School boards sue state over budgetary changes

SACRAMENTO -- The California School Boards Association has sued the state for allegedly making illegal changes to Proposition 98 in this year's budget process.

The group isn't complaining about the current year's education funding, which grew compared to the 2017-18 fiscal year. Instead, it claims a bill passed as part of the budget negotiations could blow a hole in future education budgets by changing the rules around Prop. 98. California School Boards Association v. Michael Cohen, 80002950 (Sac. Super. Ct., filed Aug. 10, 2018).

Passed by voters in 1988, Prop. 98 established a complex set of funding formulas designed to increase the minimum amount the state spends on education each year.

"It's directly at the authority that the state is giving itself to play around with the numbers," said Deborah B. Caplan, of counsel with Olson Hagel & Fishburn LLP in Sacramento and lead attorney for the association. The suit names Michael Cohen, Gov. Jerry Brown's director of finance.

H.D. Palmer, deputy director of external affairs at the Department of Finance, said he could not comment because they haven't yet had time to evaluate the complaint.

The complaint seeks to overturn provisions of AB 1825, an education bill signed by Brown in late June as part of budget negotiations. It passed with little opposition or debate.

AB 1825 sets up a new certification process around education spending. Each budget year, the state plugs various numbers into a formula that takes into account tax receipts, school attendance and other factors. These numbers are then recalibrated after the close of the fiscal year, when the state has a more accurate idea of how much revenue came in.

The plaintiffs allege the new law violates Prop. 98, which is written into the California Constitution, by allowing the state to manipulate the formula from one year to another.

"The new certification process ... gives the State the authority to define prior year education spending to something other than what was actually allocated," the complaint said, something it claimed undermines "the entire premise of the minimum guarantee."

Because California spends so much on K-14 education -- $78.4 billion under the current budget -- tiny changes in the formula can have a big impact. According to a press release from the association, AB 1825 could cost schools and community colleges up to $784 million annually.

The complaint also claims AB 1825 allows the state to borrow education money for other purposes with an "indefinite repayment" period. This violates the terms of Prop. 98 that allow the Legislature to suspend the minimum funding rules for only one year and only if it repays the money within 90 days.

"Under the new law, the state can repay this money on their own payment schedule," Caplan said.

A May report from the Legislative Analyst's Office said the new certification process was proposed by the Brown administration.