The 2022-23 Budget: Analysis of Major CCC Proposals

2022-23 BUDGET The 2022-23 Budget: Analysis of Major CCC Proposals Summary Brief Covers Major Proposals for California Community Colleges (CCC). This brief focuses on the Governor’s proposals related to CCC apportionments, enrollment, modifications to the Student Centered Funding Formula (SCFF), part-time faculty health insurance, and deferred maintenance. Proposals in these areas account for three-quarters of the Governor’s ongoing augmentations and about half of his one-time spending for community colleges. Community Colleges Facing Heightened Challenges. In 2022-23, districts are facing greater pressure to increase employees’ salaries given high inflation; cover scheduled increases in their pension contributions, partly due to expiring state pension relief; and adjust to the expiration of federal relief funds. Consistent with nationwide trends, CCC as a system also has experienced significant enrollment declines since the beginning of the pandemic. Though preliminary data for 2021-22 suggest some districts may be starting to recover lost enrollment, the current favorable job market and unknown trajectory of the pandemic make predicting when enrollments will return difficult. In addition, a number of districts face a “fiscal cliff” in 2025-26 when a key hold harmless provision related to SCFF is scheduled to expire. Opportunities to Build on Governor’s Proposals. To address districts’ fiscal challenges, the Legislature may wish to provide a greater cost-of-living adjustment (COLA) for apportionments than the $409 million (5.33 percent) proposed in the Governor’s budget. Also, to the extent the Legislature is concerned both with districts’ enrollment declines and their ability to cover continued COVID-19-related costs in 2022-23, it could repurpose the Governor’s proposed $150 million one-time funding for student outreach into a more flexible block grant. Districts could be allowed to use block grant funds for student outreach and recruitment, student mental health services, or COVID-19 mitigation, among other potential purposes. We also recommend the Legislature consider modifying the Governor’s SCFF hold harmless proposal by beginning to explore the possibility of increasing base funding for SCFF (beyond annual COLAs). Higher base SCFF funding would have the effect of shifting districts out of hold harmless more quickly while also helping them with rising core operating costs and declining enrollment. If the Legislature wanted to start moving toward those higher rates in 2022-23, it potentially could redirect ongoing funds from other proposals (including the Part-Time Faculty Health Insurance Program). GABRIEL PETEK | LEGISLATIVE ANALYST FEBRUARY 2022 www.lao.ca.gov 1 2022-23 BUDGET INTRODUCTION This brief is organized around the Governor’s Formula (SCFF), part-time faculty health insurance, major 2022-23 budget proposals for the California and deferred maintenance, respectively. Proposals Community Colleges (CCC). The first section of related to these issues account for three-quarters of the brief provides an overview of the Governor’s the Governor’s ongoing augmentations and about CCC budget package. The remaining five sections half of his one-time spending. We anticipate covering of the brief focus on the apportionments funding other CCC proposals in subsequent products. increase, enrollment, the Student Centered Funding OVERVIEW Total CCC Funding Is $17.3 Billion Under increases by $518 million (4.7 percent) over the Governor’s Budget. Of CCC funding, $11.6 billion revised 2021-22 level. In addition to Proposition 98 comes from Proposition 98 funds. As Figure 1 General Fund, the state provides CCC with a total shows, Proposition 98 support for CCC in 2022-23 of $658 million non-Proposition 98 General Fund for Figure 1 California Community Colleges Rely Heavily on Proposition 98 Funding (Dollars in Millions Except Funding Per Student) Change From 2021-22 2020-21 2021-22 2022-23 Revised Revised Proposed Amount Percent Proposition 98 General Fund $7,392 $7,528 $7,827 $299 4.0% Local property tax 3,374 3,546 3,766 220 6.2 Subtotals ($10,766) ($11,075) ($11,593) ($518) (4.7%) Other State Other General Fund $619 $644 $658 $13 2.1% Lottery 275 273 272 —a -0.1 Special funds 44 94 94 — — Subtotals ($937) ($1,011) ($1,024) ($13) (1.3%) Other Local Enrollment fees $446 $446 $448 $1 0.3% Other local revenueb 3,833 3,860 3,888 28 0.7 Subtotals ($4,279) ($4,306) ($4,336) ($30) (0.7%) Federal Federal stimulus fundsc $1,431 $2,648 — -$2,648 — Other federal funds 365 365 $365 — — Subtotals ($1,797) ($3,014) ($365) -($2,648) -(87.9%) Totals $17,779 $19,405 $17,318 -$2,087 -10.8% FTE studentsd 1,097,850 1,107,543 1,101,510 -6,033 -0.5%e Proposition 98 funding per FTE studentd $9,807 $9,999 $10,524 $525 5.3% a Difference of less than $500,000. b Primarily consists of revenue from student fees (other than enrollment fees), sales and services, and grants and contracts, as well as local debt-service payments. c Consists of federal relief funds provided directly to colleges as well as allocated through state budget decisions. d Reflects budgeted FTE students. Though final student counts are not available for any of the periods shown, preliminary data indicate CCC enrollment dropped in 2020-21, with a likely further drop in 2021-22. Districts, however, have not had their enrollment funding reduced due to certain hold harmless provisions that have insulated their budgets from drops occurring during the pandemic. e Reflects the net change after accounting for the proposed 0.5 percent systemwide enrollment growth together with all other enrollment adjustments. FTE = full-time equivalent. 2 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET certain purposes. Most notably, non-Proposition 98 ($388 million) would be excluded from the state funds cover debt service on state general appropriations limit (SAL) under the Governor’s obligation bonds for CCC facilities, a portion of budget. (In our report, The 2022-23 Budget: Initial CCC faculty retirement costs, and operations at Comments on the State Appropriations Limit the Chancellor’s Office. Much of CCC’s remaining Proposal, we cover SAL issues in more detail.) funding comes from student enrollment fees, other No Proposals for Addressing Unfunded student fees (such as nonresident tuition, parking Retirement Liabilities or Providing Pension fees, and health services fees), and various local Relief. In recent years, the Governor has had sources (such as revenue from facility rentals and various budget proposals relating to education community service programs). In 2020-21 and pension funding. These proposals have included 2021-22, community colleges also received a making supplemental payments toward pension significant amount of federal relief funds. These systems’ unfunded liabilities as well as giving federal funds must be spent or encumbered by community college districts immediate pension May 2022, as discussed in the nearby box. relief by subsidizing their rates in 2019-20, 2020-21, Governor’s Budget Contains Many and 2021-22. Though community colleges’ CCC Proposition 98 Spending Proposals. employer pension contribution rates are expected The Governor has 10 ongoing and 11 one-time to rise notably in 2022-23, the Governor does not CCC spending proposals. As Figure 2 on the have any such proposals this year. next page shows, the Governor’s ongoing Proposes No Change to Enrollment Fee. spending proposals total $843 million, whereas State law currently sets the CCC enrollment fee his one-time initiatives total $983 million. His at $46 per unit (or $1,380 for a full-time student largest ongoing spending proposals are a taking 30 semester units per year). The Governor 5.33 percent cost-of-living adjustment (COLA) proposes no increase in the fee, which has for apportionments and a major expansion of remained flat since summer 2012. the Part-Time Faculty Health Insurance Program. Funds 18 Capital Projects. The Governor His largest one-time proposals are for facility proposes to provide $373 million in state general maintenance and student enrollment and retention obligation bond funding to continue 18 previously strategies. Spending on facility maintenance authorized community college projects. Federal Relief Funds Community Colleges Received Considerable Federal Relief Funding. Community colleges received a total of $4.7 billion over three rounds of federal relief funding in response to COVID-19. (Our Federal Relief Funding for Higher Education table provides more detail on California Community College relief funds.) Collectively, colleges are required to spend at least $2 billion of their relief funds for direct student aid. The rest can be used for institutional operations. Colleges have used institutional funds for a variety of purposes, including to undertake screening and other COVID-19 mitigation efforts, cover higher technology costs related to remote operations, purchase laptops for students, and backfill lost revenue from parking and other auxiliary college programs. Deadline for Colleges to Spend Federal Relief Funds Is Approaching. Colleges must spend or encumber federal relief funds by May 2022, unless they apply for and receive an extension from the federal government. Though systemwide data on college expenditures is not readily available, a review of a subset of colleges suggests more than half of their student aid funds and just