brief. Regarding the apportionments on districts and counties. In the budget year we see a decrease of roughly 1.4 billion, which is a result of the 0.0% cost of living adjustment combined with population growth adjustments. And this figure compares the budget year to the revised current year.

Moving on to the county offices of Education, in the budget year we see a decrease of 5 million, which reflects again population growth changes applicable to the County Office of Education, LCFF, as well as the 0.0% cost of living adjustment. And I realize that this hearing isn't focused on transitional kindergarten, but I'll also briefly cover our numbers for that.

So the Governor's Budget adjusts transitional kindergarten expansion costs up by roughly 635,000,000 in the budget year, reflecting revised program uptake estimates to support the program to serve all children turning five between September 2 and June 2, and an increase of 161,000,000 to support the addition of a certificated or classified staff person in transitional cardinal classrooms serving these students. That concludes my remarks. I'm happy to take questions at the appropriate time.

Thank you very much. Thank you very much. We'll go to the Department of Education.

Good morning, Mr. Chair in Erin Aretia on behalf of the Department of Education and State Superintendent of Public Instruction as Chief Deputy, nicely shared in her overview. Our schools, students, families and educators are continuing to deal with extraordinary challenges. They're still dealing with the lingering effects of the pandemic and the need to accelerate learning while simultaneously tackling those long standing issues that ultimately predated the Covid-19 pandemic.

We've generally heard concerns around growing pension costs and staffing remains a huge challenge in the field as there are concerns about being able to effectively implement a whole number of programs while trying to also 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. But we are seeing some normalizing happening as well coming out of the pandemic there.

We're thankful for the work that's been done so far to address these issues over the last handful of years, such as providing leas with their pre Covid attendance yields levels in 21-22 and 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've seen as a result of the pandemic and overall declining enrollment that we continue to be facing.

The administration's proposal this year to fully Fund the COLA of 0.0% continues those efforts to keep the LCFF fully funded even if the COLA is Low, and we sincerely hope that the COLA will continue to remain fully funded during budget negotiations. Our LEAs, as well as our educators face significant cost pressures in this inflationary environment, and any reduced COLA only exacerbates that problem.

As we work through this budget year, it's imperative that we work hard to protect education funding to ensure that our schools can do the best they can for our students. I look forward to answering your questions at the appropriate time.

Thank you very much and then we'll move to the LAO. Welcome. Thank you Mr. Chair.

Michael Alferes with the Legislative Analyst Office. As my colleague Ken Kapphahn mentioned in the previous item, we are recommending rejecting the statutory COLA given that the budget relies on $2.2 billion in one time funds to Fund ongoing costs. Rejecting the COLA would reduce the shortfall by 628,000,000 and would avoid committing to an ongoing spending level that the state might have difficulty meeting in future years.

An additional consideration is that the zero COLA for 2425 would follow a 30% increase in funding per student from 201920 to 2324. Yes, in addition to zeroing out the COLA, the state could consider other changes to LCFF add ons to generate additional savings, such as the TK staffing ratios, add on, or other add ons that are funded on antiquated historical factors rather than student demographics. So that concludes our comments. Happy to answer any questions you might have.

Thank you very much. Let me go to the Department of Finance and follow up because the Legislative Analyst has said that it's their belief that the LCSF Local Control Funding Formula is overfunded by $1.8 billion. How would you respond to their assertion?

I'd like to refer to my colleague.

Lina Grant, Department of Finance I would just note two things. One, the 23-24 P one data just came was just certified and it came in a little bit higher than I think the LAO may have projected, a little bit closer to finances estimates, and because of this I think there might not actually be that high of savings.

I will defer to the LAO to confirm this, but the other thing to note is that because the way we're currently funding TK accounts for, as stated in the agenda, does account for those students immediately, rather than funding them based in the way the rest of the k through 12 population is, which is I think 80% of school districts are funded on the declining enrollment like the average of the past three years.

