GOVERNOR SIGNS EDUCATION TRAILER BILL WITH SIGNIFICANT IMPACT ON SCHOOL DISTRICT FUNDING

July 2011
Number 26

 
On July 1, 2011, Governor Brown signed Assembly Bill (AB) 114, the Education Trailer Bill, which includes many budget provisions that impact K-12 education. AB 114 is based on the assumption that the State will receive $4 billion more in revenue during the 2010- 2011 fiscal year than projected in the Governor’s May 2011 Budget Revise. In December 2011, the state will assess revenues to determine whether mid-year cuts are necessary. Any necessary cuts will take effect in February 2012. Under AB 114, if actual revenues received are within $1 billion of revenue assumptions, there will be no mid-year cuts. If actual revenues received are $1 billion to $2 billion less than revenue assumptions, child care and community college funding will be cut, and community college student fees will be increased by $10 per unit. If actual revenues received are over $2 billion less than revenue assumptions, school district revenue limits and community college funding will be reduced.

To offset these potential reductions, AB 114 adds section 46201.3 to the Education Code authorizing districts and county offices to reduce the school year by up to seven days. AB 114 requires that any such reduction be both agreed to by the affected employee unions and implemented by the end of the 2011-2012 school year.

AB 114 requires school districts and county office of education to follow the State’s revenue assumption by budgeting for the same level of average daily attendance (“ADA”) funding in 2011-2012 as they received in 2010-2011, and to maintain staffing and program levels commensurate with that funding level. AB 114 further eliminates the possibility of August layoffs by suspending Education Code section 44955.5 for the 2011- 12 school year.

In addition, AB 114 amends section 42127 of the Education Code, which required county offices of education to condition budget approval on a school district’s ability to demonstrate fiscal solvency in the current and subsequent two years. The amendment suspends this section for the current school year and prohibits county offices from conditioning budget approval on a district’s demonstration of fiscal solvency over the next two fiscal years. The same restriction applies to the Superintendent of Public Instruction in regard to county office budgets.

The Governor’s signing message on AB 114 includes the following statement clarifying the budgeting requirement:

  • In fashioning their local budgets, school boards may nevertheless need to make reductions due to cost increases, loss of federal funds, enrollment declines or other factors. AB 114 does not interfere with these local school board decisions. School districts should take all reasonable steps to balance their budgets and to maintain positive cash balances.

Thus, while school districts and county offices are required to use 2010-2011 funding levels in determining their 2011-2012 budgets, they may make cuts, maintain reserves, and take other actions necessary to ensure fiscal solvency. AB 114 does not preclude school districts and county offices from considering their current three-year projection in deciding whether to revise their 2011-2012 budgets.

AB 114 leaves many questions unanswered including the impact, if any, on final layoff notices issued in May 2011, school district budget projections, and the impact of such projections on negotiated collective bargaining agreements.

We will continue to provide updates as further developments occur. If you have questions about how AB 114 impacts your 2011 layoffs and/or labor negotiations, please do not hesitate to contact one of our eight offices located statewide or consult our website.

 
Dulcinea Grantham
Shareholder and Labor & Employment Practice Group Co-Chair
Walnut Creek Office
dgrantham@lozanosmith.com

 
Travis Lindsey
Associate
Sacramento Office
tlindsey@lozanosmith.com

 
© 2011 Lozano Smith

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