LAO calls for rejection of Brown’s plans for Prop. 39, adult ed

The nonpartisan Legislative Analyst took exception Thursday to key parts of the governor's education budget but generally supported the plan to use a big share of new tax dollars in the coming years to pay off longstanding debts to schools.

The LAO noted that Gov. Jerry Brown's 2013-14 budget proposal would allocate $56.2 billion in total Proposition 98 funding, which represents a 5 percent - or $2.7 billion - increase from the revised current spending level. Brown proposes to use about half of all new Proposition 98 money to pay down prior payment deferrals to schools with the other half going to up the base grants the governor would provide all districts under his new funding formula.

Two major issues that the LAO raised in the new report challenges Brown's plan for the use of Proposition 39 revenues and the restructuring of the adult education program - both of which the agency warned about in January.

Proposition 39 was adopted by voters in November to close a tax loophole that benefitted out-of-state companies doing business in California. It will generate about $440 million in the current fiscal year and closer to $900 annually thereafter. The measure calls on the Legislature to use half the money to improve energy efficiency in public buildings and for the other half to go into the state's general fund.

Brown's budget calls for distributing all the energy efficiency money to K-12 schools and community colleges on a per-student basis for five years.

The biggest program with Brown's plan, says the LAO, is that the governor would count all the energy money toward the Proposition 98 calculation, even though only half of the revenue was earmarked by voters to go to the state's general fund.

We have serious concerns with virtually every aspect of the proposal," the LAO said.

"Including all Proposition 39 revenues in the Proposition 98 calculation is a significant departure from our longstanding view of how revenues are to be treated for the purposes of Proposition 98," the nonpartisan analyst wrote The LAO recommended that the Legislature exclude the energy money from the Proposition 98 guarantee, at least in part, because voters were told it would be.

In addition, the agency recommended that the money be open to a competitive grant process, where all public agencies could apply - a move that the LAO said would better maximize energy-saving benefits.

"The proposal excludes eligible projects (such as public hospitals) that potentially could achieve a relatively high level of energy benefits," the report stated. "The proposed per-student allocation method limits potential benefits even among schools and colleges, and the proposal does not coordinate Proposition 39 funding with the state's existing energy efficiency programs."

The LAO also took exception to the governor's plan for restructuring adult education by giving control of the program to community colleges with support of a new $300 million block grant.

The LAO points out that many school districts already successfully operate adult education programs in their areas and simply giving responsibility to the associated community college - which may lack expertise and interest - is problematic.

The LAO proposes a system where both school districts and community colleges participate as adult education providers, and a dedicated revenue source that will promote coordination.

In a report released in December, the LAO said there are about 300 adult schools operated by K-12 districts - down from 335 in 2007. Another 112 programs are run by community colleges.

Because of a weak student data collection system, the LAO said there are no precise numbers on enrollment - the assumption is that because of ongoing budget cuts, there is likely a substantial unmet need.

The LAO concluded that both K-12 districts and community colleges have strengths and weaknesses in managing adult programs. The recommendation, therefore, isn't to give responsibility to one or the other but rather focus on providing more consistent outcomes.

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