under half of their institutional funds had been spent as of December 31, 2021. Comprehensive information also is not yet available on the colleges that requested and received extensions. When we surveyed districts in fall 2021, several districts indicated they had requested extensions, but those requests had not been granted. www.lao.ca.gov 3 2022-23 BUDGET Of these projects, 17 are for the Figure 2 construction phase and 1 is for the working Governor Has Many Proposition 98 drawings phase. All bond funds would Spending Proposals come from Proposition 51 (2016). A list of these projects and their associated costs is (In Millions) available on our EdBudget website. Governor Announces a “Roadmap” Ongoing Proposals for CCC. The roadmap for CCC is COLA for apportionments (5.33 percent) $409 somewhat different than the compacts for Part-Time Faculty Health Insurance Program 200 Student Success Completion Grants (caseload adjustment) 100 the California State University (CSU) and the COLA for select categorical programs (5.33 percent)a 53 University of California (UC) in that it does Technology security 25 not specify in advance what will be the size Enrollment growth (0.5 percent) 25 of future base funding increases. Instead, Equal Employment Opportunity program 10 the Governor indicates that community Financial aid administration 10 NextUp foster youth program 10 colleges’ base increases would depend A2MEND program 1 upon available Proposition 98 funds in Subtotal ($843) future years. The roadmap is similar to the One-Time Initiatives university compacts, however, in setting Facilities maintenance and instructional equipment $388 forth certain expectations to be achieved Student enrollment and retention strategies 150 by the colleges over a five-year period. The Health care pathways for English learners 130 15 expectations for the community colleges Common course numbering implementation 105 Technology security 75 include increasing student graduation Transfer reform implementation 65 and transfer rates, closing equity gaps, Intersegmental curricular pathways software 25 establishing a common intersegmental STEM, education, and health care pathways grant program 20 learning management system and Emergency financial assistance for AB 540 students 20 admission platform, and enhancing K-14 as Teacher Credentialing Partnership Pilot 5 Umoja program study —b well as workforce pathways. We describe Subtotal ($983) and assess the Governor’s roadmap with Total $1,826 CCC, as well as his multiyear agreements a Applies to the Adult Education Program, apprenticeship programs, CalWORKs student services, with CSU and UC, in our publication, campus child care support, Disabled Students Programs and Services, Extended Opportunity Programs and Services, and mandates block grant. The 2022-23 Budget: Overview of b Reflects $179,000. the Governor’s Higher Education COLA = cost-of-living adjustment; A2MEND = African American Male Education Network and Budget Proposals. Development; and STEM = science, technology, engineering, and mathematics. APPORTIONMENTS INCREASE In this section, we provide background on operating costs. Although the state is not community college apportionments, describe the statutorily required to provide community colleges Governor’s proposal to increase apportionments a COLA on their apportionment funding (as it is for inflation, assess the proposal, and provide for K-12 schools), the state has a longstanding a recommendation. practice of providing one when there are sufficient Proposition 98 resources. The COLA rate is Background based on a price index published by the federal Most CCC Proposition 98 Funding Is government that reflects changes in the cost of Provided Through Apportionments. Every local goods and services purchased by state and local community college district receives apportionment governments across the country. funding, which is available for covering core 4 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Compensation Is Largest District Operating Districts Are Facing a Couple of Notable Cost. On average, community college districts Compensation-Related Cost Pressures in spend about 85 percent of their core operating 2022-23. Augmenting apportionment funding can budget on salary and benefit costs. While help community colleges accommodate operating the exact split varies from district to district, cost increases. One notable cost pressure in salaries and wages can account for up to 2022-23 is salary pressure. With inflation higher about 70 percent of total compensation costs. than it has been in decades, districts are likely District pension contributions typically account to feel pressure to provide salary increases. for another 10 percent to 15 percent of total (If the total CCC salary pool were increased compensation costs. Health care costs vary 3 percent to 6 percent, associated costs would among districts, but costs for active employees range from roughly $200 million to $400 million.) commonly account for roughly 10 percent of A second notable cost pressure relates to districts’ compensation costs, with retiree health care pension costs. Updated estimates suggest that costs typically comprising less than 5 percent. community college pension costs will increase Additionally, districts must pay various other by a total of more than $120 million in 2022-23, compensation-related costs, including workers’ which represents about 30 percent of the COLA compensation and unemployment insurance, which funding proposed by the Governor. (Like the other collectively tend to account for about 5 percent of education segments, community college districts total costs. Districts’ other core operating costs also expect to see higher costs in 2022-23 for include utilities, insurance, software licenses, insurance, equipment, and utilities, though these equipment, and supplies. On average, about cost increases could be partly offset by costs 15 percent of districts’ operating budget is for potentially remaining lower than normal in other these noncompensation-related expenses. areas, such as travel.) Depending on Enrollment Demand, Districts Proposal Could Realize Some Workload-Related Savings. Governor Funds Apportionment COLA. As a result of declining enrollment since the onset of The Governor’s largest proposed ongoing the pandemic, districts generally have been offering augmentation for the community colleges is fewer course sections. On a systemwide basis, $409 million to cover a 5.33 percent COLA for districts offered 45,000 fewer course sections in apportionments. This is the same percentage as 2020-21 than in 2019-20, which likely resulted in the Governor proposes for the K-12 Local Control tens of millions of dollars in savings from needing to Funding Formula. (It is also the same COLA rate pay fewer part-time faculty. (When districts reduce the Governor proposes for certain CCC categorical course sections, they typically reduce their use of programs, including the mandate block grant, part-time faculty, who are considered temporary Disabled Students Programs and Services, and employees, compared to full-time faculty, who are Extended Opportunity Programs and Services.) considered permanent employees.) To the extent districts continue to experience soft enrollment Assessment demand in 2022-23, they potentially could continue COLA Likely to Be Higher in May. The federal to realize lower costs due to employing fewer government released additional data used to part-time faculty. (On net, however, colleges are still calculate the apportionment COLA on January 27. expected to see notable upward pressure on their Using this additional data, our office estimates the total compensation costs in 2022-23.) COLA for 2022-23 will be closer to 6.17 percent Districts Face Cost Pressures Stemming (about 0.8 percentage points higher than the From Expiration of Federal Relief Funds. Governor’s January estimate). Covering this higher Over the past two years, districts have used COLA rate for community college apportionments federal relief funds to cover various operating would cost about $475 million, or about $65 million costs, including new COVID-19 mitigation-related more than included in the Governor’s budget. costs. Once these federal relief funds are spent or otherwise expire, districts likely will assume www.lao.ca.gov 5 2022-23 BUDGET responsibility for covering ongoing operating Recommendation costs such as for personal protective equipment, Make COLA Decision Once Better Information additional cleaning, and potentially COVID-19 Is Available This Spring. The federal government screening and testing. Districts also will need to will release the final data for the 2022-23 COLA in begin covering the technology costs (such as for late April 2022. By early May, the Legislature also will computer equipment for students and staff as well have better information on state revenues, which, in as software licenses) that federal relief funds have turn, will affect the amount available for new CCC been covering. In addition, a number of districts Proposition 98 spending. If additional Proposition 98 have used federal relief funds to backfill the loss of ongoing funds are available in May, the Legislature revenue from parking and other auxiliary programs. may wish to provide a greater increase than the The loss of federal funds will put pressure on Governor’s January budget proposes for community district operating budgets to cover