State Spending Plan
July 12, 2017

The 2017-18 Budget

California Spending Plan

(Preliminary)

Proposition 98


State budgeting for schools and community colleges is based primarily on Proposition 98, approved by voters in 1988 and amended in 1990. In this section, we provide an overview of Proposition 98 changes under the enacted budget package. We then highlight Proposition 98 spending changes specifically for K-12 education and community colleges. On the “EdBudget” portion of our website, we post dozens of tables containing additional detail about the Proposition 98 budget (as well as the child care and higher education budgets).

Overview

Proposition 98 Establishes Minimum Spending Level. Proposition 98 establishes a minimum spending requirement commonly called the minimum guarantee. The minimum guarantee is determined by three main formulas (known as tests) and various inputs, including General Fund revenue, per capita personal income, and K-12 attendance. The state can spend at the minimum guarantee or any level above it. Spending above the minimum guarantee one year typically becomes part of the base for calculating the minimum guarantee the next year. If the minimum guarantee increases after budget enactment due to updated inputs, the state owes a “settle-up” obligation. In some years, the state also creates or pays “maintenance factor.” Maintenance factor is created when General Fund revenue is weak relative to per capita personal income and is paid when General Fund revenue is stronger.

2015-16 and 2016-17 Minimum Guarantees Down but Total Spending Up Slightly. Figure 1 shows how estimates of the minimum guarantee and Proposition 98 spending have changed from the June 2016 to June 2017 budget plans. The 2015-16 minimum guarantee has decreased $379 million due to lower-than-expected General Fund revenue. Proposition 98 spending that year, however, has increased $53 million due to various minor adjustments involving the Local Control Funding Formula (LCFF) and community college apportionments. The 2016-17 minimum guarantee has decreased $558 million, again due to lower estimates of General Fund revenue. Proposition 98 spending that year has decreased by $484 million, but total spending, including a settle-up payment of $514 million, is up slightly ($29 million) from the June 2016 level. The settle-up payment allows the state to cover some 2016-17 LCFF costs using funds set aside for Proposition 2 (2014) debt payments. In both 2015-16 and 2016-17, Proposition 98 spending is above the calculated minimum guarantees.

Figure 1

Tracking Changes in the Minimum Guarantee and Spending

(In Millions)

2015-16

2016-17

June 2016

June 2017

Change

June 2016

June 2017

Change

Minimum guarantee

$69,050

$68,671

-$379

$71,874

$71,316a

-$558

Proposition 98 spending

$69,050

$69,103

$53

$71,874

$71,390

-$484

Settle-up payment for LCFF

514

514

Total Spending

$69,050

$69,103

$53

$71,874

$71,903

$29

aReflects amount that would be required to fund the minimum guarantee and provide a $405 million statutory supplement, consistent with the June 2016 budgetary approach. The June 2017 budget plan notwithstands the supplement.

LCFF = Local Control Funding Formula.

2017-18 Spending Up $3.1 Billion Over Revised 2016-17 Level. Figure 2 shows Proposition 98 spending for each segment from 2015-16 through 2017-18. In 2017-18, total spending across all segments is $74.5 billion, an increase of $3.1 billion (4.4 percent) from the revised 2016-17 level. For 2017-18, the state funds at the estimate of the minimum guarantee. This estimate builds upon the higher levels of spending provided in 2015-16 and 2016-17. (Had the state not funded above the guarantee in those two years, the 2017-18 guarantee would have been $542 million lower.) Test 2 is the operative test in 2017-18, with the change in the guarantee attributable to a 3.7 percent increase in per capita personal income and a 0.05 percent decline in K-12 attendance. The increase in the guarantee also reflects a maintenance factor payment of $536 million. Under the administration’s estimates, the state would end 2017-18 with an outstanding maintenance factor obligation of $900 million.

