Dramatic Rebound in the Outlook for K-14 Education Funding - Nov. 18, 2020

We will provide more detailed updates on the Legislative Analyst’s Office (LAO) Fiscal Outlook and the revenue picture for 2020-21 and out-years, but wanted to give you the highlights of dramatically improved projections for the Proposition 98 guarantee for 2020-21:
  • Compared to the June Budget Act, the LAO now estimates that the 2020-21 Prop. 98 guarantee will be $13.1 billion higher. Remarkably, this would put the 2020-21 guarantee even higher than estimated in January, prior to the COVID-19 pandemic.
  • The Prop. 98 guarantee in 2019-20 is also estimated to be slightly higher than anticipated, $1.6 billion above June estimates.
  • This rapid improvement in the Prop. 98 outlook is sufficient to allow the state to reverse all of the existing payment deferrals, a cost of $12.5 billion. This would immediately relieve fiscal pressure on school districts and also reduce pressure from deferral repayment obligations on Prop. 98 funding in future years. Reversing the deferrals will require early action in January because the deferrals are set to begin in February.
  • In addition to reversing deferrals, there will be some additional one-time funding the state could dedicate to help districts with the costs of reopening schools and/or implementing distance learning and/or mitigating learning loss impacting many students.
  • On top of this good news, the state has also committed to supplemental payments to Prop. 98 ($2.3 billion) starting in 2021-22. These funds could prevent a roller coaster effect if revenue growth does not fill anticipated budget deficits in future years.
We plan to advocate for quick action to reverse the principal apportionment deferrals and to allocate one-time funds to allow districts to improve services to students in these difficult times. We’ll follow-up with details and analysis, but feel free to reach out with any questions or comments in the meantime.
Abe Hajela
Capitol Advisors Group