Nan Austin

In Modesto area, surging education funding brings cry for raises, calls for caution

The May revise, the last look at what schools will get before most finalize their budgets, is out. The bottom line is that if Gov. Jerry Brown’s plan holds, this area’s bottom line could skyrocket.

“This is the highest funding level education has ever seen,” said Robert Miyashiro with School Services of California Inc., a consulting firm that provides financial analysis used by most districts. By the firm’s figures, education spending would soar to $68.4 billion under the governor’s plan, a 44 percent increase from the bottom of the recession in 2011-12, and 21 percent higher than the prerecession peak in 2007-08.

The thundering hooves of a bull market and rising real estate values have California revenues rising as fast as a crop of summer corn this year. And 90 percent of the unexpected extra would go to schools under Brown’s plan, compared with 40 percent in a normal year.

In the Central Valley, the projection merits balloons and champagne in most districts for two reasons.

First, the Central Valley historically got less per child than districts along the coast. Most districts here had lower property tax revenues and therefore spent less on education in the 1980s, when the old base funding system set the inequity in concrete for three decades.

Second, the rural, agricultural setting makes this a land of immigrants, and the traditional home of many menial jobs that do not pay well. The large numbers of English learners and poor kids that have challenged Valley schools for generations will now bring them significantly more revenue.

But the sudden influx will not last, and districts must spend strategically, a succession of the School Services fiscal experts warned school administrators at a Sacramento workshop on the May revise held May 19.

“Most bad financial decisions are made during good times,” said Suzanne Speck.

In other words, districts that swig the champagne had better brace for the hangover. For school districts, which spend roughly 80 percent of their money on salaries and benefits, this means being strategic about raises.

School employees that took temporary concessions and furloughs during the bad times will be expecting to share in the bounty, Speck said. “Employee groups are going to want to see the lion’s share of the increases you’re seeing,” she said at a Sacramento workshop.

Look at it from the employers’ side, however, and much of what’s coming is already locked into rising employment costs that will never land in family checking accounts. The largest: mandated increases in pension contributions rising to roughly 20 percent of salary over the next few years.

“That’s money right off the top,” said Waterford Superintendent Don Davis. “They’re looking at me and talking raises, and I’ve already given them 1.84 percent,” he said.

Unfunded pension liabilities will impact what districts have left to give in negotiations, but have gotten little notice. “Here comes this wave, and we’re all here playing on the beach,” Davis said.

Higher teacher salaries bolster automatic seniority raises and extra pay for taking college courses. Those are built in to teacher contracts, adding roughly 1 percent to 2 percent per year to district payrolls. Higher health care or workers’ compensation costs also take more money from employers while adding no clink in the pocket for employees.

Then there is the sticky factor. Raises given in the good times do not disappear in the bad times.

Through the recession, most school contracts included temporary salary cuts, language essentially saying salaries will be reduced by x percent for this school year. After one year, they popped back up, unless another negotiated pact allowed them to stay reduced.

But while higher salary schedules do not go away, this surge in education spending will, the fiscal folks said.

Proposition 30’s extra taxes will last only a few more years. The end is in sight for state paybacks from the recession years, when California held back money meant for schools so the state could make its payroll.

Will the Golden State’s boom times last, and economic growth keep school spending high? Students of history would say no.

“We do know another recession is only a matter of time,” Michelle McKay Underwood of School Services told attendees. “You can think of this as a holiday for our troubles, but we can see the end of the vacation,” she said.

That end, she predicts, will be 2018-19. “It’s not a cliff, but it’s definitely something to be aware of as those revenues decrease,” Underwood said, adding, “2016-17 will be the heyday for the foreseeable future.”

What the state pays is under the microscope this month. What the state pays per child attending makes up the largest pot of money schools get. The other budget variable, however, is the number of children.

Enrollment statewide is declining. Tuolumne County’s 11 districts peaked at a cumulative 8,484 students in 1997-98. Countywide enrollment has steadily dropped to 6,122 kids in 2014-15. Denair Unified’s financial troubles came about – not because of big raises to teachers – because the district’s enrollment kept dropping and it did not cut expenses to match.

All of that links into affordability. This year, schools also have to factor in accountability, the new rubric the state will use to oversee district spending.

Most of the money schools will have from now on needs to be spent in ways that could reasonably be expected to improve outcomes for students. No one knows exactly how spending under Local Control Accountability Plans, better known as LCAPs (pronounced L-caps), will be graded in the years to come, but raises that tap that money will need to be justified.

“The days of black and white rules and living within a defined box are gone and we need to learn to live in shades of gray,” Speck said.

Rather than just showing what they spent, districts will need to show what results they got. That goes double for those high-needs students the state pays them more to serve. Knowing districts would be under pressure to raise salaries, the law tried to take that pot of money off the bargaining table.

“The decisions related to implementation of LCAP are not negotiable,” Speck stressed repeatedly.

That is, unless it can be shown to help high-needs students. Speck gave an example of a school unable to attract enough fully qualified teachers, with less than competitive salaries and a high turnover. It could reasonably be argued that higher pay would result in better instruction.

But not many districts in this region can argue those failings. The topic pushed negotiations well past the new year, however, for many districts.

One district that might qualify under those exceptions is Stockton Unified. Stockton teachers voted to strike earlier this year when stalled negotiations came to a head there. A district posting shows their base salaries were low coming into 2014-15, compared with nearby districts. The deal struck in April gives them 3 percent retroactive pay for 2013-14, 3 percent on top of that for 2014-15, plus an additional 5.5 percent starting in July, and a 1 percent signing bonus, according to a summary posted on the Stockton Teachers Association website.

In addition, Stockton teachers got additional days for training, with corresponding extra pay, and reduced class sizes in upper grades. Both give more to employees in ways that serve students, and without tying the district to a salary schedule it might not be able to afford later.

Longer school days, extra teacher preparation days, after-school programs, club adviser stipends, special project stipends – all these add to what employees take home in ways research tells us should help students.

On the hiring front, more counselors, expanding summer school and bringing back music programs are popular options. Many districts have also beefed up administrative staffs and salaries, which researchers say can improve kids’ learning, but its impact is harder to measure.

The bottom line: Slashing education funding caused turmoil in the recession. Surging funding in the recovery brings its own problems.