Figure 2

Proposition 98 Spending by Segment and Source

(Dollars in Millions)

2015-16
Final

2016-17
Revised

2017-18
Enacted

Change From 2016-17

Amount

Percent

Preschoola

$885

$975

$1,122

$148

15.0%

K-12 Education

General Fund

$43,074

$43,955

$45,763

$1,808

4.1%

Local property tax

17,047

18,133

18,981

848

4.7

Subtotals

($60,121)

($62,089)

($64,745)

($2,656)

(4.3%)

California Community Colleges

General Fund

$5,384

$5,473

$5,654

$181

3.3%

Local property tax

2,631

2,768

2,911

142

5.1

Subtotals

($8,016)

($8,242)

($8,565)

($324)

(3.9%)

Other Agenciesa

$82

$85

$91

$6

7.4%

Totals

$69,103

$71,390

$74,523

$3,134

4.4%

General Fund

$49,425

$50,488

$52,631

$2,143

4.2%

Local property tax

19,678

20,902

21,892

991

4.7

aConsists entirely of General Fund.

About One-Third of Increase Covered With Higher Property Tax Revenue. Of the total Proposition 98 spending provided in 2017-18, $52.6 billion is state General Fund and $21.9 billion is local property tax revenue. From 2016-17 to 2017-18, state General Fund increases $2.1 billion (accounting for about two-thirds of the $3.1 billion increase in spending) and property tax revenue increases by $1 billion. The primary factor explaining the growth in property tax revenue is the projected 5.3 percent growth in assessed property values, which is similar to the average growth rate over the past 20 years. Regarding local revenue associated with the dissolution of redevelopment agencies, the budget plan assumes a net increase of $31 million. This consists of a $131 million increase in the ongoing revenue shifted to schools and community colleges, offset by a $100 million decrease in revenue from the sale of assets formerly owned by redevelopment agencies.

Budget Plan Notwithstands Statutory Supplemental Payment Through 2020-21. A law enacted in 1990 requires the state to provide a supplemental appropriation when Test 3 is the operative test for calculating the minimum guarantee and school funding otherwise would grow less quickly than the rest of the state budget. The budget plan notwithstands the supplemental appropriation from 2016-17 through 2020-21. Under the administration’s estimates of the minimum guarantee, not providing the supplement has no effect on school funding in the first two years of the period. In 2016-17, the law would have required a supplemental appropriation of $405 million, but the budget plan already provides more than this amount. In 2017-18, the supplement is not applicable because Test 3 is not operative. In the latter three years of the period, the administration estimates that notwithstanding the supplement will reduce required Proposition 98 spending by $450 million in 2018-19, $290 million in 2019-20, and $110 million in 2020-21. (These estimates are highly sensitive to a variety of assumptions, particularly growth in General Fund revenue and per capita personal income.) To the extent the state provides a lower level of funding in these years, it will have a corresponding increase in its maintenance factor obligation.

Spending Package Reduces Outstanding Settle-Up Obligation by $603 Million. The budget plan includes a $603 million settle-up payment related to meeting the 2009-10 minimum guarantee. This payment reduces the state’s outstanding settle-up obligation from slightly above $1 billion to $440 million. Of the $603 million provided, the budget plan allocates $514 million for covering 2016-17 LCFF costs, $86 million for the community college guided pathways initiative, and $3 million for the Career Technical Education Incentive Grant program. The state budget package scores all of the settle-up spending as a Proposition 2 debt payment.

K-12 Education

$64.7 Billion Proposition 98 Funding for K-12 Education in 2017-18. The budgeted 2017-18 level is $2.7 billion (4.3 percent) more than revised 2016-17 level and $2.2 billion (3.6 percent) more than the 2016-17 Budget Act level. The budget increases funding per student by $450 (4.3 percent) over the 2016-17 Budget Act level, bringing Proposition 98 funding per student up to $10,863.

Package Includes Mix of Ongoing and One-Time Spending. As Figure 3 shows, the budget includes $2.4 billion in augmentations for K-12 education. Of these augmentations, $1.5 billion are ongoing increases and $933 million are one-time initiatives. In addition to these changes, the budget package includes $328 million in one-time initiatives funded from other sources. (Of this amount, $325 million is from Proposition 98 reversion dollars and $3 million is from a settle-up payment. Of the reversion dollars, $114 million is for a fund swap primarily relating to special education.) The budget also authorizes $593 million from Proposition 51 (2016) general obligation bond proceeds for school facilities. We describe major K-12 spending and programmatic changes below.