these costs college apportionments. A larger increase would should revenues from these auxiliary programs fail help all community college districts to address to return to pre-pandemic levels. salary pressures, rising pension costs, and other operating cost increases while also helping them adjust to the expiration of their federal relief funds. ENROLLMENT In this section, we provide background on the state reduced funding for the colleges. A state community college enrollment trends, describe funding recovered during the early years of the the Governor’s proposal to increase funding for economic expansion (2012-13 through 2015-16), enrollment and student outreach, assess those systemwide enrollment increased. Figure 3 shows proposals, and offer associated recommendations. that enrollment flattened thereafter, as the period of economic expansion continued and unemployment Background remained at or near record lows. Several Factors Influence CCC Enrollment. CCC Enrollment Has Dropped Notably Since Under the state’s Master Plan for Higher Education Start of Pandemic. Consistent with nationwide and state law, community colleges operate as open trends for community colleges, between 2018-19 access institutions. That is, all persons 18 years (the last full year before the start of the pandemic) or older may attend a community college. (While and 2020-21, full-time equivalent (FTE) students CCC does not deny admission to students, there declined by 115,000 (10 percent), as also shown in is no guarantee of access to a particular class.) Figure 3. While enrollment declines have affected Many factors affect the number of students who virtually every student demographic group, most attend community colleges, including changes in districts report the largest enrollment declines the state’s population, particularly among young among African American, male, lower-income, adults; local economic conditions, particularly and older adult students. Data for 2021-22 will not the local job market; the availability of certain be finalized for many months, but preliminary fall classes; and the perceived value of the education 2021 data suggests enrollment could be down by to potential students. more than 5 percent compared with the previous Prior to the Pandemic, CCC Enrollment fall. Though most districts reporting as of early Had Plateaued. During the Great Recession, February 2022 show enrollment declines from fall community college student demand increased as 2020 to fall 2021, data indicate that a few districts individuals losing jobs sought additional education could be starting to see some enrollment growth. and training. Yet, enrollment ended up dropping as 6 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Several Factors Likely Contributing to Proposals Enrollment Drops. Enrollment drops nationally Funds Enrollment Growth. The budget and in California have been attributed to various includes $25 million Proposition 98 General Fund factors, including more student-parents staying for 0.5 percent systemwide enrollment growth home to provide child care, public health concerns, (equating to about 5,500 additional FTE students) and disinterest among some students to taking in 2022-23. (The state also provided funding courses online. (As of fall 2021, about two-thirds for 0.5 percent systemwide enrollment growth of colleges’ course sections were still being taught in 2021-22.) Consistent with regular enrollment fully online.) Rising wages, including in low-skill jobs, growth allocations, each district in 2022-23 would and an improved job market also could be reducing be eligible to grow up to 0.5 percent. Provisional enrollment demand. In response to a fall 2021 budget language would allow the Chancellor’s Chancellor’s Office survey of former and prospective Office to allocate any ultimately unused growth students, many respondents cited “the need to work funding to backfill any shortfalls in apportionment full time” to support themselves and their families as funding, such as ones resulting from a key reason why they were choosing not to attend lower-than-estimated enrollment fee revenue CCC. For these individuals, enrolling in a community or local property tax revenue. The Chancellor’s college and taking on the associated opportunity cost Office could make any such redirection after might have become a lower priority than entering or underlying data had been finalized, which would reentering the job market. occur after the close of the fiscal year. (This is the Colleges Have Been Trying a Number of same provisional language the state has adopted Strategies to Attract Students. Using federal in recent years.) relief funds, as well as state funds provided in the Proposes Another Round of One-Time 2021-22 budget, colleges generally have been trying Funding to Boost Outreach to Students. many tactics to attract students. Many colleges are The Governor proposes $150 million one-time using student survey data to adjust their course Proposition 98 General Fund for student offerings and instructional modalities. Colleges are recruitment and retention strategies. This is on top beginning to offer more flexible courses, with shorter terms and Figure 3 more opportunities to enroll throughout the year (rather than After Falling During the Great Recession, CCC Enrollment only during typical semester start Plateaued, Then Declined With Onset of Pandemic dates). Colleges have been offering Full-Time Equivalent Students (In Millions) students various forms of financial assistance. For example, all colleges 1.4 are providing emergency grants to financially eligible students, and 1.2 some colleges are offering gas 1.0 cards or book and meal vouchers to students who enroll. Many colleges 0.8 are loaning laptops to students. 0.6 Many colleges have expanded advertising through social media 0.4 and other means. Additionally, many 0.2 colleges have increased outreach to local high schools and created phone banks to contact individuals 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-1717-18 18-19 19-20 20-21 who recently dropped out of college or had completed a CCC application recently but did not enroll. www.lao.ca.gov 7 2022-23 BUDGET of the $120 million one time provided in the 2021-22 Second, the state has no clear way of deciphering budget ($20 million approved through early action how effective colleges’ spending in this area has and $100 million approved through the final budget been. Given continued enrollment declines, one package). Like the initiative funded last year by might conclude that the funds have not achieved the Legislature, the purpose of these proposed their goal of bolstering enrollment. Enrollment funds is for colleges to reach out to former declines, however, might have been even worse students who recently dropped out and engage without the 2021-22 student outreach funds. Third, with prospective or current students who might some factors driving enrollment changes—including be hesitant to enroll or reenroll at the colleges. the economy, current favorable job market, Provisional language gives the Chancellor’s Office students’ need to care for family, and students’ discretion on the allocation methodology for the risk calculations relating to COVID-19—are largely funds but would require that colleges experiencing outside colleges’ control. To the extent these the largest enrollment declines be prioritized. The exogenous factors are stronger in driving student provisional language also permits the Chancellor’s behavior than college advertisements or phone Office to set aside and use up to 10 percent of banks, student outreach might not be a particularly the funds for statewide enrollment and retention promising use of one-time funds. efforts. (The state adopted these same provisions Recommendations for the $100 million approved as part of the final 2021-22 budget package.) Use Forthcoming Data to Decide Enrollment Growth Funding for 2022-23. We recommend Assessment the Legislature use updated enrollment data, as Better Information Is Coming to Inform well as updated data on available Proposition 98 Legislature’s Decision on Enrollment Growth. funds, to make its decision on CCC enrollment By the time of the May Revision, the Chancellor’s growth for 2022-23. If the updated enrollment data Office will have provided the Legislature with indicate some districts are growing in 2021-22, the final 2020-21 enrollment data and initial 2021-22 Legislature could view growth funding in 2022-23 enrollment data. This data will show which as warranted. Were data to show that no districts districts are reporting enrollment declines and are growing, the Legislature still might consider the magnitude of those declines. It also will show providing some level of growth funding given whether any districts are on track to earn any of that enrollment potentially could start to rebound the 2021-22 enrollment growth funds. If some next year. Moreover, the risk of overbudgeting in districts are on track to grow in the current year, this area is low, as any unearned funds become it could mean they might continue to grow in the available for other Proposition 98 purposes. budget year. Even if the entire amount ends up Weigh Options on One-Time Funds. To the not being earned in the current year or budget extent the Legislature thinks colleges can effectively year, remaining funds can be used to cover implement strategies to recruit students who apportionment shortfalls. If no such shortfalls otherwise would not have enrolled, it could approve materialize, the funds become available for the Governor’s student outreach proposal. The other Proposition 98 purposes, including other Legislature, however, could weigh funding for this community college purposes. proposal against other one-time spending priorities Key Unknowns in Assessing One-Time for community colleges. For example, were the Funding Proposal. Assessing the Governor’s Legislature concerned about colleges’ ability to outreach proposal to fund additional student cover continued COVID-19-related costs in 2022-23 recruitment, reengagement, and retention is given the expiration of federal relief funds, it could particularly challenging for a few reasons. First, create a COVID-19 block grant. Such an approach the state does not know how much of last year’s would give colleges more flexibility to put funds student outreach allocation colleges have been where they may be the most effectively used, such spent or encumbered to date. (Colleges are not as for student recruitment, mental health services, required to report this information to the state.) or COVID-19 mitigation. 