Full Budget Summary 2015-2016

8/10/2019 Full Budget Summary 2015-2016

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2015-16

Edmund G. Brown Jr. Governor, State of California

To the California Legislature

Regular Session 2015-16

Governors Budget Summary


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January 9, 2015

GOVERNOR

Edmund G. Brown Jr.

TotheMembersoftheSenateandtheAssemblyoftheCaliforniaLegislature:

Wehavecomefarinthelastfouryears. Then,thestatewasdeeplyindebt$26billionandourunemployment

ratewas12.1percent.Now,thestatebudget,afteradecadeoffiscalturbulence,isfinallybalanced

moreprecariouslythanIwouldlikebutbalanced. Californiahasseenmorethan1.3millionnewjobscreatedinjustfouryearsandtheunemploymentratehasdroppedto7.2percent. ThanksgoestotheLegislatureforcutting

spending,theeconomyforrecoveringandthepeopleforvotingfortemporarytaxes.

WealsohavethepeopletothankforPropositions1and2,whichsavewaterandmoneyandprepareusforan

uncertainfuture.Asaresult,bytheendoftheyear,wewillbeinvestinginlongoverduewaterprojectsand

saving$2.8billioninthestatesnewconstitutionallyprotectedRainyDayFund.

Soonwewillmakethelastpaymentonthe$15billionofborrowingmadetocoverbudgetdeficitsbackto2002.

Wewillalsorepayabilliondollarsborrowedfromschoolsandcommunitycollegesandanother$533millionowed

tolocalgovernments.

Overthenextfouryearsandbeyondwemustdedicateourselvestomakingwhatwehavedonework,

toseeingthatthemassivechangesineducation,healthcare,publicsafetyandenvironmentareactually

implementedandendure.Thefinancialpromiseswehavealreadymaderunningintothehundredsofbillions

ofdollarsmustbehonestlyconfrontedsothattheyareproperlyaccountedforandfunded. Thehealthofour

statedependsonit.

Withrespect,

EdmundG.BrownJr.

STATE CAPITOLSACRAMENTO,CALIFORNIA 95814 (916) 4452841


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2015-16 B S

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Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

SummaryCharts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Kthru12Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

HigherEducation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

InvestinginCalifornias Workforce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

HealthandHumanServices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51

PublicSafety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73

Transportation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87

EnvironmentalProtection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .95

NaturalResources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .99

JudicialBranch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

LaborandWorkforceDevelopment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

LocalGovernment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121

StatewideIssuesandVariousDepartments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .127

DemographicInformation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .139

EconomicOutlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145

RevenueEstimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .151

StaffAssignments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .171

AppendicesandSchedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .173

G B S 2015-16 iii


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I

Since2011,theStateofCaliforniasfiscalsituationhasdramaticallyturnedaround.

WhenGovernorBrowntookofficein2011,thestatefaceda$26.6billionimmediate

budgetproblemandestimatedyearlygapsbetweenspendingandrevenuesofroughly

$20billion. Thebudgetwasbalancedwithpermanentspendingcutsandtemporarytaxes

fromProposition30.

Asthestateseconomyhasrecovered,thepasttwobudgetshaverestoredsome

previousbudgetcutsandexpandedinsomeareas,suchasextendinghealthcare

coveragetomillionsofCalifornians. Inaddition,thestatehaspaiddownitsbudgetary

borrowingandaddressedsomelong-standingproblems suchasimplementingaplan

torestorefiscalhealthtoteacherpensionsandcommittingtomajorimprovementstothe

stateswatersystem.

ThepassageofProposition2intheNovemberelectiongivesthestateacritical

opportunitytoavoidrepeatingtheboom-and-bustcycleofthepasttwodecades.

Recentbudgetshortfallshavebeendrivenbymakingongoingcommitmentsbasedupon

temporaryspikesinrevenuesfromcapitalgains.UnderProposition2,thesespikesin

capitalgainswillinsteadbeusedtosavemoneyforthenextrecessionandtopaydown

thestatesdebtsandliabilities.

Astrengtheningstateeconomyiscontinuingtopushrevenueshigher.Under

Proposition98,mostofthoserevenuesarededicatedtoK-12schoolsandcommunity

collegesallowingthestatetoinvestnearly$8billioninnewfundingtobetterprepare

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studentsforcollegeandcareer.Risingcostsfromhealthcarereform,wildfires,

andthespendingimposedbytheprisonReceivermeansthat despitethestronger

revenuestheBudgetremainsprecariouslybalancedafterpayingforexistingobligations.

Thestatecontinuestohavehundredsofbillionsofdollarsinexistingliabilities,suchas

deferredmaintenanceonitsroadsandotherinfrastructureanditsunfundedliabilityfor

futureretireehealthcarebenefitsforstateemployeesandvariouspensionbenefits.

Theseexistingliabilitiesmustbeaddressed.

M F B I O C

Thefiscalstabilityfromabalancedbudgetandarecoveringstateeconomyhasbeena

welcomereprievefromthepriordecadesmassivebudgetshortfalls.Yet,maintaininga

balancedbudgetforthelongtermwillbeanongoingchallengerequiringfiscalrestraint

andprudence.AsshowninFigureINT-01,since2000,thestatesshortperiodsof

balancedbudgetshavebeenfollowedbymassivebudgetshortfalls.

Figure INT-01

Balanced Budgets Have Been Quickly

Followed by Huge Deficits1/

(Dollars in Billions)

-$50

-$40

-$30

-$20

-$10

$0

$10

$20

1/ Budget shortfalls or surplus, measured by the annual Governor's Budget.

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TheBudgetassumesthecontinuedmoderateexpansionoftheeconomy.Yet,economic

expansionsdonotlastforever. Inthepost-warperiod,theaverageexpansionhas

beenaboutfiveyears. Thecurrentexpansionhasalreadyexceededtheaverageby

ninemonths. Whiletherearefewsignsofimmediatecontraction,anotherrecessionisinevitable.

WithafundingplanthatisascomplicatedasCaliforniasbudget,therewillcontinueto

beyear-to-yearfluctuations,risks,andcostpressures. Thefederalgovernmentspolicies

haveaddedhundredsofmillionsofdollarsincostsinthepastyearalone. Dependingon

itsimplementation,changesinfederalimmigrationpolicycoulddrivestateprogramcosts

upbyhundredsofmillionsofdollarsmore.Respondingtotheimpactsofclimatechange,

suchasincreasinglyseverewildfireseasons,willcontinuetogetmoreexpensive.Rising

healthcarecostscouldcontinuetoconsumeagreaterandgreatershareofthebudgetin

Medi-Calandforstateemployeeandretireebenefits.

ThiscomingyearwillbethelastonewiththefullrevenuesofProposition30.

Thequarter-centsalestaxincreaseunderthemeasurewillexpireattheendof2016,

andtheincometaxratesonthestateswealthiestresidentswillexpireattheendof

2018.Asitwasintended,themeasurehasprovidedthestatewithincreasedresources

onashort-termbasistogivetheeconomytimetorecover.Underthemeasure,thestate

hasbeenabletorestorefundingforeducationandthesafetynet,expandhealthcare

coverage,andpayoffitsbudgetaryborrowing.

Still,asshowninFigureINT-02,thestatehas$227billioninlong-termcosts,debts,

andliabilities.Thevastmajorityoftheseliabilities$222billion arerelatedtoretirementcostsofstateandUniversityofCaliforniaemployees. Forthenext15years,

Proposition2providesadedicatedfundingsourcetohelpaddresstheseliabilities,

butthatfundingalonewillnoteliminatetheliabilities. Inaddition,thestatefaces

$66billionmoreinidentifieddeferredmaintenanceonitsinfrastructure.

Already,thecommitmentsthatthestatemadeinthepasttwoyearsarestrainingthe

statesfinances.Underaprojectionofcurrentpolicies,thestatewouldbegintospend

morethanitreceivesinannualrevenuesby2018-19(byabout$1billion).Whileforecasts

fouryearsintothefuturearesubjecttogreatuncertainty(andthestatewouldhave

operatingreservesonhandtomaintainabalancedbudgetinthatyear),itisobviousthat

thestatecannottakeonnewongoingspendingcommitments.


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Figure INT-02

Debts and Liabilities Eligible for Accelerated Payments Under Proposition 2

(Dollars in Millions)

ProposedOutstanding Use of 2015-16

Amount at Start Accelerated

of 2015-16 Payment

Budgetary Borrowing

Loans from Special Funds $3,028 $965

Underfunding of Proposition 98Settle-Up 1,512 256

Unpaid Mandate Claims for Local Governments (prior to 2004-05)1/ 257 0

State Retirement Liabilities

State Retiree Health 71,773 0

State Employee Pensions 49,978 0

Teacher Pensions 2/ 74,374 0

Judges' Pensions 3,371 0

Deferred payments to CalPERS 530 0University of California Retirement Liabilities

University of California Employee Pensions 7,633 0

University of California Retiree Health 14,519 0

Total $226,975 $1,221

1/ Amount outstanding reflects $533 million paid under the 2014 Budget Act trigger.

2/ The state portion of the unfunded liability for teacher pensions is $19.932 billion.

I M I

Overthepastfouryears,thestatehasoverhauledvirtuallyeveryareaofgovernment.

Manyofthechangesweredrivenbytheneedtobalancethebudget,whileothersweredonetoimproveservicestothepublic. Thechangesfocusonprovidingcorepublic

servicesinthemostefficientmannerpossible.Thedifficultandtime-consumingtaskof

makingtheseinitiativessuccessfulremainsafocusoftheAdministration.

LocalControlFundingFormulaThe2013BudgetoverhauledthestatesK-12school

financingsystemwiththeLocalControlFundingFormulathattargetsthemostnew

dollarstothosedistrictsservingEnglishlearners,studentsfromlow-incomefamilies,

andyouthinfostercarewhilegivingalldistrictsdramaticallymoreflexibilityto

achievetheireducationalgoals. TheStateBoardofEducationadoptedsignificantly

modifiedaccountabilityproceduresatitsNovember2014meetingandwillcontinue

toreviewandrevisespendingregulationsasnecessarytoimprovestudentsuccess.

PublicSafetyRealignmentDuetoovercrowding,risingcosts,andarevolvingdoor

ofoffendersinthestatesprisons,2011realignmentshiftedmoreresponsibility

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forlower-leveloffenderstocountieswithanemphasisonimprovedrehabilitation

andreducedrecidivism.WithupcomingbenchmarkstomeettheThreeJudge

PanelsovercrowdingorderandtheimplementationofProposition47(passedatthe

Novemberelection),thestatescorrectionalsystemwillcontinuetoundergomajorchangesinthenextyear.

HealthCareReformDueprincipallytotheimplementationoffederalhealth

carereform,Medi-Calcaseloadhasincreasedfrom7.9millionin2012-13toan

estimated12.2millionthiscomingyear.Theprogramnowcovers32percentof

thestatespopulation. Thistremendousexpansionofhealthcarecoveragefor

low-incomeCalifornianscontinuestobeanadministrativeandfinancialchallenge.

