Marsha Sutton: Basic Aid districts offer to give up “fair share” of money

A whirlwind of legislative activity a few weeks ago resulted in a proposal to the state from Basic Aid school districts to voluntarily reduce their share of state funding in proportion to the cuts Revenue Limit school districts have had to endure.

A complicated formula specifies that Basic Aid districts will give up the money they receive from the state for categorical programs, not to exceed the amount being cut from Revenue Limit districts.

So those who thought Basic Aid districts were immune from the budget disaster that’s hit California school districts can think again.

A Basic Aid district receives its general purpose funding directly from local property taxes. Revenue Limit districts receive the bulk of their funding from the state rather than local property taxes. About 90 percent of the state’s 1,000 school districts are Revenue Limit, including the largest in the state, Los Angeles Unified and San Diego Unified.

Basic Aid districts do, however, receive some funding from the state, in the form of categorical money, which is applied to specific programs. It is this categorical money, money that comes from the state, that Basic Aid districts are offering to give up.

According to Ron Bennett, president of School Services of California, Basic Aid districts are prepared to forfeit $500 to $600 per student for the 2008-2009 school year, and $600 per student for the 2009-2010 school year, in money they receive for categorical programs.

“There is no logical reason why the Basic Aid districts should not take their fair share of the cuts, and the Basic Aid districts to a person would say that to you,” Bennett said.

However, no one was waiting in line to pony up the money before, until word came down two weeks ago that legislators had finally set their sights on Basic Aid districts.

Suddenly, California’s Basic Aid consortium, called Schools for Sound Finance, whipped into action, contacting its member districts and notifying them that the state’s department of finance and other legislative groups had zeroed in on Basic Aid districts for money to help bail the state out of its financial crisis.

Several conference calls to the state’s Basic Aid districts - which now number over 100, up from 70 to 80 just a few years ago - yielded a proposal to head off something that might have been much worse, had it been designed by someone unfamiliar with the Basic Aid funding concept, Bennett said.

The news that Basic Aid districts were being targeted came out of the blue, said Bennett, whose School Services of California closely monitors education funding developments in Sacramento and provides consulting and lobbying work for Schools for Sound Finance.

“But as the cuts to Revenue Limit districts got dramatically higher in May … and with more Basic Aid districts, all of a sudden the dept. of finance decided there was enough money there … to help with the state budget,” he said.

Bennett said the proposal from Schools for Sound Finance was that Basic Aid districts sacrifice the same amount of money per pupil that Revenue Limit districts have been required to do, which amounts to about $500 to $600 per student.

But the first year, the Revenue Limit districts will receive some federal stimulus dollars which will offset their losses by about 80 percent, leaving them down about 20 percent.

So Bennett said Schools for Sound Finance offered two versions of a proposal. One is that Basic Aid districts pay 20 percent, which amounts to $85 to $100 per pupil, the same amount the Revenue Limit districts would be down after receiving stimulus funds. The second variation is that Basic Aid districts should also be allowed to receive their share of federal stimulus money, in which case they would pay the full $500 to $600 per pupil.

Either way, he said, it works out equitably, so that Basic Aid districts are kicking in the same amount to the state that Revenue Limit districts have been required to sacrifice.

For the 2008-2009 school year, which ended June 30, Basic Aid districts would need to give up either $100 per pupil and accept federal stimulus money, or pay about $500 without receiving federal money. For the 2009-2010 school year, districts can expect to sacrifice about $600 per student. It works out generally like this, for these North County districts:

Protecting local money

Bennett said the state does not have a right to take local property taxes, but they may have a right to take the categorical funds.

“We believe they cannot take the property tax,” he said. “It would take a major legislative change to do that.”

“What we’ve done is try to protect our local revenue which is our right, and the state will take the state’s resources that we have, which is state categorical money,” said Solana Beach School District superintendent Leslie Fausset, who serves as the Schools for Sound Finance Southern California Vice President.

Steve Ma, associate superintendent for business services for the San Dieguito Union High School District, said, “From a Basic Aid perspective, being able to retain their excess property taxes is the number one priority.”

So the proposal was altruistic, yes. “In this economy, everyone has to share the pain,” Fausset said. “To think that Basic Aid districts wouldn’t have to step up and participate in that feels really unconscionable to me.”

But she agreed that a pro-active approach was also intended to head off something that could have been far worse: the looting of local money to reduce Sacramento’s growing deficit.

“There was no question that we weren’t going to be exempt,” Fausset said. “So a decision was made to try to determine our own destiny and see if we can craft a fair share proposal that’s fair for everybody.”

Bennett said if Schools for Sound Finance didn’t put forth a workable offer, then the state was going to develop a plan on its own. “And it was going to be made by people who did not understand Basic Aid at all,” he said. “And absent a proposal from those who did understand, you could have ended up with something really bizarre. And we have before.”

When the call went out that a proposal was needed to give up some state funding, there were many Basic Aid districts that objected. “The ones who had the most concern were the ones who had the least experience,” Bennett said. “But in the end there were no dissenters.”

“There was a lot of discussion, and there was a lot of concern,” Fausset said. “It was difficult for folks to swallow. It’s going to be painful for everyone. We’re in very dire times.”

“We all reluctantly agreed to it,” said Ma, whose district just turned Basic Aid this year. “But there were a number of districts that were not pleased with the overall structure.”

San Dieguito’s special circumstances

Ma had concerns because the amount of money the state gives for categoricals varies from district to district. “Not all Basic Aid districts are created equal,” he said. “Some are barely into Basic Aid like us, and there are other districts that are well into Basic Aid.”

Ma said the one-size-fits-all approach is inherently unfair, because “the newbies generally have a much larger portion of our budgets in categoricals.”