8 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET STUDENT CENTERED FUNDING FORMULA In this section, we provide background on Base Allocation. As with the prior CCC’s apportionment formula, describe the apportionment formula, the base allocation of Governor’s proposal to modify it, assess the SCFF gives a district certain amounts for each proposal and formula more broadly, and provide of its colleges and state-approved centers, in recommendations aimed at improving the formula. recognition of the fixed costs entailed in running an institution. (This funding for fixed institutional costs Background is known as districts’ “basic allocation.”) On top of State Adopted New Apportionment Funding that allotment, it gives a district funding for each Formula in 2018-19. For a number of years, credit FTE student (about $4,200 in 2021-22). the state allocated general purpose funding to Calculating a district’s FTE student count involves community colleges based almost entirely on several somewhat complicated steps, but basically enrollment. Districts generally received an equal the count is based on a three-year rolling average. per-student funding rate. Student funding rates The rolling average takes into account a district’s were not adjusted according to the type of student current-year FTE count and counts for the served or whether students ultimately completed prior two years. their educational goals. In 2018-19, the state Supplemental Allocation. SCFF provides an moved away from that funding model. In creating additional amount (about $1,000 in 2021-22) for SCFF, the state placed less emphasis on seat every student who receives a Pell Grant, receives time and more emphasis on students achieving a need-based fee waiver, or is undocumented positive outcomes. The new funding formula also and qualifies for resident tuition. Student counts recognized the additional cost that colleges have are “duplicated,” such that districts receive twice in serving students who face higher barriers to as much supplemental funding (about $2,000 in success (due to income level or other factors). 2021-22) for a student who is included in two of Another related objective was to provide a strong these categories (for example, receiving both incentive for colleges to enroll low-income students a Pell Grant and a need-based fee waiver). The and ensure they obtain financial aid to support their allocation is based on student counts from the educational costs. prior year. In 2019, an oversight committee made New Formula Has Three Main Components. a recommendation to add a new factor to the The components are: (1) a base allocation linked supplemental allocation (as well as the student to enrollment, (2) a supplemental allocation linked success allocation), as described in the box on to low-income student counts, and (3) a student the next page. success allocation linked to specified student Student Success Allocation. The formula outcomes. We describe these components in more also provides additional funding for each student detail in the next three paragraphs. For each of achieving specified outcomes, including obtaining the three components, the state set new funding various degrees and certificates, completing rates, with the rates to increase in years in which transfer-level math and English within the the Legislature provides a COLA. The new formula student’s first year, and obtaining a regional living does not apply to incarcerated students or wage within a year of completing community dually enrolled high school students. It also does college. (For example, a district generates not apply to students in noncredit programs. about $2,350 in 2021-22 for each of its students Apportionments for these students remain based receiving an associate degree for transfer. The entirely on enrollment. formula counts only the highest award earned by a student.) Districts receive higher funding rates for the outcomes of students who receive a Pell Grant or need-based fee waiver, with somewhat www.lao.ca.gov 9 2022-23 BUDGET greater rates for the outcomes of Pell Grant SCFF provides additional funding for districts recipients. The student success component of the serving financially needy students, a number of formula is based on a three-year rolling average of districts in high-poverty areas of the state (such student outcomes. The rolling average takes into as in several rural areas of the state and various account outcomes data from the prior year and districts in the Central Valley) generated up to two preceding years. 20 percent increases in their apportionment Statute Weights the Three Components of funding compared with their allocations under the the Formula. Of total apportionment funding, former funding formula. Other districts—mainly the base allocation accounts for approximately concentrated in more affluent areas of the state 70 percent, the supplemental allocation accounts (such as the Bay Area and Coastal California)— for 20 percent, and the student success allocation generated about the same or even somewhat less accounts for 10 percent. funding under SCFF than how they fared under the former formula. (So-called “basic aid” or “fully New Formula Impacted Districts community-supported” districts whose revenues Differently. The 2018-19 budget provided a from local property taxes and enrollment fees are $175 million ongoing Proposition 98 General in excess of their total allotment under the funding Fund augmentation (above the apportionments formula do not receive their funding based on COLA that year) to transition to SCFF. The funding SCFF’s rules. In 2020-21, the CCC system had increase (equating to less than 3 percent that year) eight such districts. In addition, CCC’s 73rd and was in recognition of the slightly higher cost of the newest district, Calbright College, is funded entirely new formula. The impact of the new formula on through a categorical program.) district funding levels varied. Primarily because Oversight Committee Recommendation Committee Was Charged With Studying Possible Modifications to Funding Formula. The statute that created the Student Centered Funding Formula also established a 12-member oversight committee, with the Assembly, Senate, and Governor each responsible for choosing four members. The committee was tasked with reviewing and evaluating initial implementation of the new formula. It also was tasked with exploring certain changes to the formula over the next few years, including whether the supplemental allocation should consider first-generation college status and incoming students’ level of academic proficiency. Statute also directed the committee to consider whether low-income supplemental rates should be adjusted for differences in regional cost of living. The committee officially sunset on January 1, 2022. Committee Recommended Adding First-Generation College Status to Formula. In December 2019, the committee recommended that counts of first-generation college students be added to the supplemental allocation as well as the student success allocation. The committee recommended defining “first generation” as a student whose parents do not hold a bachelor’s degree. (Currently, community colleges define first generation as a student whose parents do not hold an associate degree or higher.) The oversight committee recommended using an “unduplicated” count of first-generation and low-income students. (This means a student who is both a first-generation college goer and low income would be counted as one for purposes of generating supplemental funding.) Oversight committee members ultimately rejected or could not agree on the issues of adding incoming students’ academic proficiency and a regional cost-of-living adjustment to the formula. 