californians for Just'¢e

t",..

Pi,C:O CillifCl.rn!a

ACCE

Alliance of Caiflornlansfor • comlnunfty Eml>oW~rment

PUBLIC ADVOCATESI

hlliXIHil RJ(iHTSllm

February '8)2010

Hpllprable ,AmcDurlcan Secretaryof Education

US" Dcpartment'of EqucatiQn 490 Maryland Asenuc; S, W.' Washington, D.C. 20202

Honorable Thelma Melendez

Assistant Secretary for Elementary fin4Se'condary Education . U.S.D~Nu1mehtof Education

400 Maryland A.venlle,S.W.

Washipgtoll,D, C.20202

Rccluesf.to Require Revisions foC"lifornia ts SFSFPbase2 Appliciltiow& toReje.ct Pbase2 Ftlil4higand'Calif(jrllja'sRac:etoth~top.AppliimtlonPendlnRRevfsiolls, .

Dear.Secretary Duncan and AssistantSecretaryMelendez:

Re:

Parentsand Studentsfor GreatSchools, a.statewide coalitiomjoined by YouthTogether.and Bay Area Parent Leadership Action Network (PLAN) and the Campaign for QUttJity Uqqcatioo Coordinating Comtriittec,rePtes~ri.ttrlore than half a milllon low-and moderate income California students and families and 36 of40.State SenateDistricts and State AssemblyDistiicts,

We request that tIle Department require California to revise its Phase 2 State Fiscal cStabiHzation Fund (SFsFyappHcationby·incrcasJng itssuppor] for public K-12 e~ri,,\aUQP tlim.eeftb¢ mlnimumMaiutenanee of Effort (MOE)' requirements 'Under the ARRA) including, if necessary, the criteria for any waiver-of thl';::lVi()E requirement. UnttlCalifornia doesso, the Department.should deJay release Q(Phasc 2SFSF·funcls and delay consideration of the

State's Raceto the Top (RTTT)applic~don.1 '

1 As you know, tlte Department-has made approvalof.both phases of its SFSF application II precondition for award of a Racetothe Top grant. 74 Fed. Regisier 22 I (N6v. 18,2009) at 59692,59720,59799, .

Parents and Students for Great Schools Page 2

The State's January 1-2,201 0 Phase Z application does not comply with the minimum level of effort toward school funding in 2009-10 or 2010-11 as requiredto receive American Recovery and Reinvestment Act (ARRA) funds, nor does itmeetthe minimum requirements for the requested FY 2010,.11 Maintenance.of'Effort (MOE) waiver under-the ARRA.

While California is in dire; need otSFSFand.RTIT~upport from theARRA, the.S tate must demonstrate it has earned the right to obtainthese funds, among Other things, by continuing to support public education at the level of spendingeffort exerted in prior years. We sincerely hope California will step up to meet the minimum funding requirements to be eligible fotARRA

funds and that the State will ultimately receive both SFSF and,RTIT support However, to award California ARRA funds under its present application renders Congress~MOEA11dwa~v~r provisions hollow andopensthe doorfor otherstates similarly to obtainfederal stimulus funds

while thwarting Congressional conditions. .

Specifically j. we· arcconcerned Withthcfollciwihg manipulatlons that subvert Congressional. requirements:

(3)

(1)

The State has appropriated some $2.7billipn in'funds:un.der the QUAlitr Education .Investment Acf(QmA) 19ftsc~ly~ars ~Q04-0S f;lnd:2QO.S;;Q6> but qeferred

· payh1entofthosefundstofiscalyears2008-09;tO'.2011~14; .. Under the State~·~ treatment ofdefel'raieq>SltJmihinpri9r$FSF app'lic~Uonsas~pptov~d bi the . Department, suchful1cl$ ·~fre c'oijnledf6i MQEpUl'posesasefforl·'ih the earl fer years; not theyearsthe funds wen} eventuallyprovidedto .di~tricts; . th~$tat~, howt:Y¢r,n~$ tr¢at¢~.th~QltIA·d~f<}rr~l~ htconsJMcntly-. .as~t1hrtmade in the yea!' ·of expenditure, - tl'eaHng.QE1A,defemihrconsistentJy·withother·CalIfQrni{l -: d~f~l'rals) asr~q_l.lirt!qby:fhjs Depar:tio~P:t ~.s·g~lid~nc¢>r~nq.ers· tr:e- State's tt9-e ', 20()5~06 baseline. MOE .overSl biilion high(w thanpreviously.reporjed and

• requires.Q ~IAex_penditllr~s·tob~stlbtracted Ironi i"¥s 2008-09)2009- 10; aod

· 2010-1.1. Thiscotreotior; r~ults in the Statefalling to meet.rninimum :K.-l i MOE requirements for not just 2(l1 0-11 ,as conceded, but '~dsQOfor 2'OOQ-IO.

