Board of Governors Approve New Approach to Community-College Finance
At its March 7, 2005, meeting, the California Community College Board of Governors (BOG) accepted the Chancellor’s Office’s staff report as the basis for a new approach to community-college finance. The new approach to community-college finance reflects the contributions of the “Report of the Workgroup on Community College Finance” as modified through extensive system consultation.The BOG authorizes the Chancellor to proceed with necessary steps for:
- Legislation addressing the board parameters of this new funding model.
- Changes in Title V regulations that address more detailed aspects of the model.
- Changes in administrative practice addressing details that do not require specification in legislation or regulation. The BOG specified that implementation of the new funding model would not occur before the 2006-07 fiscal year or alter the 2005-06 System Budget Request.
During the debate over the new funding proposal, BOG members heard testimony from Chief Executive Officer (CEO) representatives in support of the new funding model, as well as CEO and faculty representatives who were concerned about various aspects of the new model. BOG members indicated to Chancellor Drummond that they would like to see all 72 districts in support of the new funding model before it is implemented. Chancellor Drummond assured the BOG that he would continue to work with all parties, but could not guarantee that all 72 districts would unanimously be satisfied with the final product.
The following is a summary of the Chancellor�s Office�s recommendations for the new approach to community college finance:
Provide a stable, reliable and equitable funding allocation:
Funding Allocation
Districts should receive an annual allocation on a per-college basis with recognition for comprehensive centers, and with an equalized rate per full-time student.
Enrollment Stability and Decline
The mechanism for enrollment stability and decline should be enhanced.
Local Property Tax and Student Fee Backfill
The state should provide a guaranteed backfill for shortfalls from the state�s projections of (1) property tax revenue allocated to the districts and (2) student enrollment fee revenue.
Noncredit Instruction
Funding for selected noncredit programs, including high school competency, pre-collegiate basic skills, workforce training, and vocational education, should be provided at the per-student credit rate.
Rural College Access
The state�s interest in maintaining higher education access in rural areas of the state requires the provision of a special grant to rural colleges that face unusual geographic and demographic challenges.
Maintain quality instruction and student support services:
Cost-of-Living Adjustment
Cost-of-living adjustments should include any prior-year inflationary deficit and should be applied to college allocations, credit and noncredit funding rates, and applicable categorical programs.
Core Operational and Instructional Needs
The system�s annual budget request should include an additional 1% increase for core operational and institutional needs.
Lease-revenue Bonds
Lease-revenue bonds should be excluded from the Proposition 98 calculation and refinanced in the next general obligation bond.
Enduring educational access for students:
Systemwide Growth Funding
The system�s annual growth request should be based on the estimated sum of all calculated district growth rates.
District Growth Rates
District growth rates should be changed to better reflect local needs.
District Growth: �Banking� Mechanism
A �banking� mechanism should be established to allow deficited growth rates to carry forward for three years.
Maintain the state�s investment in facilities and instructional equipment:
Scheduled Maintenance and Instructional Equipment Stability
A stable funding stream of ongoing funds should be created for scheduled maintenance of facilities and for instructional equipment.
Prioritize student access to quality instruction and student services:
Budget Priorities
The annual system budget request should be prioritized to (1) protect the state�s existing investment in community colleges, (2) increase access and quality, and (3) maintain and expand programs essential to student success.
Finally
The �foundation grants� (how much money each district will receive based on size, multicampus, rural, urban) appear to be the issue with the most outstanding concerns. The Chancellor�s Office will continue to fine-tune this funding methodology.
The Chancellor�s Office will use SB 361 by Senator Jack Scott (D-Altadena) as the legislation to implement the new funding model. This bill will be amended during the 2005-06 legislative session and it is the intent of the Chancellor�s Office to place the bill on the Governor�s desk for signature prior to January 1, 2007.
GOVERNOR’S “NEW” SPENDING CAP INITIATIVE CONTAINS HUGE HITS TO SCHOOLS
On March 16, 2005, Governor Arnold Schwarzenegger threw his support formally behind a spending cap initiative that some say doesn�t go far enough, but still strikes a huge blow at Proposition 98 and school funding. The measure, �The California Live Within Our Means Act,” is the work of a group of pro business entities led by the California Chamber of Commerce. This measure would let the State Budget grow over time at a rate equal to the average of the prior several years, with any revenue excess over that cap going to a state reserve, an infrastructure account (including roads and schools) and to paying off current state debt.
Not everyone is pleased�this from the Orange County Register: �The measure �is either ineffective, inoperable or both,� said Sen. John Campbell, R-Irvine, who is promoting a ballot measure that would tie state spending to inflation and population growth regardless of how much revenue comes in. �It is not a real control on spending which will prevent future deficits.��
Nor should schools be pleased, since the measure includes many of the provisions from other proposals (such as ACA 4, Keene) that have so exorcized the education community.