10 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Temporary Hold Harmless Provision reduced due to enrollment drops resulting from the Intended to Ease Transition to New Formula. pandemic. (The emergency conditions allowance The new funding formula included a temporary is only on the enrollment component of the SCFF. “hold harmless” provision for those districts that The supplemental and student success allocations would have received more funding under the continue to be based on the years specified in former apportionment formula. The intent of the statute.) While final 2020-21 data will not be released hold harmless protection was to provide time for by the Chancellor’s Office until late February 2022, those districts to ramp down their budgets to the we estimate that about 40 of CCC’s 64 local new SCFF-generated funding level or find ways to nonbasic-aid districts will have claimed COVID-19 increase the amount they generate through SCFF emergency conditions allowance that year—likely (such as by enrolling more financially needy students providing them with a total of between $150 million or improving student outcomes). and $200 million in funding protections. It is Sunset Date of Hold Harmless Provision Has likely that about the same number are claiming Been Extended Multiple Times. Districts funded the COVID-19 emergency conditions allowance according to this hold harmless provision receive in 2021-22. (Currently, four other districts can whatever they generated in 2017-18 under the old claim emergency conditions allowances for other formula, plus any subsequent apportionment COLA extraordinary situations, such as from enrollment provided by the state. The original hold harmless losses resulting from wildfires.) provision was scheduled to expire at the end of Chancellor’s Office Is Analyzing Data to 2020-21. The 2019-20, 2020-21, and 2021-22 Determine a Possible Emergency Conditions budgets all extended when the hold harmless Allowance for 2022-23. In spring 2021, the provision would end. Currently, it is scheduled to Chancellor’s Office issued a memo to community expire at the end of 2024-25. After that, statute colleges signaling its intent to extend the COVID-19 generally stipulates those districts are to be funded emergency conditions allowance “for one final year” annually based on the higher of (1) what they in 2021-22. According to the Chancellor’s Office, generate under SCFF or (2) the per-student rate they the Board of Governors, which has the regulatory received in 2017-18 under the former apportionment authority to adopt emergency conditions allowances, formula (which was $5,150 for most districts) will revisit whether to extend the emergency multiplied by their current FTE student count. Based conditions allowance in spring 2022. The decision on preliminary data, in 2020-21, about 20 of CCC’s about whether to extend the allowance through 64 local nonbasic-aid districts received a total of 2022-23 will be based on an examination of districts’ about $160 million in hold harmless funds. (In other current-year enrollment trends, actions taken by words, these districts collectively received about districts to mitigate enrollment declines, and the $160 million more than they generated under SCFF.) health safety conditions in the state. Certain Aspects of Formula Have Been Proposals Temporarily Modified. While statute specifies Proposes to Change Hold Harmless Provision. the years of data that are to be used to calculate The Governor is concerned that districts funded the amount a district receives under SCFF (that according to the existing hold harmless provision is, for districts that are not on hold harmless or are on track to experience fiscal declines when the basic aid districts), state regulations provide the provision expires at the end of 2024-25. To address Chancellor’s Office with authority to use alternative this issue, the Governor proposes to create a new years of data in extraordinary cases. Known funding floor based on districts’ hold harmless level as the “emergency conditions allowance,” the at the end of 2024-25. Specifically, he proposes Chancellor’s Office has been allowing districts to that, starting in 2025-26, districts be funded at their use alternative (pre-pandemic) enrollment data for SCFF-generated amount that year or their hold 2019-20, 2020-21, and 2021-22. The purpose of harmless amount in 2024-25, whichever is higher. this emergency conditions allowance is to prevent Whereas SCFF rates would continue to receive districts from having their apportionment funding www.lao.ca.gov 11 2022-23 BUDGET a COLA in subsequent years, a district’s hold Hold Harmless Funding Creates Poor harmless amount would not grow. The intent is to Incentives for Districts. At the same time, being eventually get all districts funded under SCFF, with funded according to the Governor’s proposed hold SCFF-generated funding levels over time surpassing harmless provision creates poor incentives. The districts’ locked-in-place hold harmless amounts. poor incentives stem from districts receiving funding Supports Adding First-Generation regardless of the number of students they serve, Metric to SCFF. The Governor also signals his the type of students they enroll, or the outcomes of interest in adopting the oversight committee’s those students. That is, the hold harmless provision recommendation to incorporate first-generation does not promote the state’s value of promoting college students into SCFF. Consistent with the access, equity, and student success. Moreover, committee’s recommendation, the metric would some districts under the Governor’s proposal will be an unduplicated count (with a first-generation remain funded under the hold harmless provision for student who is also low income counting once several years. (The exact length of time will depend for SCFF purposes). The Department of Finance on how each district’s enrollment changes, how far indicates that colleges currently may not be districts’ hold harmless level is currently above SCFF, collectively or uniformly reporting this data to the and the size of future apportionment COLAs.) In the Chancellor’s Office. (Currently, districts are relying meantime, those districts would not receive funding on students self-identifying as first generation, based on workload and performance. Instead, they and districts are not consistently reporting this would continue to have limited incentives to meet information to the Chancellor’s Office.) The Governor student enrollment demand, offer courses in the thus expresses his support to add this metric once modality and during the times of day students prefer, “a reliable and stable data source is available.” and innovate in ways that improve student outcomes. All this time, these districts would be funded at higher Does Not Address Question of Further per-student rates than their district peers without an Extending Emergency Conditions Allowance. underlying rationale. The Governor’s budget does not include any proposal related to extending the COVID-19 Merit to Adding First-Generation College emergency conditions allowance. In our discussions, Goers as a Metric. Although some needs of the administration has noted that the Board of first-generation college students may be similar Governors already has the authority to do so and to those of low-income students, first-generation has not taken a position one way or another on the students also have distinct needs. National issue for 2022-23. research finds that although nonfinancially needy first-generation community college students may Assessment not have financial barriers, they often lack what is In Proposing a New Funding Floor, Governor’s referred to as “college knowledge”—knowledge of Goal Is Laudable. Based on preliminary 2020-21 how to make curricular choices, how to consult with Chancellor’s Office data, hold harmless districts faculty, and how to navigate often complex transfer generally are funded notably above the amount pathways and other program requirements. Since they generate through SCFF. These districts thus first-generation students do not have family members potentially face a sizeable “fiscal cliff” in 2025-26 with specific knowledge of the college landscape when their current-law hold harmless provision who can offer assistance on how to navigate through expires. (These districts’ funding declines could be the college system, these students may require made worse were their enrollment not to recover additional support from their community colleges. to pre-pandemic levels.) We share the Governor’s By adding first-generation status as a metric, the concern that having districts cut their budgets to state could provide districts with funds to better such a degree likely would be disruptive to students help these students. and staff. A better approach would be to have a more gradual reduction, which the Governor is attempting to accomplish with his hold harmless proposal. 