Budget Update

From the Chancellor's Office of Communications:

On Friday, Jan. 8, Governor Schwarzenegger released his proposed
2010-11 State Budget. The overall picture is, as expected, bleak. The
governor identifies a projected budget shortfall of $19.9 billion
covering the 2009-10 and 2010-11 fiscal years. Of this amount, $6.6
billion is from 2009-10 and $13.3 billion is from 2010-11. While
slightly less than the $20.7 billion estimate offered by the Legislative
Analyst’s Office in November 2009, this budget shortfall will present
a daunting challenge to state budget makers who already have exhausted
many of the available budget solutions when adopting the 2009-10 State
Budget back in July.

The governor proposes closing the budget gap through a variety of
strategies. Major solutions are listed below:

· Expenditure reductions ($8.5 billion)

· Assumed increases in federal aid ($6.9 billion)

· Alternative funding/funding shifts ($4.5 billion)

· List of potential budget solutions that would be
“triggered” if assumed $6.9 billion increase in federal aid does
not materialize ($4.6 billion cuts; $2.4 billion revenues)

Despite the dire fiscal circumstances, the governor’s proposal
generally spares K-12 and higher education from further budget cuts. In
presenting his budget, the governor asserted that protecting the
state’s investment in education is necessary in order to promote
the future economic well-being of California. (The discussion is
centering around two issues, money from transporation out of the General
Fund that lowers the guarantee and a recalculation from prior years that
says Prop. 98 should have received $46 Billion instead of $49
Billion--they don't go back and recalculate, but the don't give us all
due under the maintenance factor--thus not a cut in year to year dollars
as they stay the same, but a "cut" from what the law guarantees--lps)


For the California Community Colleges, the Governor’s Budget contains
the following proposals:

· 2.2 percent enrollment growth ($126 million). This proposed
augmentation would fund approximately 26,000 full-time equivalent
students and help the colleges respond to the tremendous enrollment
demand they are currently experiencing.

· - 0.38 percent COLA (-$22.9 million). Due to declines in
various price indices, the statutory formula for calculating the cost of
living (COLA) adjustment for colleges and K-12 schools produces a
negative adjustment for 2009-10. Accordingly, the governor proposes
making this negative adjustment to college and school apportionments.

· No increase in student fees for community college students.

· 2010-11 Property Tax Adjustment. The Governor’s Budget
assumes local property taxes allocated to the community colleges in
2010-11 will decline by $33.7 million from their 2009-10 levels. The
governor also identifies another $5.6 million in projected declines in
other local revenues (student fees; oil and mineral revenues). The
budget proposal makes a corresponding increase of $39.3 in general fund
resources to protect colleges from these declines.

· Categorical Funding. The governor proposes reducing funding
for Extended Opportunity Programs and Services (EOPS) and Part-Time
Faculty Compensation by $10 million each and using these funds to
augment SB 70 Career Technical Education funding by $20 million.
Additionally, six workload categorical programs sustained COLA
reductions totaling $786,000, which represents their share of the -0.38%
COLA. With these exceptions, the governor proposes funding categorical
programs at the 2009-10 general fund levels.

· Increased Categorical Flexibility. The 2009-10 State Budget
provided community college districts with flexibility to shift funds
among various categorical programs, as well as relief from programmatic
requirements. The governor proposes adding EOPS, Fund for Student
Success (MESA, PUENTE, and Middle College High School), and Basic Skills
to the list of programs subject to the flexibility provisions.

· SB 70 Trailer Bill Language. The governor proposes enacting
clean-up legislation to clarify that SB 70 CTE funding is not subject to
the categorical flexibility provision.

· Suspension of Mandates. The governor proposes suspending all
community college mandates that have been filed at the Commission on
State Mandates.

· Possibility of additional funding deferrals. The Governor’s
Budget narrative notes that California will likely experience further
cash flow challenges in 2010-11, which may necessitate further funding
deferrals.

· Suspension of New Competitive Cal Grant Awards. The governor
proposes that no new Competitive Cal Grant awards be made in 2010-11,
resulting in $45.5 million in budget savings. This proposal would
disproportionately impact community college students who are the primary
recipients of this financial aid.

Given the state’s continuing fiscal crisis, the budget proposal for
the California Community Colleges is about as favorable as we could have
hoped. While it would not make up for the deep cuts the colleges
experienced in the 2009-10 State Budget, it would protect the colleges
from the effects of deteriorating property tax revenues and also
provides some enrollment growth funding to help colleges serve more
students. Perhaps most importantly, the proposal would shield the
colleges from additional budget cuts. However, the proposed suspension
of Competitive Cal Grant awards, if adopted, would have a profound
negative impact on our most vulnerable students.

The Office of Communications will continue to provide regular budget
updates and track budget stories. We will also give an update on a few
key items presented at the January 11 and 12 Board of Governors meeting
in the January 19 issue of News and Notes. Please stay tuned for
additional information.

The Office of Communications