Governor’s record state budget poses new challenges

By Joe Moreno | Staff Writer

After years of struggling to enroll in classes that were simply not available, students can look forward to a more stable future as lawmakers look to restore funding for California community colleges.

California Gov. Jerry Brown’s May revise of the state budget aims to repair the financial damage dealt to California community colleges by the “Great Recession” and years of deferred payments by the State Legislature.

Brown released a record $107.8 billion budget proposal on May 13.  However, this proposal, plus an additional $2.4 billion in tax revenue that was not predicted by the Legislative Analyst Office in November, will still not be enough to correct the shortfalls of a state strapped with hundreds of billions of dollars in unfunded liabilities.

While the governor’s revision fails to fund universal preschool for 4-year-olds, a key priority among Democratic legislative leaders, he did introduce a plan to address the state’s $74 billion teacher pension fund liability.

“We’ve done a lot already, and we haven’t paid for what we’ve already done,” Brown said  while addressing the lack of funding for new programs during his May 13 press conference. “Without more taxes, there’s no other way around it.”

The governor’s budget revision was similar in many ways for higher education to the January proposal. The proposal is designed to address approximately $6 billion in deferred payments to education that built up during the recession which began in 2008.

“It’s certainly a relief to see a budget that has some positive figures as opposed to negative figures,” said Claudette Dain, Citrus College vice president of finance and administrative service. “The biggest positive is that the course hasn’t strayed too much, and that the reductions (in the May revise) aren’t a huge detriment to community colleges.”

Some of the highlights of the May revise include a decrease of  $14.8 million to reflect a change from 3 percent to 2.75 percent in funds for new access for community college students during the 2014-2015 fiscal year. This represents an ongoing reduction to Citrus College of approximately $127,000 from the January budget proposal, Dain said.

The revise also established $50 million to the Economic and Workforce Development Program on a one-time basis “to improve student success in career technical education.”

There was also an adjustment to the maintenance and instructional equipment proposal, a decrease from $175 million to $148 million , with all funds going toward deferred maintenance in the revised proposal, rather than a equal split with instructional equipment.

“While we haven’t seen significant downward adjustments from the January budget proposal to the May revise, we are far below being restored (to pre-recession levels).

“We’re not there,” Dain said. “We’re still far below the level we need to be to offer the services that are needed.”

The main challenge the May revise brings to Citrus College is the increase in employer contributions to the California State Teachers’ Retirement System, which is only 67 percent funded.

Brown’s proposal includes a $450 million down payment to the CalSTRS program next year and calls for  increasing contribution levels for employers and employees.

As part of the governor’s plan, employer contributions for the CalSTRS program would increase 1.25 percent during the 2014-2015 fiscal year and increase 1.6 percent each year after until 2020-2021.

“To further put it in perspective, a 1.25 percent increase in the STRS rate is about $300,000 for Citrus College on an ongoing basis,” Dain said. “But that’s only for one year. It goes up again 1.6 percent the next year, which is roughly $355,000. It’s $355,000 on top of $300,000.”

Citrus would be committing approximately $2.4 million a year more to the CalSTRS program by 2021.  The college’s contributions would more than double to 19.1 percent of STRS $24 million pension fund payrolls over the next seven years.

Cost of living adjustments, or COLA, have risen more than 15 percent since 2007-2008, according to School Services of California Inc. From 2008-2009 to 2012-2013, the State Legislature decided to forgo COLA payments.

COLA was proposed in January at 0.86 percent for the 2014-2015 fiscal year, eventually shifting to 0.85 following the May revise. This rate is the second lowest COLA in 20 years and reflects the sluggish economic recovery, according to School Services of California Inc website.

With the COLA percentage rate at 0.85 percent, lower than the rate of contribution increase for the CalSTRS program at 1.25 percent, revenues (COLA) cannot keep pace with expenditures (CalSTRS contribution).

“We knew that there would be some sort of phase in plan. The problem is that COLA is not keeping pace with the expenditures,” Dain said.

The May revise was recently reviewed by the Legislative Analyst’s Office.

“Our May revenue forecast projects $2.5 billion higher revenues compared with that of the administration,” Legislative Analyst Mac Taylor said in the LAO report. “In addition, we project over $700 million more in local property taxes for school districts.”

In the coming weeks, the budget committees from both the Assembly and the Senate review the governor’s budget and a legislative conference committee will help balance differences between the two houses.

The new fiscal year begins July 1, 2014. The constitutional deadline for passage of a balanced budget is June 15.