Public Relations

PCC BUDGET UPDATE #30

From CCLC - 7/8/10

Late yesterday, the Budget Conference Committee convened to take action on several language and smaller outstanding issues from various parts of the state budget.

The only community college item acted on was the rejection of the Senate's proposed language to change how Financial Aid Administration dollars are distributed among the colleges. By rejecting the proposed shift to a formula weighted on Pell Grants instead of a BOG Waivers, funds in the program will be distributed in 2010-11 in the same manner as 2009-10.

While committee members stated they hoped a spending plan could be reached by next week, the lack of serious discussion on any big picture items (revenues, borrowing, Proposition 98) both in the committee and, apparently, among legislative leaders, proves that doubtful. Instead, the Capitol is gripped with a showdown between Governor Arnold Schwarzenegger and Controller John Chiang over whether state employees will be paid minimum wage or full salary later this month.

If the courts continue to support the governor and the controller is ordered to pay minimum wage, we would expect a relatively quick, even if incomplete, resolution of the budget. While some state employees are due to be paid next Friday, most aren't expecting checks until July 30 or August 2 (direct deposit). It is very difficult to predict how quickly the Sacramento Superior Court will rule on the governor's and controller's dueling complaints, although it's interesting to note that, from the clerk to the judge, they are all state employees with an interest in the case.

PCC BUDGET UPDATE #29

From CCLC - 6/24/10

Although the end of the fiscal year will be quickly upon us next week, the Conference Committee reconciling the differences between the spending plans crafted by each house remained generally quiet this week, as discussions among Democratic legislative leadership sought to reconcile differences between plans crafted by the majority party in each house.

The Assembly Democrats plan, creative and questionably legal, borrows significant out-year revenues from an oil severance tax to avoid significant cuts. The Senate Democrats plan meanwhile continues temporary taxes and increases others, although in a manner that doesn't deliver enough revenue to avoid difficult cuts. This has caused tensions between the two houses, as Senate leaders have privately blasted Assembly leaders for raising "false hopes" among Democratic constituencies that cuts can be avoided.

The talks now appear strictly between the majority party leaders and don't appear to include the governor or any Republicans, whose votes will be needed to adopt a final spending plan.

Meanwhile, the Conference Committee is scheduled to meet this afternoon, during which the LAO will present its analysis on the Senate's state-local realignment plan.

Also this week, Assemblymember Sam Blakeslee (R-San Luis Obispo) outpolled former Assemblymember John Laird (D-Santa Cruz) in Tuesday's special election to fill Lt. Governor Abel Maldonado's former senate seat. While Blakeslee ran clear ahead, he is right now at 49.8% of the vote, short of the 50% necessary to win the seat outright, likely meaning that the seat will remain vacant until August.

While either Blakeslee or Laird would be good community college votes--both served as trustees of San Luis Obispo and Cabrillo, respectively--the lack of a vote from a moderate district pending a runoff election could exacerbate the summer budget delay. Some Democrats that had lost hope in John Laird's chance to win the seat were hoping Blakeslee would win it outright so that he could be seated and develop relationships over the next couple of months that might persuade him to put his vote up for a budget.

Meanwhile, our advocacy continues to be effective. With compromise language on SB 1143 (Liu) that commits the system to student whether an incentive funding program focused on student success might make sense and which doesn't disrupt equalization among our colleges, we are now able to support the bill. We hope that the Conference Committee will be persuaded by the bill's movement to strike the language suggesting the basic skills dollars should be distributed based on performance.

We need to keep up the pressure to oppose the Legislative Analyst's proposal to cut community colleges by $120 million and replace the revenue with a $40/unit fee. While the fee increase of 100% over 18 months is bad enough, the proposal to replace general funds provided for enrollment growth by the Governor, Assembly and Senate proposals with fees is absurd. California Watch's Erica Perez frames the debate well. If students are forced to pay more in fees, questionably smart in this economy, we argue that the revenue should restore the awful cuts to our student success categorial programs.

PCC BUDGET UPDATE #28

From CCLC - 6/16/10

Conference Committee Discusses Community College Budget

The two-house, ten-person committee charged with reconciling the differences between the two legislative chambers reached community colleges for the first time today, after a week of deliberations on other issues.

While yesterday marked the constitutional deadline for the Legislature's passage of the budget, a requirement missed in 26 of the last 30 years, the Conference Committee avoided taking action on the big picture issues that will affect the overall funding for community colleges, along with K-12 and the other segments of higher education.

Issues such as CalWORKs, Child Care, and the overall funding levels of both K-14 Proposition 98 and higher education will be subject to larger discussions likely behind the leadership curtain and out of the view of the public. These decisions likely will be held for "Big 5" discussions among the governor and the four legislative leaders.

The committee began the discussion on community colleges with a detailed discussion on student fees and the impact on student enrollment. The Legislative Analyst's Office renewed its proposal of increasing fees to $40/unit to pay for enrollment growth proposed by the governor, using the argument that fee waivers are available to single students with incomes up to $45,000 and single parents with incomes up to $80,000.

Senator Bob Huff made a motion to raise fees to $40/unit. Denise Ducheny, former San Diego CCD trustee, stated that while she's not as "hysterical" against fee increases as in the past, she was concerned that an increase to $40/unit was too much for one year. While Assembly Democrats on the committee said they are still hysterical about fees, it appears that, if Proposition 98 support for the colleges drops below the governor's proposal, the committee would turn to a fee increase to fund enrollment growth and protect categoricals. The committee held the issue open pending decisions that determine the total amount of Proposition 98 general funds for community colleges.

The committee also discussed the Senate budget subcommittee's shift of basic skills funds based on successful basic skills course completion and performance-based funding generally. The committee adopted language that requires the Chancellor to craft performance-based funding language for basic skills funds to implement in the 2012-13 fiscal year.

Also, the committee discussed the Senate budget subcommittee's language to distribute some of the Student Financial Aid Administration funds on the basis of Pell Grant awards, rather than BOG fee waivers. The LAO recommended adoption of the redirection, but delaying the implementation to 2011-12, recognizing that the new fiscal year begins in two weeks. While no action was taken, there seemed to be agreement to require a study of ways to creative incentives for colleges to increase FAFSA completions for 2012-13 implementation.

* The League supports the increased investment of $100 million, but would allocate the money to maintain and increase short-term job training slots more broadly, through the Economic Development, Career Technical and Enrollment Growth items.

** Technically, because the Assembly and the Senate took the same action, these issues are not before the Conference Committee for consideration, but may be subsequently reopened.

***On career-technical education, the League would support a $20 million additional investment, although not paid for using cuts to Part-time Faculty Compensation and EOPS.

PCC BUDGET UPDATE #27

From CCLC - 5/17/10

The weekend gave us some time to think a little bit more about the governor's May Revise, as well as a chance to look at the details of the spending plan. While community colleges fare better than almost every state entity, it is clear that the population of the economically and educationally disadvantaged Californians our colleges serve would be deeply harmed.