TheBudgetiscoveringbillionsofadditionaldollarsofexpenseswhilecomputer

systemsmustcontinuetobeupgradedtohandletheworkload.Thestatehas

alsogreatlyexpandeditsrelianceonmanagedcarehealthplans,includingthe

CoordinatedCareInitiative.

ClimateChange TheBudgetproposes$1billioninCapandTradeexpenditures

forthestatescontinuinginvestmentsinlowcarbontransportation,sustainable

communities,energyefficiency,urbanforestsandhigh-speedrail.Thesuccessful

implementationoftheseprojectsandcontinuedandevensteeperreductions

incarbonpollutantsarenecessarytoaddresstheongoingthreatposedby

climatechange.

WaterActionPlanTheWaterActionPlanistheAdministrationsfive-year

roadmaptowardssustainablewatermanagement. TheBudgetincludesthefirst

$532millioninexpendituresfromtheProposition1waterbondtocontinuetheplansimplementation.

RedevelopmentDissolutionBytheendofthebudgetyear,theelimination

ofredevelopmentagencieswillhavereturnedmorethan$4billiontocities,

counties,andspecialdistrictstofundpolice,fire,andothercriticalpublicservices.

Anadditional$5billionwillhavebeenreturnedtoK-14schools. Administeringthe

orderlydissolutionofalmost400redevelopmentagencieshasbeencomplexand

timeconsuming. Oversightofthedissolutionprocesshasprogressedtothepoint

wheretheBudgetproposeslegislationtostreamlinethestatereviewprocessto

continuethewind-downactivities.

PensionReformOverthepastseveralyears,theAdministration,Legislature,

andpublicemployeeshavetakensignificantstepstoreformpublicpension

systemsprotectingtheretirementsecurityofgovernmentworkerswhile


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controllingtheircosts. In2012,pensionreformincreasedcostsharingforemployees,

pushedbackretirementages,andrestructuredpensionformulas. In2014,

theGovernorsignedanewfundingplantoclosea$74billionshortfallforteacher

pensionsoverthenextthreedecades. TheBudgetincludes$1.4billion($371millionGeneralFund) toimplementthesecondyearoftheteacherpensionfundingplan.

C I E

TheProposition30temporarytaxeswerepremisedontheneedtoincreasefunding

foreducation. AsshowninFigureINT-03,theminimumguaranteeoffundingfor

K-14 schoolswas$56.6billionin2007-08andsankto$47.3billionin2011-12.Fromthis

recentlow,fundinghasbeenatall-timehighssince2012-13andisexpectedtogrowto

$65.7billionin2015-16,anincreaseof$18.4billioninfouryears(39percent).

K-12 E

ForK-12schools,fundinglevelswillincreasebymorethan$2,600perstudentin

2015-16 over2011-12levels. Thisreinvestmentprovidestheopportunitytocorrect

historicalinequitiesinschooldistrictfundingwithcontinuedimplementationoftheLocal

$56.6

$49.2

$51.7

$49.6

$47.3

$57.9$58.7

$63.2

$65.7

$45.0

$50.0

$55.0

$60.0

$65.0

$70.0

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

DollarsinBillions

Figure INT-03

Proposition 98 Funding2007-08 to 2015-16


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ControlFundingFormula. Risingstaterevenuesmeansthatthestatecancontinue

implementingtheformulawellaheadofschedule.Whentheformulawasadoptedin

2013-14,fundingwasexpectedtobe$47billionin2015-16.TheBudgetprovidesalmost

$4billionmorewiththeformulainsteadallocating$50.7billionthiscomingyear.

H E

TheBudgetalsoinvestsinthestateshighereducationsystemtomaintainthequality

andaffordabilityofoneofCaliforniasgreateststrengths.Byfocusingonreducingthe

timeittakesastudenttosuccessfullycompleteadegree,theuniversitiescanensure

theirsystemsarefinanciallyviableoverthelongterm. Increasedfundingmustbetiedto

gettingstudentstheirdegreesinatimelymanner,notjustadmittingmorestudents.

Thecommunitycollegesandtheuniversitysystemsmustworktogethertodevelop

innovativeandambitiousapproachessostudentscansuccessfullycomplete

theirdegrees. TheBudgetexpandscommunitycollegesrecenteffortstoimprove

studentsuccess,withaparticularfocusonachievementinunderrepresented

studentgroups.

Universitytuitionalmostdoubledduringtherecession,creatingahardshipformany

studentsandtheirfamilies. TheBudgetcommits$762milliontoeachoftheuniversity

systemsthatisdirectlyattributabletothepassageofProposition30. Thisincreased

fundingisprovidedcontingentontuitionremainingflat. Allcostcontainmentstrategies

mustbeexploredbeforeaskingCaliforniafamiliestopayevenmorefortuition.

S I

Theconstructionandmaintenanceofkeyphysicalinfrastructureisoneofthecore

functionsofstategovernment. Infrastructureandcapitalassetsallowforthedelivery

ofpublicservicesandthemovementofgoodsacrossthestate bothessential

componentsinfosteringthestateslong-termeconomicgrowth. Despitetheinvestment

oftensofbillionsofdollarsoverthepastdecade,thestatesidentifiedinfrastructure

demandscontinuetogrow.

Thedeferredmaintenanceonexistingstateinfrastructure,includingroads,bridgesandfacilitiesisstaggering estimatedtototal$66billion. TheBudgetincludes$478million

($125millionGeneralFund) forcriticaldeferredmaintenanceattheuniversitiesand

communitycollegesandinstateparks,prisons,statehospitalsandotherstatefacilities.


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Thestateslargestdeferredmaintenanceisonitshighways,roadsandbridges.

Annualmaintenanceandrepairsarebillionsmorethancanbefundedannuallywithin

existingresources. Thestatemustaddressdeferredmaintenanceonthestates

highwaysandkeyfreightcorridorsthroughexpandedandongoingfundingsources.

TheBudgetalsosupportsimprovedmanagementofourwaterresources. TheBudget

beginsimplementationofthewaterbondwithfundingforsafedrinkingwater,

waterreliabilityandgroundwatersustainability.Italsoincludesthelast$1.1billionin

expendituresfromthe2006floodbondtobolsterthestatesprotectionfromfloods.

A P I I

Forthelastseveralyears,theCensusBureauhasreportedthatabout16percent

ofCaliforniaresidentsarelivinginpovertyslightlyabovethenationalaverage

of14.9percent. TheCensusBureaussupplementalmeasureofpoverty,which

considersbroadermeasuresofincomeandthecostofliving,reflectsapovertyrateof

23.4percent(athree-yearaverage). Additionally,whilethestateseconomiccondition

hasimprovedsincetheGreatRecession,theincreaseinwagesandsalarieshasbeen

unevenwithmuchofthegainsbeingmadebythestateswealthiestresidents.

Californiahasanextensivesafetynetforthestatesneediestresidentswholivein

poverty,andthestatehasmaintainedthosecorebenefitsdespitetherecession.

Comparedtootherstates,Californiaprovidesbroaderhealthcarecoveragetoa

greaterpercentageofthepopulation,includingin-homecare,andguaranteesaccessto

servicesforpersonswithdevelopmentaldisabilities. Californiamakesavailablehigher

cashassistancetofamilies,continuesthatassistancetochildrenaftertheirparentslose

eligibility,andprovidesextensivechildcaretoworkingfamilieswithchildrenuptoage13.

Finally,thestateprovidesgenerousfinancialaidtothoseseekinghighereducation.

Inthepasttwoyears,therecoveringeconomyhasallowedthestatetotakeevengreater

stepstoassistthestatesneediestresidents. Theimplementationofhealthcarereform

hasincreasedcoverageunderMedi-Caltoanadditional4millionCaliforniansinjust

threeyears. TheLocalControlFundingFormulaisconcentratingthegreatestschool

fundingtothosestudentswiththegreatestneeds.Thestateincreasedtheminimum

wageby25percent,to$10perhour,andguaranteedthat6.5millionworkersareeligibleforsickleave.

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Despitethesesteps,millionsofCaliforniansremaininpovertyandmorecanbedone.

Educationalinvestmentsthatprovidetangibleskillsdesiredbyemployers(suchas

basicliteracy,graduationfromhighschool,certificateprogramsandcollegedegrees)

willincreaseindividualsearningpotentialandprovideapermanentpathoutofpoverty.TheBudgetprovidesover$1.2billioninfundingtosupportacoordinated

frameworkforadulteducation,careertechnicaleducation,workforceinvestment,

andapprenticeships. Thesefundsareintendedtoprovidetrainingandeducationto

workersinCaliforniasotheycandeveloptheskillstheyneedforself-sufficiencyand

greaterpersonaladvancement.

S M P D D L

Proposition2wasdesignedtohelpthestatesavewhentimesaregood. Withastock

marketthatcontinuestosurge,higherrevenuesfromcapitalgainswillbothbesavedandusedtopaydowndebts. Bytheendoftheyear,thestatesRainyDayFundwill

haveatotalbalanceof$2.8billion. TheBudgetspendsanadditional$1.2billionfrom

Proposition2fundsonpayingoffloansfromspecialfundsandpastliabilitiesfrom

Proposition98.

Inaddition,theBudgetrepaystheremaining$1billionindeferralstoschoolsand

communitycolleges,makesthelastpaymentonthe$15billioninEconomicRecovery

Bondsthatwasborrowedtocoverbudgetdeficitsfromasfarbackas2002,andrepays

localgovernments$533millioninmandatereimbursements.

A R H U L

Thestateslargestlong-termliabilitiesarerelatedtoretirementcostsfor

governmentemployees.Retirement-relatedliabilitiestotal$222billion. Asdescribed

above,theGovernorandLegislatureoverthepastseveralyearshavetakensignificant

stepstoaddressthelong-termcostsofpensions.Thestatemustnowturnitsattention

tothe$72billionunfundedliabilitythatexistsforretireehealthcarebenefits.

Statehealthcarebenefitsforretiredemployeesremainoneofthefastestgrowing

areasofthestatebudget. In2001,retireehealthbenefitsmadeup0.6percentofthe

GeneralFundbudget($458million) buttodayabsorb1.6percent($1.9billion).

Thestatespay-as-you-gosystemforretireehealthbenefitsisnotworking. Asshown

inFigureINT-04,withoutaction,thestatesunfundedliabilitywillgrowto$100billion


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Thissectionprovidesvariousstatewidebudgetchartsandtables.


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Figure SUM-01

2015-16 Governor's BudgetGeneral Fund Budget Summary


2014-15 2015-16

Prior Year Balance $5,100 $1,423

Revenues and Transfers $108,042 $113,380

Total Resources Available $113,142 $114,803

Non-Proposition 98 Expenditures $65,071 $66,279

Proposition 98 Expenditures $46,648 $47,019

Total Expenditures $111,719 $113,298

Fund Balance $1,423 $1,505

Reserve for Liquidation of Encumbrances $971 $971

Special Fund for Economic Uncertainties $452 $534

Budget Stabilization Account/Rainy Day Fund $1,606 $2,826

.

