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California Association of Private Postsecondary Schools

Lawmakers resolve community college funding gap

09/17/2013

Capitol Weekly. September 17, 2013. Across California, some six dozen community college districts – locally administering 112 schools, the largest higher education institution in the country – were scrambling for $90 million.

On the last night of the legislative session, just before lawmakers went home for the year, the Legislature approved it. 

Despite success in championing the interests of higher education at the ballot box last year, California’s community colleges this year faced the possibility of significant cuts. 

“We have reports from our district that indicate we need close to about $90 million to keep us whole from that shortfall, and the department of finance thinks we only need about $9 million,” said Vice Chancellor Dan Troy, who oversees the College Finance and Facilities Planning Division.

The shortfall, according to representatives of the community colleges, is due to state and local officials grappling with the dissolution of redevelopment agencies and the redistribution of their previously absorbed property tax. 

 “The result of all this may be that were not going to serve the number of students or provide the quality of service that we may otherwise be able to provide to the state if our budgets were ensured.” 

The predicament is rooted in a decision made last year by Gov. Brown to successfully dissolve 400 redevelopment agencies, known as RDAs, that over the past six decades had been designed to combat blight in certain areas of the state.

Eliminating those agencies freed up 12 percent, or $5 billion from $45 billion annually, in general purpose property tax revenue that historically was absorbed by RDAs.

Instead, this revenue is now redirected to schools, community colleges, cities, counties, and special districts.

But because this is considered uncharted budget territory, the community colleges are reporting they received a shortfall of nearly $90 million dollars in the State Budget passed in June.

“The Community College League of California was a strong proponent of Proposition 30, “ Scott Lay, the League’s president and chief executive officer, said in a letter to the state Department of Finance in July. “Now, only eight months later, our colleges are finding broken promises and may need to eliminate the classes they just restored to the course schedule because of Proposition 30,” Lay wrote.

According to a law passed in an education budget trailer bill last year, community colleges are supposed to be protected if revenue expected through the RDA elimination does not materialize.

“[Community colleges] are going to have to hold dollars back, maybe not offer the amount of course sections that they would like to, maybe not hiring full time faculty,” said Troy. “I think that probably the greater problem for us at this point is we fear we’ll be in this position year after year—that districts fear that they re not going to be paid the money they’re promised in the beginning of the year.”

The Department of Finance believes local level accounting and timing issues are the cause of the discrepancy, noting that the department’s property tax projections have been derived from local county auditor-controller offices.

But whatever the discrepancy, the community colleges say they haven’t received all of the money available to them via property tax revenues, which has resulted in the fiscal year ending with a $90 million budget gap. 

“They don’t have reports of having received the RDA funds at the level the department of finance thinks they have, nor have they received general fund backfill to make them whole,” said Troy. 

Higher education policymakers have been pursuing legislation to give the Finance Department authority to provide a short-term cash solution, then devise a long-term resolution of the problem, according to finance department officials. 

That means 11th-hour changes in legislation—a common occurrence in the Capitol as lawmakers wind down their session.

In these final days of session, about 58 percent of bills still being acted on took some sort of amendment and that included the education budget cleanup bill, SB97, which had been amended to resolve the community college districts’ financial strain.

The bill, authored by the Senate Budget Committee, had been rewritten in the Assembly to allow the Finance Department to allocate up to $100 million to community colleges by Dec. 31, 2013. The Assembly approved it Friday, and the Senate late did likewise later in the day, sending the bill to the governor’s desk. Gov. Brown is expected to sign it.

According to the bill’s analysis, the amendment was based on a review of property tax revenues related to the dissolution of RDAs for the 2012-13 fiscal year. It would also requires the state to notify the Joint Legislative Budget Committee should the Finance Department determine if appropriation necessary.

“The greater problem for us at this point is we fear we’ll be in the same position year after year, and that districts are going to have to be over-cautious when they budget out of fear they will not get all that is promised,” Troy said.  

Community colleges argued they should be provided a method similar to that for K-12 education, of continuous appropriation, to ensure stability in their funding.