So we think we are open to looking into our methodology and potentially revising it to reflect a more accurate picture of actual TK students attending.

I'm occasionally prone to snarky comments, and so when it comes to the LAO saying the overall budget is $15 billion in revenue down the deferrals to January 10, and we're sticking with it, but when it comes into the good, we're willing to look at the updated one and try to incorporate it in. You clearly have something you want to say.

Yes. Edgar Cabral with the LA I just want to reiterate Ms. Grant's comments. We are working on looking at the updated data. Our estimate that we developed that's in the report was prior to receiving what's called the P one data that has some preliminary information on the current year. We're still looking into it to kind of get you a revised estimate of what our number would be. But it does look like on our initial review of the data that those numbers are a little bit, attendance is a little bit higher than what we had expected and so that number will change. And we're right now continuing to update those estimates. When we have a better sense of what we think number would be. We'll update you on that.

Thank you. I really appreciate that. And I think that this is not dissimilar from the previous item and it's sort of saying that the COLA is fully funded gives a heart attack to the schools because whatever it is 0.0 is so below what they need just to do with cost of living and contracts and things.

And yet fully funded relates to the COLA, not what really is the impact on school districts. And yet doing this really depends on the money available. And here, as much as we all feel the need and the screams for what is not happening appropriately at the school district. So this just is another thing where clearly it's a moving target. It's clearly going to move until we get to May and have to figure it out.

Is there anything that any of you want to make sure we know before we just move past this item that we didn't talk about in this hearing? I knew that was in my interest because none of you'd want to extend the item, but I would try. Okay, well, thank you. We appreciate the discussion, and we know that this will continue to be an issue. We're going to move to item number five, the excess educational Revenue Augmentation Fund calculation, otherwise known as excess ERF.

And we're going to be back to Mr. Shoap from the Department of Finance and Mr. Kapphahn from the Legislative Analyst Office. And welcome to the Committee and have opening comments. And we'll go in that order. Finance and legislative analysts.

Hello again, Mr. Chair. Alex Shoap, Department of Finance. So, beginning in 1992, the Educational Revenue Augmentation Fund, ERAF, shifted property tax revenues from cities, counties and special districts to k to 14 schools.

ERAF is distributed within each county on a per average daily attendance basis to all non basic aid school districts with the intent of directing proportionally more ERF towards districts with less property tax revenues on a per Ada basis. Community colleges and special education local plan areas also receive an ERAF allocation, an ERAf that cannot be absorbed by basic aid school districts which are statutorily ineligible to receive ERAF. This is termed excess ERAF and then returned to local agencies from which it was generated.

So charter schools, they were established in the state in 1992 almost concurrently with the ERAF statutes. However, charter schools are not explicitly identified within existing ERAF distribution statutes. So to explicitly address charter schools and their interaction with existing ERAF distribution statutes, the Governor's Budget proposes statutory language to explicitly include charter schools beginning in 2526 as eligible to receive ERAF, but additional details for this proposal are still forthcoming in trailer Bill Language. That concludes my remarks. Happy to take any questions.

Thank you very much, legislative analysts.

Thank you. Ken Kapphahn again with the Legislative Analysts Office. I think the key background for this proposal is that the original purpose of these educational revenue augmentation funds was to increase the amount of property tax revenue going toward schools and community colleges.

As you heard in a few counties, those with very high levels of property tax revenue per capita, a portion of that ERAF revenue is allocated instead to the cities, counties and special districts in the county, and for historical reasons, that allocation to those local governments is known as excess ERAF. One key variable in this calculation is the total amount of funding the students in each county generate through the Local Control Funding Formula.

Generally, the more students there are in the calculation, the greater the proportion of ERAF revenues going to all k 14 educations in the county and the smaller the share going to local governments in the form of excess ERAF. Up until a few years ago, most counties administered these calculations in ways that fully accounted for students in charter schools.

