(The Summary, Background, Education Funding Level, Student Fees, and Governance sections are from the analysis in the ballot pamphlet by the Legislative Analyst’s Office.)

SUMMARY

This measure makes major changes to the State Constitution and state laws relating to the California Community Colleges (CCC). As shown in Figure 1, the measure affects CCC funding requirements, fee levels, and system governance. Each of the measure’s key provisions is discussed in more detail below.

BACKGROUND

California Community Colleges provide instruction to about 2.5 million students annually. The CCC system is made up of 109 colleges operated by 72 districts throughout the state. The system provides a number of educational programs, including:

• Academic instruction at the lower division (freshman and sophomore) collegiate level.
• English as a Second Language courses.
• Vocational education (such as nursing and automotive technology).
• Recreational courses (such as golf and cooking classes).

The CCC system spends over $8 billion in public funds annually. About two-thirds of the funding that supports community college programs comes from the state General Fund and local property taxes. The remaining one-third comes from other sources (such as student fee revenue and federal funds).

EDUCATION FUNDING LEVEL

Current Law

Each year, the state must provide at least a minimum level of funding for elementary and secondary schools (K-12) and the community colleges (together called K-14 education). This requirement, adopted by voters in 1988 through Proposition 98, is met using both state General Fund and local property tax revenues. Each year, the Proposition 98 formula calculates a new K-14 minimum amount of financial support by adjusting the previous year’s level based on changes in the economy and K-12 attendance. (Community college enrollment is not a factor in calculating the minimum K-14 funding level.) An additional requirement specifies that K-14 education must receive at least a specified percentage (about 40 percent) of General Fund revenues each year.

Each year, the state allocates Proposition 98 funding between K-12 schools and community colleges. In recent years, community colleges have received between 10 percent and 11 percent of total Proposition 98 funds.

Proposal

As noted above, existing law guarantees a certain minimum amount of annual financial support for K-14 education. Proposition 92 replaces this single requirement with two: one for K-12 education and one for community colleges. These new minimum funding requirements would take effect in 2007-2008 and be based on spending in 2006-2007.

The new K-12 funding formula would use the same year-to-year growth factors as under current law. The same would be true for the new CCC funding formula, with one important exception. Specifically, in place of K-12 attendance, a new growth factor based primarily on the young adult population would be used for calculating the community college minimum funding level. This population growth factor uses the greater of two population growth rates: (1) state residents between 17 and 21 years of age or (2) state residents between 22 and 25 years of age. The growth factor is further increased in any year that the state’s unemployment rate exceeds 5 percent. (The state unemployment rate exceeded 5 percent in 13 of the past 15 years.) However, the measure limits the total community college population growth factor to no more than 5 percent in any year.

Unlike the K-12 funding guarantee, the community college funding requirement would not be adjusted to reflect how many students are actually served. That is, there would be no direct relationship between required CCC funding levels and actual student enrollment.

The measure would not change the existing requirement that roughly 40 percent of General Fund revenues be spent on K-14 education. Consequently, Proposition 92’s new funding formulas would not apply in years when K-14’s share of General Fund spending was less than this level. In these years, the existing single minimum funding requirement would apply and the state would continue to have discretion over how to allocate funds between K-12 schools and community colleges.

Fiscal Effect

From 2007-2008 through 2009-2010, we estimate the initiative would require the state to spend more for K-14 education than under current law—an average of around $300 million per year. This is primarily because the measure’s student population growth factor under the new CCC funding requirement (the state’s population of young adults) is forecast to grow faster than K-12 attendance. As shown in Figure 2, K-12 attendance is expected to experience declines for the next few years. By contrast, the young adult population is forecast to grow between 2 percent to 3 percent for the next several years.

In the initial two years that the measure would be in effect (2007-2008 and 2008-2009), we estimate it would allocate roughly one-half of the increased funds to K-12 schools. (This results from the interaction between this measure and recent legislative action on K-12’s budget.) Then, in 2009-2010, it would direct most new funding to community colleges. Starting in 2010-2011 and continuing for the near future, we do not expect that the new funding formulas established by Proposition 92 would be in effect. This is because the measure’s combined minimum funding levels for K-12 schools and community colleges would most likely fall below the roughly 40 percent of state General Fund revenues to be spent on K-14 education. As noted earlier, the measure does not apply under such conditions. Instead, the minimum funding requirement for K-14 education would be calculated as it is under current law. Thus, there would be no net fiscal effect for the state in these years. In addition, the state would have the authority to allocate funding between K-12 education and the community colleges however it chose.