.

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Figure SUM-04

General Fund Revenue Sources(Dollars in Millions)

Change from

2014-15

Dollar Percent

2014-15 2015-16 Change Change

Personal Income Tax $71,699 $75,213 $3,514 4.9%

Sales and Use Tax 23,438 25,166 1,728 7.4%

Corporation Tax 9,618 10,173 555 5.8%

Insurance Tax 2,490 2,531 41 1.6%

Alcoholic Beverage Taxes and Fees 367 374 7 1.9%

Cigarette Tax 84 82 -2 -2.4%

Motor Vehicle Fees 20 21 1 5.0%

Other 1,932 1,040 -892 -46.2%

Subtotal $109,648 $114,600 $4,952 4.5%

Transfer to the Budget Stabilization-1,606 -1,220 386 -24.0%

Account/Rainy Day Fund

Total $108,042 $113,380 $5,338 4.9%

Note: Numbers may not add due to rounding.

Figure SUM-052015-16

General Fund Revenues and Transfers1/


Personal Income Tax

($75,213)65.6%

1/ Excludes $1,220 million transfer to Rainy Day Fund.

Sales and Use Tax

($25,166)22.0%

Other($1,517)

1.3%

Corporation Tax($10,173)

8.9%

Insurance Tax($2,531)

2.2%

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Figure SUM-06

2015-16 Total State Expenditures by Agency(Dollars in Millions)

General Special BondFund Funds Funds Totals

Legislative, Judicial, Executive $3,131 $3,093 $228 $6,452

Business, Consumer Services & Housing 639 780 140 1,559

Transportation 237 8,781 2,151 11,169

Natural Resources 2,561 1,319 1,586 5,466

Environmental Protection 68 2,901 321 3,290

Health and Human Services 31,929 20,538 - 52,467

Corrections and Rehabilitation 10,160 2,516 - 12,676

K-12 Education 47,173 101 1,063 48,337

Higher Education 14,063 42 384 14,489

Labor and Workforce Development 265 640 - 905

Government Operations 701 221 11 933

General Government

Non-Agency Departments 676 1,716 1 2,393

Tax Relief/Local Government 444 2,284 - 2,728

Statewide Expenditures 1,251 588 - 1,839

Total $113,298 $45,520 $5,885 $164,703

Note: Numbers may not add due to rounding.

Figure SUM-07

2015-16Total State Expenditures

(Including Selected Bond Funds)

(Dollars in Millions)Human Services($18,377)

11.2%

Health

($34,090)

20.7%

Transportation($11,170)

6.8%

Other($25,564)

15.5%

Corrections andRehabilitation

($12,676)

7.7%

K-12 Education($48,337)

29.3%

Higher Education

($14,489)

8.8%


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Figure SUM-08

2015-16 Revenue Sources(Dollars in Millions)

Change

General Special FromFund Funds Total 2014-15

Personal Income Tax $75,213 $1,775 $76,988 $3,487

Sales and Use Tax 25,166 13,750 38,916 2,426

Corporation Tax 10,173 - 10,173 555

Highway Users Taxes - 4,907 4,907 -770

Insurance Tax 2,531 - 2,531 41

Alcoholic Beverage Taxes and Fees 374 - 374 7

Cigarette Tax 82 688 770 -22

Motor Vehicle Fees 21 6,500 6,521 187

Other 1,040 18,050 19,090 -3,418

Subtotal $114,600 $45,670 $160,270 $2,493

Transfer to the Budget Stabilization-1,220 1,220 0 0

Account/Rainy Day Fund

Total $113,380 $46,890 $160,270 $2,493Note: Numbers may not add due to rounding.

Figure SUM-092015-16

Total Revenues and Transfers


Alcoholic BeverageTaxes and Fees

($374)0.2%

Corporation Tax($10,173)

6.3%

Cigarette Tax($770)0.5%

Insurance Tax($2,531)

1.6%

Motor Vehicle Fees($6,521)

4.1%

Highway UsersTaxes

($4,907)3.1%

Personal IncomeTax

($76,988)48.0%

Sales and Use Tax($38,916)

24.3%

Other($19,090)

11.9%

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K 12 E

Californiaprovidesinstructionandsupportservicestoroughlysixmillionstudents

ingradeskindergartenthroughtwelveinmorethan10,000schoolsthroughout

thestate.Asystemof58countyofficesofeducation,morethan1,000localschool

districts,andmorethan1,000charterschoolsprovideinstructioninEnglish,mathematics,

history,science,andothercorecompetenciestoprovidestudentswiththeskillstheywill

needupongraduationforeitherentryintotheworkforceorhighereducation.

I E

PrimarilyasaresultofincreasedGeneralFundrevenues,theProposition98Guarantee

increasesin2013-14and2014-15,relativetothe2014BudgetActlevelsproviding

additionalone-timeresourcesineachofthoseyears. TheseGeneralFundrevenue

increasesalsodrivegrowthintheProposition98Guaranteefor2015-16,asdisplayedin

FigureK12-01.Whencombinedwithmorethan$250millioninsettle-uppaymentsfor

prioryears,theBudgetproposesanincreasedinvestmentof$7.8billioninK-14education.

BuildingoffofsignificantfundingincreasesprovidedineachofthepriortwoBudgetActs,

theBudgetproposesinvestmentsfor2015-16thatwillsubstantiallyincreasefunding

distributedundertheLocalControlFundingFormula,providingadditionalfundingto

schooldistrictsandstudentsmostinneedoftheseresources.Thesefundswillallow

schoolsandcollegestorestoreandexpandbaseprogramsandservices,implement

majornewpolicyinitiatives,andsupportotherkeylocalinvestmentsandpriorities.

TheBudgetalsoeliminatesallremainingbudgetarydeferrals,ensuringthatschools

receivealloftheirresourcesontime. Duringtheheightoftherecentrecession,thestate


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18

deferredalmost20percentofannualpaymentstoschools,meaningthatschools

receivedasignificantportionoftheirfundsayearaftertheyspentthem. Someschool

districtswereabletoborrowtomanagethesedeferrals,whileothershadtoimplement

deferralsascuts. Districtsthatwereabletoborrowincurredsubstantialinterestcosts,whichledtodollarsbeingtakenoutoftheclassroom. TheBudgetproposesrepayment

ofthe$992millioninremainingK-14deferredpayments,providingcertaintyoffunding

forprogramsandservices,andeliminatinganyadditionalborrowingcoststobeborneby

schoolsandcommunitycollegesasaresultofdeferrals.

AlthoughthecurrenttrajectoryofProposition98fundingispositive,historicallythe

Proposition98Guaranteehasbeensubjecttosignificantvolatility,asdemonstratedin

FigureK12-02.Theboom-and-bustfundingcyclehasledtosignificantanddamaging

budgetreductionsduringdownturns. Inanefforttobreakthiscycle,theAdministration

proposedaconstitutionalamendmentthatvotersapprovedasProposition2in

theNovember4,2014generalelection. Proposition2requiresadepositinastate

Proposition98RainyDayFundunderspecifiedfutureconditions. Basedonstatelaw,

theyearfollowinganydepositintotheProposition98RainyDayFund,atemporarycap

onlocalschooldistrictreserveswouldbeimplemented.TheAdministrationdoesnot

$58.3

$60.9$0.4

$2.3

$65.7

$45.0

$50.0

$55.0

$60.0

$65.0

$70.0

2013-14 2014-15 2015-16

DollarsinBillions

Figure K12-01

Major Changes to Proposition 98 Guarantee Levels

2014-15 Budget Act

2015-16 Governor's Budget


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Figure K12-02

Proposition 98 Funding2007-08 to 2015-16

DollarsinBillions

$70.0

$65.0

$60.0

$55.0

$50.0

$45.0

$56.6

$49.2

$51.7

$49.6

$47.3

$57.9$58.7

$63.2

$65.7

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

anticipatefiscalconditionsrequiringaProposition98RainyDayFunddepositandthe

relatedpotentialforcapsonlocalreservesatanypointinthebudgetforecastperiod

(through2018-19).Nonetheless,theAdministrationappreciatestheconcernsexpressed

bystakeholdersregardingpotentialcapsonschooldistrictreservesandwillengagein

adialoguewiththesegroupsinthecomingmonthstoprotectthefinancialsecurityand

healthoflocalschooldistricts.

K-12 P-P S

ReflectingtherecentsignificantincreasesinProposition98funding,totalper-pupil

expendituresfromallsourcesareprojectedtobe$13,223in2014-15and$13,462in

2015-16,includingfundsprovidedforprioryearsettle-upobligations.OngoingK-12

Proposition98per-pupilexpendituresintheBudgetare$9,667in2015-16,anincreaseof

$306per-pupiloverthelevelprovidedin2014-15,andupsignificantlyfromthe$7,008per

pupilprovidedin2011-12.(SeeFigureK12-03.)


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L C F F

Inrecognitionofthefiscalchallengesthatmanyschooldistrictsface,andtoaddress

themanyinequitiesinthepre-existingsystemofschoolfinance,the2013BudgetAct

establishedtheLocalControlFundingFormula.TheLocalControlFundingFormula

includesthefollowingmajorcomponents:

Abasegrantforeachlocaleducationalagencyperunitofaveragedailyattendance

(ADA),inclusiveofanadjustmentof10.4percenttothebasegranttosupport

loweringclasssizesingradesK-3,andanadjustmentof2.6percenttoreflectthe

costofoperatingcareertechnicaleducationprogramsinhighschools.

A20-percentsupplementalgrantforEnglishlearners,studentsfromlow-income

families,andyouthinfostercaretoreflectincreasedcostsassociatedwitheducating

thosestudents.

Anadditionalconcentrationgrantofupto22.5percentofalocaleducational

agencysbasegrant,basedonthenumberofEnglishlearners,studentsfromlow-incomefamilies,andyouthinfostercareservedbythelocalagencythat

comprisemorethan55percentofenrollment.

AnEconomicRecoveryTargettoensurethatalmosteverylocaleducationalagency

receivesatleasttheirpre-recessionfundinglevel,adjustedforinflation,atfull

implementationoftheLocalControlFundingFormula.

$8,708$9,361 $9,667

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

2013-14 2014-15 2015-16

Figure K12-03

K-12 Education Spending Per Pupil

Proposition 98 All Funds

$12,248

$13,462$13,223


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TheBudgetprovidesathird-yearinvestmentof$4billionintheLocalControlFunding

Formula,enoughtoeliminatemorethan32percentoftheremainingfundinggap.

Thisinvestmentbuildsuponthealmost$6.8billionprovidedoverthelasttwoyears.

Inadditiontofundamentallyrestructuringthedistributionoffundstoschooldistricts,

theLocalControlFundingFormulasubstantiallychangeddistrictaccountability,moving

awayfromastate-controlledsystemthatemphasizedinputstoalocallycontrolled

systemfocusedonimprovingoutcomesandaccountability. Guidingeachschooldistrict,

countyofficeofeducation,andcharterschoolthroughthisnewprocessarelocally

developedandadoptedLocalControlAccountabilityPlans,whichidentifylocalgoalsin

areasthatareprioritiesforthestate,includingpupilachievement,parentengagement,

andschoolclimate.

