Governor Gavin Newsom delivers the May Revise

Governor Gavin Newsom delivers the May Revise.

Chancellor's Budget Message: Governor's May 2019 Revise

May 10, 2019 | San Diego Community College District

The California Budget 2019-20
Heracles and the Augean Stables

In Greek Mythology, the great hero Heracles (Hercules in Roman mythology) was driven mad for a period of time during which he conducted the unspeakable act of murdering his wife and children. When he recovered his sanity, he was directed by the gods to atone for his sins by entering servitude under King Eurytheus. The king directed him to undertake a series of 12 enormous tasks, called labors, in which he ultimately succeeded during his 12 years of service to the king. The 12 labors were the subject of an epic poem, which is no longer extant, by the poet Peisander.

The fifth labor was considered an almost impossible task. Heracles was directed to clean the massive stables of King Augeas, which had not been cleaned in decades despite the thousands of livestock that inhabited the enormous structures. There were many complexities in Heracles’ interactions with King Augeas. However, the bottom line was that he succeeded in cleaning the stables by diverting the course of two rivers, the Alpheus and the Peneus, and rerouting them so that they flowed through the stables at full force, thereby successfully cleaning them. Heracles knew that sometimes bold action is needed to solve large problems.

The 2019-20 budget development process for the California Community Colleges has been a unique experience since it is the very first budget development cycle for California’s new governor, Gavin Newsom. It has also occurred during a period of great concern about the efficacy of the California Community Colleges controversial “Student Centered Funding Formula,” which was introduced during the current budget year 2018-19, with adjustments being made repeatedly during the year. The funding formula called for major changes in the funding mechanism itself, a departure from the essentially enrollment-driven formula with categorical directions in areas such as student success to an entirely new mechanism that would be 70% enrollment-driven, 20% driven by economic factors affecting students, and 10% driven by student “performance” metrics. At the present time, the State System Office has indicated that it does not have sufficient funds to honor the commitments that were earlier made to base budgets and to the performance metrics. As a result, many districts in the State have developed structural budget deficits in the current fiscal year. Three statewide taskforces, including one appointed by the legislature, are hard at work trying to correct the problems in this funding formula and find new approaches. Thus, there is even greater interest than usual in the governor’s fiscal plans.

It is also important to recall California’s budget history and current fiscal context. Following a five-year, severe recession, the California budget rebounded quickly due to the passage of Proposition 30 in 2012, which, through two temporary tax measures, provided a sudden infusion of funding to the public sector, preventing a continuation of the slide into fiscal decline and refilling coffers that had been depleted. However, the sudden influx of money did not fully offset the loss of purchasing power during the recession years nor did it buttress the enormous, new budget demands to come, especially the steep increases in the employer contribution to the retirement systems CalSTRS and CalPERS. On top of these continuing and escalating challenges, a radical change was made this year in the funding formula for community colleges. This is the situation that Governor Newsom inherited and began to address in his January budget proposal.

The Governor’s Overall Budget and Process  

At a press conference yesterday morning, Governor Gavin Newsom presented his May Revision Budget of $147 billion in general fund spending.  At the outset, echoing former Governor Jerry Brown, he expressed concern about the slower growth of the California economy.  While not actually predicting a recession, the May Revision Budget is predicated on the notion that “the state must be prepared for the possibility that even a moderate recession could result in revenue declines of nearly $70 billion and a budget deficit of $40 billion over three years.”  The May Revision includes another infusion of funds into the Rainy Day Fund, bringing it to $16.5 billion and also creates a Rainy Day Fund for Proposition 98, which is the source of funding for both K-12 and community colleges.

In terms of expenditures, the May Revision emphasizes increased support for various social services, including a special fund to address homelessness.  The governor also announced some targeted increases for K-12, modest increases for the University of California (UC) and California State University (CSU) systems, and an additional $80.8 million for community colleges.  The community college increase will be allocated as $75.2 million for Workforce Technical Education, $39.6 million for deferred maintenance and instructional equipment, $5.2 million to add to the AB 2 Promise funding and $.4 million in foster care.  While this is generally good news, there are still some very serious fiscal problems that most community college districts in the state, including the San Diego Community College District, will still need to address in terms of budget adjustments and in terms of continued advocacy.