Among these, the �Live Within Our Means Act� (referred to by many Capitol insiders as the �Zaremberg Initiative� after the President of the California Chamber of Commerce), would:
� Eliminate the current constitutional requirement that school funding get �back on track� by building the current maintenance factor (about $3.7 billion) back into the base. The Zaremberg initiative provides only one-time payments of the maintenance factor, spread over 15 years. It is analogous to winning a court decision for disability settlement payments of $75,000 a year for life and for the life of your descendants, then being told that you will receive only $5,000 a year for the next 15 years, and none after that.
� Eliminate the ability to ever increase the base for Proposition 98 through �overappropriation� above the minimum. Under Zaremberg, instead of these funds�which must be approved by both the Legislature and Governor�building up the ongoing Proposition 98 minimum guarantee, or base, they will only be one-time in nature, making school funding a hand-to-mouth affair, regardless of the policy intent of the state and its elected representatives.
� Eliminate Test 3 suspensions, and (although this issue is somewhat unclear) probably allow the Governor to unilaterally reduce Proposition 98 on a quarterly basis whenever State Budget expenditures exceed the spending cap.
These measures would clearly be unacceptable to virtually the entire public education community; however, there isn�t time to pull back the initiative and recraft it for a November special election, so it appears that the only alternative would be an initiative coming out of the State Legislature. In the case that both initiatives pass, the one with the higher vote tally would take precedence on issues addressed in both versions.
FUNDING PROTECTION FOR CALIFORNIA’S K-12 SCHOOLS AND COMMUNITY COLLEGES
Senator Tom Torlakson (D-Antioch) has introduced SCA 12, which is intended to align protection for school and community college funding under Proposition 98 with the protections provided to local government revenues under Proposition 1A.
In 2004, following more than 20 years of discussion and debate after the passage of Proposition 13, local governments, including cities, counties, and special districts, sought protection of their revenues in the Constitution as well. Without concrete protections, local governments had been subject to crippling raids on local budgets in order to bridge the state�s fiscal shortfalls. As a result, the voters approved Proposition 1A, a measure that constitutionally protects local government revenues from future raids by the state. While maintaining significantly limited ability for the state to borrow from local governments in the future, it now provides local governments much needed fiscal stability.
However, protections for local government revenues under Proposition 1A now far exceed those for K-14 education under Proposition 98. Recent budgetary actions and proposals reflect considerable cuts to education that could be significantly larger in future years as the protections take effect for local government under Proposition 1A.
SCA 12 would significantly increase the protections for K-14 education funding outlined in Proposition 98. In summary, the bill would:
� Require that, in a fiscal year in which K-12 schools and community colleges are funded under Test 3, a statute be enacted to repay the resulting maintenance factor plus interest within three fiscal years. The interest would not count as part of the Proposition 98 base
� Require that, in order for the state to suspend Proposition 98, the following conditions be met:
–The Governor issues a proclamation declaring a severe state fiscal hardship that makes the suspension necessary
–A statute be enacted to repay the resulting maintenance factor plus interest within three fiscal years; the interest would not count as part of the Proposition 98 base
–The suspension cannot be enacted more than twice in 10 years
� Provide that the suspension cannot result in a loss to K-12 schools and community colleges of more than 8% of the amount of General Fund revenues allocated to them in the fiscal year prior to the fiscal year of the suspension (for example, if suspension happened in 2008-09, funding to schools and community colleges could not drop to less than 8% of the 2007-08 allocation to them)
� Provide that a suspension cannot be enacted during any fiscal year in which the state owes any maintenance factor to K-12 schools and community colleges resulting from a suspension or a Test 3 funding scenario
According to his staff, Senator Torlakson intends to amend the current bill language to reflect a state obligation to repay revenues lost in years when the Proposition 98 base is lower due to a Test 3 or suspension funding scenario.
As a constitutional amendment, SCA 12 would require a two-thirds vote of the Legislature, which means Republican support would be needed to place the measure on the ballot. Senator Torlakson hopes to qualify SCA 12 for a November 2005 vote. The measure does not need to be signed by the Governor; however, he could influence the process by requesting that his fellow Republicans not support the measure.
COMMUNITY COLLEGE AUDITS
Senator Jackie Speier (D-Hillsborough) has introduced SB 709, which, if approved, would have far-reaching effects on community college audit procedures. It appears that Senator Speier is concerned about whether districts are accurately reporting student enrollment for the purpose of state apportionments.
Existing law requires the governing board of each community college district to provide for an annual audit of all funds, books, and accounts of the district in accordance with regulations of the Board of Governors (BOG). Existing law also requires the BOG, in cooperation with, and upon approval by, the Department of Finance, to prescribe the statements and other information to be included in the community college districts� audit reports.
SB 709 would specifically require the following of local districts:
That the annual audit of a community college district examine whether community college campuses are properly reporting student enrollment for the purpose of state apportionments.
