September 10, 2004

Public education funding and its effects on the Evergreen School District

How ESD can avoid fiscal insolvency

By Brenda Franca-Serpa
Special to the Times

Editor’s Note: This article is the third in a series of five intended to raise awareness of the primary issues facing our local Evergreen School District (ESD) and to suggest credible solutions for which the entire Evergreen community can take responsibility.

Every year, each school district in California adopts a budget by July 1 or sooner. A district can choose to revise it within 45 days or by Sept. 8. ESD’s board of trustees is responsible for approving the district budget and the expenditure decisions.

SCOE’s Legislation for School district Fiscal Solvency
At the June 2004 ESD school board meeting, Cathy Grovenberg, assistant superintendent of business services from the Santa Clara Office of Education (SCOE), provided a primer on Legislation for School District Fiscal Solvency (Assembly Bill 1200).

The measurable criteria that raise a red flag regarding fiscal solvency for the SSCOE are:
- Reserves below criteria and standards levels, commonly 3 percent
- Current year ongoing expenditures exceed current year ongoing income
- Benefits without caps

The red flag was raised for ESD because in the 2003-04 estimated actuals and 2004-05 budget, it was reported that the ESD’s available reserves 2005-06 projection was only $1,562,337, which is less than 3 percent of the general fund, meaning our district will be fiscally insolvent.

Reasons behind ESD’s deficit
In 2000, the hot-air-filled dot.com bubble burst, and the predicated increase in funds for public education were quickly gobbled up to help the state pay the falsely inflated electric bills. Additionally, state tax collections were down about $1 billion below what was originally projected.

Then the tragic terrorist attack on Sept. 11, 2001 occurred, and the state was required to providergency services that were not reimbursed by the federal government. So, the slice of the budget that typically funded public education shrunk dramatically.

Every year by law, per-pupil funding gets a state grant to match the increase in the cost-of-living. The state has not fully funded inflationary increases for a number of years. And it is just now getting around to dispersing its $110 million in equalization aid to give parity to all of the low wealth districts in the state.

AB 441: The struggle for equalization funding
In 2001, Assemblymember Joe Simitian of the 21st District introduced Assembly Bill 441. This bill requires the Superintendent of Public Instruction to compute an equalization formula so that lower-funded districts would receive at least as much funding (base revenue limit) per student as the 90th percentile of the school districts throughout the state by 2006-07 fiscal year.

It was signed into law and provided $40 million as a first payment towards the equalization target. Assemblyman Simitian’s intent was to continue providing equalization funding each year in order to reach the 90th percentile equalization target by 2006-07.

California legislature leaders kill equalization funding
The key leadership in the California legislature—a unified group of assembly members from Los Angeles, San Bernardino, Fresno and Oakland—vote as a block, and they unite undecided members of the assembly to vote on bills as they do. This block of key legislators do not want any portion of the education budget allocated for equalization funding.

In 2003-04, then Governor Gray Davis appropriated $250 million for equalization as promised. However, the entire appropriation for equalization was deleted to fund other K-12 education priorities.

Equalization will take nothing away from those school districts that are funded above the 90th percentile. This is not a question of poor district management. It’s about the unfair Base Revenue Limit ESD and other Low Revenue Districts receive per average daily attendance (ADA).

Fruits of their labors
The difficult, consistent work done by Simitian and his education expert Cory Jasperson from the year 2000 until now has netted Low Wealth Districts $40 million. The assembly and senate passed the 2004-05 California budget and Governor Schwarzenegger signed it on July 31. The K-12 public school districts will receive a portion based on the Simitian equalization formula of the $110 million.

Of the $110 million in equalization funding, the ESD should receive about $436,000. The $436,000 in funding is one quarter of what is needed to get to the 90th percentile equalization target.

In other words, our Total Revenue Limit has been increased by $33.51 per student average daily attendance (ADA) in 2004-05 and needs to be increased up to $135 per student (average daily attendance).

Long haul up the equalization highway
ESD has a long way to go to see that increase in Total Revenue Limit per ADA ($135 per ADA), considering it took four years to receive a bump of $33.51 per student.

