Calculator+Finance+Budget

August 07, 2014
by Tom Chorneau

(Calif.) With the dust settling on this summer’s budget agreement and work complete on related trailer bills, the nonpartisan Legislative Analyst issued this week its most thorough review to date on exactly what was done.

It should come as no surprise that the news continues to be good for schools – but some new details might raise that appraisal to great.

For instance, the estimate for the minimum funding guarantee under Proposition 98 for the 2012-13 budget year has been revised upward to $57.8 billion – an increase of $1.3 billion over the estimate made a year ago and $4.3 billion more than anticipated when that spending plan was adopted.

There is also a revised estimate for the 2013-14 minimum guarantee to $58.3 billion – $3 billion higher than an estimate made in June 2013.

The LAO explained some of the increase is caused by the inter-play between economic conditions and the rules of Proposition 98.

“The guarantee generally grows at least as quickly as the overall state economy (as measured by per capita personal income,” the LAO reported. “In some cases, the guarantee, however, grows more slowly. In these years, the state creates an out-year obligation known as ‘maintenance factor.’ In ensuing years, the state is required to pay off maintenance factor by increasing school and community college funding to a level at least as high as it would have been had the guarantee always grown with the economy.”

As a result of the tough economic times during the past six years, the state has rung up an $11 billion maintenance factor obligation. Thus, in 2012-13, the budget provided a $5.2 billion maintenance factor payment to schools – the largest such payment ever made.

In 2014-15, the state will make a maintenance factor payment of $2.6 billion and will end the fiscal year still owing $4 billion.

Another little known fact from the LAO’s report is that in 2013-14, the Proposition 98 guarantee would have been higher if not for a “spike protection provision” included in the complex funding formula. The protection comes into play when the minimum guarantee increases at a much faster rate than per capita personal income. Under such conditions the protection provision automatically excludes a portion of the Proposition 98 funding from the calculation of the minimum guarantee the subsequent year.

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