12 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Districts Currently Protected by Emergency allocation all districts receive to address their fixed Conditions Allowance Could Lose Enrollment costs. In deciding how much to increase base Funding. Were the Board of Governors not to funding, the Legislature might consider various extend the emergency conditions allowance factors, including colleges’ core cost drivers and in 2022-23, districts that do not grow back to student improvement goals. After deciding how to pre-pandemic enrollment levels in 2022-23 would increase SCFF base funding and settling on a new generate less enrollment funding in 2023-24 than level of base funding, the Legislature then could they are currently receiving. (Due to a statutory develop a plan for reaching the higher funding funding protection known as “stability,” these level, with the plan potentially stretching across districts would receive their 2021-22 SCFF funding several years. If the Legislature desired, it could level, plus any COLA, in 2022-23. Beginning start moving toward those higher rates in 2022-23 in 2023-24, however, their SCFF allocation by redirecting some of the ongoing funds the would reflect their lower enrollment levels.) Governor has proposed in his January 10 budget. The Legislature may wish to consider whether it (In the next section of this brief, we identify a would like districts to begin adjusting their budgets potential area where the Legislature might free up in response to current enrollment conditions or ongoing Proposition 98 funds for this purpose.) provide districts another year to see if they can Also Move Toward Adding First Generation increase their enrollment levels. as a Metric. Once data are consistently Increasing SCFF Base Rate Would Have reported by districts, the Legislature could Several Key Benefits. Increasing the SCFF base further refine SCFF by adding a first-generation rate would help colleges in addressing several student metric to the SCFF supplemental and challenges. Not only would a higher base rate help student success allocations, as recommended districts respond to salary and pension pressures by the SCFF Oversight Committee. Were the (as discussed in the “Apportionments Increase” Legislature to increase the SCFF base rate, it section of this brief), but it also could help districts likely could integrate first generation as a metric facing enrollment declines (as it would soften into the formula while still preserving the overall associated funding declines). Moreover, raising the 70/20/10 split among SCFF’s three allocation base rate would have the effect of eliminating hold components. Modeling how much to adjust harmless funding more quickly. Districts would the underlying SCFF rates will become easier begin generating funding under SCFF sooner, once data on the counts of first-generation and, in turn, their incentives to serve students students becomes available. In the meantime, would be stronger sooner. A higher base rate also the Legislature could direct the Chancellor’s could result in no district receiving less funding Office to work with the colleges to improve data under SCFF compared to the former funding collection in this area. model—perhaps helping to bolster support of the Direct Chancellor’s Office to Provide Update formula itself and its focus on student outcomes on Emergency Conditions Allowance Decision. and support. Finally, we recommend the Legislature request the Chancellor’s Office to clarify its intentions for Recommendations next year with regard to the emergency conditions Modify Governor’s Hold Harmless allowance. In particular, the Legislature should Proposal by Setting a New Base SCFF Target. gain clarity on the specific criteria the Board We recommend the Legislature begin exploring of Governors intends to use in making such a the possibility of raising base SCFF funding. Two determination. We recommend the Legislature options for raising base funding are to increase the direct the Chancellor’s Office to report this base per-student rate and/or increase the basic information to the Legislature at spring hearings. www.lao.ca.gov 13 2022-23 BUDGET PART-TIME FACULTY HEALTH INSURANCE In this section, we provide background on the Pay for Full-Time Faculty Is Much Higher Than Part-Time Faculty Health Insurance Program, for Part-Time Faculty. In 2020-21, full-time faculty describe the Governor’s proposal to provide the were paid an average of $105,000 annually. On program a sizeable augmentation, assess the average, districts paid part-time faculty $60 per hour proposal, and make an associated recommendation. of instruction, with a range between $20 per hour at the low end and $80 per hour at the upper end. BACKGROUND (Part-time faculty generally are not compensated for time they spend in preparation for classes or grading Below, we provide background on faculty at the assignments.) Based on average pay, a part-time community colleges, district health care plans, and faculty member teaching three three-unit courses state requirements regarding health insurance. (nine hours per week) both in the fall and spring Faculty semester would earn about $19,000 per year. Instruction at CCC Is Provided by a Mix of Community College Health Care Plans Full-Time and Part-Time Faculty. Instruction Districts Provide Health Insurance to Full-Time at the community colleges is provided by nearly Faculty. All districts provide some level of funding 20,000 full-time faculty and about 35,000 part-time for health care benefits for full-time faculty. Typically, faculty. Districts generally require full-time faculty the district offers several medical plan options (with to teach 15 units (credit hours) per semester various costs and coverage levels) and agrees to (commonly five three-unit classes). Full-time faculty contribute a set amount toward premium costs, are either tenured or on tenure-track and are with a larger amount provided if the employee has a considered permanent employees of the district. spouse or family. (A premium is the amount paid to In contrast, districts can decide whether to retain an insurance company to have a health insurance part-time faculty, who are considered temporary plan. Health insurance plans also typically have employees, for any given term depending on course patient copays and deductibles, which reflect direct scheduling and other considerations. Statute out-of-pocket costs. For example, a plan might limits part-time faculty to teaching 67 percent of a charge a patient a set amount for a particular medical full-time load at a given district (about ten units per service or hospital stay.) In many districts, the amount semester or about three classes). Many part-time the district contributes covers the full or nearly full faculty maintain an outside job, some are retired premium cost of the lowest-price plan for full-time and teaching only a course or two, and others faculty and all or most of the cost for the faculty’s teach part time at two or more districts (with their spouse and dependents. Employees are responsible combined teaching load potentially equaling, or for covering any remaining insurance premium costs even exceeding, a full-time teaching load). not paid for by the district. In addition, districts often Faculty Compensation Collectively Bargained cover the full cost of dental and vision insurance for at Local Level. Both full-time and part-time CCC full-time faculty, with coverage also being extended faculty generally are represented by unions. Each to the faculty’s dependents. Districts generally cover district and its faculty group (or groups) collectively these health insurance costs using their unrestricted bargain salary levels and benefits. (In some apportionment funding. districts, full-time and part-time faculty are part of Decades Ago, Legislature Created a Program the same bargaining unit. In other districts, they are to Promote Part-Time Faculty Health Insurance. in separate bargaining units.) Part-time faculty collective bargaining agreements historically have not included district funding for health care benefits. In an effort to create an incentive for districts to negotiate and provide 14 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET subsidized health care for part-time faculty, in the Considerable Variation in Coverage Districts 1990s the Legislature created the Part-Time Faculty Offer to Part-Time Faculty. Among districts Health Insurance Program. For this program, participating in the program in 2020-21, the part-time faculty are defined as those with teaching amount of premium costs covered by the district assignments equal to or greater than 40 percent of ranged from 100 percent to under 30 percent. a full-time assignment (typically about two courses). That is, participating part-time faculty in these Through collective bargaining, districts and faculty districts paid between 0 percent to more than representatives decide what health coverage to 70 percent of premium costs. In some cases, offer (such as whether to extend coverage to an the amount the district covers for the insurance employee’s family). They also decide the share of premium is based on a sliding scale of how many health premiums to be covered by the district and units a part-time faculty teaches, with a lower the employee. The program does not cover dental share of cost provided for those teaching fewer or vision insurance. units or classes. Based on our discussions with the California Federation of Teachers and several Program Designed to Cover a Portion of districts, the insurance offered to part-time faculty District Costs. The program reimburses districts varies significantly across the CCC system in other (the employer) for up to half of their health insurance ways too. For example, some districts offer the premium costs provided to part-time faculty. The same medical plans to part-time faculty as the Chancellor’s Office determines the exact share full-time faculty, whereas part-time faculty in other of district premiums to cover based upon the districts are limited to choosing medical plans annual budget appropriation for the program. with less coverage or higher out-of-pocket costs. Districts generally cover remaining costs using their Some districts cover only the employee (known as unrestricted apportionment funding. For years, “self only” coverage), whereas other districts offer funding for the categorical program was $1 million