Subsequently, they adopted a different methodology that accounts for charter school students to a lesser extent, and that new approach resulted in less property tax revenue overall going towards school districts, charter schools and community college districts, and more property tax revenue going towards the local governments in those counties. So the trailer Bill Language isn't available, but we understand the intent is to specifically require counties to fully account for charter school students. Within these calculations, we'd recommend approving that proposal.

We think that approach reflects the original intent of the statute. The law at issue, as you heard, specifically refers to school districts, but at the time the law was written in the 1990s, it would have been understood to be inclusive of charter schools authorized by those school districts. The education code also has many longstanding laws deeming charter schools to be school districts for the purposes of allocating funding. I think the governor's proposal also could eliminate some odd fiscal outcomes.

Under the current methodology, when a student leaves a school district to attend a charter school, the overall amount of property tax revenue allocated for k 14 education tends to decrease. We don't think the Legislature ever intended for the charter school statutes and the ERAF statutes to be read in a way that reduces K 14 property tax revenue when a student moves from a school district to a charter school.

The governor's proposal, I think, could address that issue by requiring similar treatment of district and charter school students within that calculation. We'll follow up with more information as the trailer Bill becomes available.

Thank you. Thank you. And this has obviously generated a lot of comments, and we have letters from every local government jurisdiction that is affected by this, but let me see if I can synthesize it. First, let me ask a random question.

Was there some decision made that was like in the middle of the last decade on the appropriation of this? It makes it sound like it goes back to the 1990s, but I have a feeling that there was some decision made, like about 2014 or 2015 to allow the counties to put it in or whatever the local jurisdiction is to put it in certain places. Does that ring any bells?

I think what happened for many years this was an issue that only affected two or three relatively small counties. The big change that happened in the early 2010 early 2010 s was that two very large counties with many charter schools started to be affected by this issue. And so this issue grew from something that affected a few million, maybe tens of millions of dollars to something that affects now potentially more than $100 million. I think the change in the methodology happened.

Our understanding is around 201819 was when, and it appears to only affect five counties. Is that right? And they are all higher wealth counties? Yes, that's the common denominator, and this is one of those. The statute applies to every county, but it only matters in counties with very high levels of property tax revenue where there might be the possibility of having excess ERAF.

And one of the things I wanted to understand was the fiscal impact of this and the shift, but we won't know that until there's trailer built language. Is that right? Can anybody actually say with any certainty what the financial impact is?

So based on current available data, we estimate the impact to be around 130,000,000. I think that we would note, though, that impacted county Auditor controllers would be in the best position to discuss the effects of their counties.

But the political thing here, or public policy thing, usually not very different, is that at least the five counties and associated cities have made budget allocations based on the existing system.

And while there's a statement that it makes much more sense to include charter schools in the count, the count goes up, then lessens the excess for the local governments, and it's a De facto cut to them, even though it's being done on the affirmative public policy basis that somehow this is better to include charter schools, never intend to leave them out.

This has been an issue for two or three years in my radar, and I have some recollection that a lot of the Santa Clara part goes to courts. So this is a cut to the court systems in Santa Clara County of an unspecified amount because we can't tie that down due to a change in policy on charter schools. Am I stating that correctly? Well, I think maybe two comments.

One would be that part of the reason that the number fluctuates so much is that every year there are different numbers of charter schools and the property tax factors change. The other challenge is that not all of the counties report data to the state that the Department of Education asks for each year. And so it's hard to have a baseline when we don't have the full picture of what, when we don't have all of that data that's requested.

But I think we would concur generally with the Department of Finances estimate that was similar to one we put together, I think, four years ago based on 2021 data. I think the other maybe comment we would add is that, again, our understanding is that historically, for most of the history, most counties have been, including charter schools. And so the change, it may be perceived as a reduction, but that's relative to the more recent methodology that they have. Not the way we understand the statute has worked for most of this time.