Even'wlthout.regard to theabove analysia.theState failstomeetk-l2MOE requirements for 2009-1QwJ)el) it iIlapprQpri~JeJy 60Qrits $2SQ.!niUionof2010-11 QEIA expcndit*es,artificially pre-paid at the end of June 101O~ as.effort.madein support of public educationfor 2bQ9"l Q insteadoffor20 10 .. 11. Thi~ money is specifically earm*ked-forQEIA. i.)bligaJions' mat -ciistricts are reqtlired to undertakein20 1 O~ 1 i '. Pre"paying.thesefunds is' beingdonesolely to m~nipulate the State's figures so.as to app:ear to meet 20Q9~lOMOE1;m()~tfQ:uld be'rejected~

The~)tate concedes it will not meet K .. 12 MOE requirements for 201 OM 11. It also does not meetthe.criteria for an MOE waiver. California-is not proposing to meet Congress' waivereUgiJjjlity criterlon=that.is, tb,a~it spend the same percentage. of all 'available revenues on K~ 12 educeticn.in the waiver year as In the preceding year. Instead, Californla.Improperly ba~esitswaiyc.l'eligibilityonpropose~ .. expenditures ratherthan revehues. Expenditures, Which are subjettto voluntary manipulation by' the.State, are- neither-anauthorized basisfora waiver. applfcation

(2)

2

3

Parents and Students for Great Schools Page 3

by Congress 01' this Department nor a close proxy to the-State's revenues for 2010.-11.

Finally, we observe thatCalifornia has, by-any objective.measure, iuade:1ll~$_siYec4tStoit~ support for K-12 education in the last two years;towellbeloWthe"levelo:ftheState's spending not only in 200S_:Q6butas recently as 2007 .. 08. Bverrff'the State~s:Il)@ipulationsappear to qualify California for waivereligibility, the Secretaryi~n()tobHgatedto grantthewaiver. Rather, under these circumstances, where. the State' ssupport has'declinedsubstantially in teal terms and where the Governor's budgetproposes tax i'~dU¢tions.but nonew increases.fhe Secretary shouldwithhold approval until California demonstrates greater effort to support public

education. - ..

We tum to explore these. matters in greater detail.

1. The State.is Not Meeting. MOliLRequiremen1S for2009-lOaswcil as20i()~llasit

Inconslstently and .ImprQPe:rly c.Ql,mtsQlCJA:DcfcrrabTo.W~1'dThc;seYe3rs.

In settling a-legal challenge that the State had failed tQ.$UPPoftpubHc:educatlon with.sufficient funding· under Califol'ri'ia's· C9n~tiJuth?n:~1·'njlnjmwP'fun4h1g.,g~~tMtee,tlieState enactedthe Quality Education'Jnvestment. Actin2Xl06;- QEIAis_art Important· and.innovattve program aimed at improvingacademie.achlevement-in many of the.Sta~¢.'$lQwes~-pet(Qrnling and neediest

. schools. The legislation makescJear·tO"whk:hfiscalyeai·s the $3 billionsettlementatn()untare to beappropriated.iBpeeifically, SB 1133 (2006)appropri<!ted $30(hniHh)1l to2()07-08. .

$1 ,62Q,928,000 to 2004~05andHW,i~niajl1der: ($1,0}9j072;O.OO)to 2005~06.z The latter two amounts were ~,iappropl'jated ro(~butnotactuaUypaid ouU.n fhose.yearsrinstead these payments to districtsare being sp~ea4·a9rp~:r~ix ~$csll.y~~rs2,OO~-Q9tP2Q13~14.3 TpcQIiIA seftl~h1eht agreement expressly provides that the. $ L 6 billion for 2004':05.nl1d the $1 ,Q79 billion for 20,()S"06 «shall be deem ed to" he JtpprQPiiftti911S 'm;aqe and aIl9ca\ed)iii). thosefi$cal )il.mr$, respectivel y.4

Because, byoperation of law, the-funds have been deemed appropriatedin the prior years, they must be countedassupport for education inrhose'prior'yearsdespitethe factthat districts do not receive the funds until later years. The State has thus treated the QEIAmoneyas a deferraland, consistent with its treatnw!1to.fdyfernds. tt\C$¢ QelA funq~need. to.be.(01)}i1eq as falling in. the earlierfiscal Year whe:nthefuhds arc.bookednotthe Iaterfiseal year when the funds are received. -As you may recall, many ofus wrote.aletter tQyoplAstsummer on J.une24.2009 comp14iriitlg;>~on.gOm~r thhtg~1abo.tlt~b¢.~t!lte >streatmenf6fdefer~a] s in its SFSF application, Specifically, we-asserted thatthe.$tat~rshouldnotbeaUowed to meetMOE for2008~(i9 by counting $2.,9 billion In-deferralsfrom th~tY.9.¥a~eflbrt made in2008~09 wbenthe State would not be providing the funds to districts until2009w 10. The Department rejected ourconcerns.and

approved the State's application,.incll,lcHngit~ns~ of<Jeferrals,5 .