InresponsetofeedbackonthefirstyearofLocalControlFundingFormula

implementation,theStateBoardofEducationadoptedrevisedLocalControl

FundingFormulaexpenditureregulationsandasignificantlymodifiedLocalControl

AccountabilityPlantemplateatitsNovember2014meeting. Therevisedtemplate

andregulations,combinedwiththeexperiencesfromthisyear,shouldresultinLocal

ControlAccountabilityPlansthatbetterdescribelocaleducationalagencygoals,actions,

andservicestargetedtoaddressstateprioritiesandmeettheneedsofallstudents,

includingspecifiedstudentsubgroups.Inaddition,thenewAnnualUpdatetablesineach

LocalControlAccountabilityPlanwillallowlocaleducationalagenciestosharehowthe

planisbeingimplemented. AnnualUpdateswillreportonhowtheactions,services,

andexpendituresproposedintheprioryearLocalControlAccountabilityPlanhavebeen

implementedandprovideevidenceofprogresstowardexpectedoutcomes. Overthe

nextseveralyears,theStateBoardofEducationwillcontinuetoreviewandreviseas

necessarythespendingregulationsandtemplatewiththeultimategoalofimproving

studentoutcomes.

K-12 S F

Since1998,votershaveapprovedapproximately$35billioninstatewidegeneral

obligationbondstoconstructorrenovatepublicschoolclassroomsusedbythestates

roughlysixmillionK-12students. Inadditiontogeneralobligationbonds,schooldistricts

mayusedeveloperfees,localbonds,certificatesofparticipation,andMello-Roosbonds

toconstructadditionalclassroomsorrenovateexistingclassrooms. Thereiscurrently

nobondauthorityremaininginthestatescoreschoolfacilitiesnewconstructionand

modernizationprograms.


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Overthepasttwoyears,theAdministrationhasnotedthefollowingsignificant

shortcomingsassociatedwiththecurrentSchoolFacilitiesProgram:

Thecurrentprogramisoverlycomplexwithovertendifferentstateagencies

providingfragmentedoversightresponsibility.Theresultisastructurethatis

cumbersomeandcostlyforthestateandlocalschooldistricts.

Thecurrentprogramdoesnotcompeldistrictstoconsiderfacilitiesfundingwithin

thecontextofothereducationalcostsandpriorities. Forexample,districtscan

generateandretainstatefacilityprogrameligibilitybasedonoutdatedorinconsistent

enrollmentprojections. Thisoftenresultsinfinancialincentivesfordistrictsto

buildnewschoolstoaccommodatewhatisactuallymodestandabsorbable

enrollmentgrowth. Theseincentivesareexacerbatedbythefactthatgeneral

obligationbonddebtisfundedoutsideofProposition98. Thesebondscostthe

GeneralFundapproximately$2.4billionindebtserviceannually.

Thecurrentprogramallocatesfundingonafirst-come,first-servedbasis,resulting

inasubstantialcompetitiveadvantageforlargeschooldistrictswithdedicated

personneltomanagefacilitiesprograms.

Thecurrentprogramdoesnotprovideadequatelocalcontrolfordistrictsdesigning

schoolfacilitiesplans.Programeligibilityislargelybasedonstandardizedfacility

definitionsandclassroomloadingstandards. Asaresult,districtsarediscouraged

fromutilizingmoderneducationaldeliverymethods.

ThecurrentprogramwasdevelopedbeforethepassageofProposition39(which

reducedthelocalbondvotethresholdto55percent)in2000,whichhassince

allowedlocalschoolbondstopassupwardsof80percentofthetime. Itwasalso

developedbeforetheLocalControlFundingFormula,whichprovidesenhancedlocal

fundingflexibility.

Aspartofacontinuingdialogue,theDepartmentofFinanceconvenedaseriesof

meetingsthispastfalltodiscussanewfacilitiesprogramandobtainfeedbackfrom

educationstakeholders. Themeetingsstartedwithareviewoftheproblemswiththe

currentprogramnotedabove,andfocusedonhowafutureprogramcouldprovide

districtswiththetoolsandresourcestoaddresstheircorefacilitygapsandavoidan

unsustainablerelianceonstatedebtissuance. Informedbythesediscussions,andwiththesekeyprinciplesinmind,theBudgetproposesthefollowingrecommendationsforthe

designofanewprogram:

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IncreaseToolsforLocalControl:

ExpandLocalFundingCapacityWhileschooldistrictscanpasslocalbonds

with55-percentapproval,assessedvaluationcapsforspecificbondmeasures

andtotalcapsonlocalbondedindebtednesshavenotbeenadjustedsince

2000. Inordertoprovidegreateraccesstolocalfinancing,thesecapsshouldbe

increasedatminimumbytherateofinflationsince2000.

RestructureDeveloperFeesCurrentlawauthorizesthegoverningboardof

anyschooldistricttolevyfeesagainstconstructionwithinitsboundariestofund

schoolfacilities. Therearethreecategoriesthatdeterminetheamountoffees

adistrictcanlevy,whichrangefromafractionofprojectcoststo100percent

ofthecosts. Anewprogramshouldestablishonedeveloperfeelevelforall

districtsandcaptheamountoffeesthatcanbeleviedforspecificprojectsat

alevelbetweentheexistingLevelIIandLevelIIIfees(50to100percentof

projectcosts),subjecttolocalnegotiation.

ExpandAllowableUsesofRoutineRestrictedMaintenanceFunding Current

lawrequiresschoolstodepositapercentageoftheirgeneralfundexpenditures

intoarestrictedaccountforuseinmaintainingtheirfacilities. Ratherthan

requiringthatthesefundsbeusedsolelyforroutinemaintenance,districts

shouldhavetheabilitytopoolthesefundsovermultipleyearsformodernization

andnewconstructionprojects. Expandingtheuseofthesefundswillprovide

schooldistrictswithyetanotherfundingstreamtomaintain,modernize,

andconstructnewfacilities.

TargetStateFundingforDistrictsMostinNeedStatefundingforanewprogram

shouldbetargetedinawaythat:(1) limitseligibilitytodistrictswithsuchlow

per-studentassessedvaluetheycannotissuebondsatthelocallevelinamounts

thatallowthemtomeetstudentneeds,(2) prioritizesfundingforhealthandsafety

andsevereovercrowdingprojects,and(3) establishesaslidingscaletodetermine

thestateshareofprojectcostsbasedonlocalcapacitytofinanceprojects.

AugmenttheCharterSchoolFacilityGrantProgramMostofCaliforniascharter

schoolsleasefacilitiesforinstructionalpurposes.Toassistcharterschoolsinpaying

forrentandleaseexpenditures,theCharterSchoolFacilityGrantProgramprovides

fundingtocharterschoolseitherservingorlocatedinattendanceareaswhereatleast70percentofthestudentsqualifyforfreeorreduced-pricemeals. Tofurther

assistcharterschoolswiththeirfacilityneeds,thestateshouldpermanentlylower

thefreeorreduced-pricemealrequirementto55percent(theconcentrationgrant


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thresholdundertheLocalControlFundingFormula) andprovideadditionalfundingto

supportthisprogramexpansion.

Inproposingtheserecommendations,itistheintentoftheAdministrationtoadvance

thedialogueonthefutureofschoolfacilitiesfunding.Schooldistrictsanddevelopers

shouldhaveaclearunderstandingofwhichlimitedcircumstanceswillqualifyfor

stateassistance. Overthecourseofthecomingmonths,theAdministrationis

preparedtoengagewiththeLegislatureandeducationstakeholderstoshapeafuture

stateprogramthatisfocusedondistrictswiththegreatestneed,whileproviding

substantialnewflexibilityforlocaldistrictstoraisethenecessaryresourcesforschool

facilitiesneeds.

A E

Historically,K-12schooldistrictsandcommunitycollegeshaveprovidedadult

educationinstruction. However,therewasnoteffectivecoordinationinalljurisdictions

andregionalworkforceneedswerenotafocus. Asaresult,thestatehasaninefficient

andinsomeplacesredundantsystemthatisnotalwaysstructuredtobestmeetthe

needsofadultlearners. Strengtheningthelinkbetweenthestateseducationand

workforcesystemsiscrucialtoCaliforniasgrowingeconomy.

The2013BudgetActprovided$25millionProposition98GeneralFundfortwo-year

planninggrantstoconsortiaofcommunitycollegedistrictsandschooldistrictsin

70regions. Theplanningbuildsupontheadulteducationinfrastructureinschoolsand

communitycolleges. In2013-14and2014-15,K-12districtsalsohavebeenrequiredto

maintainthe2012-13levelofspendingforadulteducationandcareertechnicaleducation

(CTE) programsfromfundsreceivedthroughtheLocalControlFundingFormula.

TheBudgetprovides$500millionProposition98GeneralFundfortheAdultEducation

BlockGrant,whichisanintegralcomponentofthestatesworkforcedevelopment

strategy,asdiscussedintheInvestinginCaliforniasWorkforceChapter.Theblock

grantwillfundprogramsinelementaryandsecondarybasicskills,classesandcourses

incitizenshipandEnglishasasecondlanguageforimmigrants,educationprograms

foradultswithdisabilities,short-termCTEprogramslinkedtooccupationswithhigh

employmentpotential,andprogramsforapprentices. Tobesuccessful,itisimperativethattheseprogramsbewellalignedwiththeeconomicneedsofeachregion,andthat

theyprovideclearpathwaystoin-demandjobs,asdeterminedbyregionallabor

marketinformation. Theprogramwillpromoteongoingcollaborationamongstdifferent

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providersandwithentitiesthatservethepopulationsthatbenefitfromadulteducation;

namely,workforceinvestmentboards,socialservicesdepartments,andcorrectional

rehabilitationagencies.

Inorderforadulteducationprogramstobewellcoordinatedandlinkedwiththe

economicneedsoftheirregion,theAdministrationproposesthateachconsortium

designateanallocationboardresponsibleforplanningandallocatingblockgrantfunds.

Eachconsortiumwillformanallocationcommitteeconsistingofsevenmembers

whorepresentcommunitycolleges,K-12districts,otheradulteducationproviders,

localworkforceinvestmentboards,countysocialservicesdepartments,correctional

rehabilitationprograms,andonepublicmemberwithrelevantexpertise. Eachallocation

committeewillcoordinatewithregionalpartnerstoensurevariousadulteducation

fundingstreamsareintegrated,suchasblockgrantfunds,otherK-12andcommunity

collegeresources,WorkforceInnovationandOpportunityActallocations,andother

federalfunds. Eachallocationcommitteewilldeterminehowtoallocateblockgrant

fundsfordirectinstruction,supportservices,andadministrationofitsconsortium(which

willbecappedat5percent).EachconsortiumwillreportannuallytotheChancellor

andSuperintendentonprogresstowardsfulfillingitsadulteducationplanusingall

resourcesavailable. Thesereportswillinformdistributionofblockgrantfundsin

thefuture.

