Governor Looks to the Future in State-of-the-State Address

In his highly anticipated third State-of-the-State address, Governor Arnold Schwarzenegger laid out a sweeping vision for California that hearkened back to the future, recalling former governors of both parties who built the state: “In the face of massive and huge challenges, they built the foundation of California’s prosperity,” the Governor said, “They built the schools and universities that became the envy of the world. They built the bridges and aqueducts, the highways and hospitals that made California the economic powerhouse it is today.” And then he laid out his own plan.As pundits predicted, this year’s speech–as opposed to last year’s–was about building bridges, not burning them. The tone of his speech was unfailingly optimistic, even offering a mea culpa. “I have thought about last year and the mistakes that I have made,” he said, acknowledging that the people wanted action, not rhetoric, and cooperation, not conflict. To which he added, “To my fellow Californians, I say, ‘message received’.” So he concentrated on the future.

�Let me ask you,� he posed. �What kind of California do we want in 20 or 30 years? What kind of highways will we drive on? What kind of schools will our children attend? What kind of jobs will we have? What kind of air will we breathe? What kind of hospitals will care for our sick?�

He referred to the China trip he took following the November 8, 2005, special election, and the perspective that it gave him.

�I was in China recently,� he said. �What a sight. Construction cranes fill the sky. Over a billion people work and save and study. Now we all know that China has enormous problems�environmental, social, political�problems much larger than ours, but they are preparing for a global future. Do we not have the same ability to think as dynamically and optimistically about our people�s future? Of course, we do.

�California is already on the leading edge of a global economy that is changing and growing by leaps and bounds. And yet we will let this advantage slip from our fingers, if we don�t make the long-term investment in our ports, our roads, our schools, our information systems and all the other infrastructure required to compete in a world that thrives on innovation.�

And in his typically entrepreneurial manner, he posed the big issue of the times in Wall Street terms.

�Think of California as a mutual fund�in particular, a growth fund. Why do you invest in a growth fund? Because you believe in the economic future. I ask each of you . . . do you believe in California�s economic future? Then we must invest in it. If we do not invest in ourselves, how can we expect others to invest in us?�
The cornerstone of the speech is an ambitious �strategic growth� infrastructure plan�one that also acknowledges the political reality of the state today by avoiding a tax increase.

This plan is to address the state�s ongoing infrastructure needs, including schools, public safety, transportation, air quality, water and flood control, and justice. From his speech and related documents emerges a $222 billion comprehensive investment plan, including $68 million in General Obligation (GO) bonds, which, if approved, would be implemented over a 20-year period and completed in phases.

It is the Governor�s hope that the Legislature would approve the first phase of the Plan, a 10-year installment, with the bonds considered by voters over a series of elections between 2006 and 2014. The Governor is also proposing to amend the state�s Constitution to limit the state�s debt service to 6% which is currently the generally accepted guideline for General Fund Revenue.

Under this proposal, higher education stands to receive capital funding of approximately $11.7 billion, over the Governor�s 10-year plan in new state GO bonds with existing local, state, and federal funding sources utilized when possible. The intent in leveraging existing funding is to minimize the cost to the state�s General Fund.

For community colleges, the University of California (UC), and the California State University (CSU), the Administration�s suggested 2006 measure proposes almost $1.5 billion in state GO bonds. The higher education bond is proposed to fulfill the commitment agreed to in the compact with UC and CSU. In addition, it provides a like amount for community colleges. Bond expenditures proposed for the budget year for each segment are as follows:

� $400 million for telemedicine will be used to provide facilities and state-of-the-art equipment needed to expand UC�s medical programs
� $315.4 million for the construction and renovation of 29 buildings on UC campuses
� $234 million for the construction and renovation of 15 buildings on CSU campuses
� $491.7 million for the construction and renovation of 58 buildings in 38 community college districts
� In addition, 30 districts have committed to use $261 million in locally approved Proposition 39 funds to support their projects

Note: AB 58 by Assembly Speaker Nunez proposes to place a GO bond measure on the November 2006 ballot in the amount of $9,387,000,000. Approximately $2.9 billion of the Speaker�s bond measure is earmarked for higher education. Of this amount, community colleges would receive $1,507,000,000. The UC and CSU would receive $690 million each.

There were few details on education initiatives or on the operating budget for education. The Governor�s only reference to higher education was his proposal to eliminate any increase in student enrollment fees, thus freezing community college fees at $26 per unit for one more year.