2 htlp:/Jinfo.sen.ca.~(}y/pubLQ5.06/bill/senlsb IIOI-1I5()/sb 11 j3bili" 20060929 chavtered~pdf at Section

52055;765(g); see also td: Leg. Counsel Digest'l(3). .

3 Id.

4 QEIA Settlement Agreement, ~2(e) (May 10; 20(6) (avallable upon request). . .

5 See Acting Asst. Secretary.Conaty Letteft() cynlhia Bryant, June 4,2009; Acting Asst. SecretaryConaty Letter to.

John Affeldt, July 17,2009. .. . .

Parents and Students for Great Schools Page 4

As your Guidance has counseled: "The sources of data that ~,St@~ uses to make the determinations must QC consistent from year to yeat.,,6 Thus. the State cannot treat deferrals one wayan some occasions and on other occasions treat deferrals -: the opposite-way depending simply on which treatment will bolster the State's ability to meet MOE.

The correction compelled byproperly tteMingQEIA fungs aseffortmade in the years to which the Legislature has appropriated and allocated these funds means that the State's 2005~06 MOE baseline should be increased from $32.968 billion" by $1 ;079bWiQl1 to $34,047 billion and that the State should notbe allowed to c6untQEIA expenditures.in any ofthe ARRA·fiscal years at issue,20'08~09 through.201041. With s.uch YQrre,ctio.n::h.itb~cQm~QJ~artMt:theState has not only failed to meet M013 in 20,1 O~ 11, bUl~lsoin2009"'1 Oasjt~pr6Je¢tedeffolt forthe.year, $32.773 billion.falls below the-corrected 2005w06 ba$elinepf$34.041billiQn. At the same time. the-State's projected :£<;.12 effortneedsto be.eorrected further'down'Ward to:$32523 billion or $5,492 per pupi] to reflect the subtructiortof$250lhHlIonih'PtOposedQBiA expenditures.

2. The State is Not MeetingMOERequirerileritsfoi 2009~1.0,as Well-as 201041, as It ltlipropc.rlyaiulArtiffciatlyCounfs: $2S0 MilJioninQElA.Expi:lndJtu.l'C.$;(or 2010:'11

Towal~d 20Q9.; 1 O. . .

Even without regard to the foregoinganalysls qqtl~~J'{litlg lh~$tate.' smi~'all~)"Cation of QEIA funds in calculating MOE, the Statcluisaliocatos QEIAfunds'inartothetWayto meet MOEio! 2009w 1 Q. The-State inappropriately counts $250 mUlipIl,Qf2,OJO~O ·QEIAex.pend~tur¢s>slated tobeartificially pre-paid at the end of Jl:uie20 1 O,as;effortmadein supportofpublic.education for 2009~ Winstead ofror 20J(j~.] 1. This .. moneyisspeoi}ii'c,Jlyearmarkcd lor galA (JbUgation~ tlmrdistricls(1re 1'(~tjYlred to unc/ertake· ii(fOj O~IJ,' Artifici4Hy$enijingqi$lrictst~esc funds on the last-day ofFY2Q10 does not undo the fact thatthl1districts canllorlegiillyJimd should not by any prudent.counselj.expendthe funds for any 9tht;lrpurpQ$ylhf}p, me~.til:igjlieir Q:&IA ol:iligatiQ,nsin;~OlO.-ll. The Sta~e'spfQP_6salto "payforiVardJlthese (~EIAfunds is being-done. solely to massage.itsfiguresintoan appearanceofm.((etil)g~Z009 .. lQMQE. These funds representeffort.made tos~pP9rt.edu.QatiQlfaqtiYiti¢~'ih20Io.-l1aJld(lny:atfempttp countthem

toward 20.09-1 o effort should he rejected. . . .

3. The-State Has Not Demonstrated That-It Meets the Maiiltcn an ce of Effort Requ.il'cment.orMOE Waiver Eligibility for 2010-11.

The ARRA requires.that California provide at least asmuchstate support towardl(w12 education in 20lOwll as it did in 2005w06. Section 14D05{d)(.1)(A). As the-January 12,2010 California SFSFP]uise2 application demonstrates, California is not planning-to do so. Whereas in'2005w06 (he. State asserts it spent $32;968 billion in the aggregate on K:12 educations 01'$5,527 per pupil (computed by average-daily attendance.or ADA). in 20l0~11 the State expectsto.spend only

6 V.S. Departmentof Edu9(1tion, 'Guidance ol1lh~ MqinMnance,ofEjforl Requirements ill the Stale Ftscal Sla6i1i?,afiol1 Fund Proeram.OMB Numbet;j$IO~069J, Jan,,2010,aq. avallable.at http://www2.cd.gov/pol icy/geniteglrcc'overy/shHulory/n1 oe-gui dance. pdf.

