Over the past five months, the District has followed closely the development of California’s budget. Fortunately, the state’s revenue continues to outpace even some of the most optimistic projections. It is remarkable that a state that faced a $54 million budget deficit two years ago is now experiencing its second year of a significant budget surplus currently projected at $97.5 billion. What will the state do with this windfall of revenue? That continues to be the $100 billion question for Governor Gavin Newsom and the California legislature.
THE GOVERNOR’S MAY REVISION BUDGET
On Friday, May 13, Governor 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 2022-23 is $300.7 billion, $227.4 billion of which is State General Funds. “Simply without precedent” is how Governor Newsom described the state’s $97.5 billion budget surplus. About half of this amount is required by law to be spent on education, which leaves the state with a still-impressive $49.2 billion in discretionary money.
The Governor’s May Revision Budget includes an increase in Proposition 98 General Fund dollars for $1.9 billion (31%) on-going and $2.9 billion (69%) in one-time funds. In his remarks, Governor Newsom outlined “The California Blueprint,” an ambitious spending plan intended to address the state’s most pressing issues, primarily with one-time funding. This includes some familiar priorities such as wildfire and drought relief, infrastructure, and rental assistance. It also included funding for new initiatives such as inflation relief and subsidies for low- and middle-income healthcare plans. Notably, the plan contains $18.1 billion in funds that the governor says will go back to Californians, primarily in the form of checks sent to motor vehicle owners.
THE BUDGET’S IMPACT ON EDUCATION SPENDING
The governor also announced significant increases for education. For K-12 districts, the increases will bring per-student spending to $22,850 per student, the highest in state history. Higher education will also benefit with the University of California and California State University seeing a 5% base increase each year for the next five years. For their part, California’s community colleges will receive $1.5 billion of the $1.6 billion in higher education spending increases over and above the governor’s January budget. Community colleges will see welcome increases in Student Centered Funding Formula (SCFF) base funding and a larger than usual COLA, and more one-time funding to address deferred maintenance and technology funding to modernize CCC technology to protect data, and several other one-time initiatives.
What the May Revise does not include is additional state pension relief, which we strongly advocated for. This is significant because the District’s required contributions to help fund the state pension systems, CalPERS and CalSTRS, have increased dramatically over the past decade putting significant strain on all community college districts’ annual operating budgets. Similarly, the May Revise does not include funding to expand the Cal Grant program, as proposed in Assembly Bill 1746. That bill would make an additional 109,000 community college students and 40,000 university students eligible for financial aid. Lastly, we would have liked to have seen the governor expand on the three-year, $2 million plan he introduced last year to build more affordable student housing at our public colleges and universities.
The next step in the state budget process is legislative review, in which both houses of the legislature will 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 will actively be engaged in these efforts, as we have been thus far.
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 6.56% COLA for the Student Centered Funding Formula (SCFF) in the amount of $493.0 million, which is a $83.6 million increase to his January FY 2022-23 Budget proposal.
SDCCD Impact: This will likely yield $17.3 million, which would be distributed in accordance with the SDCCD Resource Allocation Formula (RAF).
The state budget proposal also includes $375 million increase to the Student Centered Funding Formula (SCFF), consisting of $250 million to increase the funding rates for the base, supplemental and success allocations and $125 million to increase the basic allocation within the base.
SDCCD Impact: This could yield $13.1 million due to re-benching the district’s SCFF “hold harmless” protection to its new “floor” for total computational revenue as of FY 2024-25 when the SCFF “hold harmless” protection sunsets.
The Governor’s budget also includes a Discretionary Block Grant of $750 million in one-time funds to address issues related to the pandemic and to reduce long-term obligations such as allowing districts to buy down its employer pension liabilities. If the block grant funds are distributed based upon FTES, SDCCD would receive $26.2 million in one-time funds.
The Governor’s Budget Revision also includes $1.523 billion in one-time Proposition 98 funds for districts to address deferred maintenance.
SDCCD Impact: This will yield $53.0 million for the District to address deferred maintenance and instructional equipment, which we would distribute 60% to facilities in the amount of $31.8 million and 40% for instructional equipment in the amount of $21.2 million.
Total Continuous funding of $30.4 million, $17.2 million actual funding and $13.1 million towards the SDCCD to move out of “hold harmless” protection under the SCFF and one-time funding of $79.2 million for deferred maintenance and block grant funding to address pandemic related issues when the state budget is adopted by the governor in June.
The May Revision also includes COLA funding for several categorical programs at 6.56% : DSPS, EOPS, Apprenticeship programs, CalWORKS, and Cooperative Agencies Resources for Education (CARE) program as proposed in the Governor’s January 2022 Budget proposal.
Although there is more detail to be determined and a host of many other one-time funds for various initiatives that were included in the May Revision, the governor’s budget proposal is good news for the California Community Colleges as it provides additional resources and a recognition of the essential work performed at the state’s 73 districts.
CONCLUSION
Going forward, the District’s leadership will be analyzing the state budget and we will continue to advocate for our statewide priorities until the state budget is approved. Executive Vice Chancellor Bonnie Dowd and others will work through the District’s Budget Planning and Development Council and other participatory governance processes to develop the 2022-23 adopted budget, which must be approved by the Board of Trustees at its September 15, 2022, meeting.
Meanwhile, I believe the districtwide strategic planning process will help our District achieve consensus around key goals and build collaboration that will help us address our long-term budget priorities. These initiatives will make us more efficient, effective, and equitable in serving students and the community. In the meantime, I welcome your thoughts and input as we work together to continue to provide high-quality instructional programs and services for the benefit of our students and the greater San Diego region.