Financial Challenges Facing California Community Colleges Amid COVID-19

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Governor's May Revision Update outlines the impact of COVID-19 on California Community Colleges' budget, with estimated expenses exceeding $208 million. The state faces a projected budget deficit of $54 billion due to revenue declines and increased pandemic-related costs. Proposition 98 funding for community colleges also decreases significantly. Legal action has been taken to address funding restrictions affecting vulnerable student groups.

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California Community Colleges Governor s May Revision Update Lizette Navarette, Vice Chancellor, College Finance and Facilities Planning May 20, 2020 1

State Budget: Process and Context May Revise is a proposalfrom the Governor to the Legislature Senate and Assembly will each consider and modify June 15th: deadline for Legislature to pass budget bill June 30th: deadline for Governor to sign budget bill Federal efforts to provide relief to states HEROES Act would allocate $500 billion 2

CCC COVID-19 Response Expenses 2019-20 Estimated Expense $ 114,948,569 Less Estimated FEMA Reimbursement $ (16,760,633) Total Reported by Per FTES Extrapolated Results Districts $ 136 $ 150,564,761 $ (20) $ (21,953,824) Cost of Reimbursements of 2019-20 Student Fees $ 58,146,807 $ 44,392,142 $ 52 COVID-19 IMPACT TOTAL 2019-20 ESTIMATED COSTS TOTAL UNMET NEED (Less Estimated FEMA Reimbursements) $208,711,568 $186,757,744 3

CARES Act Will Not Be Enough An estimated 800,000 community college students arbitrarily excluded based on the Department of Education interpretation. Among those harmed are veterans, citizens who have not completed a federal financial aid application, and non-citizens, including those with DACA status. The Chancellor s Office and five community college districts has filed a lawsuit to remove restrictions to funding that inhibit access by some of the neediest students. 4

State Budget: COVID-19 and Californias Budget Outlook DOF projects a $41 billion decline in revenues by the end of 2020-21 and a $13 billion increase in health and human services costs and other pandemic-related expenditures. The result is a projected budget shortfall of $54 billion, compared with the Governor s January budget proposal. Uncertainty in state and local revenues Tax revenues delayed until July 15 By Governor s estimation, the big three taxes will be down from January estimates by: 27.2% for the Sales and Use Tax 25.5% for the Personal Income Tax 22.7% for the Corporation Tax 5

Lower Prop 98: What does this mean for community college funding? Proposition 98 (in billions) Proposition 98 is primary source of CCC funding 2019-20 and 2020-21 guarantee declines from January estimates by as much as $3.7 billion and $14.6 billion, respectively State will have to find reductions. $90.0 $84.0 $81.6 $78.3 $77.37 $77.8 $80.0 $73.9 $70.49 $69.1 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 January DOF LAO U-Shaped LAO L-Shaped 2019-20 2020-21 6

Governors May Revision: California Community Colleges (CCC) Budget The Governor articulates expectations for CCC and other segments to maintain access to higher education, especially for underrepresented students. Expects colleges to absorb budget reductions without reducing FTES, support for students basic needs, or services to assist underrepresented students. Focuses on the expansion of competency-based education and short-term career technical education programs Proposition 98 Minimum Guarantee adjusted 7

CCC Prop 98 Funding 2019-20 2020-21 Billions Percent Change $10.00 0% $8.73 $8.73 $8.37 -2% $7.63 $8.00 -4% -4% $6.00 -6% $4.00 -8% $2.00 -10% $0.00 -12% -13% -0.36 -1.1 ($2.00) -14% 2019-20 Enacted May Revision Change from 2019-20 Enacted % 8

Impact on Community Colleges Decrease in Overall Funding of $1.5 billion compared to January Proposed Budget. For comparison, the Great Recession which devastated the community college system, cut $1.5 billion in budget cuts between 2007 08 and 2011 12 (five years). As the lowest-funded education system yet most consequential for equity and access, state leaders should recognize that doing more with less reaches a breaking point. 9

CCC Apportionments Reduces Student Centered Funding Formula by 10%. Extend Student Centered Funding Formula minimum revenue (hold harmless) provisions for an additional two years. Proportional share of cuts to categorical program reductions for community supported (basic aid) districts. Shifts June 2020 and June 2021 payments to the next fiscal year, deferring $330.1 million from 2019 20 to 2020 21 and $662.1 million from 2020 21 to 2021 22. 10

CCC Budget Changes Reduces Strong Workforce from $248 million to $100 million ongoing. Reduces Student Equity and Achievement Program, Part-Time Faculty Office Hours, Academic Senate, CCC System Support Program. Does not provide COLA. Preserves full funding for Cal Grants and CCC student financial aid programs. Exempts COVID-19 related costs from 50% law. 11

May Revision Reduction and Deferrals Millions Apportionment Reduction CY Deferral BY Deferral Net Changes $ 400 200 0 -200 -400 -600 -800 $ -1000 2019-20 2020-21 12

Foregone Increases (In Millions) 2020-21 Apportionment COLA -$167 Enrollment Growth -$32 Total -$199 13