1 SeeCalifomiaSFSF Revised Application (8eptcmber2009).

S See California SFSF Application (reviscdSeptclhber2009)

4

Parents and Students for Great Schools Page 5

$32.1 76 billion in the aggregate and $5;428 per pupil." (As noted above.fn fact)Jhe trtle2Q05-, 06 State baseline is $34.047 billion or$5,708 per pupil.)

Instead. the State bas requested that the Secretary waiveM,ahitcnance of Effort 'requirements for 2010-] 1. Though the State seeks to demonstrateitmeets the criteria.foran MOEwaiverJor

. 2010-1 l,its figures fall far short of-satisfying waiver eligibility. As.yonkrtow.Dcngress.didnot accord 'theSecretary with unbridled discretion tograntan MOEwaivet. Rather; the ARRA provides that:

The SeoretatY'shall not grant.a waiveror modification under this section Utde.S$ the Secretary de.t~rminesthat tlw:State,.;rec~iYing such Waiv~i" orlj)odificati()p WiU·no.t provide fot elementaryand secondarY'educati<in) for.the.fiscalyear 'undc'rcoiisidetali6n, .' a: smaller percentage-of the.to,talwv~nucsavaila.hleto the State .. ,.than theftmouptpr9yide.Q fat StlChp~ltp()Se' in the. preceding fiscal year.

Section 140 12(c) (eI')}pha~is added), 'thus; theSeci'91~ry hasno mjthQrityfq 8rM(a w&h~et unless the State elm demonstrate.that-it wlllspend.at least.the same;percenta.ge'.bt'totalstate revenues on publiceducationasit.did the preceding year, 10

The State's Waiver application reveals ihatitpmJects'spending$4J .('i34bUlion III ZOQ9-10and $41.917 bUlionin2910':11 on K~12andhigh~redllC4H9rl, ThiS1aWsapplicationasseftslhat ·the/~total revenues available to the State" for-educatlol1and other purposes is $8.8.,:214 hUIiortfor 2()09-10 an4$83.071 billionfor2Ql 0:011. l'Jie$¢)a)letfjgllres arc'1'IQi~,~owever)theJQtaJ rere111.fes·avai1a.ble ·totho.8tatebut fJ1erelythe'G~l1eral Ftutde:fpenditures· the ·State .pr~j~cts to' spend for the two years, I) Whentota] Stale r.evenuesayaH<:Jple in the Ge.nerai:FunJ'for ZOQ.9~lO and 2Q1 Ow 11 are ti$¢d($a 8 .(J8:4'bU1ibn.(lpd~$S9~3~2biJHPti)12 illste&dofexp(lfi;q~mr¢~,oVer5 billion more dollars are-recognized asavailable to th:eStatefor support; QfpubHced4Qatlon, A$ such, toe $Jatc. fails to meet thcMQEwajv¢rcrUeria, WhfteGs(he $t(llep1ii.n£]QSPCl1d 47.2% o!tottfl available l'evenues. on public educationin.2009~1l),. Calfjbrniaplan;f1 to spend a S1J1a.llel'perc.en(ageo/tQ(a/l'evenue.s-46.9Yo-.fn.(he/o.llO}Ying yew. contrary tQ(be m.!htll)um NlQEwqiverreCjlliremcml.

T~eJ'¢ i.s·ho~1.n1l,Qritythat aUOw~CE:l1ifQ.l'nl~tt~l)~~y itsw~iVer appllpati<)n.~tre:i(penditutes, Section 14tH 2(e j of'the ARRAexprossly requiresthat wafV:er:eflgibilityhe. basf;ld on~~t.otat revenuesavaiiabletothe St~,te" anddoes'notrefereiice oi'p¢rmJtuse ofe~pe1ldit4res-. particularly whereexpenditures are not-reflective of revenues; Ex:pendituresare,aseviden<icd

9 Se('?Califomia SFSFPhase 2 Application (January ]2·,2010)af3, 7. (Tim aggregate figure fofK·12 spending for' 2010-11 is determined by subtracting the 20 I 0-] lSiate support fOT higher education figure on page 3 ($9;741' billion) from the total 2010-11 State support for public educatlon figure on page 7 ($41.917 billion).

10 'rhe Department'sguidance has interpreted the ARRA waiVer provision tomean thatthe percentage computed against total available state revenues is to'reflect total state spending on K -12 and higher education combined. U.S. Departmen; of Education, Guidance on/he Maifltenailce-tJi'Efj'6HRequkemenisin the State Ftscal SldbilltaUon F'undPrografn, DMB Nliinber: 1810·0691 atS, Jan., 2010: .

II Department of Finance, Governor's BIldger20 10-11 :Swhmaiy Chans (Jail. 8,201 0), avallableat. http://\vww,cbtidget.ca.gov/pdflBudgetStimlfiMy/SurlllnarYChat1s.pdfat 12 Figure SUM.02. ('the Slat~ has.added to its proposed expenditures in the Governor's budget a fe\voft'-budget additions not relevanttotllis pohit.J

121d.at '13 Pigure SUM,03. .'