�In education,� he said, �the budget I will introduce next week will propose immediate repayment of $1.67 billion in Prop 98 money. This, in addition to an automatic budget increase of $2.3 billion, will be the largest increase in funding in education�s history. I propose that we use part of this money so that children once again can have art, music, and physical education in our schools.

�Also this year, California�s Prop 49 after-school initiative kicks in, which will provide an additional $428 million for after-school programs. This will make our state the only one in the nation to offer comprehensive after-school programs. Every elementary and middle school can have a program so that working parents will know that their children will be in a safe environment�getting help with their homework, doing arts and physical activity. This will be good for both the children and the parents.�

And should there be any question about his commitment to a new, bipartisan focus, the Governor closed his speech lauding the commitment shown by Democratic Senator Martha Escutia (D Whittier), who spent six years in a fight to limit junk food in schools.

�It shouldn�t have to take six years to address the health of our children,� he said. �But the thing that really impressed me, was her perseverance, her stamina, her commitment, that is what was so unbelievable.

�I ask you tonight to have the same perseverance, the same stamina, the same commitment, to help our children, our families, our communities, and our state.�

Governor Proposes a $4 Billion Increase In Funding for Schools

On January 3, 2006, Governor Arnold Schwarzenegger announced that he would be including a sizeable funding increase for schools in his 2006-07 proposed State Budget. Characterized by the Administration as the �largest investment in the quality of our schools,� Secretary for Education Alan Bersin unveiled the proposed $4 billion increase in K-14 funding, which, if approved by the Legislature, would result in total resources of more than $66 billion for education in 2006-07.

While the details about the specific proposals remain sketchy�we do not anticipate learning the specifics until the release of the proposed State Budget scheduled for January 10, 2006�the following is what has been indicated by Secretary Bersin as to what will be included in the upcoming proposed budget:

In addition to the normal Proposition 98 adjustments for inflation and growth totaling $1.9 billion, an additional $2.1 billion will be provided�$1.7 billion to pay down the Proposition 98 maintenance factor and $428 million to implement the Proposition 49 Before- and After-School Program. The Governor�s proposal will fully fund COLA and growth (Note: The estimated COLA factor was not provided), plus:
� $133 million for prior year mandated costs

The Governor is also proposing substantial financial investments in the following areas that would impact community colleges:

� Career Technical Education programs. The proposed budget will include an additional $30 million for the continued expansion and improvement of vocational education courses. This funding is in addition to the $20 million increase the program received last year. The funds will continue to be administered by the community colleges.

� Equalization. The Governor�s proposal would provide $200 million to K-12 for revenue limit equalization. Secretary Bersin indicated that additional equalization funds would be provided to community colleges. Although he did not specify an amount, $130 million would be needed to backfill the Governor�s initial commitment to provide $240 million over a three-year period.

� Student Fees. The Governor is proposing to provide the University of California and the California State University systems with more than $100 million to offset any student fee increase in the respective institutions. The Governor indicated that community college student enrollment fees ($26 per credit unit) would remain at the same level for 2006-07.

This funding increase represents much more than the anticipated increase in Proposition 98 funding most were expecting to receive. The Legislative Analyst�s Office (LAO) had estimated only a $2.2 billion increase, (after including the $428 million for Proposition 49). The estimated difference between what the LAO projected and the funding level announced by the Governor is approximately $1.8 billion. This difference is roughly the amount that was in dispute last year between the Governor and the education community after the Governor reneged on the �Deal� in 2004-05.

New Laws Affecting California Community Colleges

The following bills of interest to community colleges were signed into law by Governor Schwarzenegger in 2005 and became effective January 1, 2006:

AB 414 (Klehs, D-San Leandro) Labor Compliance Programs: Third Party Providers

This bill, relating to projects funded with state education bond funds, requires that a third party that contracts with an awarding body to initiate and enforce a labor compliance program shall not �review payroll records of its own employees and employees from its subcontractors� performing the public works project; instead, an independent third party or the awarding body must review these records.

AB 967 (Canciamilla, D-Pittsburg) Concurrent Enrollment

This bill provides that, if a principal recommends a pupil for enrollment in a college-level advanced scholastic or vocational community college course during a summer session, the 5% ceiling on concurrent enrollment does not apply if the course:

� Is provided by a middle college high school, or early college high school
� Is part of the Intersegmental General Education Transfer Curriculum
� Applies towards CSU general education breadth requirements
� Is an occupational course defined as high priority by the System Office and reported in the management information system

This bill further requires the System Office, by January 1, 2007, and each year thereafter, to report to the Department of Finance on the number of high school pupils enrolled in summer school courses, and prohibits the inclusion of these pupils within the annual budget request of the California Community Colleges.