The next steps in the process will include the development of responsive budgets by the California Senate and the Assembly, and a Conference Committee, which will lead to some modifications in the budget proposal and will be informed by local advocacy efforts.  In June, it is hoped that all budget differences will be resolved so that the governor can approve the budget and sign it into law on or before the July 1 deadline.

The California Community Colleges and the San Diego Community College District

As noted above, under the May Revision, the California Community Colleges will receive a modest increase in funds over the governor’s January budget proposal. Also, many funds, such as the special student success and equity funds and other initiatives are continuing, along with Strong Workforce funding and other ongoing initiatives.  However, the structural change in the Student Centered Funding Formula for which we advocated that would have increased base funding is not addressed in the May Revision. It is our understanding that adjustments to the funding formula will be made, but will not be implemented until the 2020-21 budget year.  Below are the key elements of change in operational funding that we can estimate as proposed in the May Revision Budget that affect community colleges in general and the San Diego Community College District in particular. 

Here are the key highlights of the additional funding identified in the budget along with the estimated impact on the SDCCD.

Cost of Living Adjustment (COLA)
The Governor’s Budget includes a 3.26% COLA in the amount of $230 million, which was a slight decrease from the 3.46% or $248.3 million proposed in January.
SDCCD Impact -The $230 million will yield $8.0 million, which will be distributed in accordance with our Resource Allocation Formula (RAF).  We will continue to advocate for COLA to be maintained at this initial proposal amount.

Adult Education Block Grant
Because noncredit programs are not included in the state funding formula, the governor originally proposed an increase of $18 million to provide the 3.46% COLA increase for these programs. However, due to the decrease in the COLA to 3.26%, the state funding for this program will decrease to $17 million.
SDCCD Impact - The District could receive $117,500 for this purpose.

Funding the Second Year of Promise Programs
The Governor’s Budget includes an increase of $5.2 million to the original $40 million included in January proposal to fund the second year of free tuition for first-time/full-time community college students.
SDCCD Impact - There is no estimate as yet for this impact.  However, this funding will enable the District to use the money we have been raising to expand the San Diego Promise to include other categories of students, such as veterans and students who are returning to community college education after years away from school.  It will also provide flexibility for the SDCCD to increase textbook grants and other support for Promise students.

One-Time Funding for Deferred Maintenance
An increase of $39.6 million in Proposition 98 General Fund for deferred maintenance, instructional equipment, and specified water conservation projects.
SDCCD Impact - Assuming the state funds will be distributed proportionally, the District should receive $1.2 million, which in accordance with past practice (60%/40% split) would result in $720,000 for facilities projects and $480,000 for instructional equipment/library materials.

Total Increase: $9.3 million

Notes:  1) A decrease in funding of $860 million in Proposition 98 funding to reflect a change in the COLA from 3.46% to 3.26% for the following categorical programs: DSPS, EOPS, Apprenticeship programs, CalWORKS, Mandate Block Grant and Campus Child Care Tax Bailout program.  Fortunately, the State will continue to fund COLA for all of these categorical programs, which was not always the case in prior years.  2) The Governor’s May Revision also includes a one-time local property tax adjustment increase of $76.7 million in Proposition 98 general funding to offset and reduce the State’s initial projected deficit against the apportionment revenue.

Because of the continuing impact of the funding formula and other factors, the SDCCD will continue to plan for internal budget adjustments, which we have already been discussing, which will stay away from further reductions in classes and services for our students and will not affect our Collective Bargaining Agreements, compensation, or employment. 

Let me close by saying that the Board of Trustees and I are generally optimistic about the coming year.  As always, we will be supportive while also seeking modifications during the advocacy period.  We especially hope to emphasize the need for greater support for the base budgets under the funding formula and the need for funding more full-time faculty positions.  Executive Vice Chancellor Bonnie Dowd continues to monitor and refine our budget figures, while also working on the important legislative oversight committee to sort out the details of the funding formula.  The College and Continuing Education Presidents, Vice Chancellors, Governance Leaders, and Collective Bargaining Leaders are also involved in this process.  Because of the District’s overall vision of service and close attention to detail, the San Diego Community College District has an excellent budget development and management process that supports its instructional programs, services to students, operations, and innovation, even when challenged and even without two rivers to divert.  Stay tuned . . . 

Dr. Constance M. Carroll
San Diego Community College District

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