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Oh Where, Oh Where Did Our Flexibility Go? For those of you leafing through the Budget approved earlier this week in search of the categorical flexibility provisions proposed in May – just save yourself the effort. None of the proposals – including increased "Mega" and "AB 825" transfer caps, access to restricted ending fund balances, reduced Routine Restricted Maintenance obligations, reduced AB 1200 reserve requirements – survived the Budget process. To refresh your memory, when the Governor’s office released its May Revise more than four months ago, nearly $1 billion in new revenue served to replace the negative Cost of Living Adjustment (COLA) proposed in January with a 0% revenue limit COLA. But the across-the-board reductions of 6% or more to categorical programs still remained in place. To mitigate this hit to school budgets, the May Revise proposed a number of provisions to increase local flexibility in transferring dollars between programs, accessing restricted carryover accounts, and reducing statutory obligations to programs such as Routine Restricted Maintenance. These proposals always stir up opposition from the parochial interests that seek to protect their small circle of interest, and this year was no different. So when the Senate and Assembly Democrats each approved a budget promising billions more to schools, along straight party lines, with no promise, and really no hope, of eventual Republican support, they took the opportunity to eliminate the categorical flexibility provisions because they “were no longer necessary” given the higher funding levels they had proposed. We warned in June that the final Budget would prove to be far leaner than the Democrats' versions in each house. We also warned that the May Revise's categorical flexibility provisions were at real risk of remaining on the cutting room floor. And that is exactly what happened. To be sure, the final State Budget for schools represents a significant increase over the funding levels in the May Revise that most agencies used to build their local budgets. (The 0.68% Revenue Limit Cola – as opposed to the 0% COLA in the May Revise – and the 0% COLA on categoricals – as opposed to the 6 % plus deficits embodied in the Revise – mean a windfall for some districts approaching 2% of total state funding.) So the real need for categorical and budgetary flexibility is likely to be not this year, but next. That is when the patched-together nature of this State Budget, with its one-time and likely non-replicable revenue sweeps, will be exposed. For that reason, we are recommending to school districts that they bank this year's unexpected windfall against the rainy days we believe are hovering just over the horizon. We are also recommending that districts continue to emphasize to their elected representatives the need for additional categorical flexibility at all times, and particularly in the tough fiscal circumstances we are likely to see in 2009-10 – and perhaps even before. Editor's Note: Bob Blattner is President of Blattner and Associates, a Partner of Total School Solutions Inc., an education consulting firm. |
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