Thursday, June 20, 2019
League Update on the 2019-20 Budget Act

On June 13, the California Legislature presented Governor Gavin Newsom with a 2019-20 spending plan of over $214 billion – a plan which maintained many of the Governor’s January priorities and campaign promises. Subsequent higher education trailer bill language was approved by the Legislature on June 17. 
Overall, the 2019 Budget Act (AB 190 and SB 73) identified three investment themes: an effective government, promoting affordability and opportunity, and supporting just and dignified treatment for all Californians. 
The final budget agreement includes five notable expenditures for California Community Colleges: 

  1. A second year of free tuition to first-time full-time students and other local College Promise strategies, 
  2. Release of Proposition 51 bond funds
  3. A buy-down of STRS and PERS forthcoming district contribution increases,
  4. A modest expansion of the Cal Grant program, and
  5. Technical adjustments to the Student Centered Funding Formula (SCFF).

The 2019 Budget Act includes a cost-of-living adjustment (COLA) of 3.26% and a reduction of $25.5 million from the May Revision for deferred maintenance and instructional equipment, now totaling $13.5 million. 
Again this year, a  priority of the League’s advocacy was the release of Proposition 51 facilities bond dollars. Thanks to over a dozen facilities advocacy days with district leaders from throughout California advocating with us to demonstrate the urgent need and value of college facilities, the Governor and Legislature approved funding for all projects in the 2019-20 Capital Outlay Plan. The 2019 Budget Act approves projects in the Governor’s January Budget and April Finance Letter supporting 15 new projects and 15 continuing projects using Proposition 51 bond funding. The budget also approves 24 new projects and provides 80% of construction funding for 5 continuing projects.

Economic Context:

The state remains on pace to build a Rainy-Day Fund of $18.7 billion by 2022-23 with a projected reserve balance of $16.5 billion in 2019-20. The Legislature emphasizes that the 2019 Budget Act is designed to anticipate increasing costs to address natural disasters, a mild recession, inadequately funded pension obligations, and the need for increasing resources to address homelessness and housing affordability. 

Proposition 98 and Community Colleges:

The California Legislature adopted an overall Proposition 98 funding level of $81.1 billion in 2019-20, $78.1 billion in 2018-19, and $75.6 billion in 2017-18, consistent with the revenue projections in the Governor’s May Revision. The 2019-20 budget agreement provides a payment of $389 million in Proposition 98 funding into the Public School System Stabilization Account (PSSSA), the first year for such a payment into the account established by Proposition 2 in 2014. Importantly, the 2019 Budget Act honors the split of a 10.93% share of Proposition 98 for community colleges.  Lastly, but key to future budget deliberations, is an adopted provision which prohibits the State from making downward adjustments to the Proposition 98 funding level once a fiscal year is over. 
The League, in collaboration with the Association of Chief Business Officials, the Association of California Community College Administrators, and the Chancellor’s Office, will release a technical joint analysis once the 2019 Budget Act is signed by Governor Newsom. Its purpose is to provide factual information about the 2019-20 budget as a common starting point for each organization’s further analyses and implementation.  

Primary Allocations in the 2019-20 Budget Act:

Funding Formula – Under the approved budget estimates, revenues would be sufficient to cover the 2018-19 Total Computational Revenue (TCR). However, it’s important to clarify that the agreement reduces apportionments in 2018-19 mainly by reducing transfer counts in the student success allocation, worth $49 million, rather than fully funding the SCFF as planned and anticipated by colleges at the start of the 2018-19 fiscal year. More details are expected next month around how the $49 million deficit will be addressed or distributed among districts. Further, the Legislature and Governor acknowledged the need to make technical adjustments to the new Student Centered Funding Formula (SCFF) to enable an effective transition. For 2019-20, the adjustments to the SCFF include:  

  • Capping performance funding at 10% of the formula, thereby maintaining the 70/20/10 percentage distribution.
  • Capping year-to-year growth in a district’s student success allocation to 10% beginning in 2019-20. 
  • Modifying the definition of a transfer student to attribute credit to the district where the student completed the most units. 
  • Extending the hold harmless period by one year, through 2021-22. 
  • Requiring colleges to use three-year averages for supplemental and outcomes funding. 

Further, the 2019 Budget Act extends the “hold harmless” provision through 2021-22 and specifies that in future years districts will receive at least the 2018-19 TCR adjusted by COLA. 

Pension Liabilities – The 2019 Budget Act builds on a unique and welcome one-time $3.15 billion pay down of CalSTRS and CalPERS to help school and community college districts with growing pension costs and unfunded liabilities. The agreement would reduce employer pension contribution increases for the next two years, resulting in districts having to contribute 1.03 percentage points less than the amount set in the existing 2019-20 payment schedule and 0.70 percentage points less in the 2020-21 fiscal year. The resources are allocated from the non-Proposition 98 General Fund. 
College Promise and Free-Tuition – The final budget agreement retains an allocation of $42.6 million for local College Promise programs, which includes resources to fund a second year of free tuition to first-time full-time students with incomes above the California College Promise Grant thresholds. The program continues to provide districts flexibility to cover students’ essential non-tuition costs and implement strategies to build a college-going culture. 
Cal Grants and Financial Aid – Currently, the Cal Grant program distributes less than 10% of Cal Grant resources to California community college students, despite the fact that our students comprise two-thirds of the higher education population. While the approved budget makes some effort to remedy this longstanding inequity, the final agreement, unfortunately, does not include funding for a financial aid program to specifically support California’s community college students. The 2019-20 budget agreement remains largely unchanged and proposes funding for 15,000 additional Competitive Cal Grant awards and a new Cal Grant access award for students with dependent children attending a public higher education institution. It’s worth noting however that of the various types of Cal Grants, the Competitive award is the best option for community college students since these awards go predominantly to our students. 
Longitudinal Data System – Maintaining a campaign promise and fulfilling a longstanding legislative interest, the Governor and Legislature include funding to plan for a new statewide longitudinal data system which would connect information from education providers, employers, and workforce and health and human service agencies. The Budget Act establishes the California Cradle-to-Career Data System Workgroup to do the following: 1) assess and recommend structural components, processes, and options for expansion and enhancement of data system functionality, and 2) advise ongoing efforts to develop, administer, and enhance the data system. 
Further detail on the Budget Agreement, and specifically the provisions affecting our districts and colleges, will be forthcoming. 
We are grateful to our members and our colleagues statewide that took the time to advocate for the largest and most diverse public sector of higher education in the U.S. Our collective efforts continue, and we will continue offering budget and policy updates.