That random checks of attendance are done for all classes for which apportionment is claimed to determine:
1. That classes reported for apportionment purposes are accurately and adequately described in the course descriptions used by that campus.
2. That classes for which apportionment is claimed are recorded on the transcript of each attending student.
3. The extent of compliance with special regulations regarding claiming apportionment for distance learning, tutoring, and other special classes.
All classes for which apportionment is claimed are published in an official campus schedule of classes.
At least twice a year, the paycheck envelopes issued to community college faculty shall contain the website address and hotline telephone number for reporting suspected improprieties to the Office of the Inspector General of the United States Department of Education.
The BOG shall establish a system for collecting information from students regarding errors in the reporting of classes on transcripts. The BOG shall provide that each student transcript shall have an annotation which states that, if a student notes that a class that has never been taken appears on his or her transcript, the student shall report that fact to an entity identified by the BOG. The BOG shall establish a method for tracking errors at each community college district for the purposes of determining whether a pattern of errors would warrant an audit of a specific community college campus or district.
On or before July 1, 2006, the BOG shall examine the formula that determines the level of funding for both credit and noncredit classes for the purpose of determining whether the formula should be amended in a manner that would help prevent errors and misrepresentations by community college districts in the reporting of class enrollment for apportionment. The findings and recommendations of the BOG with respect to this matter shall be reported, in writing, to the Director of Finance and the Legislature on or before October 1, 2006.
The Chancellor�s Office staff is recommending that the system oppose this legislation. It is unclear to what extent a problem exists to warrant such legislation. The Chancellor�s Office acknowledges that it would require an increase in staffing to improve and expand audits of local districts.
Ask Arnold (Bray–the tall one). . .
Is There a Contingency Language Model for District Negotiations?
Q. We are in the thick of negotiations with our teachers� association for a compensation package for next year (we agreed on 3% for the current year awhile back). We feel we can afford something in the 3% to 4% range for next year, as long as we get the proposed cost-of-living adjustment (COLA), funded FTES growth, and the State Teachers� Retirement System (STRS) shift goes away. Do you have any suggested contingency language models that could be used to protect the district if we reach an agreement for increased compensation now for next year?
A. It is always difficult to write contingency language�even more so when the state continues to throw us curves like the STRS shift. For most districts, that shift alone takes away almost a third of the proposed COLA and deficit reduction funding. Districts that have enrollment growth and caps on health benefits are able to do a bit more, but declining enrollment districts and those with uncapped benefits are feeling strapped and can�t afford to make a mistake in contract language.
You really have three very distinct choices for contingency language models regarding the STRS shift. If you believe it is as simple as the �the STRS shift is either in or out,� you could specify one rate if it is included and one if it is not. A second option is to base a raise on the difference in the funded base revenue per unit of FTES, minus the effect of any new provisions of law, including STRS or anything else proposed in addition to or instead of STRS. And a third option is to specify a set pay raise based upon what is known today with a provision for a reopener that would take you back to the table if anything changes.
Each of these choices has a legitimate place in your planning process. There is an element of risk in each of the choices and crystal balls are hazy in Sacramento right now. There is no �pat� answer.
By the Way . . .
Senate Rules Committee Confirms Board of Governors Appointees
The Senate Rules Committee recently approved Governor Schwarzenegger�s appointments to the California Community College Board of Governors (BOG). It is expected that the 40-member Senate will vote to confirm the Rules Committee recommendations.
The four BOG members approved by the Rules Committee are: Kay Albiana (term�January 15, 2007); Lance T. Izumi (term�January 15, 2009); Pauline Larwood (term�January 15, 2010), and Margaret R. Quinones (term�January 15, 2008). A fifth member scheduled to be confirmed, Benita D. Haley, was unable to appear before the committee due to family business�she will be confirmed at a later date.
Of interest, J. Steven Rhodes, a businessman from Los Angeles, had his name withdrawn for appointment by the Administration for unknown reasons. As a result, the Governor still has at least six more appointments to be made to the BOG.
On March 17, the four BOG members approved by the Rules Committee were approved by the Senate. Board members Izumi, Larwood, and Albiana were unanimously approved. Member Quinones was approved on a 30-2 vote.
Community College Student Transfers to Private Colleges Made Easier
Higher education leaders recently announced an agreement that they say will ease transfers from California community colleges (CCC) to National University, a private, nonprofit institution. Under the agreement, National University will advise community college students interested in enrolling in its programs. National will also waive its $60 application fee, as well as fees for the final two courses students need to complete a bachelor�s degree.
Most community college students who transfer to a four-year institution opt for a University of California or California State University campus. Sixty percent of all students attaining bachelor�s degrees at CSU, and 30% at UC, start their four-year studies at a California community college.
National University, headquartered in San Diego, has 29 campuses around the state and in Nevada. According to CCC Chancellor Mark Drummond, approximately 3,000 community college students a year transfer to National University.
Stay tuned…