Figure 3

2017-18 K-12 Proposition 98 Changes

(In Millions)

2016-17 Revised Spending

$62,089

Technical Adjustments

Make LCFF adjustments

$151

Make other adjustments

64

Adjust categorical programs for changes in attendance

-3

Subtotal

($215)

Policy Changes

Increase LCFF funding for school districts and charter schools

$1,362

Provide per-student discretionary grants (one time)

877

Provide cost-of-living adjustment for select categorical programsa

65

Augment funding for after school programs

50

Support classified employees interested in becoming teachers (one time)

25

Fund Career Technical Education Pathways program

15

Expand refugee student services (one time)

10

Add mandated reporter training to mandates block grant

8

Increase LCFF for county offices of education

7

Provide professional development for bilingual teachers (one time)

5

Create free online history/social science curriculum (one time)

5

Support Southern California Regional Occupational Center (one time)

4

Fund online educational resources

3

Fund Equity Performance and Improvement Teams (one time)

3

Fund California-Grown School Meals Program (one time)

2

Develop electronic LCAP template and dashboard application (one time)

0.4

Subtotal

($2,441)

Total Changes

$2,656

2017-18 Enacted Spending

$64,745

aApplies 1.56 percent increase to special education, child nutrition, services for foster youth, adults in correctional facilities, and American Indian education.

LCFF = Local Control Funding Formula and LCAP = Local Control and Accountability Plan.

General Purpose Funding

Accelerates Implementation of LCFF for School Districts and Charter Schools. The budget provides an additional $1.4 billion ongoing Proposition 98 funding for this purpose, bringing total LCFF funding for school districts and charter schools to $57.4 billion, a 2.7 percent increase over the revised 2016-17 level. The administration estimates this funding will result in the LCFF-target level being 97 percent-funded. School districts and charter schools may use LCFF monies for any educational purpose.

Augments LCFF Funding for Some County Offices of Education (COEs). The budget provides $7 million ongoing Proposition 98 funding for an increase to the district services portion of the COE LCFF. Specifically, the budget increases COE LCFF targets by an amount equal to (1) $18,697 for each school district located in the county (bringing total funding per district to $131,808) or (2) $80,000, whichever is higher. This change to the formula results in additional funding for the 40 percent of COEs currently funded at but not above their LCFF targets.

Requires All COEs to Develop Plans for Supporting School Districts. Trailer legislation requires all COEs to develop plans specifying how they will support their school districts. The legislation requires COEs, at a minimum, to specify how they will provide support to (1) all districts in developing their Local Control and Accountability Plans (LCAPs) and (2) any district deemed low performing. Each COE plan must include goals for each type of district support provided, metrics to measure progress towards achieving these goals, and specific actions the COE will take to meet its goals. Each plan also must describe how the COE will work with other entities, including other COEs, the California Department of Education (CDE), and the California Collaborative for Educational Excellence—to support school districts in their county. Trailer legislation also requires the Superintendent of Public Instruction (SPI) to provide assistance to a COE if the SPI finds merit in an LCAP-related complaint filed against the COE or one of the districts in the county.

Funds One-Time Discretionary Grants. The largest one-time augmentation for K-12 education is $877 million that local education agencies (LEAs) may use for any educational purpose. Funding is distributed based on average daily attendance ($147 per ADA). If an LEA has unpaid mandate claims, funding counts toward those claims. As most LEAs do not have any such claims, we estimate only about one-third ($268 million) of the funding will end up reducing the K-12 mandates backlog. We estimate the K-12 mandates backlog will be $799 million at the end of 2017-18.

Teacher Workforce

Funds Second Round of Grants for Helping Classified Employees Become Teachers. Chapter 29 of 2016 (SB 828, Committee on Budget and Fiscal Review) created a program to assist classified school employees (such as instructional aides and library assistants) in completing their bachelor’s degree and pursuing a teaching credential. The program provides grants of up to $4,000 per participant per year. The grants are intended to help cover education costs. The state initially provided the program with $20 million one-time Proposition 98 funding, providing grants for up to 1,000 participants. The 2017-18 budget package includes an additional $25 million one-time Proposition 98 funding, providing grants for up to 1,250 participants.