California Community Colleges Funding by Programa (In Millions) Funding by Program(In Millions) 2019-20 Revised 2020-21 Proposed Change (Amount) Change (Percent) Program Explanation of Change Proposed reduction ($592 million) and minor technical adjustments; portion of reduction to be achieved through categorical programs $7,430 $6,842 -$588 -8% Student Centered Funding Formula Deferrals--Student Centered Funding Formula -330 -662 -332 - Shift payments to next fiscal year Reduce by 15% and shift program set-aside to System Support Program 475 390 -85 -18% Student Equity and Achievement Program Eliminate $6.7 million ongoing restoration, reduce by $128.9 million, and shift program set-aside to System Support Program 248 100 -148 -60% CCC Strong Workforce Program Disabled Students Programs and Services (DSPS) 124 124 - - Budget neutral. Integrates set-aside from multiple programs and reduce by 15% 0 106 106 N/A CCC System Support Program Extended Opportunity Programs and Services (EOPS) California College Promise (AB 19) 116 116 - - Adjust for revised estimates of first-time, full-time students 85 80 -5 -6% 14

CCC Capital Outlay Proposals The Governor provides $223.1 million in capital outlay funding from Proposition 51, approved by voters in 2016. The funding is to support the construction phase for 15 continuing projects ($194.7 million) and the preliminary plans and working drawings phases for 25 new projects ($28.4 million) 15

Budget Planning and Forecasting Factor 2018-19 2019-20 2020-21 Cost-of-living adjustment (COLA) 2.71% 3.26% 0.00% Base reductions 0.00% 0.00% -8.00% State Lottery funding per FTES $218.34 $221.87 $223.54 Mandates Block Grant funding per FTES 29.21 30.16 30.16 RSI reimbursement per hour 6.26 6.45 6.44 Financial aid administration per College Promise Grant 0.91 0.91 0.91 Public Employees' Retirement System (CalPERS) employer contribution rates 19.72% 22.67% 20.70% State Teachers' Retirement System (CalSTRS) employer contribution rates 16.28% 17.10% 16.15% 16

Budget Process Agency Submittals of Requests Release of Governor s Budget Legislative Analyst s Analysis Budget Subcommittee Hearings Governor s Revisions (May) Budget Subcommittee Final Actions Governor s Consideration and approval Conference Committee Legislative Actions August Adjustments Legislative Review and Committees Governor s Consideration and approval Legislative Actions Implementation 17

Empowering through Educational Excellence June 2, 2020 Budget Update 18

2020-21 Tentative Budget Department of Finance, Plan for 3 Scenarios For Tentative 1. Work Load Budget with COLA 2. Work Load Budget without COLA 3. Work Load Budget with cuts up to 15% 19 Empowering through Educational Excellence

2020-21 Tentative Budget SCCCD Work Load Budget with No COLA Major Budget Adjustments Amounts Step and Column + $ 2.1 M Retirement Savings - $ 1.2 M STRS/PERS Increases + $ 2.2 M SCFT Salary Increases + $ 866 K Positions added or on hold - $ 672 K Bus Pass + $193 K 20 Empowering through Educational Excellence

2020-21 Tentative Budget (pg. 43) Unrestricted General Fund Clovis Community College Madera Comm College & Oakhurst Centers District Office Fresno City College Reedley College TOTAL DISTRICT 2019-20 Base Allocation $45,296,076 $91,848,166 $32,543,686 $24,237,623 $13,425,475 $207,351,026 Salary Adjustments 555,277 1,683,307 616,627 737,474 389,443 3,982,128 Fixed Cost Adjustments - -153,000 - -14,600 -600 -168,200 Positions -391,582 -902,700 199,389 402,160 20,827 -671,906 Districtwide Initiatives - - - - - - 2020-21 Unrestricted Base Allocation $45,459,771 $92,475,773 $33,359,702 $25,362,657 $13,835,145 $210,493,048 One-Time Revenue Allocation $242,673 $69,793 $21,576 $20,664 $9,598 $364,304 Designated Revenue Allocation 6,554,383 - - - - 6,554,383 Reserve Expenditures - - - - - - Lottery Allocation 3,000,000 465,595 197,540 193,422 143,443 4,000,000 Total 2020-21 Unrestricted Allocation $55,256,827 $93,011,161 $33,578,818 $25,576,743 $13,988,186 $221,411,735 One Time Include: DO-Election Costs, Bus Passes, Campuses-Adjunct Office Hours Designated Revenue includes: STRS on-behalf payment, Apprenticeship, Parity Pay 21 Empowering through Educational Excellence

2020-21 Budget Update New Timeline for Budget May Mid-month May Revise June 2 SCCCD Tentative Budget June 30 Governor signs balanced budget July 15 Tax revenues due August Legislators/Governor take additional action September 1 SCCCD Final Budget based on June December New SCCCD allocation 22 Empowering through Educational Excellence

2020-21 Unofficial Projections SCCCD-Projections 2019-20 Percent 2020-21 Percent Governor s May Revise -$10.4 M? 5%? -$15.4 M 7.7% Deferral -$14.1 M (4.25%) -$28.1 M (4.25%) Considerations: Final June Budget Second Apportionment: What is our new base August Adjustments 23 Empowering through Educational Excellence

2020-21 Factors 2020-21 January 2.29% 2020-21 Est. April 1.9% May Revise 0% Factor 2019-20 Cost-of-living adjustment (COLA) Employer pension contribution rates Public Employees' Retirement System (CalPERS) State Teachers' Retirement System (CalSTRS) 3.26% 19.7% 22.80% 22.68% 20.7% 17.1% 18.40% 18.4% 16.15% 24 Empowering through Educational Excellence

Immediate Actions Remote work through July 31 Travel and Conference: only essential (CY $733K fund 11) Currently freezing positions, exception will be reviewed at cabinet and the Chancellor will make the final decision (each position avg. $75K) Student workers reduced to only essential DSO s, tutorial, student ambassadors, etc. that are fully funded by FWS or CalWORKs 25 Empowering through Educational Excellence