Post Election Update Understanding the State Budget Impact on Charter Schools

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Post Election Update Understanding the State Budget Impact on Charter Schools

  1. 1. UNDERSTANDING THE CA STATE BUDGET IMPACT ON CHARTER SCHOOLS POST-ELECTION UPDATE 12.5.12 Copyright © 2012 Charter School Capital
  2. 2. TODAY’S SPEAKERS Chas Cardall Branche Jones ORRICK, HERRINGTON CA LEGISLATIVE & SUTCLIFFE CONSULTANT John Helgeson Stuart Ellis CHARTER SCHOOL CHARTER SCHOOL CAPITAL CAPITAL Copyright © 2012 Charter School Capital 2
  3. 3. AGENDAWhat We Will Cover Today •  Where We Stand •  What We Know •  Impact •  Solution •  Questions Copyright © 2012 Charter School Capital 3
  4. 4. WHERE WE STANDCalifornia State Budget•  Where we are today -  Prior to November election, significant concerns existed regarding public school funding levels and timing -  Passage of Prop 30 has clarified and strengthened the State budget situation -  While the pressure for education cuts has been alleviated, timing of payments remains uncertain Copyright © 2012 Charter School Capital 4
  5. 5. WHERE WE STANDProp 30 Passed•  Best scenario -  Current funding patterns continue -  Annual GPE funding doesn’t change•  Capital update -  Significant negotiations continue -  Some issues remain unresolved Copyright © 2012 Charter School Capital 5
  6. 6. WHAT WE KNOWEducation Protection Account•  Where do new taxes go? -  New taxes offset State funding obligation and do not increase school funding -  New tax revenue goes into the Education Protection Account (EPA) for payment to schools in June -  Approximate 21.2% withholding from monthly payments continues -  Funds withheld from schools through May will be paid to schools from the EPA in June Copyright © 2012 Charter School Capital 6
  7. 7. WHAT WE KNOWEducation Protection Account•  Tax revenues less than $6.9 billion -  The EPA will not be fully funded in June -  Smaller than expected payments will be made -  Schools will be made whole through an increased “true-up” payment on July 15 Copyright © 2012 Charter School Capital 7
  8. 8. WHAT WE KNOWEducation Protection Account•  Tax revenues more than $6.9 billion -  The EPA will be more than the target in June -  Larger than expected payment will be made -  State will be made whole through a decreased “true-up” payment on July 15 Copyright © 2012 Charter School Capital 8
  9. 9. WHAT WE KNOWEducation Protection Account•  Existing funding deferrals -  Deferrals of P1 payments into July and August may mean there is not enough actual funding in some months to withhold the 21.2% amount -  July and August deferrals will be in smaller amounts -  Those funds will be accelerated into the EPA payment in June Copyright © 2012 Charter School Capital 9
  10. 10. WHAT WE KNOWImpacts of Enrollment Changes•  How will enrollment changes reflected in the P1 filing impact the application on Prop 30? -  We don’t yet know what CDE’s approach will be -  Existing law is not clear -  We believe enrollment changes in the P1 filing will flow through into P1 apportionment period so the 21.2% withholding will be applied against actual school funding Copyright © 2012 Charter School Capital 10
  11. 11. WHAT WE KNOWImpacts of Enrollment Changes•  How will enrollment changes reflected in the P1 filing impact the application on Prop 30? -  CDE still aiming for a withholding percentage and approach that results in a withholding through May of $6.9 billion -  Overall annual amount of GPE funding for schools is not expected to change Copyright © 2012 Charter School Capital 11
  12. 12. WHAT WE KNOWImplementation•  Continued uncertainty as to how Prop 30 and EPA payment will be implemented this year and in the future -  New taxes offset the State’s funding obligation and do not increase school funding -  Although new taxes are to be dedicated to schools, they are designed as a larger budgetary solution for the state, decreasing the State’s General Fund obligation to schools Copyright © 2012 Charter School Capital 12
  13. 13. WHAT WE KNOWImplementation•  Continued uncertainty as to how Prop 30 and EPA payment will be implemented this year and in the future -  Prop 30 does not seem to allow any of the new tax revenue to go directly to the State’s General Fund -  Likely means the amounts withheld annually and to be paid out of the EPA will be based on high case estimates of Prop 30 taxes -  Otherwise the State might end up with more in the EPA to be paid to schools than CDE withheld, resulting in an additional windfall for schools and less General Fund relief for the State Copyright © 2012 Charter School Capital 13
  14. 14. THE IMPACT California State Budget •  Payment timing -  EPA withholding began in July -  Continues at 21.2% through May -  Other deferrals remain -  Controller flexibility for in year payment delays may not be exercised in same manner as last year Copyright © 2012 Charter School Capital 14
  15. 15. THE IMPACT 30%Percent of Annual Revenues Received Each Month 25% 20% 15% Base Line 2011-2012 10% Pass 5% 0% Fiscal Year 2012 - 2013 Copyright © 2012 Charter School Capital 15
  16. 16. THE IMPACT 120% 100%Cummulative Percent of State Aid Portion GPE 80% 60% Base Line 2011-2012 40% Pass 20% 0% Fiscal Year 2012 - 2013 Copyright © 2012 Charter School Capital 16
  17. 17. THE IMPACT An exercise to put this deferral in context… Copyright © 2012 Charter School Capital 17
  18. 18. THE SOLUTION What Should You Do? •  Educate yourself -  Understand the impacts to your school -  Ask questions -  Carefully analyze month-by-month payments to know what your cash flow will look like -  Visit CDE site http://www.cde.ca.gov/fg/aa/pa/iassf12adv.asp -  Plan, plan, plan Copyright © 2012 Charter School Capital 18
  19. 19. THE SOLUTION We’re Here To Help You •  Just ask -  Reach out with any questions you have -  We want you to succeed in bringing high quality education to your students -  Sign up for our blog to follow timely information at http://charterschoolcapital.org and click on the blog link •  Charter School Capital provides funding support to cover: -  21% EPA challenges -  Other payment deferrals and delays -  Growth Copyright © 2012 Charter School Capital 19
  20. 20. QUESTIONS?Charter School CapitalStuart Ellis: sellis@charterschoolcapital.orgJohn Helgeson: jhelgeson@charterschoolcapital.org877.272.1001 charterschoolcapital.orgAll information in this presentation is provided for educational and/or informational purposes. It is not intended toprovide legal, accounting, or tax advice and should not be relied on for any such purpose. Please consult anattorney, accountant, or financial advisor to answer any financial or legal questions. Copyright © 2012 Charter School Capital

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