Creates New Program to Recruit and Retain Certificated Staff. The budget redirects $11 million one-time federal Title II local assistance funding to establish the California Educator Development program to help LEAs attract and support teachers, principals, and other school leaders. The Commission on Teacher Credentialing (CTC), in conjunction with the California Center on Teaching Careers, will award grants of $100,000 to $1,250,000 to school districts, COEs, or charter schools. Awards are to be made on a competitive basis, with priority given to programs serving certain types of teachers (science, math, special education, or bilingual teachers) or operating in certain areas (such as rural schools).

Creates Bilingual Teacher Professional Development Program. The budget provides $5 million one-time Proposition 98 funding for a new program to encourage more teachers to obtain bilingual authorizations and teach in bilingual settings. CDE, in consultation with CTC, is to issue a minimum of five grants, with recipients selected on a competitive basis. Grants may be provided to COEs, school districts, charter schools, or consortia of LEAs. By January 1, 2021, grant recipients must report on the number of participants who were issued bilingual authorizations, the number of previously authorized teachers who have participated in the program and subsequently returned to bilingual teaching assignments, and the number of teachers who are still working at least 50 percent of the time in a bilingual setting.

Takes Various Actions Relating to Teacher Misconduct Reviews. The 2016-17 budget package provided CTC with $7.8 million in Teacher Credential Fee revenue to address higher ongoing workload and costs for the Office of the Attorney General (AG) to review serious teacher misconduct cases. The AG was unable to hire all anticipated additional staff in 2016-17, resulting in $4.5 million carried forward to 2017-18. The 2017-18 budget package also requires the AG to report quarterly on the status of its backlog of teacher misconduct reviews. These reports are to detail both the amount of work completed by the AG each quarter and the average cost of prosecuting a case.

Career Technical Education

Funds Third and Final Year of Career Technical Education (CTE) Incentive Grant Program. The 2015-16 budget package created a three-year competitive grant program to promote CTE at secondary schools. As designed, state funding for the program decreases over the three-year period, as local match requirements increase. In 2015-16 and 2016-17, the state provided $400 million and $300 million, respectively, for the program. Consistent with the authorizing legislation, the 2017-18 budget provides $200 million for the third and final year of the program. (Of this amount, $197 million is Proposition 98 reversion funds and $3 million is from a settle-up payment.) In 2017-18, grant recipients are required to provide a total of $400 million in local matching funds.

Provides Funding for CTE Pathway Program Directly to CDE. The budget provides CDE with $15.4 million ongoing Proposition 98 funding to support efforts linking secondary and postsecondary CTE. The funding formerly was provided to the California Community Colleges (CCC) Chancellor’s Office, which in turn passed through the funds to CDE. The basic rules of the program remain unchanged. In the past, the department has used the funds for California Partnership Academies ($9.3 million) and various other activities (a combined $6.1 million), including funding CTE student organizations and virtual CTE counselors.

Earmarks Funding for Southern California Regional Occupational Center (SCROC). The budget provides a total of $10 million over four years to SCROC—$4 million in 2017-18, $3 million in 2018-19, $2 million in 2019-20, and $1 million in 2020-21. The state funds are intended to support SCROC’s general operations. As a condition of receiving the funds, SCROC is required to submit an annual plan to the Department of Finance and the Legislature that includes detailed budget information and participant outcome data.

Other Changes

Specifies Use of Remaining Proposition 39 Funds and Extends Energy-Efficiency Programs Indefinitely. The budget provides $423 million Proposition 98 funding for energy-efficiency projects at schools and community colleges. This reflects the fifth and final year of Proposition 39 (2012) funding. Trailer legislation, however, extends the date for schools to use this funding by one year, to June 30, 2019, and sets rules for how any remaining uncommitted funds are to be used. The first $75 million in remaining funds is earmarked for school districts and COEs to replace or retrofit school buses. Priority is given to LEAs having the oldest buses, serving disadvantaged communities, or serving high shares of low-income students. The next $100 million is earmarked for a competitive grant program to provide K-12 LEAs with low- and no-interest loans for energy projects. Any funding still remaining is to be distributed as grants to K-12 LEAs according to Proposition 39 rules. The trailer legislation also extends the Proposition 39 energy-efficiency programs for K-12 and CCC LEAs beginning in 2018-19, contingent upon funds being made available through the annual budget act or other statute.

