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Unexpected Budget Shortfall Threatens College Access- July 3, 2013



You may have heard that California's community colleges were shocked late last Friday when the state informed colleges that there was a $236 million shortfall in the payments due colleges for enrolled students. This deficit factor of 4.31% is one of the largest we have ever seen, and is attributable to revenues the state assumed would be redirected to community colleges from the wind-down of redevelopment agencies.
The state failed to meet its obligation to "true up" community college revenues by June 30, 2012, even though the law requires it and the state has a bounty of cash. This morning, I sent the following letter to the Director of the Department of Finance, and our legislative team is in the Capitol talking to folks about the issue as I type.
We have already received a response from the Department of Finance that they are attentive to the issue and want to provide community colleges the needed funds as soon as possible.
For now, go out and enjoy your holiday weekend and know that we're working hard to resolve this issue as soon as possible.
July 3, 2013
The Honorable Ana Matosantos
Director, California Department of Finance
State Capitol, Room 1145
Sacramento, CA 95811
Dear Director Matosantos:
On behalf of California’s seventy-two community college districts, I want to thank you for the much improved partnership we have enjoyed over the last couple of years. Department of Finance staff members have worked closely with us as we discuss major fiscal policy issues affecting the nation’s largest system of public higher education.
In last year’s education trailer bill (SB 1016, Chapter 38, Statutes of 2012), language was inserted to ensure that community colleges were not specifically disadvantaged if projected redevelopment agency revenue did not materialize. This was added understanding that this revenue was highly speculative and that K-12 schools were automatically held harmless because of their continuous appropriation.
Specifically, Section 97 of SB 1016 provides that “On or before June 30, 2013, an amount to be determined by the Director of Finance shall be appropriated from the General Fund to the Board of Governors of the California Community Colleges in augmentation of Schedule (1) of Item 6870-101-0001 of Section 2.00 of the Budget Act of 2012.” The section further provides the methodology by which you could reduce appropriations to community colleges if local revenues exceeded projections, which we agreed to in consideration of this provision.
Late last Friday, June 28, 2013, community colleges across California were informed of a shocking deficit of $236,565,751 (4.31%). Student enrollment fee revenue is reportedly $44 million above projections, meaning the entire shortfall is attributed to local property taxes, and mostly anticipated funds from the wind-down of redevelopment agencies.
This is a crippling budget cut, even if just temporary. The Community College League of California was a strong proponent of Proposition 30, providing direct non-public funds financial support, a large private fundraising campaign, and an in-kind social media campaign cited by the Los Angeles Times as a major driver of young voter turnout. 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.
The League understands that there are many disputes between the state and local governments about the amount of former redevelopment funds that should be made available to local education agencies, and the fact that some of these may eventually be attributable to 2012-13. Nevertheless, we simply cannot withstand a $236 million budget cut at this time, with no public discussion.
That is why we supported the trailer bill, which directs the Director of Finance to augment or reduce General Fund payments to community colleges depending on the redevelopment revenues.
Further, the League is the sponsor of the largest cash-borrowing program for California’s community colleges, which goes to market in the next couple of weeks. Participating community college districts have a fiduciary liability to provide the private markets with accurate information about their cash flow. This significant and eleventh-hour budget uncertainty makes it extremely difficult for community college leaders to meet their responsibility.
On behalf of California’s 72 community college districts, we request:
1) An immediate “truing up” of funds for community colleges as required by law in section 97 of SB 1016 (Chapter 38, Statutes of 2012) to avoid a financial catastrophe in the state’s largest higher education segment.
2) The administration’s support for the same continuous appropriation provided to K-12 schools to ensure that the era of “June surprises” is behind us and student access can be maintained.
Again, we have enjoyed a great partnership over the difficult recent years, and we thank you for that. We hope that we can reach a quick resolution of this very serious situation.
Finally, I want to personally thank you for service as Director of the Department of Finance. You have been a critical element in the restoration of California’s fiscal stability. I offer the best wishes for your future professional opportunities. Sincerely,
Scott Lay
President and Chief Executive Officer
Scott Lay
President and Chief Executive Officer
Orange Coast College '94

Scott Lay
President and Chief Executive Officer
Orange Coast College '94

Community College League of California
2017 O Street, Sacramento, California 95811

916.444.8641 . www.ccleague.org

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Pippa Gibson
Phone: 408.864.8936

Last Updated: 7/3/13