San Diego Community College District

THE CALIFORNIA BUDGET 2021-22 - PENNIES FROM HEAVEN

There have been several nullremakes of the film “Pennies from Heaven,” and the music is definitely familiar. In essence, it is the story of a singer named Larry Poole who was wrongly imprisoned. When he is about to be released from prison, he receives a request from a fellow inmate on death row, named Hart, to deliver a letter to the family that was harmed by his crime. When Poole follows through, he finds that the family is indeed in dire straits and seriously in need of financial support. In order to provide the level of support they need, he takes a job with the circus, thereby earning the pennies they need to survive until he suffers an injury. He then proceeds, in a complicated plot, to involve the circus in a broader effort to support the family. In the spirit of the movie and its songs, as well as other variants, the notion of “pennies from heaven” connotes unexpected good fortune.

As California emerges from the financial and physical wasteland of the COVID-19 pandemic, we are all being suddenly confronted by numerous sources of new revenue.  The federal stimulus funding, the latest two being the Higher Education Emergency Relief Funds (HEERF) II and III, have provided significant support for our institutions and students.  The San Diego Community College District alone is receiving almost $100 million in HEERF funds.

In addition, California had a massive budget deficit of $54 billion last year, due to the impact of the COVID-19 pandemic, which caused massive unemployment and other negative consequences for businesses, for education, for health care organizations, and for the general public.  Now, however, there is a projected surplus of $75.7 billion.  When $25 billion in federal relief funds is added to this surplus, California will go into FY 2021-22 with $100 billion more funds to allocate.  The question for the May Revision Budget and for the future final FY 21-22 budget is how best to distribute this windfall of new funding, especially since it is a mixture of primarily one-time dollars with some continuous dollars. The good news is that at least we will not have to join a circus in order to obtain the new funding.

The Governor’s May Revision Budget

This morning, on May 14, California Governor Gavin Newsom presented his May Revision Budget (also known as the May Revise), representing his best budget projection since the release of his January Budget Proposal.  The governor’s new budget proposal for FY 2021-22 is $196.8 billion. Using the projected surplus, coupled with the federal stimulus funding, the governor is proposing to use the $100 billion increase in what he calls “The California Comeback Plan,” which consists of a solid base budget augmented by “historic investments” in a wide range of organizations, projects, and initiatives to advance the state’s many missions.  As he said in  his press conference, “the Bible teaches us that we are many parts but one body,” and he endeavored to demonstrate this in his plan.

Components of the Comeback Plan include a wide variety of items. Some highlights are increased reserves (especially $15.9 billion for the Rainy Day Fund); immediate tax relief through “the largest tax rebate in U.S. history,” as well as traffic fine forgiveness for tickets received between 2015 and 2021; substantial funding to address homelessness (including special funding for student homelessness); housing; health care and mental health initiatives; jobs and infrastructure improvements; climate, wildfire, drought, and emergency support equipment and systems; support for “immigrant integration (special general and legal support for DACA students and $50 million to community colleges for vocational and ESL courses); criminal justice system improvements; and many other general initiatives, including one under the title of “Clean California,” because, as Governor Newsom said, “This state is too d**n dirty!”

May Revision Budget

The governor also announced significant increases for K-12 education, including an innovative program to create $500 savings accounts for 3.7 million low-income, homeless, and foster care children as a foundation for their college plans.  The University of California and the California State University systems are slated for both increases and restoration of funding that had been previously cut.  A new campus for the CSU is also proposed, Humboldt Polytechnic, for northern California. 

The California Community Colleges also fare well in the Governor’s May Revision budget, and are poised to receive an increase of $3.6 billion, which includes the complete retirement of the deferrals (late compensation to conserve state resources); a cost-of-living-adjustment (COLA); more funding for Guided Pathways; funding to reduce the cost of textbooks for students; funding to boost student recruitment and retention efforts; support for expanding the dual-enrollment program between community colleges and high schools; funding for ESL and vocational training related to the immigrant integration initiative mentioned above; and funding to offset student food and housing insecurity.  This is an ambitious budget proposal, which many of us in community colleges are already lauding.

