State School Bond Bills
This week both active state school bond bills met a major test: passage out of their house of origin. AB 75 (O’Donnell) was passed by the Assembly on Wednesday, June 2, and SB 22 (Glazer) was passed by the Senate on Thursday, June 3. Both bonds would fund community college facilities, subject to appropriation by the Legislature in the annual budget act; this is the same process that is currently used to allocate funds. CCFC supports both bills.
AB 75 (O’Donnell): AB 75 has been updated to specify a dollar amount. It would place a $12 billion bond on the 2022 ballot (date still unspecified – primary or general) and would include K-12 and community college facilities.
SB 22 (Glazer): SB 22 places a $15.5 billion bond on the 2022 ballot (election date unspecified), with $2 billion for community college districts. The bond would include K-12, community colleges, UC, and CSU. During debate on the Senate floor, Republicans expressed concern with passing a school bond at a time when there are significant one-time funds available in the budget that could be used for facilities purposes.
At some point, there will need to be negotiations between the two houses to reconcile differences between the two bond bills on policy issues and the inclusion of UC and CSU. CCFC is requesting amendments to SB 22 to remove the provisions that would increase local bonding capacity. This change was included in Proposition 13 (2020) and was a target for anti-tax groups. SB 22 also includes proposals that are concerning for some in the K-12 community.
We could see movement at the end of the summer this year, or early next year, on final passage of a bond bill in time for the 2022 ballot.
FY 2021-22 Budget Negotiations
On Tuesday, June 1, the Senate and Assembly announced agreement on a Legislative Version of the FY 21-22 budget. Now the Legislature will finalize negotiations with the Governor, as they work to meet the June 15 constitutional deadline to pass the budget. This year, in a significant departure from typical procedures, the Legislature chose not to use the conference committee process to reconcile policy differences between the Senate and Assembly, and to instead reach agreement through private conversations.
The Legislative Version includes the following with implications for community college facilities:
Higher Ed Facilities, Acquisition and Student Housing. Creates a new $4 billion fund for CSU and UC facilities and for student housing at Community Colleges, CSU, and UC. Specific projects funded through the new fund, called the Capacity and Affordable Student Housing (CASH) fund, will be approved through Legislative action beginning later this year and through future budget action. CCFC note: The Legislature rejected the Governor’s May Revision student housing program proposal due to lack of information. We do not yet know any additional details about their newly proposed program, however Assembly Member McCarty is authoring AB 1377, which would create a revolving loan fund program for UC/CSU/CCC student housing and a separate grant program for feasibility studies and preconstruction services.
Prepayment of General Obligation Bond Debt. Pays $1 billion of General Obligation Bond payments early, which will reduce required spending in future years.
Full Pay-Off of Prop 98 Deferrals. Pays off $11 billion of Prop 98 deferrals, including $2.6 billion not proposed in the May Revision. Paying down deferrals gets local school and community college districts cash for their programs and replenishes an important budget tool to assist with the next economic downturn.
Deferred Maintenance. The Legislature proposes increased funding above the Governor’s May Revision proposal for deferred maintenance. The Governor proposed $250 million (one-time American Rescue Plan Act of 2021) and $314.1 million (one-time Proposition 98 General Fund) to address deferred maintenance at community colleges. The Legislature agrees with the $250 million in Federal funds and would like to increase the Proposition 98 funds to over $400 million. The exact amount will be subject to final negotiations with the Governor.
Capital Outlay Projects. We believe that the package likely also includes the 9 new capital outlay projects and 32 continuing projects, but we will need to see the budget bill language once it is available to confirm this. Both education budget subcommittees approved these projects.
A note on the state appropriations limit (aka “Gann Limit”): legislative leadership were careful to propose spending on items that can be excluded for purposes of the state appropriations limit calculation, such as capital outlay and paying down GO bond debt. The Gann Limit caps the amount of revenues from tax proceeds that can be appropriated by the state. Any overage is due to be allocated between K-14 schools and taxpayer refunds. The Governor estimated that the limit for the 2020-21 and 2021-22 fiscal years would be exceeded by $16.2 billion and anticipated a supplemental payment of approximately $8 billion to schools and community colleges in 2022-23. The Legislative Version announces that it maintains total spending as much as $30 billion below the Constitutional appropriations limit for 2021-22.
CCFC Legislative Advocate