AB 982 (Laird, D-Santa Cruz) Student Health Fees

This bill allows districts the option of charging a fee (currently up to $13) for student health centers to all students, including students receiving Board of Governors fee waivers.

AB 1088 (Oropeza, D-Long Beach) Mandatory Orientation

This bill requires each local community college governing board to:

� Include educational and preventive information about sexual violence to students as part of their established on-campus orientation; or
� If a campus does not have an orientation, include the above information on its website

This bill also requires community colleges to develop policies encouraging students to report any campus crimes involving sexual violence.

AB 1280 (Maze, R-Visalia) California Community College Baccalaureate Partnership Program

This bill, until July 1, 2014, establishes the California Community Colleges Baccalaureate Partnership Program, and authorizes the System Office to award up to two grants, not exceeding $50,000 each, if the funds are provided in the annual Budget Act, to interested applicants. Each applicant is to be composed of �at least one community college and at least one baccalaureate degree-granting institution.� This bill specifies that these funds are:

� To be prioritized to applicants in areas with the lowest rates of baccalaureate degrees
� To be given to applicants that demonstrate that the programs offered meet labor market
� Intended for one-time �startup� costs
This bill requires the System Office to submit a report to the Legislature and the Department of Finance on the program�s efficacy by April 1, 2012.

AB 1366 (Lieber, D-Mountain View) College Fiscal Accountability

This bill authorizes the Board of Governors to assign the Fiscal Crisis and Management Assistance Team (FCMAT) to assist a community college district with establishing and maintain sound fiscal and budgetary conditions, and to comply with principles of sound fiscal management. This bill also requires the Chancellor to report to the Board of Governors on the following: the events which led to the crisis, an action plan for remedying the deficiencies, a process for assessing district progress in correcting deficiencies, and benchmarks indicating sufficient local capacity to manage the district�s responsibilities.

AB 1480 (Maze, R-Visalia) Community College Agricultural Education

This bill requires the California Community Colleges Agriculture and Natural Resources Advisory Committee, with funding provided to it under the federal Carl D. Perkins Vocational and Technical Education Act (VTEA), to identify and develop quality program criteria to evaluate the effectiveness of agricultural education programs, and submit a report by June 30, 2007, to the System Office and the Legislature.

AB 1492 (Evans, D-Santa Rosa) Capital Outlay: Intercept Financing

This bill allows community college districts to issue lease-revenue bonds secured with general apportionment funds for the purpose of constructing energy-efficient capital outlay projects. By allowing districts to use �intercept financing� for bond repayment, districts may be able to secure lower interest rates in exchange for having the Chancellor withhold apportionments from the district and directly transfer the funds to the Controller for repayment to bondholders.

SB 70 (Scott, D-Altadena) Vocational Education

This bill requires the Board of Governors to assist economic and workforce regional development centers and consortia, including middle and junior high schools, high schools, and regional occupational centers and programs, to improve linkages and career-technical education pathways between high school schools and community colleges for the benefit of pupils and students in both educational systems. This bill requires the Board of Governors to ensure that elementary and secondary school educators strongly collaborate with college faculty in implementing this provision. The bill contains $20 million for these purposes.

Legislature Returns to Sacramento�First Order of Business: �Two-Year Bills�

The Legislature returned to Sacramento on January 4, 2006, to complete the second year of its two-year legislative cycle. During the 2005 legislative session, more than 2,700 bills were introduced by the Assembly and Senate. Legislators will have the opportunity to introduce more bills in 2006, which will likely bring the two-year total to more than 4,000.

Legislation introduced in 2005 that did not pass the policy committees must be heard by January 13, 2006. The last day for any committee to hear and report to the floor bills introduced in that house is January 20, and all bills must be out of their house of origin by January 31. The last day to introduce bills is February 24.

Two-year bills of interest to community colleges that must be heard by January 13 are:

AB 58 (Nunez, D-Los Angeles) Kindergarten-University Public Education Facilities Bond Act of 2006

This bill is the vehicle for placing a general obligation bond for K-12 and higher education facilities before the voters in 2006. The size of the bond has not yet been finalized. The bill is scheduled for hearing in the Assembly Education Committee on January 11.

