On January 10, 2018, Governor Brown released his proposed State Budget.  He stated that the 2018-19 State Budget is solid and prepares California for the future.  He acknowledged the strong national and state economies but warned of the dire consequences of a recession.  By the end of the 2018-19 budget year, this recovery will match the longest recovery in post-war history, and Governor Brown has proposed to fully fund the state Rainy Day Fund, providing some safeguard against the next downturn in the economy. The budget does not include projections for the federal income tax reform, which could significantly affect the State budget; he indicates that these implications will appear in the May Revise.

The budget provides $780 million (≈ 4%) in new funds for California community colleges.  The two major new initiatives included in the State Budget are the $175 million allocated to support the transition to a student-centered funding formula and the $120 million allocation to establish a fully online community college.  More details of these initiatives, highlights of the rest of the Budget and estimates for LBCC are as follows:

Ongoing Unrestricted

• Cost of Living Adjustment (COLA) of 2.51% totaling $161.2 million. 

  • This could provide around $2.8 million for LBCC; although it is not guaranteed since there will be a new funding formula.
• Enrollment Growth funds of 1% totaling $60 million for increased full-time equivalent students (FTES). 
  • We do not expect enrollment growth in 2018-19, since we will fall into stabilization this year.  If we were able to grow at this level, we would have to generate an additional 211 FTES (above our 21,076 FTES base) in order to earn up to $1.1 million, assuming the new funding formula provides growth in FTES only.
• New Funding Formula implementation funds of $175 million to ensure all districts receive the same level of funding in 2018-19 as they did in 2017-18.  The new funding formula as proposed will comprise the following elements:
  • Base Grants (50% of formula) — District base grants determined by FTES enrollment.
  • Supplemental Grant (25% of formula) — Supplemental grants based on the number of low-income students that the district enrolls reflecting two factors: (1) enrollment of students who receive a College Promise Grant fee waiver (formerly known as the BOG Waiver) and (2) enrollment of students who receive a Pell Grant.
  • Student Success Incentive Grant (25% of formula) — intended to fund short-term and long-term metrics including: (1) the number of degrees and certificates granted and (2) the number of students who complete a degree or certificate in 3 years or less.  There will also be additional funds for each Associate Degree for Transfer granted by the college.
  • Hold Harmless Provision—During the first year of implementation, districts would be held harmless to 2017-18 levels.  This means that we are not guaranteed to receive COLA.
    • We await guidance and pro forma projections from the Chancellor’s Office to help us determine the impact of this fundamental change to our apportionment funding.

Ongoing Categorical

• Cost of Living Adjustment (COLA) of 2.51% totaling $7.3 million for select categorical programs.  This increase is only for DSPS, EOPS, special services for CalWORKs and Child Care Tax Bailout.  We estimate approximately $80,000 in additional funds for LBCC.
• Cost of Living Adjustment (COLA) of 2.51% totaling $20.5 million for the Adult Education Block Grant.  We estimate approximately $30,000 in additional funds for LBCC.
• Implementation of the California College Promise (AB 19) totaling $46 million.  The administration establishes an expectation that colleges encourage students to take 15 units per semester to qualify for a Promise grant after they have implemented guided pathways. 
  • The dollar impact available to us is unknown at this time.
  • These funds may be used “to waive enrollment fees for all first-time resident students enrolled in 12 units or more per semester during their first year or for other innovative purposes to advance specific student success goals”.
• $32.9 million for Student Success Completion Grants or approximately $500,000 for LBCC.
  • The proposal consolidates the Full-Time Student Success Grant and the Completion Grant programs and shifts to a per-unit per semester/per year grant.  These funds are provided to students that qualify through Financial Aid. 
• Consolidating categorical programs – the Chancellor’s Office is urged to consult with stakeholders to develop a proposal for consolidating categorical programs in time to be considered for the May Revise.  The Administration is interested in consolidating the programs while keeping them restricted.

One-Time

• Deferred Maintenance & Instructional Equipment totaling $274.3 million with no match requirement.  This would provide about $5 million for LBCC.
• Innovation Awards totaling $20 million.  These funds focus on enhancing equity and will be competitive grants.

Online Education

• $120 million ($100 million one-time and $20 million ongoing) to establish a fully online community college to provide critical education and economic opportunities to specified working adult learners aged 25-34 years old.

  • The intent is to create the 115^th community college within our system run by the Chancellor’s Office as a newly developed local educational agency with its own governing board. 

Capital Facilities

• Funding is provided for 20 (15 continuing and 5 new) state capital outlay projects.  Included in that funding are our two continuing projects:
  • $26.806 million for Multi-Disciplinary Facility Replacement, Buildings M & N at LAC utilizing the Design-Build delivery system.
  • $228 thousand for working drawings for Construction Trades Phase 1, Building MM at PCC.  We anticipate construction funding in the 2019-20 fiscal year.

Next Steps

This budget is the beginning of the annual budget process.  The process will continue with input collected from system stakeholders, a review by the Legislative Analyst’s Office, and an initial round of budget subcommittee hearings prior to the release of the May Revise.  We look to the Chancellor’s Office and await the trailer bill language in coming weeks to provide guidance and clarification on the two new initiatives – the student-centered funding formula and the online community college. 

Although the new funding formula comes as no surprise, it is a major game changer in our funding, and the long-term impact could be dramatic.  Preparing our Tentative Budget will be difficult since we do not anticipate simulations of the new funding formula impact until late spring.  At this time, we know that our minimum funding level will be what we received in 2017-18 and does not include the 2.51% COLA nor the growth funding proposed.  This puts added pressure on our budget since we cannot anticipate additional funding to help cover the costs of our negotiated salary increases and known STRS, PERS and health benefits increases. 

We will consider all of these factors and any new guidance as it becomes available while working with the Budget Advisory Committee to develop the Tentative Budget that goes to the Board in June.