Assembly Bill 1646–Community College Omnibus Legislation

Each year, legislation is introduced that is noncontroversial and is intended to make a number of technical, clarifying, and conforming changes to various Education Code provisions related to the California Community Colleges. This year the omnibus legislation, AB 1646, was introduced by the Assembly Higher Education Committee.During the final days of the 2005 legislative session, AB 1646 was amended to authorize California Community Colleges to provide assistance to students from Louisiana, Mississippi, and Alabama who have been affected by Hurricane Katrina.

An urgency clause was added to the bill, making it effective upon the signature of the Governor. The Governor signed AB 1646 (Chapter 654/2005) on October 7, 2005.

The following is a summary of the major provisions of AB 1646. Read the rest of this entry »

Preliminary September Revenues Up Sharply

Although the Department of Finance (DOF) has not yet released its monthly Finance Bulletin for October, Brad Williams, the Legislative Analyst’s chief economist, has acknowledged that revenues from two of the three major taxes are up significantly. The corporation tax came in $525 million above the May Revision estimate and the personal income tax (PIT) exceeded the estimate by $380 million, for a total gain of $905 million. No information is available at this time for the sales tax and the other minor taxes.While some have speculated that the corporation tax gain is related to rebuilding contracts tied to the hurricane-damaged Gulf Coast region, Williams rejects this theory because taxable profits from such activity would not materialize this soon. Instead, he believes that the gain could be a result of corporations taking advantage of a reduced federal tax rate on earnings generated in foreign countries. Federal law allows foreign earnings to be “repatriated” to the United States and thus subject to domestic tax rates, which in turn would generate greater tax revenues for California and other states. In addition, Williams believes that the high profits enjoyed by oil companies could be contributing to the corporation tax gain.

While the official DOF’s account of revenues will not be available until later in the month, this news is certainly welcome. Even if the other taxes just meet expectations, the collections from the corporation tax and the PIT will place the monthly take about 10% above estimate. Combined with collections from prior months, the September revenues would place the state almost $1.8 billion ahead of projections, which would ease the types of cuts and program reductions many Capitol observers anticipate will be part of the January Governor’s Budget. Read the rest of this entry »

Legislative Analyst Identifies $6 Billion Budget Gap

In a report on the current year state spending plan, the Legislative Analyst’s Office (LAO) identified a $6 billion gap between revenues and expenditures for 2006-07. While the Legislature and the Governor made progress in reducing the structural budget gap with the 2005 Budget Act, ultimately the state spending plan continues a four-year practice of deficit spending.In the report titled California Spending Plan 2005-06, the LAO acknowledges that the budget gap has been reduced from about $9 billion to $6 billion, largely because of stronger revenue collections in 2004-05 and $2 billion in cuts contained in the budget. Nevertheless, the operating shortfall is far from being eliminated. One of the principal reasons for the persistence of the shortfall is the state’s reliance on one-time solutions to bridge the budget gap, which emerged in 2001-02 following the collapse of technology stocks.

In the report, he LAO identified $5.9 billion in 2005-06 budget solutions. These included program savings of $4.1 billion (of which the broken agreement on Proposition 98 accounted for $3 billion), funding shifts of almost $730 million, loans and borrowing totaling about $900 million, and revenues from tax compliance of just under $100 million.

It is important to note that the LAO, in identifying the actions taken to produce a State Budget for 2005-06, acknowledges that the amount owed to K-14 education under Proposition 98 should have increased with the growth in General Fund revenues. Thus, the nonpartisan Analyst counts as part of the budget solution the failure of the state to provide $3 billion in additional funds.

The LAO also identifies $2.9 billion in outstanding debts owed to K-12 schools as a result of payment deferrals imposed over the last four years. Referring to these amounts as “credit card” debts, the LAO acknowledges $1.1 billion in revenue limit and categorical deferrals, almost $1.5 billion in mandate deferrals, and $290 million in ongoing unfunded costs for the revenue limit deficit factor. The LAO report can be viewed on line at www.lao.ca.gov. Read the rest of this entry »