Augments After School Education and Safety (ASES) Program. Proposition 49, passed by the voters in 2002, requires the state to provide $550 million in Proposition 98 funds annually for the ASES program. Since Proposition 49 was enacted, ASES providers have received $7.50 per child per day. The budget increases ASES funding by $50 million (9 percent)—bringing total funding to $600 million. The augmentation will increase the per-child per-day rate.

Increases Funding for Tobacco Use Prevention Education. As required by Proposition 56 (2016), the budget provides $32 million in new cigarette tax revenue to support tobacco use prevention education in California schools. The budget reserves this funding pending legislation to be adopted later this session that creates a new prevention education program. If such legislation is not enacted this session, the funds are to be allocated under the existing Tobacco Use Prevention Education program administered by CDE.

Makes Various Adjustments to K-12 Mandates Block Grant. The 2017-18 budget package adds two new mandates to the K-12 mandates block grant. The first mandate requires schools to provide trainings on the detection and reporting of child abuse. For this mandate, the budget adds $8.5 million ongoing Proposition 98 funding to the block grant. The second mandate requires schools to administer the California Assessment of Student Performance and Progress computer-based exam. Though this mandate is added to the block grant, the budget does not include additional block grant funding for it.

Applies Cost-of-Living Adjustment (COLA) to Certain Programs. In addition to these changes, the budget provides a 1.56 percent COLA for both the K-12 and community college mandates block grants and establishes a statutory COLA for them moving forward. These block grants have not received a COLA since they were originally created in 2012-13. The cost of providing the COLA in 2017-18 is $3.5 million and $503,000 for the K-12 and community colleges block grants, respectively. The budget also applies a 1.56 percent COLA to several other state categorical programs—special education, Child Nutrition, the Foster Youth Services Coordinating Program, the American Indian Early Childhood Education program, and American Indian Education Centers. The total cost of providing a COLA for these five programs is $61 million.

Expands Refugee Student Services. The budget provides $10 million one-time Proposition 98 funding for the Department of Social Services (DSS) to provide grants to districts serving notable numbers of refugee students. Specifically, the program is limited to districts in counties that DSS labels as “refugee-impacted.” Currently, DSS has identified ten such counties. The grant funds will be provided on a competitive basis to three cohorts over the next three years, with each cohort receiving a total of $3.3 million (supplementing an existing federal grant that has provided $1 million annually the past several years). Districts are to use their grants to provide extra services, such as tutoring and counseling, to refugee students.

Funds Two Initiatives Relating to History/Social Science. The first initiative provides $10 million unspent prior-year Proposition 98 funding for a COE or consortium of COEs to create an online repository of resources to help schools implement new history/social science and health curriculum frameworks. Funding would be available for three years and is intended to focus on particular components of history/social science (specifically the Armenian genocide; labor issues; lesbian, gay, bisexual, and transgender issues; and civic education) and particular components of health (specifically sexual harassment and violence prevention). The second initiative provides $5 million one-time Proposition 98 funding for the California Historical Society, in partnership with the California History/Social Science Project, to create a free online K-12 curriculum for history/social science. The curriculum must include primary and secondary sources, lesson plans, and other instructional materials. In addition, the curriculum must use archival and digital resources of state and federal institutions. The curriculum must be made available to teachers by July 1, 2019.

Augments Existing Environmental Education Program. The budget provides $4 million unspent prior-year Proposition 98 funding for the California Regional Environmental Education Community (CREEC). The CREEC is a network of COE staff that helps schools integrate environmental literacy into the K-12 curriculum. The CREEC network receives $350,000 annually from special fund revenues. The Proposition 98 augmentation is to help teachers integrate environmental literacy into their curricula, assist LEAs in making environmental literacy curriculum and activities broadly available, and develop and maintain a website to serve as a resource for schools. Of the amount provided, $1.5 million must be used to contract with the Department of Resources Recycling and Recovery for making associated materials available to schools.

Creates Equity and Improvement Teams. The budget provides $2.5 million one-time Proposition 98 funding for two or more COEs to assist LEAs in closing achievement gaps in California’s public schools. The selected COEs would help build expertise within LEAs to (1) identify disparities in opportunities or outcomes among student groups or school sites, (2) engage stakeholders to identify local priorities unique to their student populations and incorporate those priorities into their LCAPs, and (3) take action to address identified disparities. The COEs would be required to identify resources or develop new resources with the intent of maximizing their use across the state. The funding provided would be available over three years.

