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February 19, 2014

Department of Finance Provides Clarity and Further Confusion Regarding Compliance with LCFF…

Among the many aspects of the new Local Control Funding Formula (“LCFF”) is the option that Local Educational Agencies, or LEAs, comply with Grade Span Adjustment (“GSA”) requirements to receive augmented funding.  Specifically, in order for an LEA to receive additional K-3 GSA funding starting in 2013-14 (an additional 10.4% of the K-3 base grant funding, or roughly $720 per student assuming full funding of the K-3 base grant), the LEA must transition to school site average K-3 class sizes of no more than 24:1 as the LCFF is fully implemented.  The amount of transition required in a given year is equal to the percentage of “gap funding” awarded to the entity.  (Education Code § 42238.02.)  As an alternative, an LEA can still receive the GSA funding without making progress toward class sizes of 24:1 if a “collectively bargained alternative annual average class enrollment for each schoolsite in those grades is agreed to by the school district.”

Education Code section 42238.02 is not clear regarding whether an existing collective bargaining agreement (“CBA”) can be considered a collectively bargained alternative that satisfies the K-3 GSA requirements.  In the past, the State Department of Finance (“DOF”), and industry experts opined that an existing CBA could satisfy the collectively bargained alternative option if it otherwise met LCFF GSA requirements.  However, it now appears that the DOF is changing its interpretation. 

On February 7, 2014, DOF announced that it intends to propose the following requirements in its 2014-15 audit guide that will provide three options for LEAs to meet K-3 GSA requirements:

1.         Comply with the transition to class sizes of no more than 24:1;

2.         Modify an existing CBA provision, or enter into a new CBA, that specifically includes an alternative to the 24:1 class size transition; or

3.         Enter into a “letter” with the local bargaining unit that confirms or validates that the existing CBA provides a collectively bargained alternative to 24:1.

The requirement of a “letter” that “validates” an existing CBA marks a departure from previous interpretations of the statute and adds a considerable level of confusion, as there is not yet any guidance as to what information such a “letter” must actually contain. 

It is important to note that these requirements do not appear in any statute or regulation, or in the 2013-14 DOF audit guide.  In fact, all that is required in the recently amended 2013-14 DOF audit guide is that the auditor to “confirm in writing the [local entity’s] awareness of the requirements of the Local Control Funding Formula pursuant to Education Code Sections 2574, 2575, 42238.02, 42238.03, and 42238.07, as applicable, for the 2013-14 fiscal year,” and that a “written certification signed by each school district’s, county office of education’s, or charter school’s superintendent, administrator, or authorized designee shall be deemed sufficient verification.”  This broad provision applies generally to the LCFF and specifically to K-3 GSA, but only requires certification of “awareness” of the requirements of the law. 

It remains unclear whether the California Department of Education will concur with the DOF’s interpretation of Education Code section 44238.02.  However, if this interpretation prevails, it appears that if a bargaining unit will neither sign a letter nor bargain a new alternative, districts will need to meet the 24:1 transition requirements.  Additionally, it is likely that, by the end of 2014-15, a district that does not have a qualifying collectively bargained alternative in place must demonstrate progress toward a 24:1 ratio in both 2013-14 and 2014-15.  In other words, if the DOF’s interpretation prevails and a district is unable to comply with the above DOF guidelines by the end of 2014-15, it should reduce class sizes in 2014-15 by the amount that would have been required had they complied with the 24:1 transition requirements in both 2013-14 and 2014-15.

It is unfortunate that at this late date there is still little clarification regarding how the State will interpret GSA requirements.  Districts should prepare to work with bargaining units to either negotiate GSA language or enter into a still undefined validation letter.  On a positive note, districts can rest assured that, at least for the 2013-14 school year, the DOF will allow all districts to meet these requirements by simply acknowledging they exist.

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