It is unclear when the formulas would again require the state to spend more than the required share of state General Fund revenues on K-14 education. When they did, the fiscal effect would depend on the performance of the economy as well as the relative growth rates between K-12 attendance and the CCC student population growth factor.

STUDENT FEES

Current Law
As discussed above, Proposition 98 funds (General Fund and local property taxes) provide the major source of support for CCC. In addition, most students pay education fees that contribute to the community colleges’ overall funding. Fee revenue is available to the community colleges for the same general purposes as Proposition 98 funding. These fees cover a small portion (less than 10 percent) of resident students’ total educational costs. In 2007-2008, student fees provide about $285 million in revenue to the community colleges.

California’s community college fees, which are set by the state, have consistently been the lowest in the country. Prior to 1984, the state did not charge a fee at all. In the past decade, fee levels have fluctuated between $11 and $26 per unit. The current per-unit fee is $20, which means that a full-time student taking 30 units per academic year pays $600.

About one-quarter of all CCC students do not pay any educational fees. This is because current law waives the fees for resident students who demonstrate financial need. Most of these students are low- to middle-income. Generally, a community college student living at home, with a younger sibling and married parents, could have annual family income up to roughly $65,000 and still qualify for a fee waiver.

Proposal
This measure reduces student fees to $15 per unit beginning in fall 2008. Thus, total annual fees for a student taking a full-time load of 30 units during the 2008-2009 academic year would be $450, which is $150 less than the current level. (This fee reduction would have no direct impact on needy students because fees are already waived for all students who demonstrate financial need.)

The measure also significantly limits the Legislature’s authority to increase fees in subsequent years. Any fee increase would require a two-thirds vote of both houses. In addition, the measure limits annual fee increases to the lower of:

• 10 percent.
• The percentage change in per capita personal income in California (which typically averages about 4 percent).

For example, at $15 per unit, a 4 percent growth in per capita personal income (the lower of the two formulas) would allow for an increase of 60 cents. However, since the measure also requires the rounding down of any fee increase to the nearest dollar, the fee level would remain at $15. The measure would require a simple majority vote in the Legislature in order to reduce fees.

Fiscal Effect
If the measure passes, it is likely that fees would remain at or near $15 per unit for many years. This is because at this level the Legislature could only increase the fee if per capita personal income exceeded 6.7 percent in any given year. (This has occurred just once in the past 20 years.)

The revenue impact of a fee reduction under this measure would depend on the fee level that would have existed without this measure. If the fee level would have otherwise remained at its current amount ($20 per unit), the community colleges would collect about $70 million less in annual student fee revenue as a result of this measure.

GOVERNANCE

Current Law
The State Constitution currently references the community colleges in various financial contexts (such as their eligibility for Proposition 98 funds), but it does not formally establish or define the community colleges. This has been done instead through laws adopted by the Legislature. Under current laws, the community colleges are operated by districts that are governed by locally elected Boards of Trustees. The state provides these governing boards with significant autonomy in matters such as:

• Determining course offerings.
• Hiring and compensating campus staff.
• Managing district property.

The Board of Governors (BOG) of the California Community Colleges oversees the statewide system. Key functions of BOG include:

• Setting minimum standards for districts (such as student graduation requirements).
• Coordinating statewide programs.
• Providing technical assistance to the districts.
• Appointing a chancellor to run day-to-day operations and make recommendations on policy matters. (The chancellor’s executive staff—deputy and vice chancellors—are appointed by the Governor).

The BOG consists of 17 members (16 voting and 1 nonvoting). The Governor appoints these members to terms of either two or six years. Currently, the Governor is required to select 5 of the 17 members from lists of persons approved by specified community college organizations (such as faculty and staff groups).

Proposal
The measure amends the State Constitution to formally recognize the CCC system. For example, it specifies in the Constitution that the community college system is a part of the state’s public school system, and is made up of districts that are governed by locally elected boards.