You see, I think for the last two years, because there was so much chatter about this that I think it was last year, I forget which year, I actually agendized it in the budget Subcommitee, and we had a discussion, and the real thing was the county offices of education in some of these counties felt like that should come their way and that this was something that was being diverted away from them, even though there was legislative action that was pretty clear in the past, and there was also disproportionate, and I'm sorry this is in the haze.

I'm just remembering charts and letters from a year or two ago, but it seemed to me that Santa Clara County had a disproportionate amount of the five counties. They had something like half of the amount that was in this category among the five counties. And so if there's a shift, because there's a considerable number of charter students in Santa Clara County, it's going to have a real disproportionate hit on the court system or other things that are funded out of that.

So just to clarify, that actually is a separate issue. Both issues affect Santa Clara, but the excess ERAF issue, boy, that's really winning the lottery, is separate from this issue. The trial court issue is that, again, separate from all of the ERAF calculations. The county offices of education in that county and some other counties receive property tax revenue above their statutory target under the Local Control Funding Formula. And the state directs that toward covering some of the trial court costs in the county.

From a trial court perspective, that shift is neutral because it's just replacing General Fund the state would otherwise provide. But whatever you decide on the excess ERAF proposal doesn't affect that shift. Well, it's really hard. I read the staff report, and I was holding it up to the light, trying to understand how does it affect the two issues here. And it was in its own lane. So that's very helpful. Thank you.

And I know from seeing who's sitting out there, we're going to hear about this in public comment. Is there anything else that you want to do? The thing about it is that I think we would like to know what the fiscal impact really is before we get to decisions in May.

And I would think at this point that it might be in the interest of the counties to report, and if there's a hesitancy to report, we should do some work to try to get them to report before we're trying to measure the fiscal impact and decide what we're doing here. Yes,

I can add just one context, one additional comment. So there isn't any funding, there isn't any money from this proposal scored in the Governor's Budget to the extent you adopt the proposal.

And there's more property tax revenue going towards k 14 education, that would increase the total pot of funding for schools under Proposition 98 in 2425. It wouldn't result in state General Fund savings, at least not in that year. But you're doing that on the state side. You're not doing that on the impact of local government side for those that are not schools that are impacted by what this change would mean. Right. So this is just about thinking through. You've got a $73 billion budget shortfall.

Could this proposal help address that? And what we're saying is it would increase funding for schools, but it's not saving the state 130,000,000 in General Fund if you adopt.

Well, I was a budget analyst for county government for a number of years, and when I went to this one county supervisor when I was first running for the Assembly 20 years ago, she said, zero, I'm going to support you, but you're going to be like the rest of them.

You're going to get up there and after 10 minutes, you're going to forget where your entire career was. And so I am channeling that in this because of the impact that happens to local government and that that has to be acknowledged in this. And just see how it all fits. This is not being done in a vacuum. So having said that, you already added a comment without me asking for it, but do either of you have any closing comments before we move on? Great. Thank you.

We really appreciate this. And we're just going to want to have the facts as we move on. That completes our five issues, and we're going to move to public comment. But let me take an informal poll of the people that are here who wants to speak in public comment. That looks to me like about 15, even though I always know people get excited by the public comments that are made. So let me just set a two minute limit, and please step to the microphone and state your name and organization and what you want to say for two minutes.

Yeah. Thank you, Mr. Chairman. You are not in the haze and I appreciate your experience in county government. This is Paul Yoder on behalf of the City and County of San Francisco on the ERAF issue.

First of all, in terms of a lot of things that were just stated at that table and guesses about intent and whatnot, there was no change in statute. And that is so true that as your analysis notes. Thank you, consultant. On February 16, 2021 then state controller Betty issued guidance to counties to continue to exclude charter schools from ERAF calculations.