First, a couple of notes on the governor's revised budget proposal as it pertains to community colleges.

• Cash flow -- This will be a very difficult budget on which to reach the required two-thirds vote, and we counsel districts to have available or borrowable cash resources to operate without state funds through September. Without a spending plan in place, the Controller cannot make payments to community colleges and, unlike last year, no spending plan has yet been adopted.
• Community college CalWORKs funding -- The governor leaves the $26.7 million currently used to support students enrolled in CalWORKs, but would maintain the flexibility language applicable to these funds last year. However, we don't believe the Legislature will adopt the governor's overall proposal to eliminate CalWORKs funding and encourage districts to plan to continue serving this student population next year.
• Child care -- We are still working to gather information from the California Department of Education on how many child care slots are currently funded in community colleges. Clearly, the loss of these funds could significantly reduce or eliminate the ability of community colleges to operate early childhood education programs. While the Legislature may reduce the income eligibility for subsidized child care slots (and thus the number of slots funded in community colleges), we don't expect the governor's proposal to be adopted completely.
• COLA -- The May Revise reduces the K-12 COLA from 0.38% to 0.39%, but does not propose a corresponding change to the community college COLA.

From our standpoint in both the community college and overall state budget, not much has changed since the January budget when the California Community College Trustees and Chief Executive Officers of the California Community Colleges policy boards identified budget priorities. When we talk to the CEOCCC board on Friday, we will recommend reiterating our existing positions:

• Maintain California's existing tax structure through calendar year 2011. This would provide $5.5 billion in revenue by suspending scheduled tax cuts. This would enable maintaining CalWORKs, Child Care and avoid the $1.5 billion unallocated reduction to our K-12 schools.
• Oppose the negative cost-of-living adjustment (-0.38%), unless community colleges are provided the opportunity K-12 is to recover skipped positive COLAs over the last two years.
• Oppose the cuts to Extended Opportunity Programs and Services ($10 million) and Part-time Faculty Compensation ($10 million).

We are at a turning point as a state. Five years ago, the Legislative Analyst Office projected that the 2010-11 general fund revenues would be $117 million. Because of the revenue collapse, even with $10 billion in temporary new taxes, the general fund is projected to be $91.4 billion. Simply put, the state's revenue structure overly relies on personal income tax revenue that has been particularly hard hit in this recession and which won't recover for a few years.

While few of us want to pay more taxes, we also don't want to be the only state in the nation without a welfare safety net or to see a $1.5 billion unallocated cut to our K-12 schools. Sure, cities like mine will have fundraisers to ensure that students in already high-achieving school districts don't experience the cuts, while others turn to parcel taxes to fill the gap. However, we are quickly returning to a haves and have nots system, one which will indeed impact our colleges.

Further, while our community colleges may be proposed to receive 2.21% enrollment growth, our most vulnerable students may not have access to our colleges because their child care and support costs are eliminated. On top of the student success categorical cuts last year, this may spell doom for our most needy students as we engage in a campaign to maintain access, increase student success and ensure student equity.

The cuts may not be hitting our bottom line hard, but they are hitting our students and future students hard. For our institutions' and students' sake, we may need to raise our voice on their behalf this year.

PCC BUDGET UPDATE #26

From CCLC - 4/13/10

The month of April accounts for about $10 billion in personal income tax revenues, which is 22% of annual PIT revenues and 11.4% of total annual general fund revenues. While most of us pay most of our state income taxes through withholding, the relatively few "make or break" large taxpayers often have huge end-of-year settle-ups due from stock options and capital gains.

So, two days before the tax deadline, how are the tea leaves reading? Through Friday, a net (tax payments minus tax refunds) of $1 billion had been collected. Today's report will be a big one, accounting for the weekend's receipts. There have been strong days and weaker days, including two that saw more refund claims than payments. As of now, it's completely feasible that we hit the $10 billion number, although overshooting it, and thus significantly reducing the huge state deficit, seems ambitious.

In good news, however, the state's revenues in the first three months of the year outpaced projected revenues by $2.3 billion. However, even if the trend continued, the good news doesn't necessarily reduce the deficit equally. Most notably, as idenfitied by the Legislative Analyst in a March 19 letter to legislative budget staff, perhaps as much as 60% of the new revenues would be required to be provided to Proposition 98.

While that would normally have me putting on a party hat and dancing on my desk, it is very unlikely that schools and community colleges will be provided billions more amidst $10-$15 billion in cuts to UC, CSU, and health and human services. More likely, the higher revenues that come in above projections, the harder we're going to have to fight to avoid a suspension of Proposition 98. Even with the added revenues, we're going to have to fight hard to avoid deeper cuts to our categorical programs and to hold on to the 2.21% enrollment growth the governor included in his January budget.

We must and will continue to tell our story about the students being shut out because of enrollment caps and the impact to the services of our most educationally disadvantaged students of the student successs categorical cuts.

PCC BUDGET UPDATE #25

From CCLC - 3/17/10

Federal Update

Together with our AACC and ACCT partners, we continue to monitor the developments in Washington, D.C. related to the Student Aid and Fiscal Responsibility Act and health care reform. While we expected the compromise bill to be unveiled yesterday, the public vetting was pushed back apparently until later today following Congressional Budget Office scoring showing the health care bill revisions cost more than anticipated.

In addition to the apparent difficulty House Speaker Nancy Pelosi is having in rounding up a majority vote for the package, complex budget scoring rules are bogging down the process. To be eligible for the filibuster-proof majority vote reconciliation process in the Senate, the once-per-year reconciliation bill must identify net deficit reduction of $2 billion over the next five years.

Because the health care provisions expected in the reconciliation bill are costly, but popular (such as closing the Medicare prescription drug "donut hole" further and expanding the special Medicaid deal for Nebraska to all states), the reconciliation bill doesn't currently meet the reconciliation deficit reduction requirement. This is one reason SAFRA is such an attractive part of the reconciliation package and why parts of SAFRA are being thrown overboard. With the student loan savings, the reconciliation requirements are met without the health care provisions providing net deficit reduction.

The concern now, however, is that even more savings from SAFRA could be used to paper over the additional costs of the health care reform reconciliation provisions. The spending items apparently left in SAFRA--Pell Grants, student loan reforms, minority-serving institutions--could find themselves in jeopardy if the costs of the health care provisions can not be pared down enough while still attracting a majority vote.

We believe the $67 billion in savings from eliminating unnecessary subsidies in the student loan program are higher education savings and must be reinvested in college access and success.

As community college advocates, we aren't involved in the health care debate, and its important that we don't appear to take sides in this extraordinary partisan and divisive issue. However, we will remain vigilent and let you know if there are any opportunities to protect the education investments that remain in SAFRA.

State Budget Update

While we've been focusing on the $2 billion in federal funds we hoped to get in Washington, D.C., the state budget debate is beginning to heat up.

