Governor and Legislature Reach Budget Agreement

Governor Arnold Schwarzenegger and legislative leaders emerged from their “Big Five” meeting on July 5 to announce that an agreement has been reached on the estimated $116 billion 2005-06 State Budget.
Initial intelligence from the Legislature and the Governor’s press statements indicate the following:

• The Budget modifies the proposal to shift the cost of STRS to local school districts by agreeing to a compromise to take one-half the money ($235 million) from the state�s general fund and count the other half against the funding schools would have received under Proposition 98�meaning a sharp reduction from the $247 million proposed by the Budget Committees for funding for prior-year mandated cost claim reimbursement. School districts will not have to expend any local funds, according to reports.
• The Budget provides the same level of funding for schools as the Governor�s May Revise, increasing Proposition 98 funding by $3 billion, but does not provide the $3.1 billion owed to schools under the Proposition 98 formulas.

It was also reported that the Governor plans to use the “good will” that seemingly came out of the Budget talks to try to work out a compromise over the spending control measure (see “The ‘California Live Within Our Means’ Act–What It Means for California Public Schools” in the June 24, 2005, Community College Update, page 159) that will be on the November special election ballot.

Other key �deal-making� compromises include agreements that do not raise taxes, that pay down all of a $1.3 billion loan owed to local governments in the fiscal year that ends next June�instead of a year later to lessen the state�s future debt; and that do not make use of voter-approved authority to sell additional bonds to help cover the state’s deficit.

The State Legislature sped a State Budget to the Governor Thursday morning, July 7, 2005, with far more speed�and with a far wider margin�than has been the norm in recent years.

The Budget, hammered out in a series of closed-door meetings with high level staff and with the Big Five (the Governor and the leaders of each party in each house), was finalized only Tuesday night, July 5. And on Thursday, July 7, the Assembly voted 65-13 to send it to the Governor, with the Senate voting 34-4, (the Assembly needed 54 votes and the Senate 27 to meet the two-thirds vote requirement for a budget.)

Budget Bill�Senate Bill 77

The following is a summary of budget line items for community colleges contained in SB 77 that was approved by the Legislature and sent to the Governor for his consideration (keep in mind that the Governor may use his �blue pencil� to veto items in the Budget):

� The Proposition 98 �base� for the community colleges increases by $439 million over the 2004-05 Budget Act, or 9.1%. This increase includes $210.4 million for a 4.23% COLA, and $141.9 million for enrollment growth (3% for general apportionments and 1.76% for selected categorical programs)

� The student enrollment fee remains at $26 per credit unit
� The budget restores $31.4 million in Partnership for Excellence funds
� Basic Skills and Apprenticeship�$43.4 million
� Student Financial Aid Administration�$51.6 million
� Disabled Student Programs and Services�$91.1 million
� Special Services for CalWORKs Recipients�$34.6 million
� Foster Care Education Program�$4.7 million
� Matriculation�$66.3 million
� Academic Senate for the Community Colleges�$467,000
� Equal Employment Opportunity�$1.7 million
� Part-time Faculty Health Insurance�$1 million
� Part-time Faculty Compensation�$50.8 million
� Part-time Faculty Office Hours�$7.1 million
� Telecommunications and Technology Services�$24.3 million
� Economic Development�$35.7 million
� Transfer Education and Articulation�$1.9 million
� Physical Plant and Instructional Support�$27.3 million
� Extended Opportunity Programs and Services�$104.7 million
� Fund for Student Success�$6.1 million (includes $19 million for the Puente Project, $2.4 million for the MESA Program, and no less than $1.4 million for the Middle College High School Program)

In addition, the amount appropriated reflects the intent of the Legislature to defer $200 million for apportionments to the 2006-07 fiscal year, pursuant to legislation enacted for the 2005-06 fiscal year. Also, of the amount appropriated ($10 million) shall be used to provide additional support for nursing program enrollment and equipment needs (the Board of Governors shall develop a Request for Applications to allocate the funds appropriated for these purposes to local districts).

In terms of funding from one-time sources, the Budget Bill provides $20 million for the Governor�s initiative for improved articulation in career technical education programs between community colleges and the K-12 system. From one-time funds, the budget bill also provides $33 million to backfill the property tax shortfall for the 2004-05 fiscal year.

Finally, see the following article on �Education Trailer Bills� for more detail on equalization funding and noncredit funding.

Education Trailer Bills�SB 63 and SB 80

Education trailer bills are introduced to place into statute and/or implement various provisions of the Budget Bill. The primary education trailer bill is SB 63. This trailer bill contains two provisions that apply to community colleges.

District Level Accountability

The Budget restores $31.4 million in Partnership for Excellence Funding that was lost in last year�s Budget Act. This restoration of this funding is tied to the enactment of SB 63, which contains language that provides for district-specific outcome measures, based largely on recommendations adopted by the Board of Governors.

SB 63 contains Section 84754.5, which is added to the Education Code, to read, in part:

As a condition of receiving specified funds ($31.4 million) in the annual Budget Act to encourage district-level accountability efforts, community college districts shall provide data, in a format and according to a schedule to be specified by the Office of the Chancellor of the California Community Colleges, for the purpose of the annual report to the Legislature and for purposes of providing the means for both internal and external assessment of the district�s educational offerings in meeting the high-priority educational goals of the state.

The Chancellor shall withhold, delay, or reduce funds specified in the annual Budget Act to encourage district-level accountability efforts from a district that fails to provide needed data by specified deadlines.

Foster Parent Training

Senate Bill 63 amends Section 1529.2 of the Health and Safety Code to read, in part:

In addition to the foster parent training provided by community colleges, foster family agencies shall provide a program of training for their certified foster families.

After all allocations for foster parent training in community colleges have been made, any moneys remaining in the Foster Children and Parent Training Fund may be allocated to foster children services programs.

Equalization and Noncredit Instruction

The Budget Conference Committee reduced the $40 million to $20 million for equalization, which is the amount contained in the Budget Bill, SB 77. The Budget Conference Committee then allocated $10 million to increase the noncredit instruction rate and $10 million to cover unfunded mandates.

SB 80 modifies the Budget Bill to delete the $10 million for noncredit instruction and increases equalization funding by $10 million, thereby providing $30 million in equalization funds to be allocated in the same manner as for 2004-05.

�Arnold Bray