The California school boards challenged this guidance in the courts, and in June 22, the court found in favor of the state controller's interpretation of the local ERAF calculations. Then controller said the counties were doing exactly what they should be doing, and then a court validated that when challenged, these five counties have only abided by the law. This proposal should be rejected. On the comments you made, Mr. Chairman, this I especially want to thank you for that. A cut over here hurts other people over here.

It couldn't come at a worse time for the city and County of San Francisco. This would add close to $100 million to their current deficit. Please reject this. It doesn't help the state's General Fund. The schools are going to get their money no matter what. And thank you.

Good morning, Mr. Chairman. Members Karen Lange, on behalf of the Marin County Board of Supervisors and the Napa County Board of Supervisors, similarly situated to San Francisco. Although the numbers are smaller, the impact to their much smaller General Fund is significant, and so we would ask for you to reject the proposal. I would also observe to you that charter schools have students attending from various counties, and the one in San Francisco is actually almost entirely online.

So it would be San Francisco property taxpayers funding the education of students sitting in someone's living room in an entirely different county. So we would ask you to take that into consideration as well under the light of Proposition one A. Thank you so much.

Thank you very much. Welcome.

Thank you, Mr. Chair. My name is Sadalia King with Catalyst California, which is also a Member of the California Partnership for the Future of Learning. The partnership is the statewide alliance of Community organizing advocacy groups that center black, indigenous and communities of color to advance the shared vision for schools. Yesterday, we submitted a letter to your Committee urging you to protect the funding for community schools program that students and families rely on.

We appreciate the historic investments made over the last few years across the birth to twelveth grade California public education system, including the historic $4.1 billion in community schools programs. The evidence is clear. Community schools change the outcomes of students who have historically been denied equal opportunities and are essential to transforming the public education in California, in particular for those represented by our coalition. So we look forward to continue to partnering with you to champion and effectively implement this community school programs across the State of California. Thank you.

Thank you very much for your comments. Welcome to the Committee.

Hello chair and Members. My name is Ines Rosales. On behalf of Public Advocates and also a Member of the California Partnership for the Future of Learning. Just want to emphasize we submitted a comment letter to your Committee this week, along with our 11 core organizations, urging you to preserve the full 2.6 billion committed and promise to students and families through the California Community Partnership program. The Community Schools approach is a core program really critical to straight lake public education in our state.

Students and families are counting on these funds to reach their school communities to really close long and persistent equity gaps for students. We are also here asking you to protect investments to improve teacher preparation and diversity, and specifically by maintaining funding for the Golden State teacher, teacher and counselor, residency and national board certification grant programs. So thank you so much.

Mr. Chair and Members and staff. Andrew Shane from End Child Poverty California. Associate myself with the comments about community schools, but here to focus on the universal school meals program. Just reminding the chair and everyone that although you clearly have a great memory, that there are more than 200 organizations, including many from your district, who are in strong support of universal school meals.

Since California's first in the nation passage, nine states have adopted it, 25 have introduced legislation, and it was even proposed as part of the President's White House conference to end hunger in America. So we've truly inspired a national movement. We do have several concerns with the Leo's analysis and their proposal, including how CDE is improving direct certification. And if we walk back now, we will actually forfeit the ability to maximize federal dollars. There will be a subsequent letter going in with those concerns.

So we, of course, urge adoption of the governor's proposal. And finally, in closing, just as a parent with children in west Contra Costa, we know that there are families who are still afraid to come forward. The damage from the previous Administration, federal Administration cannot be overstated. This is the only way to make sure that all hungry students eat. We have seen the end of stigma at the lunchline. Please adopt the governor's proposal. Thank you.

Thank you. Chair Laird and Committee Members and staff Becky Silva with the California Association of Food Banks with one in three households with children one in three households with children food insecure. Today we want to express how grateful we are for California's trailblazing national leadership in school meals for all, a policy that food banks are proud to support along with many other organizations across California, and a true success story.

