The California Budget 2023-24: Weathering the Storm

January 11, 2023 | Carlos O. Cortez, Ph.D. - Chancellor of the San Diego Community College District

Dear Colleagues and Friends:

The governor stands at a podium. Sign language translator is on the top right of the screen. Text reads 35.6 billion dollars in budget reservesIt is ironic that as California Governor Gavin Newsom and his staff developed a proposal for the state’s Fiscal Year 2023-24 budget, an “atmospheric river” took aim at the state with deadly rain, winds, and storm surf. After two pleasant years with significant budget surpluses, storm clouds have gathered and California is experiencing a sharp drop in revenues. This leaves many wondering if the state will need to access its substantial “rainy day” reserves to balance its budget.

On January 10, Governor Newsom held a news conference to outline a $297 billion budget for FY 2023-24, which includes a 3.6% decrease from last year’s record budget. The budget includes $224 billion in the General Fund and a projected deficit of $22.5 billion.

The governor does not propose using the state’s rainy day reserves, which he feels may be needed more urgently if economic conditions continue to decline. Instead, the budget is balanced using a combination of spending delays and cuts. Some reductions are included in a trigger that would restore funds if revenue improves.

The release of the governor’s Budget Proposal marks the official start of the state’s budget development process. Next up are legislative discussions, advocacy from the public and private sectors, and further analysis by the State Department of Finance and the Legislative Analyst’s Office as more is known about revenue generated in the current year. The governor’s second budget proposal, known as the May Revise or May Revision, must be released each year by mid-May and based upon updated revenue, as well as input from legislative discussions and public advocacy efforts. The state must pass a budget by June 15, in time for the July 1 start of the 2023-24 fiscal year.

Read the joint budget analysis from the
California Community Colleges Chancellor’s Office

In his remarks, Governor Newsom reviewed the process and components of the budget effort that resulted in the state’s expenditure plan for FY 2023-24. A few areas of new investment include flood protection and funds to combat the fentanyl crisis. Governor Newsom says homelessness remains the state’s No. 1 funding priority. Meanwhile, education and social service programs are largely protected from reductions, although funding for affordable student housing will be delayed. Areas of planned investment, which will likely see major cuts, include climate change programs and transportation. 

Budget Impact on Education and the San Diego Community College District

As for education, Proposition 98 funding for K-12 and community colleges is $108.8 billion, a slight decrease from last year and the first drop in funding in a decade. On the plus side, the budget includes a massive cost of living allowance (COLA) of 8.13% and a modest 0.5% increase in growth funding. The governor remains committed to the multi-year roadmap for the system, which is essential to its ambitious student success and diversity, equity, and inclusion goals. As such, the California Community College system will receive $778 million in new revenue including $200 million in one-time Prop 98 funding to boost student enrollment and retention. The governor also makes good on previous commitments to fund the UC and CSU with 5% general fund budget increases targeted at increasing access and affordability.

The governor’s budget recognizes the essential role in the state’s economic health played by California’s 116 community colleges. Previous budgets extended the “funding floor” for the Student-Centered Funding Formula’s hold harmless provision beginning in fiscal year 2025-26. The SCFF “funding floor” will have district’s funded at their 2025-26 generated revenue or their 2024-25 funded revenue, whichever is higher. While continuing to support California’s community colleges, which have struggled to regain enrollment lost during the pandemic, the funding comes with a warning that community colleges must attract and retain more students in the years to come or face budget consequences.

The San Diego Community College District has always followed a balanced approach to fiscal policy and operations and has been aggressive in taking steps to eliminate all developments that produce structural deficits. Under the governor’s proposed budget, the SDCCD will continue to invest in our great institutions, City, Mesa, Miramar, and Continuing Education colleges, to advance their programs and innovations.  

Here is a summary of the governor’s proposed budget, which Executive Vice Chancellor Bonnie Ann Dowd and several agencies have analyzed, as it affects community colleges in general and the San Diego Community College District in particular. (For those who would like more detailed information, see the joint budget analysis from the California Community Colleges Chancellor’s Office, working with other organizations.)

Continuous Revenue

- Cost of Living Adjustment (COLA). The governor’s Budget includes an 8.13% COLA in the amount of $653 million.
SDCCD Impact. This will yield approximately $23.7 million, which will be addressed in accordance with the SDCCD Resource Allocation Formula (RAF). 

- Apportionment Funding for Growth. The governor has proposed .05% in growth funding in the amount of $28.8 million.
SDCCD Impact. If the District is funded under the Student Centered Funding Formula’s (SCFF) minimum revenue provision (i.e., hold harmless); SDCCD will not be eligible to receive any growth funding.

One-Time Revenue

- Deferred Maintenance to support districts operational and energy efficiency projects is included in the governor’s proposal. This year’s state allocation proposal is $627 million.
SDCCD Impact. The District could receive approximately $22.5 million in one-time funding. As with past practice, 60% or $13.5 million would be allocated to facilities and 40% or $9.0 million would be allocated for instructional equipment and materials.

Total Increase: $23.7 million on-going funding and $22.5 million of one-time funding.

Although there is more detail to be provided in the months to come, the governor’s proposed budget includes funding to community colleges for several state initiatives that support access, equity, and innovation. The proposed budget continues to demonstrate the state’s commitment to education in spite of current economic uncertainty. The governor’s proposed budget is the first step in the process for development of the state’s 2023-24 adopted budget and it once again provides some needed relief in several areas that are important to the state, community colleges, and the students and communities we all serve.   

The Board of Trustees, college presidents, vice chancellors, Academic and Classified Senates, and student leaders will be involved in legislative advocacy efforts that will begin later this month when we will participate in statewide advocacy meetings with a focus on increasing base funding and continuing the mitigation of the impact of increases in the employer contributions to CalSTRS and CalPERS.

During the coming months, you will all receive information about the budget issues that will be addressed, along with other legislative matters, and your ideas and suggestions will be welcome. The Chancellor’s Cabinet and Budget Planning and Development Council will now turn their attention to the actual, detailed budget development process for 2023-24, a process in which everyone will be involved through designated councils and committees, both districtwide and at the campuses. All districts are required to approve a Tentative Budget by June 15 and an Adopted Budget by September 15 each year. In addition, the District’s strategic planning process includes opportunities to provide direct input on our priorities and initiatives to be pursued in the years to come. I encourage you to stay engaged and let your voice be heard.

Carlos O. Cortez, Ph.D.
Chancellor of the San Diego Community College District

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