The news in Sacramento has been mixed. While the state's revenue is up $2 billion over the projections used to identify a $20 billion state deficit over the next 18 months, there is apparent gridlock between the Democratic legislative leaders and the governor.

While the Legislature met its constitutional requirement of resolving the fiscal emergency declared by the governor in January, the governor vetoed virtually all of the package of solutions approved to address the emergency. In vetoing the measures, the governor pointed out that most of the cuts were prospective in the 2010-11 fiscal year and not the midyear cuts he believes are necessary to resolve the deficit.

Tomorrow morning, the Senate's budget subcommittee on education will hold an overview hearing on the governor's budget plan for higher education. Chancellor Jack Scott will testify on behalf of community colleges, and we will be there to monitor and report to you any significant discussions affecting our colleges. The hearing is expected around 9:30 a.m., although is contingent on the adjournment of a short floor session, and will be held in Room 3191. The audio of the hearing should be available.

On Monday, thousands of community college students will converge on Sacramento to make their voices heard. The rally is convening at 7 a.m. at Raley Field in West Sacramento with the one-mile march to the State Capitol scheduled to begin at 10 a.m.

Meanwhile, students at the Coast Community College district are "abuzz" with a campaign to have 1,000,000 Californians send a text message of "No More Cuts" to 69302. The results of the campaign will be presented to legislators. Standard text messaging rates apply (no cost if you have unlimited text messaging).

PCC BUDGET UPDATE #24

Ad Hoc Budget Advisory Committee - 3/9/10

The PCC Ad Hoc Budget Advisory Committee will meet each month on every 2nd and 4th Thursday, except during spring break.  Meeting schedule, agendas and minutes are available here and from the list of budget links in the left sidebar above.

PCC BUDGET UPDATE #23

PCC Interim Vice President, Administrative Services - 2/8/10

PASADENA AREA COMMUNITY COLLEGE DISTRICT
BUDGET IMPACT DEVELOPMENT

The budget process in the state of California is extremely complex.  The process starts in the Fall of each year with agency proposals being fed into the Department of Finance.  In the month of January, the Governor then proposes a budget for the fiscal year beginning the upcoming July 1.  In the month of May, the Governor makes revisions to the previously-proposed budget, called the “May Revise.”  The intent of that document is to amend the previous proposal to reflect five additional months of data and trends.  The Legislature then debates the budget with the goal of passing the budget and having it signed by the Governor prior to the start of the new fiscal year.  That very rarely happens.  Too often the budget process is not concluded until late July, or even into August.  Sometimes it is later yet.

On January 8, the Governor proposed his budget.  In the weeks since that time, all public agencies have reviewed the proposal to understand its impact on their respective agencies.  In the case of the Community College System, the Chancellor’s Office, the Community College League and others are working to first understand the impact of the numbers, and then to formulate responses and strategies aimed at either improving or mitigating perceived or potential negative impacts.

With the continual unfolding of the budget in Sacramento, staff at PCC will continually evaluate and analyze the potential impact of the numbers on our district.  It is critical that these studies are extremely preliminary as there is often little correlation between the January proposed budget and the adopted budget.  Large swings occur between one version of the budget and the next, so planning must be understood to be tentative until the final budget adoption.

At this very early stage, the Community College League has put forth its understanding of the Governor’s proposed budget.  Based on those numbers, PCC has interpolated the revenues that would flow to PCC from the State.  The process essentially uses the current year budget as a guide to next year’s budget by applying percentage relationships between the overall system budget with PCC’s portion of that budget.  By then, applying that same percentage to the Governor’s proposals, next year’s budget is projected.

On the reverse side of this report is the initial analysis/projection.  The first two columns report last year’s and this year’s adopted budget.  The middle column shows the Governor’s January proposal.  The fourth column shows PCC’s current year budget.  The small column calculates the percentage of PCC’s portion of the overall budget.  The last column uses that percentage to project the coming year’s budget.  At the bottom of the last three columns, a calculation is performed to compare the bottom-line for this current year with that of the coming year.  A negative number reflects a project funding cut, and a positive number would reflect a funding increase.  While the current projection is a $321,959 revenue cut, it can be expected that the real cut will be far larger, as all districts have been advised that the anticipated apportionment increase for growth will be the first thing sacrificed during the contentious wrangling that is expected.

Richard P. van Pelt, Ph.D.

Click here to access the 2010-11 INITIAL CONCEPTUAL Budget Analysis DRAFT

PCC BUDGET UPDATE #22

Chancellor's Budget Remarks - 1/8/10

California Community Colleges Chancellor Jack Scott offers the following comments on the Governor's proposed 2010-11 State Budget. Click here to access his entire speech.

PCC BUDGET UPDATE #21

From CCLC - 1/8/10

The governor just released his proposed 2010-11 budget and, while we will get more details in briefings this afternoon and spreadsheets yet to be released, here are the initial points on the community college budget and a preliminary response.

Major points of the proposed community college budget

• Provides $126 million to fund enrollment growth of 2.21 percent (about 26,000 new full-time students)
• Reduces funding for apportionments and select categorical programs by $22.9 million to account for a negative cost-of-living adjustment (COLA), computed at -0.38% due to reductions in the statutory inflationary index
• Maintains all categorical cuts and flexibility allowances approved in 2009-10, and does not backfill the $35 million in federal funds provided this year to ease the cuts.
• Proposes student fees be maintained at $26/unit.
• Makes technical changes to accommodate and backfill reduced property taxes and other budget year revenue shortfalls and acknowledges, but does not backfill, student fee revenue shortfall of $10 million in the current year.
• Proposes the suspension of the competitive Cal Grant program, with no new awards provided beginning in fall 2010.

I look forward to sharing more information as it becomes available and as we have more time to digest the entire proposed state budget.

PCC BUDGET UPDATE #20

Chancellor's Budget Remarks - 12/17/09

Chancellor Jack Scott discusses the state of California’s budget and how it will affect accessibility to the Community College System. Click here to access his entire speech.

PCC BUDGET UPDATE #19

From Chancellor's Update - 11/18/09

This morning, the Legislative Analyst’s Office (LAO) released the Fiscal Outlook, its annual report containing a five-year forecast of the state’s financial condition. Each year, the report is viewed as the first credible update on the state’s fiscal status following enactment of the State Budget. As such, the Fiscal Outlook begins to set the expectations that frame the upcoming budget process. While offering some glimmers of hope, particularly in regards to state revenues and economic performance, the report’s central message is that California remains in the throes of a serious budget crisis due to a mammoth structural shortfall. This shortfall is largely due to the inability of state leaders to make the realistic and lasting changes necessary to bring state spending and revenues into alignment.

The Fiscal Outlook does not offer specific forecasts for the California Community Colleges, but rather includes our budget in the overall Proposition 98 forecast. Still, the report offers a useful prediction of the budget environment we are likely to encounter as state leaders begin deliberations on the state budget in the new year.