TheChancelloroftheCommunityCollegesandtheSuperintendentofPublicInstruction

willjointlyapproveallocationsoffunds,withanemphasisonprovidingfundingtothose

regionswiththegreatestadulteducationneeds. Fundingallocationsapprovedbythe

ChancellorandSuperintendentwillbedistributedtoprovidersasdeterminedbytheir

allocationcommittees. Intheinitialyear,toeasethetransition,fundingwillbeprovided

directlytoK-12schooldistrictsintheamountoftheK-12districtsmaintenanceofeffort

foradulteducationasjointlydeterminedbytheChancellorandtheSuperintendent.

Furtherallocationswillbedistributedaccordingtothelocalallocationcommittees.

Afinalreportfromthetwo-yearplanningprocesswillbeprovidedbyMarch1,2015.

Thisreportwillinformtheaccountabilityframeworkfordeliveryofadulteducationand

remainingpolicydecisions,suchashowfeesarechargedforsimilarprogramsdelivered

bydifferentproviders.


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C T E

High-qualityCTEprogramsprovidestudents,particularlythoseatriskfordroppingout,

withvaluablecareerandcollegereadinessskills,andareacriticalpiecetotheoverall

workforceinvestmentstrategyoftheAdministration,asdiscussedinmoredetailinthe

InvestinginCaliforniasWorkforceChapter.PriortotheadoptionoftheLocalControl

FundingFormula,thestateprovidedmorethan$500millionannuallytosupporta

collectionofCTEcategoricalprograms,mostnotablytheRegionalOccupationalCenters

andPrograms(ROCPs).The2013BudgetActcollapsedalmostallofthisprevious

categoricalfundingintotheLocalControlFundingFormulaintheformofa9-12grade

spanadjustment,withrequirementsondistrictsintheirLocalControlandAccountability

Planstodescribehowtheyintendtomeetthecareertechnicaleducationneedsoftheir

studentsconsistentwithstate-adoptedstandards. Additionally,the2013BudgetAct

includedatwo-yearmaintenance-of-effortrequirementforlocaleducationalagenciesto

maintaintheirexistinglevelsofspendingonROCPs,providingthemwithadditionaltime

tostructuremorelong-termservicedeliveryarrangements. Further,boththe2013and

2014BudgetActsprovided$250millioninone-timeProposition98fundingtosupport

theCareerPathwaysTrustProgram,whichprovidesone-timecompetitivegrantsto

createinnovativeprogramsandpartnershipslinkingrigorousacademicstandardsto

careerpathwaysinhigh-needandhigh-growthsectorsoftheeconomy.

GiventhecomplexityandrelativelyresourceintensivenatureofstartingandupdatingCTE

programs,theBudgetproposes$250millioninone-timeProposition98fundingineach

ofthenextthreeyearstosupportatransitionalCTEIncentiveGrantProgram. Unlikethe

existingCareerPathwaysTrustProgram,schooldistricts,countyofficesofeducation

andcharterschoolsreceivingfundingfromthisnewtransitionalprogramwillberequired

toprovideadollar-for-dollarmatch,andpriorityforthesestatefundswillbegivento

localeducationalagenciesapplyinginpartnershipwithotherlocaleducationalagencies

toofferregionalprograms.TomaintaineligibilityforfundingundertheCTEIncentive

GrantProgram,recipientswillneedtodemonstratepositiveresultsacrossaspectrum

ofoutcomemeasures,includinghighschoolgraduationrates,CTEcoursecompletion

rates,pupilsobtainingindustry-recognizedcredentialsandcertificates,thenumberof

pupilsachievinggainfulemploymentinrelevantoccupations,andthenumberofpupils

progressingtopostsecondaryeducation. Thisprogramisintendedtoacceleratethe

developmentofnewandexpandedhigh-qualityCTEprogramsduringthenextthree

yearsandprovideopportunitiesforprogramgrowth.

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O R I

Inadditiontoreformingschoolfacilities,adulteducationandcareertechnicaleducation,

theAdministrationremainscommittedtoadditionalreformsandinvestmentsintheareas

ofCommonCoreandmandates,technologyinfrastructure,teacherpreparationand

energyefficiency.

C C M

The2013BudgetActprovided$1.25billioninone-timeProposition98GeneralFund

tosupporttheimplementationoftheCommonCorestatestandardsnewstandards

forevaluatingstudentachievementinEnglish-languageartsandmathematics. These

standardsfocusondevelopingthecritical-thinking,problem-solving,andanalytical

skillsstudentswillneedfortodaysentry-levelcareers,freshman-levelcollegecourses,

andworkforcetrainingprograms. Thisfundingwasprovidedoveratwo-yearperiodto

supportnecessaryinvestmentsinprofessionaldevelopment,instructionalmaterials,

andtechnology.

TheBudgetproposesmorethan$1.1billionindiscretionaryone-timeProposition98

fundingforschooldistricts,charterschoolsandcountyofficesofeducationtofurther

theirinvestmentsintheimplementationofCommonCore. Thesenewdollarswillalso

helpsupportimplementationofnewlyadoptedEnglishLanguageDevelopmentstandards

andCaliforniasNextGenerationSciencestandards,aswellasmaketheinvestments

necessarytosupportnewresponsibilitiesrequiredundertheevolvingaccountability

structureoftheLocalControlFundingFormula. Ofthisamount,$20millionwillbe

providedtocountyofficesofeducation,distributedonthebasisofcountywideADAandthenumberofschooldistrictswithinthecountyofficesjurisdiction.Thebalance

ofthisfundingwillbedistributedtoschooldistrictsandcharterschoolsonthebasis

ofADA. Allofthefundsprovidedwilloffsetanyapplicablemandatereimbursement

claimsfortheseentities,whichbuildsoffoftheapproachinthe2014BudgetActwhen

$400.5millioninone-timefundingwasprovidedforbothgeneralpurposeactivitiesand

mandatesreimbursement. Thiscombinedtwo-yearinvestmentwillsubstantiallyreduce

theoutstandingmandatesdebtowedtolocaleducationalagenciesconsistentwiththe

Administrationsgoaltopaydowndebt.

T ITheBudgetproposes$100millioninone-timeProposition98fundingtosupport

additionalinvestmentsininternetconnectivityandinfrastructure. Thisbuildson

$26.7millioninone-timeProposition98fundingthatwasprovidedinthe2014 BudgetAct


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toassistlocaleducationalagenciesmostinneedofhelpwithsecuringrequired

internetconnectivityandinfrastructuretoimplementthenewcomputer-adaptivetests

administeredunderCommonCore. Whileitisanticipatedthatlastyearsfundingwill

addresstheneedsofmostschoolsthatcouldnotsupportthecomputer-basedfieldtests,thereareasignificantnumberofschoolsthatcouldonlysupportthesetestsbyshutting

downothernon-essentialaccesstoonlineactivity. Thissecondinstallmentoffundingwill

furtherupgradeinternetinfrastructuretoreflecttheincreasingrolethattechnologyplays

inclassroomoperationstosupportteachingandlearning.

T P

TheCommissiononTeacherCredentialingisresponsibleforbuildingthequalityofthe

statesteacherworkforce.TheCommissionscoremissionincludessettingpreparation

standardsandreviewingpreparationprograms,licensingthestatesteacherworkforce,

anddiscipliningteacherschargedwithmisconduct.

Stateoversightoftheeducatorpreparationsystemiscurrentlynotrobustenoughtoverify

thatprogramsaremeetingpreparationstandardsandproducingfullypreparedteachers.

Thecurrentaccreditationprocessreliesprimarilyonself-reportsofprogramcompliance,

sometimesthousandsofpagesinlength,coupledwithbriefsitevisits. Thissystem

doesnotprovideanefficientoreffectivewaytoidentifyandimproveoreliminateweak

programsoridentifystrongprogramssothatotherscanemulatethem. Furthermore,

thecurrentTeacherPerformanceAssessment,whichallteachercandidatesmust

passbeforetheybeginteaching,isoutdatedandnotalignedtocurrentteacher

performancestandards. And,thereisnoassessmenttodetermineifapersonisprepared

tobeaschoolprincipal.

Toaddresstheseissues,theBudgetproposes$5millionnon-Proposition98

GeneralFund(overatwo-yearperiod) to:(1) conveneanAccreditationAdvisoryPanel

toproviderecommendationstotheCommissiononstreamliningpreparationstandards,

(2) enhanceexistingdatasystemsanddevelopnewdatasystemstoorganizeand

retrieveinformationfromassessmentsandprogramsurveys,(3) developcandidateand

employersurveysthatshedlightonthenatureandqualityofpreparation,and(4) increase

transparencyandaccesstoinformationaboutthequalityandeffectivenessof

educatorpreparationprograms.TheBudgetalsoproposesanadditional$5million

non-Proposition98GeneralFund(overatwo-yearperiod)toupdatetheTeacherPerformanceAssessmentanddevelopanAdministratorPerformanceAssessmentto

verifyeducatorqualityandtoassistwithdeterminingtheeffectivenessandqualityof

preparationprograms.

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Currently,newteachersarerequiredtoparticipateinaninductionprogramtomaintain

theirteachingcredentialandemployment. However,thecurrentstateinductionprogram,

theBeginningTeacherSupportandAssessmentprogram,iscumbersomeandexpensive

tooperate. Asaresult,somedistrictsandcountieshavestoppedprovidingbeginningteacherinductionprogramsandothersarechargingbeginningteachersforinduction.

Inmanycases,teachersarestrugglingtocompletetheinductionrequirementsduetothe

lackofavailableprogramsorthecostofparticipatinginaprogram. Tobeginaddressing

theseproblems,theBudgetdirectstheCommissiontoevaluatetheburdenofthecurrent

inductionrequirementsonschooldistrictsandnewteachersandidentifyoptionsfor

streamliningandreformingbeginningteacherinduction. Furthermore,theAdministration

willengagestakeholdersinthecomingweekstodeterminewhattheresponsibility

ofschooldistrictsshouldbetoprovidekeyinductionsupportsfornewteachers,

suchasmentoring.

E E

Proposition39wasapprovedin2012andincreasesstatecorporatetaxrevenues.

For2013-14through2017-18,themeasurerequireshalfoftheincreasedrevenues,upto

$550millionperyear,tobeusedtosupportenergyefficiency.

TheBudgetproposestoallocatethe$368millionofenergyefficiencyfundsavailablein

2015-16asfollows:

$320.1millionand$39.6milliontoK-12schoolandcommunitycollegedistricts,

respectively,forenergyefficiencyprojectgrants.

$5.3milliontotheCaliforniaConservationCorpsforcontinuedtechnicalassistanceto

K-12schooldistricts.

$3milliontotheWorkforceInvestmentBoardforcontinuedimplementationofthe

job-trainingprogram.

