Governor Speaks; Another Cut Emerges - Jan. 18, 2012
January 18, 2012
Governor Jerry Brown just finished his annual State of the State address. The theme, California on the Mend covered several topics, including high speed rail, K-12 education, water, pensions, and, of course, his tax plan.
While we are generally supportive of his balanced approach to the state budget, we are disappointed that higher education was not mentioned in the 20-minute speech. In the current year, California's three segments of public higher education have taken $2 billion in cuts, and next year threatens more cuts and an evisceration of the state's Cal Grant program.
Water, transportation and K-12 schools are important to California's future, but we cannot neglect the intellectual infrastructure necessary to fuel California's economic rebound and growth.
On another topic, the Chancellor's Office and League staff are getting a lot of questions about the current year "deficit factor." A deficit factor is most frequently created when either local property taxes or student fee revenues fall below the amount projected in the budget act, leaving a hole in the general apportionment used to cover the per-FTES enrollment in our colleges.
As recognized in the governor's budget proposal and currently being tallied by the Chancellor's Office, there is a very large shortfall in student fee revenues in the current year. A shocking 70% or greater number of units are being granted a fee waiver, resulting in less revenue than projected. This is likely because of the impact of the continued recession and also a shift of fee-paying students to other higher education options. In contrast, just a few years ago, about 50% of the units had fees waived. Fee revenue shortfalls are shared by all districts receiving general apportionment, regardless of the college that granted the fee waiver.
What this means, though, is that the Chancellor's Office will soon provide districts with a very significant one-time deficit factor for the current year (ending June 30), possibly in the 2%-2.5% range.
While 2% may sound like a small number, some of our districts are already at the 5% reserve that is a red flag for the Accrediting Commission and for the private banks that underwrite the cash-flow borrowing that is necessary for most districts to continue operating. And, this new cut is on top of the $385 million in actual cuts already taken this year.
The good news is that the 2012-13 proposed budget is predicated on a much more reasonable fee estimate. However, for many districts, this already lean year will get that much tighter.
Community College League of California