5

Parents and Students for Great.Schools Page 6

here, within the voluntary control of the State and can be manipulated down or up in a given year to achieve the appearance of fe dera I compliance. Revenues are much less subject to manipulation. Congress' intent was obviously to permit waivers only where a state could demonstrate it WaS putting forthaf least the same amount of'effor; onK .. 12educatic)fl relativeto totalavailablerevenues as it did the prior year. While the Department's guidance has also permitted effort to bemeasured by "appropriaticns.t'-obviously the Department's doing socannot operate to conflict with the plainlanguage.iu the ARRA.13 Thus,the use of "appropriations" in waiver applications would only be authorized by Congress where appropriatlons are a reasonable proxy for the State's.revenues orinthe case where-e-asyouurged Pennsylvania do in your June 18,20091etter to Governor Rendell=-a state exceeds its.available revenues to support public education by appropriating additional monies fl·Omll.ra_h)_y-day fund.

4. The State_is NotMakitlgEffQrts toMtlint4~n' F-ilmllJlgfor:EalJC3H(mSuf:fici~ntt9 Wal'l'an t •. Ex(lrci$cQf (hil$e:cl'e.taa;y' s.'l\10£W~iv~rr P'$cretionfQr·201 O~ U~.

Each ofthe above mentioned concerns should be reason to reHuitem6di{1catio.nofCalifornWs application- for SFSF.Phase 2 funds to awaythat.ensures the-State wm make.addltlona! efforts to fund education, Allowing California totre~t deferrals inconsistenOy,topayfQl'ward. subsequent year oblig-ations,arid to base lts waiv¢rapplication on signiflcantly lowered eXMn<lltilte$ .father· than on all available revenues will open the door for other states toundertake similar . machinations and to subvert theMajnt~n<mt;le-Q(Effort requiNme.n(s intheARRA,

Yet, even. if all of these concerns were disregarded,' California's overall Iack of willingness-to take measures to.maintain itse4t1catiqn,Jt)hdingisrem;on for the Secretary to use his discretion to deny the-State's appiicati:on·Yorawaiverfor20fO-ll. As recentlyas 2(J07-()8. the $tate spent $?Q~344billion on 1<-12 equcationwHh th~ .State' s General Fund sh,@.tecOn$titlltjllg$37.752 biUionof'thatainOllot.11 The Governor's recently released budget.proposes tospcnd:ln,~OlO~'11 $4S;974biUion onK-12 ~quQatjtmwithaState!sGenefal Fund,share of$32.Q2ibHliQrt;IS This constitutes a $6.3-rilllon ilhnualdeciease ih()VeraH' &- }:z..spendih'gequaltoa 13% de:cline:as . well as a:15% decline in theState'sdlrect effort. Byariyobj~cHve measure, CalifornHtis undertaking massive-cuts t_oit$supportforK-12 education.

IQPl'QPosil1g~9dttlQnal ~1.Il?s~f;lnti,~1 gutstq e~uqaJio?}lhe20JO.bu~.~el, ~roposal PlqQVpri).Qr Schwarzencgger Inoludesno new taxes-and m fact-includes reductLOnSHl'taxes.! . The. Governor's proposalalso :leek-sip elimin{lte.~st~te sal~stax.on g~,SOnl}e ah4 stipst!itt~yjtwith-~. excise tax on ga$olineirior<.lertontov~:feveh~es6utoftheGenerai Fund and into theState's special funds category. This maneuver's primary purpose . and effeot.isto, render theJ)tQPo~ition

13 Itis well-settled thatagency regulatlens=end even more so agency guldance-v'may not serve'toamend a statute, Koshiand v. i-lelv(lrlng,·298 U.S. 44-1. 447 (1936), nor add to the statute 'something which is not there.' Uniteil States v. Calamaro, 354 U:S~ 351 (1957)," CalijoJ'nia.(Josmefoiogy Co a/ilion v. Riley, \lOF.3d 1454, 1460 (9th Cir.1997).

14 California Legislative Analyst 's Office, The 20' 0·/18,ldg(ll: Overview of the Governor's Budget (Jail. 12, 20 I 0) at Figure 4, OV-19, availableat

http://www.lao.ca.gQv/re.porl:/20 I Olbu(lIbudgel_overYiewJbud_ovetvlew_p 112 J O,pd!

[SId,· . . . ..

l6 California Budget Project, Governor's Proposed Budgel1ncludes Deep Cuts, Asslljlles More Federal Funds (Jan 13,20t 0) at 2, available at http://\\I\vw.cbp.orgilidfsl2010/100108_Gov_Budget.pdf.

6

Parents and Students for Great Schools Page 7

98 minimum school funding guarantee inapplicable to those. funds and thereby enable the State to avoid having to spend an additional $836 million in support of public education.i" Clearly the State is not making or maintaining efforts to support public. education, but rather, is seeking to employ all available machinations to avoid doing so.