K-12 B A

SignificantAdjustments:

K-12DeferralsAnincreaseofalmost$900millioninone-timeProposition98

GeneralFundin2014-15toeliminateallremainingoutstandingdeferraldebt

forK-12. Inter-yeardeferralsforK-12hadreachedahighof$9.5billioninthe

2011-12 fiscalyear.


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EmergencyRepairProgram Anincreaseof$273.4millioninone-time

Proposition98GeneralFundresourcesfortheEmergencyRepairProgram.

Thisfundingwillretirethestatesfacilitiesfundingobligationunderthetermsofthe

Williamslawsuitsettlementagreement.

SchoolDistrictLocalControlFundingFormulaAdditionalgrowthofapproximately

$4billioninProposition98GeneralFundforschooldistrictsandcharterschoolsin

2015-16,anincreaseof8.7percent.

CountyOfficesofEducationLocalControlFundingFormula Anincreaseof

$109,000Proposition98GeneralFundtosupportacost-of-livingadjustmentfor

thosecountyofficesofeducationattheirtargetfundinglevelundertheformula.

CharterSchoolsAnincreaseof$59.5millionProposition98GeneralFundto

supportprojectedcharterschoolADAgrowth.

SpecialEducation Anincreaseof$15.3millionProposition98GeneralFundto

reflectaprojectedincreaseinSpecialEducationADA.

Cost-of-LivingAdjustmentIncreasesAnincreaseof$71.1milliontosupporta

1.58-percentcost-of-livingadjustmentforcategoricalprogramsthatremainoutside

oftheLocalControlFundingFormula,includingSpecialEducation,ChildNutrition,

FosterYouth,Preschool,AmericanIndianEducationCenters,andtheAmerican

IndianEarlyChildhoodEducationProgram. Cost-of-livingadjustmentsforschool

districtsandchartersschoolsareprovidedwithintheincreasesforschooldistrict

LocalControlFundingFormulaimplementationnotedabove.

LocalPropertyTaxAdjustmentsAdecreaseof$11.4millionProposition98

GeneralFundfortheschooldistrictandcountyofficeofeducationin2014-15as

aresultofhigheroffsettingpropertytaxrevenues. Adecreaseof$1.7billionin

Proposition98GeneralFundforschooldistrictsandcountyofficesofeducationin

2015-16asaresultofincreasedoffsettinglocalpropertytaxrevenues.

AverageDailyAttendanceAnincreaseof$197.6millionin2014-15forschool

districtsandcountyofficesofeducationasaresultofanincreaseinprojectedADA

fromthe2014BudgetAct,andadecreaseof$6.9millionin2015-16forschool

districtsandcountyofficesofeducationasaresultofprojecteddeclineinADAfor

2015-16.

Full-DayStatePreschoolSlots Anincreaseof$14.8millionProposition98

GeneralFundand$18.8millionnon-Proposition98GeneralFundtosupport

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32

A

Publicschoolattendance

grewin2010-11and2011-12,

andthendeclinedslightlyin2012-13.Attendancebegan

increasingagainin2013-14,

andisprojectedtogrowfurther

in2014-15anddeclineslightly

during2015-16. For2014-15,

K-12ADAisestimatedtobe

6,000,733,anincreaseof8,166

from2013-14.For2015-16,

theBudgetestimatesthatK-12

ADAwilldropby585fromthe2014-15level,to6,000,148.

P 98 G

Proposition98guaranteesminimumfundinglevelsforK-12schoolsand

communitycolleges.Theguarantee,whichwentintoeffectinthe1988-89fiscalyear,

determinesfundinglevelsaccordingtomultiplefactorsincludingtheleveloffundingin

1986-87,GeneralFundrevenues,percapitapersonalincome,andschoolattendance

growthordecline.

Proposition98originallymandatedfundingatthegreateroftwocalculationsorTests(Test1orTest2).In1990,Proposition111(SCA1)wasadoptedtoallowforathird

fundingtestinlowrevenueyears. Asaresult,threecalculationsortestsdetermine

fundingforschooldistrictsandcommunitycolleges(K-14). Thecalculationortestthatis

useddependsonhowtheeconomyandGeneralFundrevenuesgrowfromyeartoyear.

Forthe2013-14through2015-16fiscalyears,theoperativeProposition98testsare3,1,

and2,respectively.

C C

SubsidizedChildCareincludesavarietyofprogramsdesignedtosupportthegainful

employmentoflow-incomefamilies. Theseprogramsareprimarilyadministeredbythe

DepartmentofEducationthroughnon-Proposition98fundingandtheannualfederal

61%62% 60%

25%24% 26%

9%

9% 9%5%

5% 5%

0.0

15.0

30.0

45.0

60.0

75.0

2013-14 2014-15 2015-16

DollarsinBillions

Fiscal Year

Figure K12-05Sources of Revenue for California's

K-12 Schools(As a Percent of Total)

State Funds Local Taxes Federal Funds Local Misc

$73.4

$79.3 $80.8


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ChildCareandDevelopmentFundgrant. Allprogramsaremeans-testedandrequire

thatfamiliesreceivingsubsidieshaveaneedforchildcare,whichmeansalladultsinthe

familymustbeworking,seekingemployment,orintrainingthatleadstoemployment.

Mostprogramsarecapped,drawingeligiblefamiliesfromwaitinglists,whilethosespecificallylimitedtoCalWORKsfamiliesorformerCalWORKsfamilieshavebeen

fundedforalleligiblerecipients.

ThemajorcappedprogramsincludeGeneralChildCare,AlternativePaymentProgram,

andMigrantChildCare.CalWORKsprogramsinclude:Stage1,administeredbythe

DepartmentofSocialServices,forfamiliesoncashassistancewhoseworkactivities

havenotstabilized;Stage2,administeredbytheDepartmentofEducation,forthose

CalWORKsfamilieswithstableworkactivitiesandforfamilieswhoaretransitioningoff

aid,foruptotwoyears;andStage3,alsoadministeredbytheDepartmentofEducation,

reservedforfamilieswhohavesuccessfullytransitionedoffaidformorethantwoyears

andstillhaveachildcareneed.

Californiareceivesabout$550millionannuallyinfederalChildCareandDevelopment

BlockGrantfunding,whichinadditiontostateGeneralFund,providesthetotalfunding

fortheGeneralChildCare,MigrantChildCare,AlternativePayment,CalWORKsStage

3,andchildcarequalityprograms,aswellasforLocalChildCarePlanningCouncils.

OnNovember19,2014,thePresidentsignedanactreauthorizingtheblockgrant.

Underreauthorization,statesareexpectedtomakechangesinblockgrant-fundedchild

careprograms,includingannualizinglicensinginspections,providinghealthandsafety

inspectionsfornon-familylicense-exemptproviders,allowingforextendedincome

eligibility,providingadditionalfundingforchildcarequalityactivities,restructuringprofessionaldevelopmentforchildcareprovidersandstaff,andincreasinglocalchild

careprograminformationprovidedtofamilies. Whilethestatehasseveralyearstobegin

implementingthesechanges,theywill,nevertheless,posemanychallengesforCalifornia,

especiallybecausetheblockgrantfundsarenotanticipatedtobesufficienttomeetthese

newrequirementsandtomaintaincurrentservicelevels.


RegionalMarketRate(RMR)Full-YearUpdateAnincreaseof$33.5million

non-Proposition98GeneralFundtoreflectafull-yearupdateoftheRMR.

The2014 BudgetActupdatedtheRMRfromthe85th percentileofthe2005RMR

surveytothe85 thpercentileofthe2009survey,deficited10.11percent,effective


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January1,2015. Thisincreasereflectsthedifferenceinfull-yearcostofthisupdate

in2015-16.

Cost-of-LivingAdjustment(COLA)Anincreaseof$9.2millionProposition98

GeneralFundand$12.3millionnon-Proposition98GeneralFundtoreflecta

statutoryCOLAof1.58percentforcappedchildcareprograms. COLAwas

suspendedfortheseprogramsfrom2008-09through2014-15.

Stage2Adecreaseof$11.6millionnon-Proposition98GeneralFundin2015-16to

reflectadecreaseinthenumberofCalWORKsStage2casesandanincreaseinthe

costpercase.TotalbasecostforStage2is$348.6million.

Stage3 Anincreaseof$38.6millionnon-Proposition98GeneralFundin2015-16

toreflectanincreaseinthenumberofCalWORKsStage3casesandanincreasein

thecostpercase.TotalbasecostforStage3is$263.5million.

ChildCareandDevelopmentFundsAnetdecreaseof$14.9millionfederalfundsin

2015-16toreflectareductionofavailablecarryoverfunding. Totalfederalfundingis

$565.2million.

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Eachyear,millionsofCalifornianspursuedegreesandcertificatesorenrollincourses

toimprovetheirknowledgeandskillsatthestateshighereducationinstitutions.

Moreareconnectedtothesystemasemployees,contractors,patients,

andcommunitymembers. Californiassystemofhighereducationconsistsofthree

publicsegments:

TheUniversityofCalifornia(UC)educatesapproximately249,000undergraduateand

graduatestudentsandistheprimaryinstitutionauthorizedtoindependentlyaward

doctoraldegreesandprofessionaldegrees.

TheCaliforniaStateUniversity(CSU) providesundergraduateandgraduate

instructiontoapproximately448,000students,andprimarilyawardsbaccalaureate

andmastersdegrees.

TheCaliforniaCommunityColleges(CCC)arepubliclysupportedlocaleducational

agenciesthatprovideopen-accesseducationalandvocationalprogramsto

approximately2.1millionstudents.

Inadditiontoprovidingdirectsupporttothesethreesegments,thestatealsoprovides

financialaidtostudentsattendingpublicandprivatepostsecondaryCaliforniainstitutions

throughtheCalGrantprogramand,beginningin2014-15,toUCandCSUstudentsthroughtheMiddleClassScholarshipProgram. Morethan125,000studentsreceived

newCalGrantawards,andmorethan170,000studentsreceivedrenewalawardsin

2013-14. In2014-15,morethan95,000studentswillreceiveMiddleClassScholarships.


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I H E

BeginningwiththeMasterPlanin1960,Californiasapproachtohighereducationhas

beentoprovideeducationalopportunityandsuccesstothebroadestpossiblerangeof

Californiansbyheavilysubsidizingthepublicsegmentstokeepcostslowforuniversity

studentsandevenlowerforcommunitycollegestudents. Thismodelaimstocreate

greateropportunitiesforindividualstudentsandabenefittothestate.

Theeconomicdownturnin2008andresultingshortfallsinstaterevenuesrequired

reductionsinthestatessubsidiesofpublichighereducation. Inresponsetothe

significantcutsinstatefunding,UCandCSUalmostdoubledsystem-widetuition

andfeesfrom2007-08to2011-12,increasingby$5,556(84percent) atUCandby

$2,700(97percent)atCSUduringthisperiod(seeFigureHED-01).Theserapid

increasessometimesimplementedtwicewithinagivenyear oftenoccurredwith

littleadvancenoticetostudentsandtheirfamilies. Althoughtuitionandfeeshavebeen

flatsince2011-12,thesehighertuitionlevelsremainahardshipformanystudentsand

theirfamilies.