Highlights

California faces a projected $20.7 billion budget shortfall over a two-year period (fiscal years 2009-10 and 2010-11).

This shortfall results primarily from increases in projected expenditures compared to the enacted State Budget.

Sluggish State General Fund revenues represent a relatively small part of the problem.

While still lagging the nation, California’s economy has likely hit bottom and is beginning a recovery. LAO points to slowing job loss and rising home prices as indicators that California’s economy is beginning to turn around.

LAO states that “Addressing this large shortfall will require painful choices—on top of the difficult choices the Legislature made earlier this year.”

Proposition 98

Despite the state’s worsening budget outlook, the 2009-10 Proposition 98 minimum guarantee has increased by $1 billion since the 2009-10 State Budget was enacted. The 2009-10 State Budget provided a total of $50.4 billion for K-12 schools and community colleges. Due to changes in the factors used in the Proposition 98 calculation, the state’s constitutional funding obligation is now $51.4 billion and, as a consequence, the state owes community colleges and K-12 schools $1 billion more than provided in the 2009-10 State Budget.

This counterintuitive increase in the Proposition 98 minimum guarantee is the result of a downward adjustment in 2008-09 State General Fund revenues. Because the Proposition 98 calculation drives off the year-to-year change, a downward adjustment to the 2008-09 revenue figures made the funding guarantee increase.

LAO recommends that the Legislature wait until May to decide how to address the $1 billion increased obligation. LAO justifies that recommendation on the grounds that the Proposition 98 calculation will likely change again once revenue estimates are update in April. If the $1 billion obligation is still in effect at that time, LAO suggests that the Legislature could suspend Proposition 98, negotiate a multi-year payment plan for the funds, or simply provide the funds in the current year.

Given the magnitude of the state’s fiscal woes, it seems unlikely that the $1 billion would be paid to schools and colleges this year. Perhaps the biggest benefit of this increased obligation is that, with the state already spending less on Proposition 98 than required by the State Constitution, it will be politically more difficult for the Legislature or Governor to propose mid-year cuts to community colleges and K-12 schools.

LAO estimates that the Proposition 98 funding guarantee will remain relatively flat into 2010-11, dropping $334 million or 0.7 percent.

In its out-year forecast, LAO estimates that Proposition 98 guarantee will decline in 2011-12 (down $2 billion or 3.9 percent) and then begin to rise again in 2012-13 through 2014-15 (an average annual increase of 6.8 percent). Given volatility in the Proposition 98 funding calculations, these out-year forecasts are subject to greater error.

Current-Year Budget (2009-10)

California faces a projected current-year deficit of $6.3 billion. This estimated budget shortfall is due to the following factors:

$1.4 billion due to the failure of the California Department of Corrections to achieve planned expenditure reductions.

$1 billion due to an increase in the Proposition 98 funding obligation (described above)

$1 billion due to state’s failure to sell the State Compensation Insurance Fund

$900 million due to failure to achieve planned savings in Medi-Cal

$800 million due to courts blocking redirection of Public Transportation Account funds to generate state savings

$451 million due to General Fund revenues trailing below estimates

2010-11 Budget

California faces a $14.4 billion operating shortfall for 2010-11. Major factors include:

$7.4 billion in one-time solutions that were used to balance the 2009-10 State Budget. These solutions included borrowing, deferring payments, accelerating revenue collections, and temporary tax increases. Because these solution will no longer be available, the result is a hole in the 2010-11 state budget.

$3.5 billion due to updated revenue estimates.

Continuation of many of the new liabilities identified in the current year (see above).

2011-12 through 2014-15

LAO forecasts that, absent state action, operating shortfalls will increase in 2011-12 and persist into 2014-15. Projected shortfalls are as follows:

2011-12     $21.3 billion

2012-13     $23 billion

2013-14     $20 billion

2014-15     $18.4 billion

The large increase in operating shortfalls beginning in 2011-12 is due to the expiration of $12.5 in temporary tax increases adopted as part of the February budget deal (some of the tax increases begin triggering off at the end of the 2009 tax year).

Taken in total, LAO’s report offers a sobering assessment of California’s fiscal condition. The choices that state leaders will face in closing the $21 billion budget shortfall will be very difficult—all the low hanging and medium hanging fruit is gone. It will take another year of fierce advocacy in order to fend off additional deep cuts to the community colleges. At the local level, district budget plans should not assume a rapid turn around and must have significant contingency plans built in. It will take tough choices, creativity, and innovation for community college districts to weather the storms ahead.

More updates will follow.

PCC BUDGET UPDATE #18

From Chancellor's Update - 11/12/09

As is common this time of year, speculation has begun among Capitol insiders regarding the size of the state budget deficit. The revenue and expenditure estimates underlying the 2009-10 State Budget have by now grown stale. Updated budget estimates from the Legislative Analyst’s Office (LAO) and the Department of Finance (DOF) are around the corner, but not yet available. In this vacuum of information, budget staffers and lobbyists begin making guesses and sharing rumors.

Governor Schwarzenegger contributed to the buzz when, on Tuesday, November 10, at a press conference regarding the recently enacted water legislation, he made off the cuff remarks regarding the state budget. In his comments, he state that “we're not out of the woods yet, we still have a problem.” He went on to explain that the administration estimates that the 2009-10 State Budget is on track to end the fiscal year between $5 billion and $7 billion in the red. The Governor did not provide specifics on the shortfall, but subsequent comments from DOF representatives make clear that the shortfall is largely due to state revenues coming in below estimates. The State Controller indicates that state revenues for the first quarter of the 2009-10 fiscal year came in $1.1 billion below budget act estimates. Extrapolating this shortfall over the rest of the year generates an estimated annual shortfall of $4.4 billion. In addition, it appears that the Governor’s estimate factors in various fiscal liabilities from ongoing litigation which in some cases seeks to block budget cuts ($80 million in cuts to In-Home Supportive Services) and in other cases challenges the state’s ability to borrow funds ($850 million from Redevelopment Agencies).

In addition, the Governor noted that the 2010-11 budget already faces a deficit of roughly $7 billion due to one-time solutions used to balance the 2009-10 budget. These one-time solutions fall into a number of categories including reserves, borrowing, one-time federal funds, and expiring tax revenues. Because these one-time solutions will no longer be available next year, they result in a structural imbalance or budget shortfall.

Taken together, the 2009-10 and 2010-11 budget shortfalls noted by the Governor total between $12 billion and $14 billion. While not offering any specifics on how he planned to close the budget gap, the Governor said “So we just have to hang in there, tighten our belts and live within our means. That's the most important thing.” He indicated that he would share his budget plan with the public in January, thus confirming that he does not intend to call a special session on the budget this fall. January 10 is the constitutional deadline for the Governor to release a budget proposal; with the tenth falling on a Sunday this coming year, he will most likely release his budget plan on January 8.