We applaud the federal govornment's.efforts to support-our children in a time of need, and we hope California will receive SFSF Phase 2 funding MdJ as well, RTTT fundingat some point in the future; Before that happens, however, we urge you to require the State to revise its application and its effort so that it will truly be mah1t~ining its supportfor public education in line with the ARRA's requirements.

Jfyou have questions about our position:$,please"4oriothesitatetocontactJohflAffeldtat (415)

43]·7430, . . . .

Sincerely.

~·~l-Y~\·~~

Jeremy Lahoud Roberta Furger Jchn T. Affeldt

Executive Director Research &Comm. Mgr, Managing Attorney

Californians for Justice PICO California Public Advocates Inc.

AmySchur Executive Director ACCE

cc: Hon, Russlynn Ali, AssistantSecretary for Civil Rights

Charles Rose, General CO.\ll!sel· .

Roberto J, Roqrigu~z;Speoial Assistant.to-tho.Presldent for Education CaliforniaCQngNssional.Oelegation

Governor Arnold Schwar:zenyggcr

Jeannie Oropeza, Califorriia Dept, 'of.Finance

California State Legislature .

7

Parents and Students.for Great Scheolsis a cOalitionofleadlnggtasstoots and.advocacy organizations =-Califbrniansfor Justice, PICO California, AlHanceofCaHfQrnians for' Community Empowerment>ar1~tPu.1;IlicAdvocates.- woXking to. ensure-that. students and parents have a voice on education reform.' The coalition works from two basic premises: . (1) every child.in California deserves the.opportunily tosucceed in school, and

(2) Californiaschools must respond to the needs and expectations of those most directly affected: parents and 'students. .See http://parentsandstudents.org/.

17 .

id. at 1,2·3; see also California Dcpartmcritof Finance, Governor's Budget Summary 2010·11,79 (Jan, 2010)

available at http://www.ebudget.ca.gov/pdflBud~etSummary/RevenueEstimates,pdf.

10rking together to support and uprove California's public schools

Association of California School Admillistrators (ACSA) rejlrmnlillg l'M1e ch4n 16,000 Jchool oomini,rr<l"!QfI

. California Association Of School Business Officials (CASBO) Il'prmnllnz I'M1t than 4,000 schoo! firuma lim! 114fflinimaril'oi! I)'IlITUlgHS

California County Superlntendents Educational

. Services Assoelarlon (CCSESA) Ttjlrmnring all 58 COUll!)' mtomnlendenlJ ml'o)USM«t CAlifornia

California Federation of Teachers (CFf·AFLCIO) r~prtlm!ing 1I(ariJ 90,000 tdllCatkm ~mp/o)~e5

California School Boards Association (CSBA)

re}lrmnling nearly 1,000 K·12 1,1\001 dhtrlw ,,"d .:.lUI\!)' of/ict$ O{rdllCa(Wn Ihroug!J"ul California

Califomla School Employees Association (CSEA)

r~prt.l~nling more th.1n 2)0,000 daulfi~d d,oo! empkoym

California State PTA

reprtJenllll,! IM!'I! lhan one milliDll parmll, fromm, ollld Hudi~!J in C<llifOlllM

California Teachers Assoclation (erA)

!*t.<tn!illl 0t>(1 ) 25,000 eduool<lr'!

Service Employeeg International Union (SEIDl

rt~unli", mMe rhan 50.000 KW! ~mplqw In CAlifornia

Legislative Ccnsultanti Peter Birdsall 916.719.1315

February 4, 2010

Secretary Arne Duncan

U.S. Department of Education 400 Maryland Avenue, SW Washington, DC 20510

Dear Secretary Duncan:

We (Ire writing to express our serious concern about the proposed California state budget for K-12 education and to ask you to review carefully any waiver request or certification by the Governor that California Is complying with the maintenance of effort (MOE) requirement of the American Recovery and Reinvestment Act. More specifically, we are urging you to enforce that requirement In order to protect the investment In public education for the children of California.

Our concern results from proposals by the Governor to reduce funding for K-12 education In California In 2010-11 by $2.4 billion-approximately $400 per student. On Its face this proposal violates the maintenance of effort commitment made by the Governor and the state of CalifornIa. However, the Governor's Administration claims that it can still meet the MOE requIrement by using a measure of state funding for K-12 education as a percentage of the state General Fund.

Unfortunately, the Governor's proposed budget would manipulate this calculation In at least two ways:

. .

1. It proposes to replace a sales tax on gasoline with an excise tax on gasoline.

Since the excise tax revenues do not technically count towards the State General Fund calculation, but sales tax revenues do, this "gas tax swap" has the effect of reduclng the General Fund portion of the formula. As a result, the budget proposes a cut to K-12 educatton that Is "allowable" because the percentage of the reduced General Fund Is being maintained. This msnlpulatlon allows the Governor to propose a reduction to K-12 education funding of more than $800 millionand still claim the state Is maintaining the same level of effort.