Extends District of Choice Program by Six Years, Makes Several Changes. This program allows students to transfer to any school district that has deemed itself a District of Choice. If oversubscribed, these districts must use a lottery to select transfer students. The 2017-18 budget plan extends the program—which was set to expire July 1, 2017—to July 1, 2023, and modifies the program in several ways. Regarding the lottery, trailer legislation requires Districts of Choice to give priority to low-income students and children of military personnel. Compliance with lottery procedures are to be verified as part of districts’ annual audits. Regarding outreach, trailer legislation requires each District of Choice to post application materials, deadlines, and lottery information on its website, in some cases posting the information in multiple languages. In addition, a District of Choice must provide each home (sending) district a preliminary list of approved transfer applications by February 15 and a final list by May 2. Regarding oversight, trailer legislation requires each District of Choice to register with its county board of education and CDE beginning in 2018-19. Districts that fail to register and submit required data will not receive funding for their transfer students. The budget plan also reduces funding for students transferring into basic aid districts from 70 percent to 25 percent of the funding those students would have generated in their home districts. Trailer legislation also requires CDE to (1) collect and post data from Districts of Choice on its website and (2) submit a plan for collecting the data no later than December 1, 2017.

Makes Various Other Adjustments. The 2017-18 budget package also makes various other changes to K-12 programs:

  • K-12 High Speed Network (HSN). The budget replaces $8 million ongoing Proposition 98 funding for the K-12 HSN with $8 million unspent funding from the Broadband Infrastructure Improvement Grant program.
  • K-12 HSN Infrastructure Upgrades. Trailer legislation requires the K-12 HSN to develop a methodology for identifying and prioritizing Internet infrastructure upgrade projects exceeding $25,000. The K-12 HSN must submit the newly developed method to CDE, the Legislature, and the Department of Finance by December 1, 2017, and begin using the methodology in 2017-18.
  • Online Educational Resources. The budget provides $3 million ongoing Proposition 98 funding for the State Librarian to make online educational resources publicly available. The budget provides the funding to Riverside COE to spend upon the direction of the State Librarian.
  • Fresh School Meals. The budget provides $1.5 million one-time funding to create the California-Grown Fresh School Meals Grant Program. The program will provide grants to at least 13 LEAs to help them (1) purchase California-grown food to be used in school meals, (2) purchase equipment necessary to provide freshly prepared school meals, and (3) train food service employees on providing healthy school meals. Trailer legislation specifies that CDE is to give grant priority to LEAs with high shares of low-income students and English learners.
  • Training Relating to New Science Standards and Assessments. The budget uses $502,000 in anticipated one-time savings from the state’s testing contract to conduct statewide trainings for teachers related to new science standards and assessments. The trainings are to help teachers understand the new science standards, provide examples of how the standards can be taught, provide sample assessment questions, and explain how the new assessment can inform teaching and learning. The state plans to begin using the new science assessment in spring 2019.
  • LCAP E-Template and California School Dashboard. The budget provides $400,000 one-time Proposition 98 funding to the San Joaquin COE to undertake two specified activities: (1) $350,000 to develop an electronic LCAP template that will streamline the process of creating, editing, reviewing, and publicly posting LCAPs; and (2) $50,000 to develop a mobile application to support the California School Dashboard. The Dashboard is a website that provides information on school and district performance based on the indicators included in the state’s new accountability system.
  • Report on Full-Day Kindergarten. Trailer legislation requires our office to submit a report by March 1, 2018 that includes options for incentivizing full-day kindergarten and differentiated funding rates for full-day and part-day kindergarten.

State Operations

Funds Instructional Quality Commission Activities. The budget includes $948,000 one-time non-Proposition 98 General Fund to support the activities of the Instructional Quality Commission. Specifically, the funding is for the commission to create a model curriculum for ethnic studies, update standards in world languages and visual and performing arts, create computer science content standards, complete the health curriculum framework, and adopt instructional materials for history/social science and science. These activities are required due to recently adopted legislation.