This has allowed over 6 million children, regardless of income, to sit together, to eat nourishing meals to fuel their bodies and minds. And I wanted to highlight specifically that one of the reasons why school meals for all is so important, as Andrew was saying, is that the federal income threshold for free school meals is so Low that it excludes many families and their children who are food insecure but wouldn't qualify under federal income guidelines.

So we urge you to reject the proposals by the LAo to pull back funding for school meals and instead adopt the governor's proposal to continue investing in California's vision for school meals for all. Thank you so much.

Thank you very much. Welcome.

Good morning, Senator Laird Anna Ioakimedes on behalf of Los Angeles Unified School District, we would like to lift up and highlight the comments around the importance of maintaining the COLA, in particular with what ... offered, that our costs are going up four and a half to 5%. We just signed a legislative, excuse me. We just signed a bargaining agreement for our staff to increase their wages, and we were really counting on having a greater COLA than we've seen.

In addition to that, in light of expected deficits, we would appreciate any flexibilities possible in the programs which LAO referenced, for example, the ELOP program. Any flexibilities that can be offered would really help to offset cuts in other areas and the expiration of federal funds. Finally, Los Angeles Unified is proud to have been a district that has expanded access to transitional kindergarten ahead of the state mandate. We know that we're offering high quality early learning opportunities to families that may not have that opportunity otherwise.

And we would urge the Legislature to really consider whether at this point in time, imposing penalties on districts that have expanded opportunities to early learning is the right choice. Thank you so much.

Thank you. And, you know, last year when the Legislative Analyst was presenting and said ELOP, I went acronym alert and made them spell it out, and that person is watching this saying, that was really unfair. You jumped on me and you didn't say it, but you said expanded learning enough that we know what the picture is.

Mr. Chairman. Good morning. David Campos on behalf of the County of Santa Clara, first of all, thank you and to the staff for their graciousness in meeting with us to discuss this very important issue of excess ERAF. We appreciate and respect their work. But we very strongly disagree with the analysis that was presented in this Committee. And just for people watching, we in Santa Clara Value public education.

Thank you, sir.

We have a history of investing in public education as much as any other place in California. But what we're talking about is not only a difference of opinion in the law, but a very clear indication from the courts that the excess Ibrahf counties like Santa Clara have been right all along. What we're talking about here is the Department of Finance, unfortunately, trying to do something that it couldn't do in the courts. It's not a clarification. They're trying to undo a court case that they lost.

Moreover, we have a very serious constitutional issue here because what we have seen over the years is the Department of Finance trying to take excess Eraf money, or eraf money away from local governments. And that's why in 2004, voters in California passed Prop 1A. So to the extent that they're trying to change the allocation for counties, that would be unconstitutional. But beyond that, beyond the fact that the courts have said we are right and they're wrong, we're here about the impact on community.

And this is why I appreciate you being in that role, sir, because you understand that what often happens in Sacramento is that people don't fully understand the impact on the ground. You cannot take this money away from places like Santa Clara City and County of San Francisco without impacting the people that we serve. And in Santa Clara, that means the safety net. It's not just the courts. It's actually things like HIV prevention.

It's things like meals for seniors and quite frankly, things like behavioral health services, which the state wants us to provide. And yet you're talking about taking $32 million. That would simply be devastating for our residents. It would lead to cuts in services and that safety net, but also layoffs. So that's why your perspective is so important. How does this impact the local governments? And if it's not going to help the state General Fund, why are we having this conversation?

To take money away, $180,000,000 from these counties that is needed in those communities.

Thank you so much, Mr. Chair. Jean Hurst here today, on behalf of the Urban Counties of California, I'm also speaking on behalf of my colleagues at the Rural County Representatives of California, the California State Association of Counties and the League of California Cities, as well as the San Mateo County Board of Supervisors. We obviously concur with our county colleagues that have spoken previously in opposition to the administration's excess ERF proposal.

