Budget Trigger FAQs
October 26, 2011 On June 28, the Legislature passed a budget for the 2011-12 fiscal year which was signed by Governor Brown on June 30. One significant budget component affecting schools is an automatic "trigger" that will cut funding to schools if state revenues fall far below projections.
What is the budget "trigger?"
The budget "trigger" was enacted by Assembly Bill 121 this year as part of the 2011-12 budget. Because the budget was approved with somewhat optimistic revenue projections, the trigger ensures the state will be fiscally sound in case the revenues do not materialize. If revenues fall below specified projected levels, then automatic cuts will be implemented.
How does it work?
The budget trigger would impose specified cuts based on the level of the projected shortfall. If the mid-year projection is $1 billion short of budgeted revenues, $600 million in cuts would be imposed on the California State University system, University of California system, and various developmental and health services programs. If the revenue shortfall is more than $2 billion off the original projection, then cuts move in to Proposition 98 funding for K-12 and community colleges. The law specifies up to about $1.8 billion in Prop 98 cuts, depending on the shortfall. About $250 million would come out of home to school transportation and community colleges, and the rest out of revenue limits.
What is the current status and when will we know whether the cuts will be implemented?
On December 13, the California Department of Finance (DOF) issued its economic forecast for the remainder of the 2011-12 fiscal year. According to DOF projections, the state General Fund revenues will fall short by $2.2 billion compared to the initial budget assumptions. These estimates are much improved over the projections provided by the Legislative Analyst in November, and will spare K-12 education from the most severe mid-year cuts. However, under these projections, school district will face $248 million cut to transportation programs, and all school will experience a $79.6 million cut to general purpose revenue limits. This results in a cut of approximately $13 per pupil in K-12 schools, or one-half a day of instruction for the school year. These DOF projections are the final determinant of budget "trigger" cut, which schools have been preparing for since the budget was enacted in June. We do not anticipate further reductions for the 2011-12 fiscal year.
What does this mean for charter schools?
Charter schools should revise their current year budget plans based on the revised revenue estimates as a result of the mid-year cuts. Since most charters do not participate in transportation programs, that cut will not have a direct impact. But, the revenue limit general purpose block grant will decrease by approximately $13 per unit of average daily attendance.
Because of the uncertainty, charter schools should continue to plan for different levels of funding. Contingency planning and sound financial management are very important. In January, the Governor will release his budget plan for 2012-13. Schools should keep a close eye for out our Capitol Updates and other CCSA communications, including the Budget Updates section of the website. As budget data comes in, we will provide more information.