AB 1286 (Evans, D-Santa Rosa) Community College Facilities
Existing law authorizes the governing board of any community college district to sell or lease, under specified conditions, real property that the district owns. This bill would require the authorization to have precedence over other expenditure obligations of the district, except for any obligations the community college district has incurred through the State Public Works Board�s issuance of lease revenue bonds under specified provisions of existing law, which shall be met first. The bill is scheduled for hearing in the Assembly Higher Education Committee on January 12.

AB 1319 (Cogdill, R-Modesto) Community College Fees

This bill would establish the Community College Enrollment Fee Reimbursement Program under the administration of the Student Aid Commission. Under the program, the Commission would reimburse a person for the amount that he or she paid for enrollment fees for up to 35 semester units, or the equivalent number of quarter units, at any campus or combination of campuses of the community college system if that person earns at least 60, but no more than 72, semester units, or the equivalent of quarter units, and that person earns a bachelor�s degree at any campus of the University of California or the California State University within seven years of the date that person enrolled at a community college campus. This bill is scheduled for hearing in the Assembly Higher Education Committee on January 12.

AB 1399 (Garcia, R-Cathedral City) Student Financial Aid

This bill would express the intent of the Legislature to enact legislation to ensure that any child of a member of the armed forces of the United States or the California National Guard who serves at any time between September 11, 2001, and the end of the conflict in Iraq, is eligible to receive a Cal Grant award. This bill is scheduled for hearing in the Assembly Higher Education Committee on January 12.

AB 1482 (Canciamilla, D-Pittsburg) School District Bonds

This bill would require a K-14 district governing board, prior to selling bonds, to adopt a resolution as an agenda item at a public meeting that includes several specified items, including, among other things, express approval of the method of sale selected. This bill is scheduled for hearing in the Assembly Education Committee on January 11.

SB 55 (Lowenthal, D-Long Beach) Governing Boards: Meeting Agendas

This bill would require that, when the presiding officer of a local Academic Senate notifies, in writing, the executive officer of a community college district governing board that a motion of no confidence has been adopted by that Academic Senate with respect to a campus or district administrator of that district, the executive officer of the governing board shall cause the matter to be placed on the agenda of the next meeting of the governing board. This bill is scheduled for hearing in the Senate Education Committee on January 11.

Note: SB 361 (Scott, D-Altadena), the system�s proposed new funding formula legislation, is a two-year bill and is currently in the Assembly Appropriations Committee. Since the bill has passed its house of origin, the deadline for a hearing is not until May 26.

Is Community College Enrollment Funding Keeping Pace With Demand?

A recent report by the Legislative Analyst�s Office (LAO) indicates that community college student enrollments are not keeping pace with funding for student growth. Funding for student enrollment at the California Community Colleges (3% for 2005-06) has grown faster than the college-age population (1.5% for growth in 18 to 24 year-old population).

According to the LAO, in four of the past five years, community colleges received more funding for enrollment growth than it used to enroll additional students. In the past two years, community college enrollments have actually declined. The most obvious reason for the decline in enrollments is the significant increases in student fees (rising from $13 to $26 per credit unit over the pass four years). Also, a decline in class offerings has led to reduced enrollments.

The LAO report indicates that no �unfunded� enrollment remains. Over the years, some community colleges occasionally enrolled more students than they were funded to serve, commonly referred to as �over-cap� students. Some colleges occasionally enrolled fewer students than they were funded to serve.

In 2001-02, total unfunded enrollment statewide was about 35,500 full-time equivalent students (or about 3.5% of total enrollment). With enrollment growth funding exceeding new enrollment in recent years, unfunded enrollment was eliminated for all districts in 2004-05 according to the Chancellor�s Office.

As noted, the 2005-06 Budget funds enrollment growth of 3%. This is about twice the expected rate of growth for the college-age population, and is projected to support all enrollments.

The Chancellor�s Office is requesting 4% for growth funding in the 2006-07 Budget. It is not likely the Administration will fund growth at that amount and it could be something less than the 3% received in 2005-06. The Governor�s January 10 State Budget release will tell the tale.
For a complete review of the LAO�s report on enrollment funding, visit its website at www.lao.ca.gov.

Should Community Colleges Play a Role In the High School Exit Exam?