Next week, the LAO will release its Fiscal Outlook, a multi-year budget forecast based on updated revenue and expenditure estimates. Included in the reported are estimates of the Proposition 98 funding requirement, a major factor in shaping the budget prospects for the California Community Colleges. Most budget watchers consider this report the first credible peak at the upcoming budget cycle. When the report is issued, I will provide a budget update summarizing its findings.

PCC BUDGET UPDATE #17

From PCC - 9/18/09

Budget material that was available at the PACCD Board of Trustees meeting on September 16 are now available on the web. Please click the  links below to access these documents.

Budget Report
Adopted Budget
Budget Summary

PCC BUDGET UPDATE #16

From PCC - 9/17/09

The Pasadena Area Community College District Board of Trustees voted to adopt a 2009-10 budget for Pasadena City College. Click here to view the budget in its entirety.

PCC BUDGET UPDATE #15

From CCLC - 7/30/09

Each day seems to bring new budget news, and it will likely be several weeks before the budget dust settles.

For example, today we're hearing different news about which categorical programs will share the burden if the anticipated federal funds don't materialize. The confusion is as expected, considering the many conversations among budget staff and external constituencies and lack of specific language on the issue. Unfortunately, all of the decisions are a zero-sum game. To the extent one program is protected from a cut, critical programs like Matriculation may shoulder a larger cut. For now, we will focus on making sure community colleges receive as much of the federal state fiscal stabilization dollars as possible, to try to protect all categorical programs from deeper cuts.

Further questions are raised by the application of "flexibility" authority to programs that were awarded to districts on a grant basis (economic development and career-technical being the largest). We encourage districts to await guidance from the Chancellor and plan to use grant-based dollars as best as possible within the spirit of the grant. Clearly, moving forward, it will be important to assess what we as a system can do given a new and depressing fiscal reality.

We will continue to provide guidance as available so your college communities can make the smartest decisions given the circumstances, but it's possible (likely) that the facts will change over time.

This morning, I spoke to the 2009 class of Admin 101, a week-long leadership development program conducted by the Administrators Association of California Community Colleges (ACCCA). Despite a fiscal environment that leads to frustration and despondent feelings, it's great to see faculty, administrative and classified leaders that are stepping forward and want to serve in leadership capacities for our colleges.

PCC BUDGET UPDATE #14

From Chancellor's Update - 7/16/09

Over the past week, reports coming out of Big 5 negotiations have indicated significant progress toward an overall budget agreement. Perhaps it was the impending summer recess, perhaps the mounting cash crisis and IOUs, or perhaps the pounding California is taking in the national press. Whatever the reason, it has been reported that state leaders had resolved most of their outstanding differences and were poised to cement a budget deal.

Reports today, however, indicate that talks have hit a snag related to Proposition 98 funding. At issue is whether the budget deal will acknowledge whether schools and colleges are owed roughly $11 billion in future years due to under-funding in the 2008-09 fiscal year. Language in the State Constitution regarding Proposition 98 leaves some ambiguity as to whether a "maintenance factor" is accrued during a "Test 1" year. This highly technical issue has never arisen before and has generated considerable controversy. The Governor has weighed in that no maintenance factor obligation is generated. The Education Coalition has asserted that a maintenance factor is generated and the California Federation of Teachers has filed a lawsuit challenging the Governor's contention. Legislative Democrats have sided with the Education Coalition.

The specific details of how the maintenance factor issue is being debated--where each of the Big 5 members stands, what "fixes" are being considered--have not been released publicly. The matter is a significant enough of a stumbling block that budget talks have stalled out for the time being. The State Senate was sent home for the weekend, but told to remain ready to return to Sacramento should a budget deal come together.

It is likely that the Big 5 will resume meeting in the near future in order to get negotiations back on track. We will stay tuned and pass along any new developments as they occur.

PCC BUDGET UPDATE #13

From CCLC - 7/9/09

There have been few developments since I wrote on Tuesday. The only increasing activity has been in rhetoric, with an escalating war of words between the governor's office and Assembly Democrats.

While Arnold Schwarzenegger and Assembly Speaker Karen Bass released dueling YouTube videos (Gov/Speaker) yesterday, two highly technical debates have emerged around school finance.

The first centers around the fiscal year-end revenues, which appear to have fallen $1.8 billion below the May Revise estimates. In doing so, 2008-09 may have landed in a Test 1 year, thereby reducing the amount required to be provided to K-14 in 2009-10 (because the maintenance factor I wrote about last week would not have to be repaid). This could avoid a contentious debate over whether or not to suspend Proposition 98, which the governor has proposed when it looked like more was owed and against which CTA has pledged a $1 million fight. For more on this issue, Capitol Weekly has the story.

The other issue is the governor's recent revival of a proposal to temporarily shift $2 billion from local governments to schools. Despite significant opposition from local government, some see the move as necessary to bring together a deal without tax increases and with less severe cuts to health and human services. However, by doing so, the federal government could deem that schools were "cut" $2 billion below the maintenance of effort requirement necessary to receive $10 billion in federal funds, including the ones that are hoped to partially backfill the deep community college categorical cuts. Even though schools would receive the same amount of money, they would be receiving a larger share of local property taxes and a smaller general fund share, thus falling below the maintenance of effort requirement, which looks at state general fund expenditures. For more on this, read Matthew Yi's San Francisco Chronicle article.

These two formulas--Proposition 98 and federal ARRA maintenance of effort--are further complicating an already incredibly difficult budget deal, and giving time for protests to regenerate steam against the cuts that many had grown to reluctantly accept. Instead of moving toward a compromise, more liberal legislators seem less willing to vote for the cuts they cast votes for only last week, and there has been open talk of a leadership challenge in the state Assembly.

While we still believe that the final community college budget will look very similar to the previously described impact, a real impact hit home this week. The state controller, accommodating the drop in June revenues, announced that school and community college deferral payments would not be made this week, but rather would be held until July 30. For community colleges, this is a three-week delay of $540 million. We estimate that the cash management costs (borrowing and lost interest) of that three-week delay will result in a $600,000 cut systemwide.

That $600,000 could have been used to save 100 course sections at a time when 250,000 students are being squeezed out of community colleges.

PCC BUDGET UPDATE #12

From CCLC - 7/7/09

This is my fifteenth budget advocating for community colleges, from my time as a student advocate, through my early years with the League up until now. While this one may be the ugliest one, there are certainly patterns that emerge. Some call it the "budget dance"; others call it "kabuki" after the highly choreographed (and notably, all-male) Japanese dance-dramas.

California's budget pattern usually involves a deal appearing imminent and state leaders constructively working on a solution, only to quickly deteriorate until talks start over again. That's what has happened since I last updated you on the budget on Friday. Over the weekend, it appeared a solution was near after Democrats shelved their proposed tax hikes, but yesterday Assembly Speaker Karen Bass denounced the governor and boycotted the "Big 5" meeting of legislative leaders and the governor over Schwarzenegger's assistance of new anti-fraud measures in the in-home supportive services program.

