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State Budget Acts of 2011 and AB 114

Education Finance

INTRODUCTION

On June 29, 2011, Governor Brown signed the State Budget Act for the 2011/2012 fiscal year. Included in the Budget Act is Assembly Bill 114. AB 114 adds, amends or repeals more than fifty (50) statutory sections in the Education, Family, Government and Welfare and Institutions Codes. While most of AB 114 is effective July 1, 2011, the Bill includes myriad “trigger” provisions that only take effect if certain levels of State revenue are not projected by December 15, 2011.

By way of illustration, affected programs, services and key provisions include (those in bold are discussed in this update):

  • BUDGET DEVELOPMENT – County Superintendent, County Office of Education and School District;
  • FISCAL OVERSIGHT – County Superintendent and County Office of Education;
  • Child Care and Development Services (modification of criteria and age for eligibility of services; plus a trigger for possible mid-year cuts);
  • Specified Programs (maximum reimbursable amounts reduced by 11% instead of 15%):
    • Preschool Education Program,
    • General Child Care Program,
    • Migrant Day Care Program,
    • Alternative Payment Program,
    • CalWORKs Stage 3 Program, and
    • Allowance for Handicapped Program;
  • Proposition 98 funding calculation ($2.1 billion deferral; child care funding removed; and downward re-benching);
  • Charter School Supplemental Categorical Block Grant (extends allocation to 2014/2015; expands prohibition applicable to locally or direct funded charter schools);
  • CERTIFICATED LAYOFFS – August/Mid-Summer;
  • INSTRUCTIONAL DAYS – Possibility of up to 7 fewer;
  • AB 3632 – Mental Health Services for Pupils (shifts responsibility to schools with a funding transfer); and
  • TRANSPORTATION – Home-to-school.

DISCUSSION

A.  BUDGET DEVELOPMENT – County Superintendent, County Office of Education and School District

AB 114 mandates that budgets for county superintendents, county offices of education, and school districts are to be based on the assumption that the revenue per unit of average daily attendance will be the same for 2011/2012 as it was for 2010/2011 (i.e. flat-funding). The Bill also requires staffing and program levels to be maintained at a level “commensurate” with flat-funding projections.

The requirement to maintain staffing and program levels is unclear. As a result, it will be subject to conflicting interpretations, legal challenges and possibly clean-up legislation. Unions will likely argue that the intent is for an employer to provide the exact services and employ the exact number of employees as existed in 2010/2011.

The more responsible argument, however, is that the legislature intended for public school employers to utilize flat-funding projections for 2011/2012 and exercise prudent fiscal management “commensurate” with that level of funding. Such a determination could, and should, take into account the long-term fiscal viability of the employer.

These restrictions and requirements are only applicable to the 2011/2012 fiscal year.

B.  FISCAL OVERSIGHT – County Superintendent and County Office of Education

AB 114 strips county superintendents and county offices of education of the power/duty to require school districts to demonstrate an ability to meet financial obligations for the 2012/2013 and 2013/2014 fiscal years (AB 1200 review). Further, school districts cannot be required to project revenues for 2011/2012 below 2010/2011 levels.

These restrictions are applicable only for the 2011/2012 fiscal year.

C.  CERTIFICATED LAYOFFS – August/Mid-Summer

AB 114 also contains a one-year suspension of the August certificated layoff window. This is the provision that permits school districts to conduct a certificated layoff during the period following passage of the State budget through August 15, if per pupil revenue limit funds do not increase by at least 2 percent. Since funding did not increase, this would have been an option for districts to utilize.

At present, the legislature has not imposed any restrictions on the classified layoff provisions (generally, 45 days notice). Nor, has the legislature imposed an overt requirement that prior certificated layoff notices be rescinded. However, depending how the requirement to maintain staffing levels is interpreted, a latent mandate could require the rescission of some layoff notices.

D.  INSTRUCTIONAL DAYS – Possibility of up to 7 fewer

AB 114 contemplates the potential for mid-year budget cuts to K-12 education of up to 1.9 billion dollars. The “trigger” is pulled if projected revenues are 2 billion dollars (or more) short of projections. If that happens, school districts would be authorized to reduce the school year by an additional seven (7) days for the 2011/2012 school year (if placed on top of the existing 5 days that are authorized, this would result in a 168 day student year). Such reductions, however, are subject to collective bargaining.

By the time the determination concerning mid-year cuts is made, it will be very difficult to complete the bargaining process by the end of the 2011/2012 school year. Thus, the additional 7 day concession may be illusory unless the employer starts bargaining early (read “now”) and utilizes contingency language to address the AB 114 trigger.

E.  TRANSPORTATION – Home-to-school

If projected State revenues do not materialize, AB 114 provides that mid-year cuts will include the elimination of the remaining half-year of funding for home-to-school transportation.

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