Funds State Board of Education (SBE) LCFF Activities. The budget package extends non-Proposition 98 funding for three positions in the Office of Planning and Research to support SBE’s implementation of LCFF. The 2016-17 budget provided annual funding of $549,000 for these positions, with funding to begin phasing out in 2018-19. The budget package provides annual funding of $572,000 from 2018-19 through 2021-22. The budget also provides $160,000 one time to pay the state’s membership dues to the Education Commission for the States.

Aims to Standardize Process for Reclassifying English Learners. The budget provides $437,000 one-time federal Title III funding to CDE for efforts related to the standardization of English learner reclassification. The funding is made contingent on the enactment of pending legislation.

Reduces Funding for Bus Driver Training Program. The CDE’s Bus Driver Training program is funded with State Penalty Fund monies and fee revenue. The budget reduces total funding for the program from $1.7 million in 2016-17 to $1.4 million in 2017-18 (an 18 percent reduction). State Penalty Fund revenue for the program decreases from $1.6 million in 2016-17 to $838,000 in 2017-18 (a 48 percent decrease). In response to the drop in special fund revenue, trailer legislation expands CDE’s authority to charge course fees. Whereas CDE formerly could charge course fees only to transit bus drivers, moving forward it also may charge course fees to school bus drivers, pupil activity bus drivers, and farm labor bus drivers. Due to some combination of raising fees and expanding the group of program participants assessed fees, the budget assumes fee revenue will increase from $117,000 in 2016-17 to $275,000 in 2017-18 (a 135 percent increase). The budget also assumes that CDE will use $276,000 of existing program reserves in 2017-18—leaving a reserve of about $325,000 at year end.

School Facilities

Provides First Installment of Proposition 51 Bond Funding for School Facilities. Passed by the voters in November 2016, Proposition 51 authorizes the state to sell $9 billion in general obligation bonds—$7 billion for schools and $2 billion for community colleges. The state plans to issue $593 million of these bonds for K-12 facility projects in 2017-18. This would fully fund the state’s list of $368 million in already approved facility projects, as well as $225 million in additional projects. (The budget also reappropriates the remaining balance of $1.7 million General Fund provided in the 2016-17 Budget Act to construct a middle school activity center at the California School for the Deaf in Fremont.)

Establishes New Audit Rules. Trailer legislation shifts audit responsibilities for state-funded school facility projects from the Office of Public School Construction to local independent auditors. Moving forward, the local auditors are to review facility expenditures to ensure that they comply with the rules of the state’s School Facilities Program. In June 2017, the State Allocation Board also enacted a regulatory change requiring districts to sign grant agreements prior to receiving state funding that specify allowable project expenditures.

Increases Maximum Grant for Charter School Facility Grant Program. Under this program, the state provides certain charter schools with grants to help defray the cost of renting and leasing school facilities. Previously, the state provided applicants with grants equating to either $750 per student or 75 percent of their annual facilities costs, whichever was lower. New trailer legislation updates the $750 per-student amount to $1,117 and applies a COLA moving forward. The 2017-18 increase is the first increase in the per-student amount since the program was created in 2001.

California Community Colleges

$8.6 Billion Proposition 98 Funding for CCC in 2017-18. The budgeted 2017-18 level is $324 million (3.9 percent) more than the revised 2016-17 funding level and $270 million (3.3 percent) more than the 2016-17 Budget Act level. The budget increases funding per full-time equivalent (FTE) student by $363 (5.2 percent) over the 2016-17 Budget Act level, bringing Proposition 98 funding per FTE student up to $7,416.

Package Includes Mix of Ongoing and One-Time Spending. As Figure 4 shows, the budget includes $584 million in community college augmentations, partly offset by $260 million in reductions largely due to the removal of prior-year, one-time spending. Of the augmentations, $417 million are ongoing increases and $167 million are one-time initiatives. In addition to these changes, the budget includes $123 million in one-time initiatives funded from other sources ($86 million from a settle-up payment and $37 million from 2015-16 Proposition 98 dollars). The budget also authorizes $17 million from Proposition 51 general obligation bond proceeds for community college facilities. We describe major CCC spending and programmatic changes below.