In the big scheme of things, the setback probably won't delay the solution too long, although each day that passes makes the problems worse and requires the Legislature to find deeper cuts. Simply put, now that the fiscal year has started, you can't cut money that has already been legally encumbered or spent. Further, this week's expected report from the state controller on June revenues could cast a negative cloud over negotiations if revenues come in lower, as expected, which could wipe out the reserve Democrats are counting on minimizing to replace program cuts and tax increases.

Meanwhile, after Republicans announced that they would not support rule waivers for bills that failed to meet this Friday's policy committee deadline, Senate President Pro Tem Darrell Steinberg green-lighted the restart of committee hearings. Thus, the Legislature has a full day of bill hearings ahead, and it's unlikely we will see a floor session in either house. Another Big 5 meeting is scheduled today, although it's unclear when it will take place and whether Speaker Bass will return to the negotiating table.

I hope to have some encouraging news soon.

Scott Lay

PCC BUDGET UPDATE #11

From President's Message - 7/2/09

Dear PCC Family,

On Wednesday, the Pasadena Area Community College District Board of Trustees voted to approve reduction measures for the 2009-2010 budget by the estimated shortfall of nearly $7.7 million. This extremely difficult decision was necessary as California's fiscal and economic state continues to deteriorate and community colleges prepare to absorb the massive cuts proposed by decision-makers in Sacramento.

The board was presented with prioritized budget reduction options by the campus ad-hoc budget committee. They are as follows:

We have discussed a number of cost-saving ideas at the College Coordinating Council, as well as the ad-hoc budget committee, and vice presidents, deans, and managers have been working with their faculty and staff to identify cost-cutting and cost-saving ideas as well. Our campus groups made every effort to keep the cuts away from the classrooms and our students, but the magnitude of these draconian cuts from Sacramento made this impossible. While we have taken a number of cost-cutting measures this year, the severity of cuts proposed in the May 28, 2009 Governor's budget have made deeper cuts for 2009-2010 a reality.

Due to the size of these cuts, PCC's winter intersession will be eliminated for 2010. There were many factors that led to this recommendation. The most significant is that it allows the institution to "right-size" course offerings while allowing for additional sections to be added to the spring and fall semesters, where we serve most of our new and continuing students.

I want you to know that these in no way are easy decisions. In fact, it would be an understatement to say they are tough and unpleasant. But I want to assure all of you that we will get through this, and that we are in much better shape than many other community colleges. Our fiscally prudent practices and budget reserves to cover payment deferrals from the State have enabled us to weather this storm.

During the coming days and weeks, the State budget will continue to be a moving target as the legislature tackles the $26.3 billion shortfall in the State's general fund. We will continue to keep you informed through meetings, forums, and our college website, where all information I receive from the State Chancellor's Office and the Community College League of California pertaining to the budget is posted for your reference. 

I would like to thank our trustees, faculty, staff, and administrators for their hard work through these very tough times. I would also like to thank our students and the community for their steadfast support.

All the best,

Paulette J. Perfumo

PCC BUDGET UPDATE #10

From CCLC - 7/2/09

Yesterday, it became clear that the state would proceed with issuing IOUs and that the budget standoff may actually continue for awhile. The governor and Democratic leaders used ascerbic language to characterize each others positions, and the governor ridiculed the Legislature for considering animal rights bills while the budget talks were stalled. The Senate subsequently cancelled all policy committees "until the budget revision is complete." (As an aside, many Capitol insiders found it an ironic victory for Republicans, who are opposed to most of the legislation making its way through the committees, and could block any rule waivers after next Friday's policy committee deadline.)

In a morning press conference, the governor declared a fiscal emergency and announced he would not consider any legislation that was unrelated to the budget. He also submitted another proposed budget revision to accomodate the increase in the deficit from $24 to $26.3 billion created by Tuesday night's inaction. In the revision, the Governor proposes suspending Proposition 98 and making $1.4 billion in unspecified Prop. 98 reductions below his May Revise proposal. It is unclear whether that's inclusive of $680 million in reductions proposed in June and rejected by the Conference Committee. The suspension would further delay the repayment the $3.6 billion in Proposition 98 maintenance factor expected to be created by the Legislature's inaction before the end of the 2008-09 fiscal year. (For a more technical explanation on this, read an e-mail I sent to CBOs yesterday.) The governor also announced a third furlough day and made them fixed days (first three Fridays of each month), leading to a 14% salary cut for most state employees.

The Legislature hasn't announced its schedule for the weekend, but based on previous July budget fights, we would guess they announce sessions tomorrow morning and Sunday night. While they will be criticized for leaving town, it is indeed needed. They need to be back in their districts to cool off a little bit after an overheated week (both politically and thermally).

For community colleges, the lack of a budget revision shouldn't change much. Districts and colleges should continue to plan on the cuts that we've previously described, and districts are expected to continue receiving cash from the state (not IOUs).

I don't expect to write you again until Monday, unless a deal falls out of the sky. We will be updating the League's Advocacy Center page with the Legislature's schedule information as it comes out and twittering throughout the weekend. You can also read the League's Twitter postings ("tweets") on the Advocacy Center page.

PCC BUDGET UPDATE #9

From CCLC - 6/30/09 (Part 2)

Last night, the Senate failed to reach deals on either corrections to the 2008-9 fiscal year, which ended at midnight or a larger budget deal sought to correct a nearly $24 billion shortfall. The gavel came down shortly before midnight, and both houses are expected to return mid-morning.

Hope had increased throughout Tuesday that a deal would be reached when it was revealed that failure to adopt a shift from redevelopment agencies to school districts would lead to a triggered increase in required spending for schools and community colleges in future years, including $3.6 billion in 2009-10. Nevertheless, Senate Republicans and the governor insisted that agreement on an entire package had to be reached before any parts of the budget fixes could be adopted. If the Proposition 98 formula proves true, the problem could have increased to $28 billion overnight.

The state now heads toward the issuance of 28,742 in IOUs totalling $53.3 million this Thursday, mostly in tax refunds. While community college students receiving Cal Grants would also eventually receive IOUs, no such payments are expected in July. Community college apportionment payments from the state, which the colleges use for general operating expenses, are expected to continue to flow.

When it seemed clear the 2008-09 "current year" fixes would fail, the Senate proceeded to pass a series of budget correction bills on a simple majority vote. The bills are similar to majority vote bills vetoed by Governor Schwarzenegger tonight. The Senate then went on a recess, before returning to allow three Democrats who had refused to vote for the fixes to change their vote to support. Nevertheless, the needed two Republican votes were not there.