at least some level of coverage to the employee’s ongoing. Due to the state’s fiscal condition during the spouse and dependents too. Districts vary as well Great Recession, the program’s budget was reduced in the number of terms a part-time faculty member to $490,000 in 2009-10. The program has been must teach in a row (or within a certain period of funded at $490,000 ongoing since that time. time) to be eligible for a district-provided plan. Almost Half of Districts Participate but Program Covers Small Share of District Costs. State Health Insurance Requirements Figure 4 shows that in 2020-21, 33 of CCC’s 72 local Most Californians Have Health Insurance. districts submitted claims to the Chancellor’s Office Since 2020, state law has required all adults and for reimbursement under the program. (Systemwide their dependents to have health insurance—a data are not available on all districts offering health requirement commonly known as the “individual insurance to part-time faculty. Some districts, however, do offer insurance Figure 4 to part-timers without seeking state Summary of Part-Time Faculty reimbursement for a portion of those costs.) Just under 3,700 part-time Health Insurance Program faculty received health care coverage 2020-21 from these districts (about 10 percent of all part-time faculty). On average, Number of districts participating 33 districts covered about 80 percent Share of local districts participating 46% Number of part-time faculty participating 3,691 of the $31 million in total premium Share of total part-time faculty participating About 10 percent costs, with part-time faculty paying Total premium costs $31,481,326 the remaining amount. Program Premium cost paid by district $24,722,739 reimbursements covered about Premium cost paid by employee $6,268,587 2 percent of districts’ premium costs. Annual program funding $490,000 Percent of district premium cost covered by program 2% www.lao.ca.gov 15 2022-23 BUDGET mandate.” State residents who choose to go “Family Glitch” Has Negative Implications without health insurance generally face a state tax for Some Employees. Importantly, affordability is penalty. Roughly 90 percent of Californians have based on the cost of a plan to cover the employee health insurance. Most insured Californians receive only—not the cost of the plan that would also their health insurance through their employer. cover their spouse or dependents. If the employer In addition, Medi-Cal offers free or low-cost contributes little to nothing for the spouse’s and medical coverage to qualifying low-income adults dependent’s premium, some employees may find and children in the state. Older adults generally adding family members to the employer-sponsored are eligible for Medicare, a federal program that plan financially prohibitive. Nonetheless, the family provides health insurance primarily for persons remains ineligible for financial assistance through 65 years or older. California also has a state-run Covered California (as the district still offered service, known as Covered California, as insurance to the employee). This outcome is often discussed below. referred to as the family glitch. Health Insurance Available Through Covered California. California residents who do not receive PROPOSAL health care coverage through their employers, Governor Proposes $200 Million Ongoing spouse, or from other government programs can Augmentation for Part-Time Faculty Health purchase insurance that meets established quality Insurance Program. With a current program standards through a central health insurance funding level of $490,000, the proposed marketplace known as the California Health augmentation represents a 400-fold increase—the Benefit Exchange (Covered California). Residents largest ongoing CCC augmentation in percentage who meet certain qualifications (including having terms by far. The proposed augmentation would income below a specified level) can receive result in this program shifting from being one of the subsidized premiums and other financial assistance smallest CCC categorical programs to one of the when they purchase an insurance plan through largest. The Governor’s stated intent in providing Covered California. the large augmentation is to create a stronger Rules Around Who Can Qualify for Premium financial incentive for more community college Subsidies Under Covered California. Importantly, districts to provide medical care coverage to their if a person’s employer provides a health plan that is part-time faculty. The Governor does not propose deemed affordable to the employee and provides a any other changes to the program itself. specified minimum level of coverage, the employee cannot qualify for subsidies (for themselves or ASSESSMENT their families) through Covered California. (In such Problem Is Unclear. The Governor indicates cases, a person can still purchase health insurance an interest in expanding medical coverage for through Covered California but would pay the full part-time faculty. The administration, however, cost of the plan.) Currently, employer-provided has not yet provided any data on the number of insurance is considered affordable by the federal part-time faculty who do not have health insurance. government if the employee’s share of the annual The administration also has not provided any self-only premium for the lowest-priced plan costs data on the share of part-time faculty who access less than 9.6 percent of the employee’s household health insurance through an outside job, spouse, income. If the employer offers a plan that meets Medi-Cal, Medicare, or Covered California. (District this definition of affordable (and meets certain administrators we spoke with believed that most other standards) but the employee turns it down part-time faculty have health insurance through one and receives financial help through a Covered of these means.) Without these data, determining California plan, the employee has to pay back the whether a problem exists involving health care Covered California subsidy when filing state and access or affordability is not possible. federal taxes. 16 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET Some District-Provided Health Care to other part-time workers. Also, such a major Coverage May Be Disadvantaging Certain expansion of the current program for CCC part-time Part-Time Faculty. Some part-time faculty working faculty could set a greater precedent for dealing in districts that offer health insurance could be with each group of part-time workers separately, worse off than had their district not offered health potentially introducing further inequities. care. This is particularly the case if employers Proposal May Not Be the Best Approach to provide plans that keep premium costs for the Improve Health Care Affordability. If the goal is employee to less than 9.6 percent of household to improve health care affordability and statewide income but provide little or no contribution toward coverage, the Governor’s proposal might not be covering the employee’s family. In such cases, the best approach as it likely would only impact coverage through the district-provided plan for a relatively small number of residents. Notably, a a spouse or dependents might cost more than recent report from Covered California highlights coverage through a Covered California plan. various options to offer increased financial Nonetheless, the availability of the district plan assistance to a much broader group of Californians for the employee would prevent the family from than this proposal, with state costs ranging from receiving financial assistance if they enroll in a $37 million to $452 million. These options are Covered California plan due to the family glitch. designed to reduce or eliminate various health care In such circumstances, the family could have higher costs (such as the amount patients must pay for health insurance costs than if no district-provided certain medical services and the maximum they plan had been offered. Like other related data in this are required to pay out-of-pocket in a given year) area, the administration has not yet provided data for low- and middle-income Californians who have on how many part-time faculty are being negatively purchased health plans through Covered California. affected in this way. (Our forthcoming publication, The 2022-23 Budget: Part-Time Faculty Face Greater Uncertainty Analysis of Health Care Access and Affordability With District-Provided Coverage. Given declining Proposals, will provide additional details and enrollment across the CCC system, districts have assessment of these options.) been reducing course section offerings. These reductions mean fewer teaching opportunities for RECOMMENDATION part-time faculty. If part-time faculty are not hired More Information Is Needed to Assess or fall below a certain number of teaching units, How Best to Enhance Health Coverage. they stand to lose district-provided health care or The Legislature needs additional information if see an increase in their premium costs. Even were it is to assess the implications of the Governor’s districts to offer robust coverage for part-time proposal. In particular, the Legislature needs faculty and their families, the Legislature thus faces clarification about what problem the administration the policy question of whether this CCC program is trying to solve, the extent of the problem, and is the best way to provide them