I do want to stand up a little bit for the Auditor controllers at the affected counties who have the very difficult job of accurately allocating property tax revenues. These are very complex methodologies that are not easy. They work very closely with the staff at the state controller's office to ensure that they're doing it right because they are subject to audit, and when they do it wrong, they got to pay people back. They have to fix the problems that were created.

And so this is really a collaborative effort. And particularly in these counties where these methodologies, as we know, are controversial, these have been carefully worked through with SEO. We at the Association level are working hard to help assess the fiscal impact. Of course, we're waiting to see the language, but the goal is to ensure that the counties are all singing from the same page, that we all have a common understanding of what the impact will be so we can accurately share that information with you.

The notion that there's some sort of reticence or perhaps misbehavior at the county level, I have some concern with. That's not what's going on here. We think that maybe these folks are being sort of unfairly maligned. I just concur with my colleagues that have mentioned the litigation. That litigation has concluded that statute does not include charter schools. We do not agree that including them is a clarification and that the Prop one a protections come into play in this matter. And we look forward to continuing to work with you on this issue.

Thank you. Thank you for your spirited defense of Auditor controllers.

Maybe we need a stand next here. Good morning. Katie McCoy Hardeman with the California Teachers Association wanted to comment on two things. The first, CTA has concerns with the governor's $8 billion funding maneuver proposal as we believe it doesn't follow the constitution and existing statute by basically bringing down the prior year minimum guarantee, either through this $8 billion off the books payment or through Reserve payments as suggested by the Leo that has long term permanent impacts on the property guarantee.

So I want to work with you on that issue. And then around excess ERAF, our favorite topic, CTA strongly supports the governor's proposal to clarify include charter schools, in that, as you know, charter schools are treated as same as school districts for funding purposes. Just wanted to make one other comment around the court case. The courts ruled the way that they did, but they also said the Legislature needs to clarify this and that's what the proposal does. So that's all. Thank you.

Thank you very much. Appreciate your comments. Welcome.

Thank you. Tiffany Mok with CFT, a union of educators and classified professionals. We have both Prop 98 schools and also those who are outside of 98. So I appreciate your comment about that. As such, we would like to echo the comments of CTA and also express our concerns about the $8 billion maneuver. We believe it does not uphold the constitutional guarantee of Proposition 98.

In addition to that, we would like to note that making cuts is a choice, as you're all well aware, but that there's also the choice to increase revenues, and we would support many revenue increases, including but not limited to the wealth tax we have discussed and split roll taxes and also corporate taxes. So we just wanted to leave you with that. And thank you so much.

Good afternoon, Chair Laird Marcus Detwiler with the California Special Districts Association, the only statewide Association representing all types of California special districts, providing millions of Californians with essential local services like parks and recreation, fire protection, water and wastewater, and more. Would like to align our comments with those provided by the urban counties of California and other local government stakeholders similarly situated and urge this Subcommitee to reject the proposal related to the calculation of excess Erath thank you. Thank you. Appreciate your comments. Thank you.

Mr. Chair and Staff Jeff Bacher, representing the Riverside County Superintendent of Schools and the 23 school district superintendents in Riverside County want to express our gratitude to the Administration for their efforts to protect education from the impacts of what we're seeing across the entire state with respect to revenues. Senator Laird, we take your comments to heart about looking at the overall budget picture at RCOE, for example, Riverside County Office of Education. We serve many students in programs that are funded outside of Proposition 98.

By far the largest division budget wise in our county office is early education services. We play a major role with both Alternative Payment Programs, subsidized childcare. So we understand the need to look at that big picture. Want to also assure you that on the education management side, advocates are having a lot of conversations about the Proposition 98 maneuver as it's become to be known, and we're struggling with it. There are myriad opinions about what is the best way to move forward.