The next "deadline" is hard to identify. The next few days seem difficult after the rhetoric of the last 48 hours, and members like to go home to wave the flag in Fourth of July parades. Sunday night would be a possibility. The latest revenue figures will come in late next week and could be ugly. June is the largest revenue month (partially due to accounting changes), and the "reserve" that has been counted on to help close the gap may practically disappear when the latest receipts are tabulated. This would result in billions of additional solutions needed beneath that to which the conference committee had agreed.

Where does this leave community colleges? Well, it is believed that the Legislature could still make the mid-year cuts and deferrals, even though the year has concluded. In better times, the Legislature has provided Proposition 98 "settle-up," adding money after the fiscal year based on a guarantee of funding that escalated during the fiscal year. Some believe that the opposite, and legal, maneuver, would be a "settle-down," or a reduction after the fact that lowers the guarantee. Thus, community colleges should still prepare to to take the $85 million in 2008-09 cuts, on top of the 2009-10 cuts. These are estimated on each district's League budget impact page.

Additionally, few education lobbyists seriously expect that the additional $3.6 billion in Proposition 98 "maintenance factor" that may have been created tonight by the failure of SB 80 will lead to more money in 2009-10. The increase will almost certainly be suspended and postponed to a future date.

An added complication this year is the maintenance of effort required to receive federal state fiscal stabilization money. Any fiscal year shenanigans engaged in by the state must be allowed by the federal government, or $6 billion in funds could be at risk. In other words, the state can't simply cut 2009-10 more because they missed the opportunity to cut 2008-09.

Thus, we're essentially where we were 24 hours ago, and the dire warnings about lost opportunities to save may not materialize, and the same $24 billion shortfall may need to be tackled--this year. However, our problems in future years have likely increased.

PCC BUDGET UPDATE #8

From Chancellor's Update - 6/30/09

Just a brief update following my message from late yesterday afternoon. Last night a little past 10:00 p.m., following a series of meetings between Democratic and Republican Senate leaders, the State Senate returned to the floor and “lifted the call” on SB 64, SB 74, and SB 80. These are the three bills that would achieve $3.3 billion in current-year savings largely through cuts and funding deferrals to schools, colleges, and universities. For the community colleges, the current-year package includes an $85 million unallocated cut and $115 million in funding deferrals. All three measures failed to achieve the required two-thirds vote needed for immediate implementation and thus failed passage. All three bills were “granted reconsideration” so that they may be taken up again.

During the evening’s proceedings, Governor Schwarzenegger weighed in, reiterating his opposition to the bills. The press release from the Governor’s Office stated, “To prevent the state from issuing IOUs, the legislature must come to the table with a package that solves the entire deficit with the necessary cuts and reforms, and without tax increases. The Governor will not sign any piecemeal approach, including the three bills currently being debated which only solve a fraction of the deficit.”

This morning, the Senate is back in session, again taking up the three current-year bills. The initial vote this morning continued to reflect a partisan standoff, with no Republicans voting in support. The bills were once again placed on call and the Senate recessed in order to allow continued negotiations among party leaders.

If the Legislature fails to act prior to midnight tonight, the current-year solutions would no longer be possible. This would push the entire $24 billion problem into the next fiscal year. Since both the Governor’s and the legislative Democrat’s budget plans rely on the current-year solutions, both camps would be forced to restructure their budget proposals. It is difficult to predict exactly how this restructuring would impact the various sectors of the budget. While Proposition 98 should continue to provide protection to schools and colleges in 2009-10, there could be greater pressure to suspend Proposition 98.

In addition, State Controller John Chiang has announced that the state would be forced to issue over $3 billion in IOUs during July if a budget deal is not achieved by midnight tonight. Community colleges (along with K-12 schools) would not be subject to the IOUs due to special protection provided in the State Constitution. While Cal Grant awards would normally be subject to the IOUs, fortunately no disbursements were planned for July so there will be no real impact.

Today and tonight are sure to be charged with drama as state leaders appear intent on playing a game of political chicken all the way to the end. More updates to follow.

PCC BUDGET UPDATE #7

Current Budget Impact on PCC - 6/30/09

PCC BUDGET UPDATE #6

From CCLC - 6/30/09

Normally, the last day of the fiscal year is a big media event but doesn't actually have serious consequences if the Legislature misses the deadline. This year, oddly, the stakes are huge, even though the state already has a budget.

Last night, three bills to make "mid-year" adjustments to the 2008-09 budget failed to get the requisite two-thirds votes. Those bills include cuts (including $85 million unallocated reduction to community colleges), deferrals and accounting changes (including an additional $115 million deferred for community colleges), and other maneuvers (like $250 million "shifted" from redevelopment agencies to school districts. In total, the bills account for $3.3 billion of the $24 billion in savings needed to balance the budget. If midnight tonight passes without action, those options are off the table and additional solutions will need to be found. The savings are also enough to avoid state-issued IOUs for at least a few weeks.

Note: You can understand why we're cheerleaders for neither an $85 million "midyear" cut with only hours left in the fiscal year nor an additional $115 million in deferrals, which would bring the total cash deferrals to community colleges to $655 million resulting in significant cash management costs for the districts.

Democrats insist that, even if agreement is reached on the full package now, there isn't time for legislative staff to write the highly technical bills in time to be voted on. Thus, they argue, the Legislature shouldn't let the $3.3 billion in options go away while they hammer out the details of the bigger package. The Assembly Republicans accepted this argument last week and refused to offer their votes, stalling the current year solutions.

The governor insists that he will not accept a piecemeal approach and Senate Republicans are backing him and refusing to offer their votes for the bills. The standoff is expected until late tonight, with legislative staff bringing their jammies to work today.

The situation was complicated on Saturday when the governor added four policy demands in exchange for the unwillingness of the Democrats to embrace the elimination of Cal Grants, CalWORKs and Healthy Families. The demands include eligibility and accountability reforms to CalWORKs, In-home Supportive Services (IHSS) and Medi-Cal, and a rewriting of the state's pension system to create a lower tier for employees hired after today.

Democrats counter that the issues are too substantive to decide in three days and need to be vetted through the normal policy process. The governor, sensing a real desire by Democrats to avoid the deep cuts requested, thinks that he may have a window to get reforms that wouldn't otherwise be approved through the normal legislative process.

The governor last night offered more budget options, including putting the $2 billion "borrowing" from local government back on the table. He had previously proposed it and withdrawn it under the outcry of local officials.

The constantly evolving plans (one could say options) have distracted leaders from the normal goal of tabulating the necessary savings (admittendly, $24 billion is about the farthest goal posts ever attempted). With only so much mental bandwidth to go around, it gets harder to see how all of the issues can be tackled by midnight. However, one learns never to say never around the Capitol.

Finally, we've been fine tuning the district-by-district budget impacts available at http://www.ccleague.net/impact/. I welcome your thoughts as we try to make this information as helpful as possible to you.