2, The proposed budget would shift away from schools In 2010-11 approximately $300 million in property tax revenues that were allocated to schools in 2009-10. Under state law, the state back-fills this loss of property tax revenue with state funds-resulting In no net Increase In funding to schools, but showing a $300 million increase in State General Fund support for K-12 education. This "Increase" in General Fund support then allows the Governor to propose a separate, real cut of $300 million in funding for schools, while claiming that the state is maintaIning its level of General fund support for schools.

The Education Coalition

1201 K Street, suite 710, Sacramento, CA 95814

Secretary Arne Duncan February 4,2010

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We fully recognize that the federal government must be sensitive to the financial problems faced by states, but the proposals described above are manipulations of the funding calculations, not reflections of economic difficulties. We respectfully urge you to review these proposals carefully and then clearly Inform the state that your Department will not allow the maintenance o~ effort requirement to be manipulated to create the appearance of state funding commitments that are not real.

Sincerely,

-.'.-1l-~;~~--4-( Q_''' /~.-.-

Adona! Mack, ACSA

Mike Ricketts, CCSESA

Debbie Look, PTA

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Michelle Castro, SEIU

Dennis Meyers, CASBO

Jeff FreItas, err

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Steve Henderson, CSEA

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Estelle Lemieux, CTA

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cc: Dr. Thelma Melendez de Santa Ana, Assistant U.S. Secretary of Education

Anthony Miller, Deputy U.S. Secretary of Education

Roberto J. Rodrrguez,.$pecial Assistant to the President for Education Governor Arnold Schwarzenegger

The Education Coalition

1201 K Street, Suite 710, Sacramento, CA 95814

SEQUOIA UNION HIGH SCHOOL DISTRICT

460 JAMES AVE;NUE, REDWOOD CITY. CALIFORNIA 94062·1098

BOARD OFTRUSTE.ES OON(;laSON

OI.IVIA G. MARTINEZ l..ORRAINE RUML.EY AL.AN SARVER CHRIS THOMSJ;:N

A DMINISTRA TlVE OFFICES (650) :3 6 9- t 412

PATRICK R. GEMMA SUPERINTENOENT

January 31, 2010

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~ :::: Secretary Arne Duncan

U.S. Department of Education 400 Maryland Avenue. SW Washington, DC 20510

Dear Secretary Duncan:

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We have been, extremely impressed with your commitment to education and your deep concern to turn 7round ihe lowest performing schools in the nation, especially In California.

We are supportive of California's recent Maintenance of Effort (MOE) Assurance and Waiver Application that was submitted (0 your office on January 11,2010 as part of the State's Federal Stabilization Funds (FSF). Phase II application.

However,we are concerned that some of California's past and current actions might jeopardize 1) California's Phase lJ application, 2) California's Race-ro-the-Top application, and 3) the six bi1lionof State's Federal Stabilization Funds that has already been allocated to California. Consequently. we would urge you in your approval of California's MOE application to take the opportunity to make the 'following three points abundantly clear to our Governor and to our Legislature:

\'''~ California cannot use Forward Funding Accounting to calculate its Maintenance of Effort "~,. California cannot use Federal Stabilization Funds to support an on-going program,

\_"" California cannot use Federal Stabilization Funds to backfill cuts that have already been backfilled

I. Forward Funding Accounting

California has a very innovated program called the Quality Education Improvement Act (QEIA). This program provides funding for 488 schools performing in the lowest two declles (lowest 20%) of the state's academic achievement test. The state's al1ocation totals $402 million - $500 per student for grades K-3, $900 per student for grades 4-8, and $1,000 per student for grades 9·12. These schools usually contain an inordinately high number of minority students who are located in the poorest parts of rural and urban California.

In the Governor's just released budget proposal, the Governor is proposing K-12 reductions of $892.6 mi1lion in 2009- 10 and $1.5 billion in 2010.111, Those reductions in 2009-10 would have meant that California would have exceeded your required MOE level by $34 per student, In order to get around this, {he Governor is proposing that $250 million of next's year QEIA allocation be made on June 30.2010 - our fiscal year runs from July to June 30. The money will not be spent until next year, 2010·11. However, this change means that the state now satisfies the MOE requirement by $8 per student.

I See page 5S of'the Governor Budget Summary 20/0-11.

This is what we mean by forward funding accounting. If tbis is allowed, it creates a hole big enough for a school bus to ride through, It may be hard for us to find that school bus in California since we have also cut school transportation by 20%. If a state like California wants to make more reductions in 2009~ 10, jt will just increase the amount of forward funding. Forward funding makes a mockery out of your MOE requirement, We would request that you prohibit forward funding.