Current law requires the K-12 graduating class of 2006 to pass a high school exit exam that demonstrates the students� competency to receive a high school diploma. The state�s own independent evaluator, HumRRO (Human Resources Research Organization), reported that nearly 100,000 students in the Class of 2006�22% of the graduating class�have been unable to pass the California High School Exit Exam (CAHSEE) and will be denied a high school diploma if they cannot pass the exam this year, even it they have passed all of their classes.

As a result of the concerns expressed about the high number of students that are being denied a high school diploma, public meetings on alternatives to the high school exit exam have been convened. Comments and suggestions have been made to the Superintendent of Public Instruction that recommend alternative methods in addition to CAHSEE by which students may demonstrate their ability to meet rigorous state standards and receive a diploma that reflects this accomplishment.

Is There a Role for Community Colleges?

The HumRRO report suggests alternatives to the CAHSEE that the state might explore, including a senior-year portfolio, summer school courses after 12th grade, a community college program, and additional years in high school. It has been pointed out that a community college program and additional years of high school are fall-back alternatives, of which only a limited number of student can and will take advantage.

The HumRRO Report suggested that community college programs that currently lead to a high school diploma be updated to focus on CAHSEE skills, so that students who have been unable to pass the CAHSEE could receive a high school diploma through participation in a community college program (see the December 2, 2005, Update, page 310, �Should Community Colleges Issue High School Diplomas?�).

The proposed community college alternative raises numerous concerns because it likely will serve only a small percentage of students and because of the major impact it will have on California�s underresourced community college system. For these reasons, it should be considered only in concert with other alternatives and only if it is adequately funded.

Putting aside the effectiveness of a community college program as an alternative to the CAHSEE, asking community colleges to take on the role of preparing an additional 50,000 to 100,000 students a year to graduate from high school will place an enormous burden on community colleges and require an infusion of additional funding. Currently only seven community college campuses offer basic-skills classes leading to a high school diploma. Some organizations that have made comments regarding alternatives to CAHSEE believe that asking community colleges to play a central role in educating high school students is a distraction from the system�s already significant mission.

The CAHSEE was created to ensure that students who receive a high school diploma actually have acquired the content and skills necessary to compete successfully in the workforce. According to the HumRRO Report, involving community colleges in this equation blurs this system of accountability and goes against the original intent of the CAHSEE legislation. Thus, the evaluators believe alternatives for students who have been unable to pass the CAHSEE should first be implemented in the high schools, not in community colleges. Community college programs, as alternatives to the CAHSEE, are appropriate for�and have the capacity for�only a small number of students.

Ask Arnold…

Can You Explain the Governor�s Proposal?

Q. I have seen several articles about the Governor�s proposal to increase school funding in 2006-07. Some say the increase is $4 billion, while others cite $4.3 billion. Why the difference? Also, I�m seeing that some people are saying that the Governor�s proposal still leaves almost $4 billion owed to education. Can you explain that as well?

A. You�re not the only one who is confused about these numbers. The $4.3 billion is the Governor�s proposed increase in total Proposition 98 funding for K-14 education. Of this, it is our understanding that about $3.7 billion is for K-12 education and $600 million is for community colleges. The Governor�s reference to a $4 billion increase is the increase in total funds for K-12 education, and those include Proposition 98 funds, federal aid, local revenues other than property taxes, and bond funds.

While the Governor is proposing to augment Proposition 98 funds by almost $1.7 billion more than is required by law, he is still not fully addressing the failure to honor the �Deal� in 2004-05 that limited the impact of the suspension of Proposition 98 to $2 billion. Because state tax revenues in 2004-05 ultimately exceeded the 2004 Budget Act forecast, the Proposition 98 minimum funding level increased as well�but no further funding was provided to schools for that year. Thus, the impact of suspension was really $3.8 billion, and schools were underfunded by $1.8 billion in 2004-05.

Since this shortfall is ongoing, schools are underfunded by another $1.8 billion in 2005-06 (based on current estimates) and would have been underfunded by $1.9 billion in 2006-07 had the Governor not proposed the $1.7 billion augmentation. Adding up these shortfalls yields a total of $3.8 billion still owed to schools for 2004-05 through 2006-07.

In our opinion, the Governor deserves credit for funding almost all of the ongoing shortfall, starting in 2006-07. Given the LAO�s recent forecast of the state�s ongoing structural budget problem, this is a much better start to the 2006-07 budget negotiations than we had expected. But, of course, we need to see the details of the Governor�s budget proposal, which will be released on January 10, 2006, to see the whole scope of funding proposals for K-14 education.