Recentbudgetshavesignificantlyincreasedstatesupportforhighereducation.

ThepassageofProposition30inNovember2012preventeda$250millionreduction

inGeneralFundforeachsystem,plusthestateprovidedanadditional$125million

toeachsegmenttorecognizethattheydidnotincreasetuitionandfeesin2012-13.

Proposition30alsoallowedthestatetocommittoamulti-yearinvestmentplan.

The2013and2014BudgetActsprovidedatotalof$267millioninnewGeneralFund

resourcestoeachsystem. Therefore,theBudgetcommits$642milliontoeachuniversitysystemin2014-15attributabletothepassageofProposition30.

Thestatesuniversitiesalsoreceivesignificantindirectstatesupportthroughstate

financialaidprograms. Approximately23percentofalltuitionrevenueforUCand

22percentforCSUispaidforwithstatedollars,andthisstatesupportfortheuniversities

hasgrown$643millionforUC(218percent)and$507millionforCSU(391percent)

since2007-08. In2014-15,theMiddleClassScholarshipProgrambegantooffset

apercentageoftuitionandfeecostsatUCandCSUforstudentswithfamilyincomesof

upto$150,000.

Asaresultoftheseinvestments,Californiapubliccollegeanduniversitygraduates

carrysomeoftheloweststudentloandebtburdenscomparedtograduatesfrom

otherstates.Californiastudentsinpublicandnon-profitcollegesrank49thinstudentdebt

levelsabouthalfofCaliforniaundergraduateshavestudentdebt,averaging$20,340,

comparedtomorethan69percentofundergraduatesnationally,averaging$28,400.

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Figure HED-01

UC and CSU Expenditures and Undergraduate Tuition and Fees(Dollars in Millions)

Change from2007-08

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 Dollars Percent

UC

General Fund

for University

Support 1/$3,398.8 $2,603.5 $2,815.2 $3,141.2 $2,473.4 $2,566.6 $2,844.4 $2,990.7 $3,106.1 -$292.7 -9%

State

Financial Aid $295.2 $338.7 $425.9 $561.8 $687.2 $718.9 $765.8 $881.6 $938.4 $643.2 218%2/

Other Tuition

and Fee 1,297.9 1,338.1 1,628.5 1,650.9 2,335.4 2,299.9 2,320.7 2,250.2 2,193.4 $895.5 69%

Revenues

Other Funds 3/ 602.8 1,358.3 652.5 824.8 822.2 878.4 922.2 1,019.7 1,019.7 $416.9 69%

Total Funds $5,594.7 $5,638.6 $5,522.1 $6,178.6 $6,318.2 $6,463.8 $6,853.1 $7,142.2 $7,257.6 $1,662.9 30%

Systemwide

Tuition and

Fees 4/$6,636 $7,126 $8,373 $10,302 $12,192 $12,192 $12,192 $12,192 $12,192 $5,556.0 84%

CSU

General Fund

for University $3,264.3 $2,509.0 $2,739.3 $3,009.2 $2,418.1 2,473.9 $2,768.7 $3,026.1 $3,153.6 -$110.7 -3%

Support 1/

State

Financial Aid $129.7 $145.8 $196.2 $228.3 $312.3 $352.0 $414.9 $536.5 $636.4 $506.70 391%2/

Other Tuition

and Fee 1,046.6 1,260.3 1,434.4 1,453.6 1,874.7 1,867.5 1,864.1 1,699.9 1,707.1 $660.5 63%Revenues

Other Funds 3/ 340.1 1,055.6 303.5 415.0 422.3 463.9 521.3 512.1 512.1 $172.00 51%

Total Funds $4,780.7 $4,970.6 $4,673.5 $5,106.1 $5,027.4 $5,157.3 $5,569.0 $5,774.6 $6,009.2 $1,228.5 26%

Systemwide

Tuition and

Fees 4/$2,772 $3,048 $4,026 $4,440 $5,472 $5,472 $5,472 $5,472 $5,472 $2,700 97%

1/UC and CSU totals include the costs of state general obligation bond debt service and retiree health benefits. For both UC and CSU, the costs of state

general obligation bond debt service are imputed for 2007-08 through 2012-13, inclusive. For CSU, the costs of retiree health benefits are imputed for

2007-08 through 2011-12.2/

This line includes, for all years, funds paid through the Cal Grant program, and, beginning in 2014-15, funds paid through the Middle Class Scholarship

Program. Fiscal years 2013-14, 2014-15, and 2015-16 are projected amounts.3/

Other funds include general resources, lottery funds, and federal ARRA funding.4/

Tuition and fees are in whole dollars.


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TheBudgetproposestotalfundingof$28.7billion,reflectinganincreaseof$1.2billion,

or4.4percent,above2014-15.Withintheseresources,theBudgetincludesfundingof

$16.3billioninGeneralFundandProposition98-relatedsources.SeeFigureHED-02fora

summaryofhighereducationfunding.Highereducationcontinuestobeahighpriorityforinvestmentbecausewidelyaccessible,high-qualityhighereducationdrivestheinnovation

thatfuelsCaliforniasever-evolving,dynamiceconomy.Nevertheless,asthestate

reinvestsinhighereducation,itcannotfundthebusiness-as-usualmodelofproviding

instructionatitshighereducationinstitutions. Astheneedsofthestateanditsstudents

evolve,thefundinganddeliverymodelsofthestateshighereducationinstitutionsmust

keeppace.

Figure HED-02

Higher Education Expenditures(Dollars in Millions)

Change from

2014-152013-14 2014-15 2015-16 Dollars Percent

University of California

Total Funds $6,853.2 $7,142.2 $7,257.7 $115.5 1.6%

General Fund 2,844.4 2,990.7 3,106.1 $115.5 3.9%

California State University

Total Funds $5,569.0 $5,774.6 $6,009.3 $234.7 4.1%

General Fund 2,768.7 3,026.1 3,153.6 $127.5 4.2%

Community Colleges

Total Funds $12,039.0 $12,480.3 $13,154.0 $673.7 5.4%

General Fund & P98 7,055.5 7,519.2 8,119.1 $599.8 8.0%

Student Aid Commission

Total Funds $1,725.8 $2,021.9 $2,227.6 $205.6 10.2%

General Fund 1,056.0 1,615.1 1,926.9 $311.8 19.3%

Other Higher Education 2/

Total Funds $57.8 $106.6 $83.3 -$23.3 -21.9%

General Fund 9.6 60.8 $37.1 -$23.7 -38.9%

Total Funds $26,244.7 $27,525.7 $28,731.9 $1,206.2 4.4%

General Fund $13,734.2 $15,211.9 $16,342.8 $1,130.9 7.4%

1/ To allow for comparisons with totals for UC and CSU, the totals for the community colleges include property tax revenues,

which are a component of the state's obligation pursuant to Proposition 98.

2/ This category includes expenditures for the Hastings College of the Law, including state general obligation bond debt service

for the law school, and the Awards for Innovation in Higher Education.

BothUCandCSUproposedbudgetsfor2015-16thatcallforincreasesinfundingwell

beyondthe4-percentGeneralFundincreasetheAdministrationcommittedtoinits

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long-termfundingplan:UCproposestorequiremoreresourcesfromstudentsthrough

steeptuitionandfeeincreasesorbyreplacingCaliforniastudentswithnonresident

students,andCSUproposesthestateprovide$97.1millionmoreGeneralFundthanthe

Administrationsplan. ThestateisstillemergingfromthelargestrecessionsincetheGreatDepression,anditsfinancesremainconstrained. Thestatemustcontinuetorebuild

itsuniversitiesbudgets,butonlyinamannerthatissustainableoverthelongtermand

thatexploresallcostcontainmentstrategiesbeforeaskingCaliforniafamiliestopaymore

throughtuitionincreases.

I P M A

AsthestatecontinuestoreinvestandgrowfundingforUC,CSUandtheCCCs,

theAdministrationexpectsthesegmentstousethesefundstoachievestatewide

goals,including:

Maintainingaffordability;

Decreasingthetimeittakesstudentstograduate;

Increasingthenumberofstudentswhocompleteprograms;and

Improvingthetransferofcommunitycollegestudentstofour-yearcolleges

anduniversities.

TheBudgetprovidesincreasesinfundingwithafocusonresults,ratherthanfunding

enrollmentgrowth. Traditionalenrollment-basedfundingdoesnotencourageinstitutionstofocusoncriticaloutcomesaffordability,timelycompletionrates,andquality

programsnordoesitencourageinstitutionstobetterintegratetheireffortstoincrease

productivityofthesystemasawhole. Instead,itbasesallocationofnewfundson

thecostsoftheexistinginstitutionalinfrastructure,withoutexaminingwhetherthe

stateiswell-servedbyitsuniversitiesandcollegescontinuingtodelivereducationin

thesameway.Underthisoldmodel,increasedfundingcomesfromadmittingmore

students,whichcanmakeensuringstudentscompletemeaningfulprogramsinatimely

mannerasecondaryconcern.

Insteadofcontinuingenrollment-basedfunding,thefour-yearinvestmentplanfor

UCandCSUthatbeganin2013-14callsforgrowingGeneralFundsupportforeach

segmentannually. Thesemulti-yearinvestments,however,arecontingentonthe

segmentsholdingtuitionandfeesflatat2011-12levels. Inadditiontoreversingits


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decisiontoraisetuition,UCwillalsobeexpectedtokeepnonresidentenrollmentfrom

furtherincreasingandtotakeconcreteactiontoreducecosts.

TheBudgetcontinuestorequireboththeUCRegentsandtheCSUBoardofTrustees

toadoptthree-yearsustainabilityplansthatsettargetsforkeymeasuresrelatedtothe

goalsabove.Thesesustainabilityplansareanimportantcomponentofunderstandingthe

prioritiesoftheappointedgoverningboardsandallowforarobustdiscussionofpriorities

duringthebudgetprocess. TheAdministrationexpectsinstitutionstoalsocontinue

implementingreformstoimprovestudentsuccessandtorealizeinstitutionalefficiencies.

Withsavingsachievedthroughnewcostreductionsandcurrentefficiencyefforts,

incombinationwiththeGeneralFundincreases,theAdministrationexpectsthe

universitiestomaintaincurrenttuitionandfeelevels.

U CConsistingoftencampuses,UCistheprimaryinstitutionauthorizedtoindependently

awarddoctoraldegreesandprofessionaldegreesinlaw,medicine,business,dentistry,

veterinarymedicine,andotherprograms.TheUniversitymanagesoneU.S.Department

ofEnergynationallaboratory,partnerswithprivateindustrytomanagetwoothers,

andoperatesfivemedicalcentersthatsupporttheclinicalteachingprogramsofUCs

medicalandhealthsciencesschoolsthathandlealmost4millionpatientvisitseachyear.

