Today the Governor released his May Revision budget, which is typically an updated budget proposal based on April tax filings. However, because the income tax deadline was extended to July 15, policymakers will not have an accurate picture of tax revenues by June 15, the constitutional deadline to adopt the state budget. It appears the June 15 budget may be something of a “placeholder” budget, to be updated in August, and perhaps again in the fall, when the state has a better understanding of tax revenues and additional Federal funds.
In the May Revision, the Governor anticipates a deep recession, with skyrocketing unemployment and a significant reduction in revenues due to the COVID-19 crisis. He estimates the budget deficit at $53.4 billion through the end of FY 20-21, down from an anticipated $5.6 billion surplus projected in his January budget proposal.
Absent correction, the May Revision anticipates a $19 billion reduction to the Proposition 98 minimum guarantee to K-14 public education. He proposes a number of solutions to mitigate these reductions, such as applying Federal crisis response funding to education and the use of reserves and deferrals. The Governor proposes creation of a new 1.5% obligation of state appropriation limit revenues starting in FY 2021-22 to avoid a permanent decline in school funding, which grows to $4.6 billion in additional funding for schools and community colleges.
During his press conference today, the Governor made a plea to the Federal government, which is empowered to mitigate many of the cuts that California is facing by providing additional Federal funding.
Capital Outlay and Proposition 51 GO Bond Funding
In his January budget proposal, the Governor proposed to fund preliminary plans and working drawings for 24 new capital outlay projects in FY 20-21. The May Revision includes $28.4 million in general obligation bond funding for preliminary plans and working drawings for 25 new capital outlay projects in FY 20-21, adding a project at Yuba CCD. These are all of the new projects recommended for funding by the Board of Governors. Click here for a list of these projects.
In January, the Governor indicated that continuing projects would receive construction funding “consistent with project schedules.” There are 39 projects that have previously received planning dollars and are now awaiting construction funding. The May Revision proposes to provide $194.7 million in GO bond funding for the construction phase of 15 continuing projects in FY 20-21. Those not receiving construction funding in FY 20-21 are proposed for re-appropriation in FY 21-22. Click here for a list of the 15 continuing projects.
CCFC is pleased that the Governor recognizes the importance of community college capital outlay projects in achieving student success. Additionally, these projects will be important to our state’s economic stimulus and recovery, while training the individuals working on the front lines for the health and safety of our communities.
Deferred Maintenance and Instructional Equipment
The January budget proposed $17.3 million (one-time General Fund) for community colleges to address deferred maintenance. The May Revision summary does not provide an update on this proposal.
Additional Items of Interest
Reductions – The Governor outlines a number of reductions for community colleges that would not go into effect (i.e. be “triggered off”) if the Federal government provides sufficient funding to restore them. Some of these reductions include:
$167.7 million reduction in ongoing Proposition 98 General Fund, of which $.06 million is attributable to a revised cost-of-living adjustment at the May Revision, for a 2.31 percent cost-of-living adjustment for apportionments. This is in addition to a $9.3 million ongoing Proposition 98 General Fund cut, of which $.01 million is attributable to a revised cost-of-living adjustment, regardless of Federal funding.
$31.9 million reduction in ongoing Proposition 98 General Fund for enrollment growth.
$83.2 million reduction in Proposition 98 General Fund ($40.4 million in one-time funds) for support of apprenticeship programs, the California Apprenticeship Initiative, and work-based learning models.
$593 million reduction in Proposition 98 General Fund (roughly 10%) for the Student-Centered Funding Formula. To maintain student access to community colleges, the Administration proposes statute to proportionally reduce district allocations through adjustments to the formula’s rates, stability provisions, and hold harmless provisions.
$135.6 million reduction in Proposition 98 General Fund for the CCC Strong Workforce Program.
$3 million reduction in Proposition 98 General Fund for Calbright College (the online college).
Deferrals – The May Revision proposes to defer $330 million from 2019-20 to 2020-21, and $662.1 million from 2020-21 to 2021-22 for community colleges.
Flexibility – The Governor indicates that the Administration will pursue statutory changes to enable the UC, CSU, and CCC to use restricted fund balances, except lottery balances, to address COVID-19 related impacts and the loss of revenue from university enterprise functions. Any restricted fund balances must first be used to mitigate the impacts to programs and services that predominantly support underrepresented student access to, and success at, a college or university, and to expand the number of students annually served in online courses and programs.
Tuition Programs – The May Revision maintains the state’s investment in two years of free community college while providing students with continued access to major financial aid programs, including the California College Promise fee waiver, Cal Grant Awards, the students with dependent children Cal Grant supplement, and the Middle Class Scholarship. The Governor acknowledges that many workers return to higher education and job training after losing a job.
Power Resiliency – The May Revision maintains $50 million in one-time General Fund to support preparedness measures that bolster community resiliency to support critical services still vulnerable to power outage events, including schools, county election offices, and food storage reserves. This proposal supports a matching grant program to help local governments prepare for, respond to, and mitigate the impacts of power outages.
The Governor’s May Revision budget proposal will now be heard by the Legislature, which has been in recess since March 20 and has not conducted its typical budget subcommittee review process this spring. The Legislative Analyst’s Office (LAO), which provides policy and budget guidance to the Legislature, believes the deficit may be substantially less than the Governor’s prediction. LAO has outlined two potential budget scenarios, a “U-shaped” recession with an $18 billion deficit through FY 20-21, and an “L-shaped” recession with a $31 billion deficit. LAO recommends action to address the problem sooner rather than later, and suggests a combination of tools such as accessing reserves, reducing expenditures, increasing revenues, and shifting costs.
The Legislature and Governor will now negotiate on how to bring the budget into balance, as they work toward the constitutional deadline of June 15. CCFC will continue to urge the Legislature to provide funding for all 25 new capital outlay projects recommended by the Board of Governors for funding in FY 20-21.
CCFC Legislative Advocate