What Is the Best Way to Handle Budget Priority Discussions?

Q. Our district recently established a budget advisory committee. Our first meeting is scheduled before the Governor�s Budget comes out on January 10, 2006. Since our committee involves many stakeholders with varied backgrounds, we want to have our first session focus on priority-setting methodologies. Do you have any suggestions for us regarding budget priority discussions?

A. Community College districts are legally and financially dependent on the state and will always work within finite dollars. Finite dollars require judgmental decisions that, if not made locally, will inevitably be made by others.

In budget priority discussions, a community college district must decide if it is more important to do �this� rather than �that���yes� to some and �no� to others. So here are some suggested do�s and don�ts in budget priority setting:

1. Don�t avoid having a defined process for setting expenditure priorities. Focus on a process that will work for you, but in any event, focus on a process. Commit to doing something. Don�t avoid the essential.

2. Remember that priority setting requires �either� and �or� decisions. Priority setting requires leaders who are willing to �get to no.� Priorities necessitate choice. Choice requires an ability to push some priorities �off the table.� If you can�t accept no, you can�t establish priorities.

3. The worst priority setting is that that is done in a vacuum. A �needs analysis� that is not based upon available dollars builds priorities on a foundation of nonreality. It will lead to dashed hopes and a resulting loss of faith in the priority-setting process. Always force district decisions to be made within a circumference of financial reality.

4. The second-worst priority system is one that identifies a part of the budget as being completely sacrificed in order to cover everybody else�s priorities. Consider the district that routinely proposes �no salary increase� from the district�s revenue increase because of �program demands.� The lack of realism leads to an inappropriate priority process. Most likely, if there were a real revenue increase, the district would spend dollars for top priorities�including funding faculty and staff salary increases.

5. Priority setting requires that all services of the district potentially be on the table. To exclude �all instructional services� or �all classroom services,� as an example, avoids an analysis of critical issues. To entirely exclude instructional/classroom services eliminates at least 50% of the agenda.

6. Build priorities based on knowledge�force information, if you must, out of others so that those making the decisions become knowledgeable regarding priority issues. Don�t establish priorities without doing your homework.

7. Recognize that the biggest impediment to priority setting, if you are not careful, is an employee contract. Avoid �no layoff� clauses, prohibitions on contracting out, and excessive controls on transfer, evaluation, or hours of employment. This gives you an opportunity to represent the public rather than a single interest group. Don�t hogtie yourself or future boards through carelessness in negotiations.

8. Recognize that the best priority setting does not simply build on �what is.� True priority setting must consider future needs as well as current needs. You must be willing to challenge �what is� in order to be able to establish valid priorities. If you are not willing to challenge what is, and you only prioritize the marginal dollar, you are prioritizing peanuts, when you could be prioritizing the elephant.

Remember, if you really intend to make a difference, you have to determine priorities. If you do not determine the priorities, they will be determined for you.

Is Not Being the Right �Fit� a Valid Reason for Not Being Hired?

Q. I have been a candidate for two Chief Business Official (CBO) openings recently. Both times I progressed to the second round of interviews only to lose out to another candidate. In both instances, the district indicated that the successful candidate was a better �fit.� Was their explanation an easy way out for not telling me the real reasons I wasn�t selected, or is not being the right �fit� a valid response?

A. Thanks for a great question. As in all matters involving the building of an effective leadership team, the ability of a candidate to complement the skills of the other team members is very important. We generally find that the district is looking for some very specific skills and talents when adding such an important member to the leadership team.

We go to great lengths to communicate the particular skills that may be critical in each position for which we recruit. The perfect CBO for a given district will have the right combination of interpersonal and technical skills, but will also have strengths that match the most urgent needs of that particular district. From the moment we begin to develop the brochure and advertising materials until the final selection is approved by the board our goal is to find the best possible match for both the candidate and the district.

Not all candidates are appropriate for all districts; nor are all districts appropriate for all candidates. A large part of the search and interview process is to find candidates who match the needs and personality of a district. All of the candidates who make it through the initial paper screening and are invited to a first-round interview meet the basic qualifications for the job. All of the candidates who do well in the first-round interview and are invited back for a second-round interview could, in our opinion, do the job. By the time we are down to a small number of finalists, all of whom could do the CBO job successfully in some districts, we are looking for the candidate with the best probability of success in this district. The �fit � of the individual and how his or her skill set matches up with district needs is always a judgment call.

