State Budget Update - Oct. 6, 2010
From: Skinner, Erik
Sent: Wednesday, October 06, 2010 6:19 PM
Subject: Budget Update--October 6, 2010
Earlier today, the Legislature began to publicly release details about the 2010-11 budget package recently agreed to by legislative leaders from both parties and the Governor. At an afternoon hearing, the Joint Budget Conference Committee briefly aired the plan, but provided only a cursory overview of the proposal. Tomorrow morning, both houses plan to hold votes on the budget package. While there appear to be a few dissenters in the Legislature, the general sentiment inside the Capitol seems to be that the package is likely to pass. While the information released today provides us with a good sense of the overall package, we have not yet seen the budget documents and trailer bills necessary to fully assess the budget plan. Accordingly, please treat the information in this update as preliminary. As more details become available and we have time to analyze them, further updates and guidance will be provided.
Based on overview documents released today, here are the major elements of the budget package:
- $7.5 billion in budget cuts
- $1.4 billion in increased revenues due to improved economic data
- $1.2 billion in new revenues due to delayed tax breaks (Net Operating Loss suspended for 2010-11; this revenue increase is offset by $132 million in new tax breaks negotiated as part of the budget agreement)
- $5.3 billion in federal funds (this represents an increase from Governor’s May Revision estimates)
- Pension reforms, including raising PERS retirement age for new employees and end to “spiking” (see page 8 of the overview document, web link provided below)
- Budget reforms creating a stronger “rainy day fund”
- Suspends Proposition 98 and defers and additional $1.9 billion in payments to K-12 schools and community colleges
- The Legislature’s overview document can be accessed at: <http://tinyurl.com/2w2qulx>http://tinyurl.com/2w2qulx
For the California Community Colleges, the highlights are as follows:
- $189 million in new funding deferrals. These funds would be pushed from the latter part of the 2010-11 fiscal year into the beginning of the 2011-12 fiscal year. These new deferrals would bring the total of inter-year community college deferrals to $892 million.
- $126 million for community college enrollments
- $35 million to restore categorical programs (provided as an across-the-board partial restoration of the 2009-10 cuts)
- An additional $25 million for the Economic and Workforce Development program to maintain and expand workforce training course offerings
- An additional $20 million for SB 70 Career Technical Education Programs (bringing total program funding to $68 million)
- Rejection of a negative COLA (that would have resulted in a $23 million cut to community colleges)
- Rejection of an earlier proposal to allow community colleges to receive full repayment for prior-year mandate claims. (We are told that the plan was rejected based questions over its legality.)
While on its surface, this budget provides the community colleges with resources to meet some of our most pressing needs, the additional deferral raises considerable concerns. Unlike past deferrals that were used to avert cuts, the proposed new deferral is being provided to support an augmentation for enrollment funding and select categorical programs. It is unclear whether cash-strapped community colleges have the capacity to front the investment in these areas while waiting for the state to make payments in the next fiscal year. In addition, we should be concerned that by pre-committing funding in the 2011-12 fiscal year, the state may be left in a position of being unable to fund baseline growth and COLA costs in the next fiscal year.
We will continue to analyze this budget package and provide further information in the coming days. In the meantime, I would urge caution in reacting to this new budget. The “credit card financing” evident in the proposed community college budget raises considerable concerns about the fiscal integrity of the overall budget plan. Unfortunately, many in the Capital are already talking about the possible need to open the budget again in the coming months once it falls out of balance.
Executive Vice Chancellor for Programs
California Community Colleges,
1102 Q Street
Sacramento, CA 95811-6549
direct line: 916-323-7007