Proposition 92 makes a number of changes affecting BOG. For example, it amends the Constitution to increase the number of members to 19 (all with voting rights). In addition, the measure amends statute to require the Governor to appoint additional BOG members from lists provided by specified community college organizations.

The measure also gives BOG more control over its staff and its budget. For example, it authorizes BOG (rather than the Governor) to appoint and set compensation levels for executive officers. Moreover, the measure gives BOG “full power” over how to spend funds appropriated for its administrative expenses in the annual budget.

Proposition 92 does not change the current responsibilities of BOG or its authority over community college districts.

Fiscal Effect
This measure would not change the state’s authority to appropriate funding for the BOG’s administrative budget. As a result, it would not have any direct impact on state costs. The proposition, however, would give BOG more control over whatever funds are provided to it.

LEAGUE POSITIONS

This is a situation where we have conflicting positions. The LWVC Community College System position supports a statewide community college system with sufficient resources to fulfill its overall goal: to offer all Californians access to a quality higher education. Resources should be stable, accommodate all enrolling students, be fairly distributed among the college districts, and provide opportunities for long-range planning. Governance should allow greater authority within the system itself with local districts making key decisions about mission priorities to meet community needs.

On the other hand, the LWVC State and Local Finances position calls for measures to ensure revenues that are both sufficient and flexible enough to meet changing needs for state and local government services and that contribute to a system of public finance that emphasizes equity and fair sharing of the tax burden as well as adequacy.

It includes a preference for measures that contribute to the flexibility of the system and states that earmarked funds should only be used where social benefit significantly outweighs the loss of flexibility. Earmarked funds should contain a sunset date and provisions for review and reauthorization, and earmarking should in all cases be statutory rather than in the state constitution.

The LWVC Constitution position favors legislative flexibility and opposes constitutional provisions that earmark tax funds for specific services.

DISCUSSION

The state has for a number of years been faced with budget shortfalls and an ongoing structural deficit, which simply means that we are spending more money than we are taking in, even in relatively good years. In years when revenues fall off, the state has resorted to a combination of severe service cuts, borrowing, and overestimating revenues and underestimating costs to balance the budget.

This year both the Department of Finance and the Legislative Analyst have noted that revenues are lagging and that economic projections give cause for concern, with estimates of the potential deficit at approximately $10 to $11 billion. No one is predicting a change in the ability of the Legislature to find a two-thirds majority vote to raise revenues to close the funding gap. The combination of Proposition 98 and debt repayment already take up about half of the General Fund, and other ballot measures, both with and without their own funding source, have claimed the lion’s share of the rest of the budget.

The League does not support ballot box budgeting in any case, but under these circumstances, we cannot support yet another measure that mandates added spending with no new revenue. In addition, Proposition 92 proposes to cut the current community college fees to $15 and make it nearly impossible to raise them, despite the fact that they are already among the lowest in the nation and low income students receive fee waivers.

If this measure passes, in any tight budget year it will take money from some other unspecified programs. Experience has taught us that those are most likely to be from the areas of health and welfare, which typically do not have guaranteed funding.

Read our flyer summarizing why we urge all to vote No on Proposition 92. Also read Time to Stop Digging!

The rebuttal to the supporters’ argument was signed by Allan Zaremberg, President, California Chamber of Commerce; Joel Fox, President, Small Business Action Committee; and Teresa Casazza, Acting President, California Taxpayers’ Association.

The rebuttal to the opponents’ argument was signed by Stefan Lee, Student, Sacramento City College; Valerie Novak, Student, San Joaquin Delta College; and Samuel Aguilar III, Student, College of the Desert.

RESOURCES

Anne Henderson, LWVC State and Local Finances Program Director, lwvc@lwvc.org

Chris Carson, LWVC Government Director, govt@lwvc.org

Helene Lecar, LWVC Community College System Program Director, lwvc@lwvc.org

Barbara Inatsugu, LWVC Education: Pre-K through 12 Program Director, education_pk12@lwvc.org

Trudy Schafer, LWVC Senior Director for Program, 916-442-7215, Fax 916-442-7362, tschafer@lwvc.org

Californians for Fair Education Funding—No on Proposition 92, 916-218-6640, www.noprop92.org

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