For districts that receive little in categorical money, their loss is limited because there is a stop-loss provision in the proposal.

For example, if a district owed $10 million in categorical money but only received $5 million in categorical money from the state, the district would only have to pay the $5 million.

But for other districts that take in more categorical money for special programs, they would have to pay more. Ma said Irvine just moved into Basic Aid and has a large categorical program. If Irvine took in $15 million in categorical money, it would have to give it all up, he said.

“I felt there should be a sliding scale for those districts that were new to Basic Aid,” said Ma, who argued that the new Basic Aid districts should give up less of their categorical money than others.

“Nobody disagreed,” he said. “But they felt time was of the essence to get a deal that would be very easy to understand on the part of the legislature. They didn’t want to complicate it to a point where it was tough to explain and people would get frustrated. There was some concern that making it too complicated would jeopardize the entire deal.”

Bennett said most of the districts have enough categorical funding to cover the amount of the cut.

“But it’s true that if you had a district that didn’t have enough to cover it, our position is that the cuts would stop when you run out of the categorical money,” he said. “So if the assessment was $500 [per pupil] and you only had $450 per student in categoricals, your share would be $450.

“That’s because we do not believe the state under current law has any right to take property tax. So at the point where we’ve given up all of the state money - that’s categoricals - then we believe they cannot take the property tax.”

Cutting programs

If Basic Aid districts are giving up categorical money, what happens to all those categorical programs?

“We may rethink all the programs,” Ma said. Many of them will disappear, or they may be scaled back significantly, he said.

Categorical money comes to districts from the state in three tiers. Tier I categoricals include heavy hitters like special education, class-size reduction for kindergarten through third grade, and home-to-school transportation.

Related Links:  Schools for sound finance and Basic Aid Districts | More by Marsha

Tier I programs are not subject to the proposal - only Tier II and Tier III programs. Those include summer school, supplemental school counseling, instructional materials, school and library improvement grants, English language services, art and music grants, adult education, school safety and violence prevention, and many others.

Summer school, in session now at San Dieguito, is a Tier III program. Ma said if he had known several months ago that the money would disappear, he might have recommended not offering summer school this year.

Home-to-school transportation, now a Tier I categorical, may move to Tier III. “That would be terrible for us,” Ma said. “It’s a million-dollar program per year.”

Ma said if San Dieguito were still a Revenue Limit district, it would be losing about $730 per pupil this year - the equivalent of $8.8 million. As a Basic Aid district, they are being asked to give up about $6 million in all their Tier II and Tier III categorical money.

He said he was “freaking out” when he learned that San Dieguito might have to give back $6 million of categorical money.

However, he is hopeful that the district will receive its share of the federal stimulus money, which would be about $3.75 million.

“We were looking at an additional $6 million in cuts,” he said. “And suddenly, we’re thinking we may get [an extra $3.75 million in] stimulus dollars. That’s changed the complexion of things.”

Getting some stimulus money “softens the blow,” he said.

Ma said long-time Basic Aid districts like Del Mar, Solana Beach and Rancho Santa Fe are in a better position to absorb the categorical losses.

Even so, the Del Mar Union School District, which faced serious budget issues this past year and successfully campaigned for donations to its foundation to support valued programs, learned in the last few weeks that this new proposal means that a deficit reduced to only about $140,000 has now ballooned to about $2.5 million.

No board vote

Mobilization of the Basic Aid districts and preparation of the proposal to the budget conference committee in Sacramento happened so fast that district staff was barely able to keep their school boards informed of developments, let alone have time to discuss the item at a regular school board meeting.

So school board members did not vote to accept or reject the proposal, not did the public have an opportunity to weigh in on its merits.

Fausset said she’s kept her board informed both by email and telephone. Ma said he and his staff, along with SDUHSD superintendent Ken Noah, were directly involved, and had little time to talk things over with their board.

“It happened so quickly,” Ma said. “A number of districts did express frustration that they didn’t have time to talk to their boards about whether this deal was fair or not. I think in the end, time was of the essence.”

Bennett said the language was written after taking input from all districts that chose to participate in the Schools for Sound Finance conversations. The proposal was then presented to the budget conference committee, which is a joint committee composed of senators, assembly members, Republicans and Democrats.

“They try to come together on a conference committee bill that can be presented to both parties and both houses, and that conference bill is what is being debated now,” Bennett said.

Bennett acknowledged that there was little chance for the public to be informed of developments. But he said there was no alternative, because events unfolded in a matter of days and there was a narrow window of opportunity to act in order to affect the decision.

The proposal is not a bill yet. “But we think it will happen,” Bennett said. “And we think it will happen the way we’ve laid it out. The only question is whether it’s adopted in its entirety or whether the governor sticks to his threat to veto the whole thing.”

Ma said it may have been naïve of the Basic Aid districts to wait so long and think they were safe from cuts, given the extent of slashing Revenue Limit districts have had to absorb.

“In retrospect, I wish we would have had this discussion two months ago,” he said. Had it happened sooner, the pace would have been more orderly, board members and the public would have been involved, and additional cuts could have been anticipated.

But the frenetic rush to offer a plan for Basic Aid districts to carry their fair share of the burden is over, and now it’s “hurry up and wait.”

If the proposal eventually becomes law, students in Basic Aid districts can expect further reductions in services in proportion to the cuts the other 90 percent of districts throughout the state are having to take.

“There’s not a district in California that’s not going to suffer,” Fausset said.

Marsha Sutton is a freelance education writer who covers education issues in San Diego County. She can be reached at: SuttComm@san.rr.com

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This entry was posted on Tuesday, July 7th, 2009 at 8:50 am and is filed under Columns, Education, Politics & Government. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.