�Fit� is a very oblique term for defining the role the candidate will need to play in a particular district. Sometimes �fit� is determined by the uniqueness of the school district. Districts, for example, will seek CBOs with selected but specialized skills in areas such as capital construction in a fast-growing district, exceptional accounting skills in a fiscally troubled district, or good business management skills in a district whose Maintenance & Operations department does not have strong leadership.

A district with a quiet superintendent may want a more aggressive CBO, a strong board may want an analytical CBO, or a labor-troubled district may want a CBO who can work well with unions; a large district may value management skills more and a smaller one technical skills more. All of these conditions are elements of a good fit.

The best �fit� is probably the number one characteristic distinguishing between the first- and the second-ranked candidates. Generally, the runner-up candidate was just as qualified and just as capable as the candidate selected, but the superintendent or governing board concluded that the �fit� just wasn�t right.

So yes, we believe that the other candidate being a better �fit� is a valid response. In the long run, you are much better off in a district that fits your personality and talents. We care as much about the long-term success of the candidates as we do about the long-term success of the district. Only when we have the best possible match, or �fit� do we give both parties the highest probability of success.

Did a Court Reject the Lawsuit Over Breaking the �Deal�?

Q. I read in the Sacramento Bee that a court rejected the arguments in the lawsuit over the underfunding of Proposition 98. Does this mean that the lawsuit is dead?

A. No. The lawsuit�officially known as California Teachers Association and O�Connell v. Schwarzenegger is not at all dead. According to the Law Firm of Remcho, Johanson and Purcell, which filed the suit, the writer in the Sacramento Bee misunderstood the judge�s recent action. In the court action signed December 12, 2005, Judge O�Hanesian granted what is called a �demurrer� on the complaint, but with leave to amend within 20 days.

The judge explicitly stated that she was not deciding against the merits of the claims, but rather wanted the plaintiff�s attorneys to spell out in more detail the Governor�s duty to recalculate the Proposition 98 minimum guarantee during the course of a fiscal year. The plaintiff�s attorneys have done that in an amended complaint that will be filed soon. So the case is alive and well, but there is no timeline set for when the hearing on the merits of the case will be.

By the Way . . .

The Community College Governance and Funding Stabilization and Student Fee Reduction Act Submitted to the Office of the Attorney General for Certification. The community college funding and governance initiative has been submitted to the Attorney General for the purpose of preparing a title and summary of the proposed measure. Once certified by the Attorney General�s office for circulation, sponsors may begin the signature- gathering process. More than 598,000 qualified signatures will need to be collected for the November 2006 ballot.

As you are aware, the initiative would create a separate �pot� of Proposition 98 funds for community colleges. Student enrollment fees would be reduced from $26 per unit to $20 and the System Office would have greater autonomy pertaining to employee hiring and governance.

Note: the initiative includes expanding the Board of Governors membership from its current level of 12 members to 19 voting members. Local trustee members would be increased from two to three; faculty representatives would be increased from two to three, and classified employee representatives would be increased from one to two. In addition, the two student members to the board would have voting privileges.

Reminder on Grace Period for Flexible Spending Arrangements. Last May, the Internal Revenue Service issued a notice (2005-42) that gave employers the option of amending their flexible spending arrangements (FSAs) to adopt the longer grace period. This new grace period runs 2� months, through March 15 of each year. All employers must have amended their plans by the end of 2005 (assuming calendar year plans) in order to provide this additional grace period.

For employers who have amended their plans accordingly, unused FSA funds at the end of 2005 can now be carried over into 2006, and employees can apply those funds to expenses incurred through March 15, 2006.

Governor Appoints Two to the Commission on State Mandates. The Governor recently appointed Steve Worthley, who currently serves as a Tulare County supervisor, and Sarah Olsen of Manhattan Beach, who has served as staff director and principal consultant for Republican Fiscal Consultants in the California State Assembly from 1995 to 1999, to the Commission on State Mandates.

A fifth generation native Tulare County resident, Worthley is a lawyer maintaining a private practice and has worked as counsel for Sequoia Forest Industries. He has experience in public education, having been a member and past president of the Dinuba Elementary School Board.

Olsen worked as a policy and fiscal analyst for the Office of Legislative Analyst for 12 years before taking the job in the Assembly. She will fill the public member seat on the Commission.