health insurance— why the proposal in the Governor’s budget is the with part-time faculty potentially fluctuating in and most optimal solution. The Legislature also needs out of district-provided coverage. Potentially having information allowing it to compare the health to change health plans frequently might be less coverage for part-time faculty to other part-time optimal for part-time faculty than remaining insured workers in the state. Without this information, under Covered California. moving forward with the Governor’s proposal Proposal Raises Equity Issues for Other could have unintended, counterproductive effects— Part-Time Workers in State. California has potentially exacerbating rather than mitigating many part-time employees throughout state and health coverage inequities. Furthermore, gathering local government. Yet, the state generally does more information on these issues likely would not fund a special health care program for these take several months, making budget action for other groups. Expanding a program for part-time 2022-23 impractical. CCC faculty thus could create an inequity relative www.lao.ca.gov 17 2022-23 BUDGET Legislature Could Task Administration With • For districts that offer health insurance to Providing This Information. If the Legislature part-time faculty, does the coverage extend to is interested in enhancing health coverage for the employee’s family? If so, how much of the part-time workers, it could direct the administration, premium is covered by the district? How many in coordination with the Chancellor’s Office, to part-time faculty are on this type of coverage? obtain more information on the insured status The Legislature similarly could direct the of part-time faculty and on the part-time faculty administration to work with other state agencies to health care plans currently offered by districts. gather comparable information for other part-time The Chancellor’s Office could survey part-time workers in the state. The Legislature could give faculty and districts to learn, at a minimum: the administration until October 2022 to submit • What percent of part-time faculty have this information. With such information, both the health insurance? What is the source of their administration and Legislature would be much health insurance? better positioned to inform potential budget • What factors are driving whether districts decisions for 2023-24 and decide how best to offer health insurance to part-time faculty and enhance health coverage for part-time workers what factors are driving the type of coverage in California. they provide? FACILITY MAINTENANCE In this section, we provide background on and repairs, the replacement of instructional CCC’s maintenance backlog and maintenance equipment and library materials, hazardous categorical program, describe the Governor’s substances abatement, architectural barrier proposal to fund deferred maintenance and removal, and water conservation projects, among other projects, assess the proposal, and offer other related purposes. To use this categorical associated recommendations. funding for maintenance and repairs, districts must adopt and submit to the CCC Chancellor’s Office Background through FUSION a list of maintenance projects, CCC Maintains Inventory of Facility with estimated costs, that the district would like Conditions. Community college districts jointly to undertake over the next five years. In addition developed a set of web-based project planning to these categorical funds, CCC districts fund and management tools called FUSION (Facilities maintenance from their apportionments and other Utilization, Space Inventory Options Net) in district operating funds (for less expensive projects) 2002. The Foundation for California Community and from local bond funds (for more expensive Colleges (the Foundation) operates and maintains projects). Statute requires districts to spend at FUSION on behalf of districts. The Foundation least 0.5 percent of their current general operating employs assessors to complete a facility condition budget on ongoing maintenance. Statute also assessment of every building at districts’ campuses contains a maintenance-of-effort provision requiring and centers on a three- to four-year cycle. districts to spend annually at least as much on These assessments, together with other facility facility operations and maintenance as they spent information entered into FUSION, provide data on in 1995-96 (about $300 million statewide), plus CCC facilities and help districts with their local what they receive from the Physical Plant and planning efforts. Instructional Support program. (Given inflation since 1995-96, coupled with the 0.5 percent general State Has a Categorical Program for operating budget requirement, districts tend to be Maintenance and Repairs. Known as “Physical spending far above this maintenance-of-effort level.) Plant and Instructional Support,” this program allows districts to use funds for facility maintenance 18 LEGISLATIVE ANALYST’S OFFICE 2022-23 BUDGET State Has Provided Substantial Funding repairs, in the long run. Funding energy efficiency for Categorical Program Over Past projects also could be beneficial, as these Several Years. Historically, the Physical Plant projects are intended to reduce districts’ utility and Instructional Support categorical costs over time. In addition, instructional equipment program has received appropriations when and related support is core to CCC’s mission of one-time Proposition 98 funding is available delivering quality educational services to students. and no appropriations in tight budget years. One-Time Funding Does Not Address Since 2015-16, the Legislature has provided a Underlying Cause of Backlog. Deferred total of $955 million for the program. The largest maintenance backlogs tend to emerge when appropriation came from the 2021-22 budget, districts do not consistently maintain their facilities which provided a total of $511 million. According and infrastructure on an ongoing basis. Although to the Chancellor’s Office, thus far districts have one-time funding can help reduce the backlog in chosen to use nearly three-quarters (about the short term, it does not address the underlying $365 million) of these 2021-22 funds for deferred ongoing problem of underfunding in this area. maintenance and other facility-related projects, with Though districts are required to spend a certain the remaining one-quarter of funds intended for share of their general operating funds on ongoing instructional support purposes. maintenance, the current rate (0.5 percent) may not Even With Recent Funding, Chancellor’s be sufficient given the maintenance backlog exists Office Reports Sizeable Maintenance and would have grown absent state categorical Backlog. Entering 2021-22, the Chancellor’s Office funding the past several years. reported a systemwide deferred maintenance Recommendations backlog of about $1.6 billion. Because of the funds Consider Governor’s Proposal as a Starting provided in the 2021-22 budget (plus local spending Point. To address CCC’s maintenance backlog, on projects), the backlog has been reduced to we recommend the Legislature provide at least about $1.2 billion. This is the same size as the the $388 million proposed by the Governor. As it CCC backlog identified back in 2017-18. Since that deliberates on the Governor’s other one-time time, state funding effectively has kept the backlog proposals and receives updated revenue from growing but not shrunk it. information on the Proposition 98 minimum Proposal guarantee in May, the Legislature could consider providing CCC with more one-time funding for Governor Proposes $388 Million One Time this purpose. for Physical Plant and Instructional Support Program. Of this amount, $109 million is 2022-23 Consider Developing Strategy to Address Proposition 98 General Fund and a total of Ongoing Maintenance Needs. In addition $279 million is Proposition 98 settle-up funds to providing one-time funding for deferred ($182 million attributed to 2021-22 and $97 million maintenance, we encourage the Legislature to attributed to 2020-21). The Governor excludes all begin developing a long-term strategy around CCC $388 million from SAL. In addition to the categorical maintenance. Potential issues to consider include program’s existing allowable purposes, proposed whether the current statutory expectation around trailer language would allow districts to use the district spending on maintenance is sufficient, funds for energy efficiency projects. Districts would what fund sources to use for maintenance, have until June 30, 2024 to encumber the funds. the mix of funding provided ongoing versus on a one-time basis, the period over which to Assessment address the existing maintenance backlog, and Proposal Reflects a Prudent Use of One-Time associated reporting. Given the magnitude of Funding. Providing funds for deferred maintenance maintenance needs at CCC, developing such a projects would address an existing need among strategy would likely require planning beyond the districts. Addressing this need can help avoid more 2022-23 budget cycle. expensive facilities projects, including emergency www.lao.ca.gov 19 2022-23 BUDGET LAO PUBLICATIONS This report was prepared by Paul Steenhausen, and reviewed by Jennifer Pacella and Anthony Simbol. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, California 95814. 20 LEGISLATIVE ANALYST’S OFFICE