If you multiply the $135/ADA by an ADA of 13,008 (and rising according to the ESD), it would equal $1,756,080 per year extra funding for the ESD. We need that funding.

Assemblyman Simitian structured his equalization formula to raise the base revenue limit of Low Wealth Districts on data from 2000-01. If we add lost revenue (the $135/ADA we should have received to be in the 90th percentile from 2000-01 to 2002-03) that amount would be $5,000,535 and I would not have written this article because the ESD would not be on the brink of fiscal insolvency.

Politics as usual
The leadership representing Los Angeles, San Bernardino, Fresno and Oakland is formidable, and its members vote as a block. They imply by their voting record that all of Northern California’s school districts are wealthy; this is a fallacy. When the base revenue limit for the ESD was established, we were considered rural, and rural districts received less funding than urban districts.

The ESD has seen considerable growth and could no longer be considered rural, yet the funding system remains unchanged. The ESD deserves the same funding as urban districts throughout California and, in particular, in Los Angeles.

Saving ESD from fiscal insolvency and avoiding cutbacks
There are several actions Evergreen citizens and taxpayers can take to avoid fiscal insolvency and cutting back on essential programs in ESD:

- Measure N is a viable method to avoid fiscal insolvency and to continue excellence in education. Measure N, an Evergreen-specific parcel tax specific that will appear on the November election ballot, will keep the $1.9 million collected within the school district. The $1.9 million raised through the parcel tax will reduce the approximately $5 million deficit to about $3.1 million.

- Assert our influence upon the California legislature by multiplying attendance on Councilman Dave Cortese’s bus trips to Sacramento and give testimony to our current economic plight and demand the balance of equalization funding.

- Write to Governor Schwarzenegger by Oct. 4. Governor Schwarzenegger is already working on next year’s budget. We need to let him know we desperately require the balance of the equalization funding.

- School districts can’t ask voters to raise property taxes for schools, but interested and involved members of the community can form and raise funds for a private foundation directly benefiting the ESD. If you are interested in forming an education foundation, please e-mail Brenda at byfs@sbcglobal.net.

Beggars can’t be choosers
The equalization funds are a mere drop in the bucket, but we are not in a position to be picky. Additionally, the 2004-05 Proposition 98 formula showed that schools would get a $4 billion dollar boost, but Governor Schwarzenegger will withhold $2 billion.

This is the harsh reality of being forced to depend on the state of California for school funding. Proposition 98 guarantees a small cost-of-living-increase, even in economic downturns; however, it doesn’t tell the bureaucrats where to come up with the money if it doesn’t exist.

The fourth article in this series will appear in the next edition of the Evergreen Times. It will explain from a historical perspective how the ESD ended up with a huge deficit. It will explain how under funding in terms of total revenue limit per Average Daily Attendance has negatively impacted ESD’s budget over the years. It will delve into possible program cuts and how it may be necessary to renegotiate salaries and benefits with its employees to solve its budget crisis.

Brenda Franca-Serpa is an involved member of the Evergreen community. One of her children is a student of Laurelwood Elementary School and her other child attends Silver Creek High School. If you have specific questions about any of these articles, e-mail her at byfs@sbcglobal.net.

Categorical programs impact ESD’s general-purpose fund

In the 1970’s, categorical programs and funding grew due to lawsuits filed by parents of special needs children and civil rights organizations requiring public schools to educate students with special needs and circumstances.

The funds for educating these students come from the state or federal government providing qualifying schools or districts for specific children with special needs, certain programs. Special Ed and CSR are two of the largest state programs in terms of dollars.

In general, schools or districts must spend the money for the specific purpose. This aid is in addition to the funding all schools receive for their general-purpose education fund.

Not all districts receive the total allocation of state and federally mandated categorical funding. Yet they are still required to administer the programs and must borrow from other sources, such as the general purpose education fund. This is referred to as encroachment.

When services, such as special education are required, districts must pay the full costs no matter how much or how little money they receive for that purpose.