PCC BUDGET UPDATE #5

From Chancellor's Update - 6/29/09

There is an old Sacramento saying that it takes an extreme summer heat spell to bring about a state budget deal. So far, our recent string of 100 degree-plus days is not showing results.

Last night the State Assembly passed a series of budget-related bills intended to address the state’s $24 billion budget shortfall. Put forward by Democratic leaders, the bills for the most part reflected the Conference Committee version of the budget (the community college portions were identical). The major change in the package was a restructuring of several revenue proposals designed to allow for passage on a simple majority vote. Specifically, the proposals were recrafted to mirror an approach taken by Legislative Democrats in December in which fees were substituted for taxes in order to render the tax changes “revenue-neutral.” The State Legislative Counsel contends that such a manuever allows the changes to be enacted on a simple majority vote. Legislative Republicans contend that the approach is unconstitutional and threaten to challenge the maneuver in court. The Governor vetoed the set of bills in December and has threatened to veto the new versions as well.

Earlier today the Senate passed the package of bills approved by the Assembly last night. Normally the bills would have gone directly to the Governor for his signature or veto. However Senator Steinberg seemed to indicate that the Senate would hold onto the bills for the time being in order to “sort out some differences with the Assembly.” It is not unusual for the Legislature to hold onto bills in order to work out technical issues or to impact the timing of a negotiation. We are attempting to get clarification on the status of these bills.

Late this afternoon, the Senate took up the current-year portions of the Conference Committee budget package which includes over $3 billion in current-year cuts and deferrals. These same bills were approved by the Assembly last week on bipartisan votes only to be rejected by the Senate. The bills require a two-thirds vote due to the need for immediate implementation. The bills were brought back to the Senate in a last ditch effort to achieve current-year savings before the end of the fiscal year. For the community colleges the current-year package includes $85 million in cuts and $115 million in funding deferrals.

At this time, the bills have been placed “on call” in the Senate awaiting final vote tallies. Based on the current vote count, the measures would fail due to lack of Republican votes. However, Senate leader Darrell Steinberg is meeting with Republican leadership in an attempt to broker an agreement. The Senate is scheduled to return at 6:00 p.m.

PCC BUDGET UPDATE #4

From CCLC - 6/29/09

The Senate just voted to approve a package of budget changes and tax increases on a majority vote, using the same strategy as used by the Assembly in a late session last night. By swapping the existing gasoline excise "tax" for a gasoline "fee," Democrats believe legally they don't need a two-thirds vote for approval. The action was taken in an extraordinary session, which means the bills would take effect in ninety days (urgency bills require a two-thirds vote). The governor, however, has pledged to veto any budget that "raises taxes," and reiterated that position through a tweet earlier today.

The Senate plans to return at 4 p.m. today to try to pass the current year cuts and deferrals bills, which includes the $85 million cut to community colleges and additional $115 million deferral from this week until next week. While the bills passed the Assembly on a bipartisan vote last week, both the governor and Senate Republicans opposed taking any part of the package separate from the $24 billion solution.

PCC BUDGET UPDATE #3

From Chancellor's Update - 6/26/09

The State Senate has just adjourned, marking the end to three days of unproductive legislative floor sessions. For the most part, this week’s floor debates in the Senate and Assembly have been dominated by the same partisan speeches witnessed since the beginning of the state’s fiscal crisis long ago.

On Wednesday, Democrats in both houses put up for vote the full budget package adopted by the Conference Committee on June 16. The package failed in both houses on largely partisan lines.  While most Democrats voted in favor, a few Democrats voted no or abstained due to concerns over the severity of the budget cuts. Republicans, on the other hand, argued for deeper cuts. (The community college details were identical to those shared in my budget update from June 16.)

Also on Wednesday, in an apparent attempt to motivate the Legislature, State Controller John Chiang announced that, absent enactment of a budget fix, California will experience a cash shortfall in July and be forced to issue IOUs. (I would note that the announcement specified that payments protected under the State Constitution, including payments to community colleges, will be made during the month of July. Payments that may be disrupted by the state’s cash shortfall include: “payments to local governments for social services, private contractors, state vendors, income and corporate tax refunds, and payments for State operations including legislative per diem.” So the July payments to community colleges will not be effected by the state’s cash crunch. While it is possible that Cal Grant allocations may be disrupted, few if any Cal Grants disbursements are scheduled during the month of July.)

On Thursday, the Assembly took up and unanimously passed a set of three bills that would enact the current-year elements of the Conference Committee package. For the community colleges, that package contains $115 million in funding deferrals and $85 million in cuts. Following the Assembly’s passage of those bills, the Governor issued a statement criticizing the package as “piecemeal” for failing to address the total projected budget shortfall and promised to veto the bills if they arrived on his desk. Shortly thereafter, the bills were voted on in the Senate and failed along partisan lines.

Today, both houses met and debated another set of bills that represented the remainder of the Conference Committee budget plan. All three bills failed in both houses on partisan votes.

So, for now, the state budget process is again at an impasse. Both houses have provided notice that they will meet over the weekend. More updates to follow as the situation develops.

PCC BUDGET UPDATE #2

Current Budget Impact on PCC - 6/24/09

PCC BUDGET UPDATE #1

California's community colleges are dealing with unprecedented enrollment demand, coupled with the largest budget cuts in the system's history.  Our students are facing the complete elimination of the Cal Grant financial aid program, as well as an increase in student fees from $20 a unit to $26 a unit or more. It is important to note that community colleges currently do not keep this fee. The fees are collected and given to the state. Community colleges are funded per Full-Time Equivalent Student (FTES) and currently rank behind the K-12, UC, and CSU systems in funding from the state.

All budget numbers are very fluid at this time and will certainly continue to change throughout the summer. Current budget cut proposals for community colleges statewide include: an $85 million reduction for 2008-2009 categorical funds, which translates into approximately $1 million to be cut from PCC's categorical programs for this current year. The 2009-2010 state budget proposes to cut 58 percent more from categorical programs; PCC's share will be about $3 to 4 million in cuts to those programs.

Adding to the state budget challenge is a $42.1 million property tax shortfall for 2008-2009, and community colleges are not backfilled for this shortfall. State property tax revenues for 2009-2010 are estimated to be $116.7 million less and with proposed partial backfill coming from federal stimulus funds. This will be an additional reduction of approximately $2.2 million to the PCC general fund.

The state currently plans to delay payments to community colleges as well. For these scenarios, it is important to keep reserves intact as much as possible to maintain flexibility the college in meeting its financial requirements. In addition, the 2009-2010 budget contains no funding for growth.

PCC remains committed to keeping the cuts as far from the classroom as possible. Unfortunately, the cuts from the state are so severe that there will likely be staffing reductions in temporary, casual, and part-time positions as class offerings are condensed.

Community college leaders and advocates believe this current budget proposal will change the structure of community colleges for decades to come. PCC is committed to continue its proud tradition of providing quality higher education as we weather this budgetary storm.