We'll continue to have those conversations and look forward to continuing that conversation both with you and with staff. And then lastly, want to thank you for your comments about Assembly Bill 218. The district that Mr. Fine referenced in his presentation about the $137,000,000 judgment is a district in Riverside County, and we anticipate there will be other districts that are impacted, if not quite in such a dramatic fashion, but in a similar fashion.

And in fact, I'll be in a meeting later this afternoon with colleagues where we're exploring possible solutions to these problems, and we look forward to continuing that conversation with you and staff. Thank you

Good afternoon, Mr. Chair and Committee staff. Lizzie Cootsona here today on behalf of the office of Kat Taylor and the American Heart Association, as well as our partner organizations, the Center for Eco Literacy and NextGen California, want to echo the comments by some of my colleagues on the topic of school nutrition.

We are strongly in support of the governor's proposed funding for California's landmark School nutrition program, school meals for all, and we are very concerned with the LAO's recommended cuts which would increase childhood hunger, reduce the quality of school meals, and threaten the livelihood of school nutrition professionals. Thank you so much for your time.

Thank you. Good afternoon, Mr. Chair and Committee consultants Mishaal Gill, on behalf of California Association of School Business Officials, representing over 30,000 school business leaders statewide, we want to express our appreciation for the state's continued investments in core programs for public education amid economic uncertainties and recognize the proposed budget prevents mid year cuts and deferrals to leas.

While we acknowledge that the COLA for the LCFF is not what we anticipated to be from last year, we do believe it is an equity based funding system that allows leas the opportunity to meet the needs of students and communities and support fully funding the statutory COLA for the LCFF and programs outside of the LCFF. We also support the additional proposed funding of $122.2 million ongoing for universal meals, helping provide sustainability for the programs.

We appreciate FICMAT's presentation on the fiscal health of school districts and request the consideration of the following cost pressures Las are experienced, including increased cost of services and increased amount of students in need of special education increase to the calpert's school employee contribution rate, liability insurance and also utility costs, especially for school districts that are participating in ELAP. Thank you.

Thank you very much.

Good afternoon. Kim Lewis, representing the California Coalition for Youth and want to express our support for the school meals as well as the money for the homeless youth technical assistance centers. There was over 8500 young people who were unaccompanied in our k through 12 system experiencing homelessness last year and know that these meals can be maybe the only place that they schools can be the only meals that they get that whole day.

So we want to make sure that the dollars are there for our young people. Switching hats for the Corporation for Education Network initiatives in California, we support the administration's proposal for initial $5 million for the Broadband Infrastructure grant program. We've been able to successfully connect 44 schools over 13 counties, representing 1400 student staff and faculty, to getting broadband fiber based solutions. Thank you.

Thank you.

Good afternoon. I'm Chairman Laird. My name is Laurie Furstenfeld, and I'm the legal Director of legislative advocacy at the Child Care Law Center. Parent Voices California also wanted to know that they're aligned with our comments. The state budget is the most important legislation for creating an equitable society for one, for black and brown families to have the childcare they need. And the childcare providers are fairly compensated for their hard work and dedication to our children.

Chairman Laird, we appreciate your thoughtful questions and raising concerns about the General Fund taking the hit with the governor's $8 billion proposal. We also appreciate you raising that. We need to be mindful in meeting the needs of the whole child and applying a balanced approach.

We urge the Committee to carefully consider other options to solve the $8 billion shortfall that protects the General Fund now and vital life giving General Fund programs in coming years, such as childcare, and solve the Prop 98 over appropriation within Prop 98 to the extent possible while protecting the individuals and communities of color. Thank you.

Thank you very much. That completes our public comment period. And let me thank everybody, because I know sometimes it's hard to sit through the whole hearing and then get to public comment. So we appreciate you're doing that. And I think the hearing and the public comment just demonstrate how hard this is going to be. So we've got four more months to work on this and look forward to partnering with all of you. And happy to air the issues very clearly today. So with that, the budget Subcommitee number one on education will stand adjourned.