Legislation Sent to Governor to Assist Students Displaced By Hurricane Katrina

California’s institutions of public higher education have stepped forward to assist students enrolled in universities and colleges in Alabama, Louisiana, and Mississippi who are victims of Hurricane Katrina. Education leaders have announced that it is important that students who were enrolled in schools in the Gulf Region are able to continue their education uninterrupted. The Governor has directed California’s community colleges to make sure that students are able to attend classes until the educational facilities in the Gulf Region can be reopened.In order for California community colleges to be of assistance, there needs to be modification to existing law as it pertains to nonresident tuition. Districts currently do not have the authority to waive nonresident tuition for the victims of Hurricane Katrina. However, individuals who were living in the affected states who have retained their California residency would be able to return to California and apply for admission to the community colleges as residents. Thus, during the final days of the 2005 legislative session, AB 1646 was amended to provide community college districts with the authority to waive nonresident tuition for Gulf Region students affected by Hurricane Katrina. Read the rest of this entry »

Lawsuit Filed to Enforce Proposition 98 Guarantee

The California Teachers Association (CTA) announced August 9, 2005, that it is suing Governor Arnold Schwarzenegger and Director of Finance Tom Campbell to enforce state law related to the Proposition 98 (Prop 98) minimum school funding guarantee.At issue is the 2004-05 State Budget deal to suspend Proposition 98�but to limit any cut to $2.0 billion, as codified in SB 1101 (Chapter 213/2004). With state tax revenues coming in much higher than expected in 2004-05, the Prop 98 minimum funding level grew, resulting in Prop 98 funding being $3.8 billion lower than the guarantee. Thus, the lawsuit contends that the state must appropriate another $1.8 billion for K 14 education in 2004-05.

In addition, the lawsuit asserts that the Prop 98 guarantee for 2005-06 was calculated using the “unlawfully low” funding provided in 2004-05–which affected the base and lowered the 2005-06 guarantee by another $1.3 billion. Read the rest of this entry »

Legislative Analyst Weighs in on Proposition 76: “Live Within Our Means”

Last week the Legislative Analyst’s Office (LAO) issued its analysis of Proposition 76, the “Live Within Our Means” (LWOM) measure. The analysis will be included in the sample ballot for the November 8th special election. With respect to education funding, the LAO concludes that the net impact of the proposition “would be to lower the minimum guarantee for K14 education.” (Emphasis included in the LAO’s write-up.) The Office’s nonpartisan analysis is important since many voters and opinion makers will rely on this review to shape their understanding of this complicated measure.

A process for ensuring balanced state budgets was one of the Governor’s January 2005 proposals unveiled when he delivered his State of the State speech and outlined his 2005-06 budget proposals. In this speech, the Governor declared the upcoming year the “year of reform” and indicated his intent to pursue budget cutting provisions and Proposition 98 changes to eliminate budget shortfalls. Read the rest of this entry »

Details of Final Budget Package Finally Emerge

In a somewhat protracted endgame to the State Budget process, the final pieces of the education budget finally became clear five days after the State Budget was sent to the Governor.

The big question in the process was the fate of the proposed $469 million STRS hit, or “teacher tax,” a proposal debuted by the Governor in January and renewed in his May Revision. That proposal has been taken off the table, meaning community colleges and K-12 school districts are not on the hook for an additional 2% in contributions to STRS (the employer rate stays at 8.25%). It was unclear for a time who was going to pick up the cost of the $469 million proposed STRS shift–it is now clear that K-14 schools have lost out on $247 million in mandated cost claim reimbursements proposed by the legislative Democrats from prior year Proposition 98 settle-up funds, but the state will bear the remainder of the burden. Read the rest of this entry »

New Under the Dome Articles!

• Details of Final Budget Package Finally Emerge
• Significant Vetoes by the Governor
• Governor Signs Education Trailer Bill — Senate Bill 63
• The Facts on the 2005-06 Education Budget
• Loss of Accreditation at Compton College Appealed
• Ask Arnold (the tall one)
  • *What’s the Status of the STRS 2% Issue?

Click here to read the whole story.

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. Read the rest of this entry »

May Revise–Little Change for Education, Despite More Than a Billion in New State Revenues

Education, despite being the largest program in the state’s budget, received a relatively small share of the new state revenues in Governor Schwarzenegger’s 2005 May Revise budget proposal.In fact, the Governor is taking credit for leaving Proposition 98 funding for 2005-06 at the same level as proposed in January, even though the minimum guarantee has fallen by $509 million. But that drop in the Proposition 98 minimum guarantee is an artifact of the Governor’s refusal to allocate more funding for 2004-05 to honor his $2 billion “Deal”–last year’s agreement to suspend Proposition 98 funding but limit the cut to $2 billion. Had that deal been honored, Proposition 98 funding would be higher than the level proposed in the May Revise by about $1.8 billion in 2004-05 and by about $1.4 billion in 2005-06. Read the rest of this entry »