TheUniversityofCaliforniahasthehighestcoststructureandreceivesthehighest

per-studentsubsidyofthethreesegments,andyetisadvocatingformoretuitionor

statefunds. TheUniversityhasundertakensomeinitiativestoreduceadministrative

costs;however,italsoneedstoseriouslyevaluatethecostdriversofitsvarious

missionsteaching,research,andpublicserviceandimplementchangestocontrol

thosecosts,whileimprovingaccesstostudentsreflectiveofthestateincluding

transferstudents.

Tothisend,attheGovernorsrequest,theUCRegentsareexpectedtoforma

committee,staffedbytheAdministrationandtheUCOfficeofthePresident,toreduce

theUniversityscoststructure. Thiscommitteewillsolicitadvicefromabroadrangeof

experts,reviewdataanddevelopproposalsthatallowtheUniversitytodeliverquality

educationatalowercostandobviatetheneedforincreasedtuitionorincreasingout-of-stateenrollment. Specifically,thecommitteewillgatherinformationanddevelop

proposalstodecreaseUniversitycostdrivers,enhanceundergraduateaccess,improve

time-to-degreeanddegreecompletion,reviewtheroleofresearch,andexplorethe

useoftechnologytoenhanceeducation. Thecommitteesproposalswillbeconsidered

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bythefullUCBoardofRegents. Theseproposals,inconjunctionwiththeUniversitys

sustainabilityplan,willinformongoingdiscussionsonefficienciesandreformstoimprove

thecoststructure,studentaccessandoutcomesattheUniversity.

SignificantAdjustment:

GeneralFundIncreaseAnongoingincreaseof$119.5millionGeneralFund

contingentupontheUniversitykeepingtuitionat2011-12levelsin2015-16,

notincreasingnonresidentenrollmentin2015-16,andtakingactiontocontrolcosts.

C S U

CSUprovidesundergraduateandgraduateinstructionthroughmastersdegrees

andindependentlyawardsdoctoraldegreesineducation,nursingpractice,

andphysicaltherapy,orjointlywithUCorprivateinstitutionsinotherfieldsofstudy.

With23 campuses,CSUisthelargestandmostdiverseuniversitysystemin

thecountry. CSUplaysacriticalroleinpreparingtheworkforceofCalifornia,awarding

103,637 degreesin2013-14;itgrantsmorethanone-halfofthestatesbachelors

degreesandone-thirdofthestatesmastersdegrees.CSUawardsmoredegreesin

business,engineering,agriculture,communications,health,andpublicadministrationthan

anyotherCaliforniainstitutionofhighereducation. Morethan50percentofCalifornias

teachersgraduatedfromCSU.

TheCaliforniaStateUniversityreceivesroughlyhalftheper-studentsubsidyasUCand

hasaloweroverallcoststructurethanUC. LikeUC,CSUhasworkedtoreduceadministrativecosts,andCSUhasbeenactivelyexaminingandimplementingstrategies

toprovidemoreeffectiveremedialprograms,reducecoursebottlenecks,enhanceits

completionrates,andsimplifythetransferprocess. However,completionratesare

lowonly17.3percentofadmittedfreshmencompletetheirstudieswithinfouryears.

Toencouragethemostpromisingstrategiestoenhancecompletion,theBudgetincludes

$25millionforinnovationawardsfocusedonpartnershipsandpracticesthatpromote

completionofdegreeswithinfouryearsofstartinghighereducation,withaparticular

focusonimprovingperformanceinthisareaatCSUcampuses.


GeneralFundIncreaseAnongoingincreaseof$119.5millionGeneralFund.

ThisfundingshouldobviatetheneedforCSUtoincreasestudenttuitionandfees

andcanbeusedbytheUniversitytomeetitsmostpressingneeds.


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InnovationAwardsTheBudgetprovides$25millionforinnovationawardsto

recognizeCSUinstitutionsthatimplementinnovationsthatleadtomoretimely

degreecompletion.

CenterforCaliforniaStudiesTheBudgetshiftsthecostsoftheCenterfor

CaliforniaStudiestoCSUsmainGeneralFundappropriationinsteadofbudgeting

thosecostsseparately. CSUisexpectedtoprovidethesamecostadjustmentsto

thecentercommensuratewithincreasesprovidedforotherCSUoperations.

LantermanDevelopmentalCenter TheBudgetincludestransferringtheexisting

propertyoftherecentlyclosedLantermanDevelopmentalCentertoCaliforniaState

PolytechnicUniversity,Pomona. Thecampusintendstousethepropertytoexpand

itsacademicprogramsandInnovationVillage. ThetransferiscontingentonCSU

acknowledgingthatstatefundswillnotbespecificallyappropriatedfortheoperation,

maintenanceordevelopmentofthisproperty;andtheUniversityaccommodatingthe

needsofotherstatedepartmentsforaportionofthelandinthearea.

C C C

Thecommunitycollegesarepubliclysupportedinstitutionsofhighereducationthat

providebasicskills,vocational,andundergraduatetransfereducationasapartofthe

largestsystemofhighereducationintheworld,with72districts,112campuses,and

72 educationalcenters. In2013-14,thecommunitycollegesawarded62,318 certificates

and107,472degrees,andtransferred105,346studentstofour-yearhigher

educationinstitutions.

TheCCCsservefarmorestudentsthaneitherUCorCSUandfacemany

challengeswithlowcompletionratesaprimaryissue thatwereexacerbatedduring

thetightProposition98budgetsintherecenteconomicdownturn. In2012,thesystem

convenedaStudentSuccessTaskForce,whichmadeanumberofrecommendations

toimprovestudentsuccessaccordingtovariousmeasures,suchascompletionof

basicskillsandEnglishasasecondlanguagecourses,persistenceandretention,

andsuccessfultransfertofour-yearinstitutions. Thecollegeshavestartedtoenhance

themeasurementofstudentsuccess,whichcanbeusedtotargetinvestmentin

programsthatbestimprovestudentoutcomes. TheAdministrationexpectsthiseffortto

improvecompletionrateswhileclosingachievementgapsandproposesadditionalstate

investmentinthisarea. Thisincludesexpandingcurrentservicestoimprovestudent

outcomes,suchaseffectiveorientation,assessment,placement,counseling,andother

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educationplanningservices. Italsoincludesresourcestomitigatedisproportionate

impactsonaccessandachievementinunderrepresentedstudentgroups,alignedwith

eachdistrictsboard-approvedstudentequityplan.

TheCCCsalsoprovidetechnicaleducationvitalforpreparingtheworkforceforthe

statesdynamiceconomy.However,theseeffortsneedtoberefreshedandbetter

coordinatedwithtechnicaleducationprogramsofferedatK-12andadultschools

tomeetindustryneeds. InNovember,theCaliforniaCommunityCollegesBoard

ofGovernorslaunchedtheTaskForceonWorkforce,JobCreation,andaStrong

Economy,whichwillbringtogetherleadersineducationandworkforcedevelopment

todeveloprecommendationstoguidefutureinvestmentsintechnicaleducationatthe

communitycolleges. TheBudgetsupportsthiseffortbymakingnumerousinvestments

toimproverelevanttechnicaleducation,includinginadulteducation,apprenticeship

programsandanincreaseinthefundingrateforcareerdevelopmentandcollege

preparationnon-creditcourses.Thesedollarswillallowcollegestodesigncareer

developmentandcollegepreparationnon-creditcoursesbettersuitedforstudents

pursuingcareertechnicaleducation.


InvestinginStudentSuccess TheBudgetprovidesanincreaseof$200million

Proposition98GeneralFundtoimproveandexpandstudentsuccessprogramsand

tostrengtheneffortstoassistunderrepresentedstudents. Thisincludes$100million

toincreaseorientation,assessment,placement,counseling,andothereducation

planningservices. Italsotargets$100milliontocloseachievementgapsinaccessandachievementbetweenunderrepresentedstudentgroupsandtheirpeers,

asidentifiedinlocalstudentequityplans.

IncreasedOperatingExpensesTheBudgetprovidesanadditional$125million

Proposition98GeneralFundtoincreasebaseallocationfundinginrecognitionof

increasedcommunitycollegeoperatingexpensesintheareasoffacilities,retirement

benefits,professionaldevelopment,convertingparttimetofull-timefaculty,

andothergeneralexpenses.

Growth TheBudgetprovidesanincreaseof$106.9millionProposition98

GeneralFundforgrowthingeneral-purposeapportionments,whichrepresentsa2-percentincreaseinfull-timeequivalentenrollment. The2014Budgetdirected

theBoardofGovernorstoadoptagrowthformulathatgivesfirstpriorityto

districtsidentifiedashavingthegreatestunmetneedinadequatelyservingtheir


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G B S 2015-16

H E

pTM5Aif3Jb

communityshighereducationalneeds. Thisnewgrowthformulaistobegininthe

2015-16 fiscalyear.

Cost-of-LivingAdjustment TheBudgetprovidesanincreaseof$92.4million

Proposition98GeneralFundforacost-of-livingadjustmentof1.58percent.

AdultEducationBlockGrantTheBudgetprovides$500millionProposition98

GeneralFundtoimplementtheAdultEducationBlockGrantasdiscussedinthe

K thru12EducationChapter.

ApprenticeshipPrograms TheBudgetprovides$29.1millionProposition98

GeneralFundforexpansionofapprenticeshipprograms. Thisincludes$14.1million

togrowexistingapprenticeshipprogramsand$15milliontocreateinnovative

apprenticeshipdemonstrationprojectsthatfocusonnewandemergingindustries

withunmetlabormarketdemand.

CareerTechnicalEducationTheBudgetprovides$48millionProposition98

GeneralFundone-timetosupporttheCareerTechnicalEducationPathwaysProgram

attheChancellorsOffice. Thesefundsprovideresourcesforcommunitycollegesto

develop,enhance,andexpandcareertechnicaleducationprogramsthatbuildupon

existingregionalcapacitytomeetregionallabormarketdemands.

EnhancedNon-CreditRateChange TheBudgetprovides$49millionProposition98

GeneralFundtoreflectanincreaseadoptedwiththe2014Budgetinthefunding

rateforcareerdevelopmentandcollegepreparationnon-creditcourses(alsoknown

asCDCPorenhancednon-credit) toequaltherateprovidedforcreditcourses.

Careerdevelopmentandcollegepreparationnon-creditcoursesofferflexibilityforcommunitycollegestodesignanddelivercoursesbettersuitedforstudents

pursuingcareertechnicaleducation. Thelowerfundingrate,alongwiththehigher

costofcareertechnicaleducation,serveasbarrierstomanycommunitycolleges

offeringcareerdevelopmentandcollegepreparationinstructioninamannerthatbest

supportsstudentsuccess.

MandateBacklogPayments TheBudgetprovidesanadditional$353.3million

Proposition98GeneralFundtocontinuepayingdownoutstandingmandate

claimsbycommunitycolleges. Thesepaymentswillfurtherreduceoutstanding

mandatedebt,whileprovidingcommunitycollegeswithone-timeresourcesto

addressdeferredmaintenanceatfacilities,instructionalequipmentneeds,andother

Full Budget Summary 2015-2016

Documents

Transcript of Full Budget Summary 2015-2016