The next step in the state budget process is legislative review, in which both houses of the legislature will now engage in order to come to an agreement with the governor on a final budget by June 15 in order to comply with the Constitutional requirement of adopting a state budget by July 1. During the period leading up to the June 15 deadline, strong advocacy efforts will be made to shape the final budget. Many of us in the San Diego Community College District (SDCCD) will be actively engaged in these efforts, as we have been to date.

Impact on the San Diego Community College District
Although there are numerous impacts, here are the most significant effects of the Governor’s May Revision Budget on the San Diego Community College District.  Further clarifications will be coming as further analysis of the state budget proposal is made.

Continuous Revenue

Cost-of-Living-Adjustment (COLA):  The Governor’s Budget Revision includes a 4.05% COLA for the Student Centered Funding Formula (SCFF) in the amount of $185.4 million, which is a $74.3 million increase to his January FY 2021-22 Budget proposal. The COLA represents a 2.31% adjustment for FY 2020-21 and 1.7% for FY 2021-22.

SDCCD Impact: This will yield $7.5 million, which would be distributed in accordance with the SDCCD Resource Allocation Formula (RAF). 

One-Time Revenue

Deferred Maintenance: The Governor’s Budget Revision includes $314 million in Proposition 98 funding.

SDCCD Impact: This will yield $10.9 million for the District to address deferred maintenance and instructional equipment, which will be distributed 60% to facilities in the amount of $6.6 million and 40% for instructional equipment in the amount of $4.3 million.

Total Continuous and One-Time funding Increase:  $18.4 million.

Apportionment Deferral Elimination:

The Governor’s May Revision Budget includes an increase of $326 million in one-time Proposition 98 General Fund dollars to fully retire deferrals from the FY 2021-22 to the FY 2022-23.

SDCCD Impact: The District’s state apportionment funding that was deferred (i.e., not paid) in February, March, and April 2021 was $25.4 million, which the Governor’s May Revision Budget estimates will be paid in July and August 2021.  (Note: The District applied for and was exempted from May and June 2021 deferrals for a total of $16.9 million that was not deferred.)  The elimination of deferrals allowed the District to forego any costs associated with short-term borrowing through Tax Revenue and Anticipation Notes (TRANs), which had been anticipated for FY 2020-21.

Notes:  1) COLA funding for the following categorical programs will remain at 1.5% COLA: DSPS, EOPS, Apprenticeship programs, CalWORKS, and Cooperative Agencies Resources for Education (CARE) program as proposed in the Governor’s January 2021Budget proposal.  This is one of the areas in which we will be providing legislative advocacy to increase the COLA for these programs.

Other areas related to the Budget Proposal are:

COVID-19 Block Grant:  An increase of $50 million in one-time Proposition 98 General Fund dollars to support grants to assist community colleges with responding to the COVID-19 Pandemic and transitioning back toward in-person education. Block Grant Funds are normally distributed based upon FTES; therefore, it is likely the SDCCD will receive $1.8 million.

Student Success Completion Grant:  An increase of $27.2 million in ongoing Proposition 98 General Fund dollars to support revised estimates of student eligible for the program.

Although there is more detail to be determined and a host of many other one-time funds for projects that were included in the May Revision, the governor’s budget proposal provides another year of general, solid support for California’s community colleges, and addresses the impact of the COVID-19 pandemic in constructive ways.

Conclusion

As you know, I will be retiring at the end of this current fiscal year, with my last day being June 30.  Let me close this message by saying that I am pleased to be able to help us shape a budget that is much more positive than the budgets we have had to manage during the COVID-19 pandemic.  It is clear that both California and the San Diego Community College District are on the road to both recovery and advancement. The Board of Trustees, the faculty, the administrators, the classified professionals, the student leaders, the labor unions and meet-and-confer organizations, and our community partners have all collaborated and supported our District’s efforts to stay solvent and to position City, Mesa, Miramar, and Continuing Education colleges to move forward with innovation and high-quality instructional programs and services for the benefit of our students and the San Diego region.  It has been my great privilege to work with everyone during the past 17 years as Chancellor and I will leave my position knowing that economic recovery and progress are at hand.

Thank you for your support. Stay well. 

Dr. Constance M. Carroll
Chancellor of the San Diego Community College District