We should add a word or two about California's budget schedule. The budget that is being proposed is for the fiscal year from July 1,2010 10 June 30,2011. However, the current year budget for 2009wlO will also be impacted. The proposed $892.6 milllon of cuts in 2009-10 wi1J depend on legislation being past this year.

Usually, the key date is the May Revision, which updates all the revenue assumptions and other proposals. The state should calculate a new MOE estimate at that time. Most of us do not expect a 20010wll budget passed until well after July I. It could be as late as the fall. That final budget will probably have actions that will impact 2009-10. The actually MOE estimates will not be known until the budget is passed,

Most of us unfortunately expect additional cuts to education. That is one reason why the Phase II funding and the Race-to-the-Top funding is so important. That is also why it so important that we are spending the Fiscal Stabilization funds according to your guidelines and regulations.

II. Using Federal StabUIzation Funds to Support On-Golng Programs

Your regulations and guidelines have been very specific that the stabilization funds are not to be used to support ongoing programs. For the most pan California has followed those guidelines. However, currently California is in the process of using $355 million of stabilization funds to backfill 2008-09 cuts that were already funded. This was done to free up $355 million in state savings to fund the 2009wlO QEJA program.

The funding was made especially complicated, but there is no question about the end product. There is also no question that the $355 million of Stabilization Funds are being used to fund CUts that were already backfilled. We are afraid that this will show up in your audits and may jeopardize our Stage II funding, our Race-to-rhe-Top funding, and the $6 billion that the state has already received in stabilization funding.

Our July Budget for 2009~10 funded the QEIA program from the federal School Improvement Grants. It took a struggle to correct that mistake. The Governor's veto message of SB 84 (Steinberg) stated that $355 million in federal funds had been inderulfled to in effect fund the QElA allocation'. The process works as follows:

1. There was $1.5 billion of categorical cuts in of 2008·09. These categorical cuts were actually made in 2009-10 and immediately restored by cuts in school district'S revenue 1imits - general purpose funding.

2. The state is now in the process of identifying and offsetting $355 million of the 2008-09 categorical cuts that were restored. Those funds are now being taken from school districts and are called 2008-09 reductions. This will be finished by the end of February. As you can imagine the impacted school districts are extremely upset.

3. Once the $355 million has been taken, the offsets will be backfilled with the federal stabilization funds.

The California Department of Education (CDB) has told school districts that" It is impOItant to note that CDE is not reducing these programs' entitlemenfs. rather CDE is using their apponionments as vehicles to recoui! cash."

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2 " •• Instead, my Administration has identified $355 million in federal Fiscal Stabilization Funds that have been provided to the State for the purpose of restoring reductions in the 2008-09 fiscal year. As a reSUlt, California will have a plan to achieve the savings included in the 2009-10 Budget, while holding QEIA schools harmles8.~ SB 84 veto message.

4. Once the $355 million of cash has been collected and replaced with federal stabilization funds. then $355 million will be used to fund the 2009~10 allocation for the QEIA program.

California should get a prize for creativity. However, the Whole purpose of the above four-step is to use the $355 million of the fiscal stabilization funds to create a state savings of $355 million. which would then be used to fund the QEIA program and thereby save the state $355 million. The whole purpose of the California four-step is to take the $355 million of federal stabilization away from our six million students, their schools and their teachers. We believe that if this runs counter to your guidelines and regulations then it should not be allowed.

We believe thai your approval of the state's MOE Assurance and Waiver Application is an excellent opportunity to remind our Legislature and Governor that they cannot use the Federal Stabilization Funds to support an on-going

program or to backfill CUts that have already been backfilled.· .

We believe that the federal stabilization funds should only be used to restore real cuts that have not already been restored. If the state made a mistake in their allocation of the $355 million of federal stabilization funds, then they should be told to correct that error. There is plenty of time in 2009-10 to make that correction. Those funds should go to restoring the cuts not to create state savings. We believe that the stabillzatton funds were designed to benefit the children, teachers and school districts.

It is also interesting to note that we are over half way through the 2009-10 fiscal year and the QEIA program for 2009- 10 has still not been funded. School districts will receive the funds but in the meantime they must borrow the funds to keep the program running. In addition, they are going to have their share of the $355 million of categorical apportionment funds taken away from them for at least two months and maybe longer. When it comes to these low, performing schools the stale does not seem to care about when they get funded.

Ill. Conclusion

As we Slated in the beginning, we are supportive of the Slate's application, however, we think that it is extremely important to make it very clear that 1) forward funding accounting is not allowed, 2) that stabilization funds should not be used to support existing programs. and 3) that stabilization funds should not be used to restore cuts that already have been restored, Thank. You.

~

Patrick R. Gemma.

Superintendent

Copy: Dr. Thelma Melendez de Santa Ana. ASSistant Secretary of Elementary and Secondary Education Roberto J. Rodrlguez, Special Assistant to the President for Education

Anthony Miller, Deputy Secretary of Education

California Congressional Delegation

California Stale Legislature

Governor Arnold Schwarzenegger

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