Figure 4

2017-18 CCC Proposition 98 Changes

(In Millions)

2016-17 Revised Spending

$8,242

Technical Adjustments

Remove one-time spending

-$177

Make other adjustments

-84

Subtotal

(-$260)

Policy Changes

Augment apportionments (above growth and COLA)

$184

Provide COLA for select programsa

104

Fund deferred maintenance and instructional equipment (one time)

77

Fund guided pathways initiative (one time)b

64

Fund 1 percent enrollment growth

58

Increase Full-Time Student Success Grant

25

Create Community College Completion Grant Program

25

Fund Innovation Awards (one time)

20

Augment Online Education Initiative

10

Develop statewide integrated library system (one time)

6

Augment Part-Time Faculty Office Hours Program

5

Provide direct state support for veterans resource centersc

5

Provide direct state support for Umoja Programc

3

Subtotal

($584)

Total Changes

$324

2017-18 Enacted Spending

$8,565

aApplies 1.56 percent increase to apportionments, Extended Opportunity Programs and Services, Disabled Students Programs and Services, Financial Aid Administration, CalWORKs student services, mandates block grant, and support for certain campus child care centers. Of the increase, $98 million is for apportionments,

bBudget also includes $86.3 million in settle-up funding for this purpose.

cIn addition to the amounts reflected in the table, these programs might receive indirect state funding through other community college student support programs.

COLA = cost-of-living adjustment.

Apportionments

Funds 1 Percent Enrollment Growth. The budget provides $58 million for 1 percent enrollment growth systemwide. In addition, the budget adjusts for enrollment declines that districts experienced in 2016-17 and anticipated enrollment restoration in 2017-18. (If its enrollment declines in a given year, a district’s funding correspondingly declines the following year. Districts, however, generally have three years to restore enrollment up to earlier levels and earn back the associated funding.) After adjusting for declining enrollment (-2.1 percent) and restoration (1.3 percent), the budget supports net enrollment growth of 0.2 percent, representing about 2,200 FTE. Provisional language authorizes the Chancellor’s Office to repurpose any unused growth funding for backfilling any unanticipated shortfalls in apportionment funding (due, for example, to lower-than-expected local property tax or fee revenues).

Funds 1.56 Percent COLA. The budget includes $98 million to provide the statutory 1.56 percent COLA for apportionments. The budget also includes $5 million to provide a 1.56 percent COLA for five categorical programs: (1) Extended Opportunity Programs and Services, (2) Disabled Students Programs and Services, (3) CalWORKs Student Services, (4) the mandates block grant, and (5) Child Care Tax Bailout (which supports campus child care centers that serve as teaching labs for early childhood education students). Additionally, it includes $1 million to provide a partial COLA for financial aid administration.

Provides Additional Unrestricted Funds Beyond Growth and COLA. The budget includes a $184 million apportionment increase that districts may use for any educational or operational purpose—including hiring additional faculty, paying retirement costs, expanding professional development, and maintaining facilities. Trailer legislation rescinds existing Chancellor’s Office authority to allocate any higher-than-anticipated local property tax or fee revenues as unrestricted funds to colleges. This authority rarely has been used by the Chancellor’s Office because prior-year excess revenues typically are reappropriated through the budget process.

Financial Aid

Augments Full-Time Student Success Grant. The budget provides $25 million to increase the maximum annual Full-Time Student Success Grant from $600 to $1,000 per award. The state created this grant in 2015-16 to provide additional aid to CCC students who enroll in 12 or more credit units per term and qualify for Cal Grant B and Cal Grant C awards. In 2017-18, Cal Grant B and Cal Grant C awards for CCC students are $1,672 and $1,094, respectively. The full-time grant of $1,000 is an add-on to these amounts.

Creates New CCC Completion Grant. The budget includes $25 million for a new Community College Completion Grant. As set forth in trailer legislation, the grant provides an additional $2,000 annually for Full-Time Student Success Grant recipients who develop a comprehensive education plan and enroll in 15 or more credit units per term. The Chancellor’s Office is required to submit a report to the Legislature by April 1, 2019 that includes information about associated program enrollment and outcomes.

Increases Cal Grant C Awards for CCC Students. The budget includes $1.7 million to double the Cal Grant C book and supply award from $547 to $1,094 for CCC students. (Cal Grant C recipients who attend other institutions will continue to receive a book and supply award of $547.)

Other Ongoing Programmatic Increases

Funds Common Course Management System. The budget augments the CCC Online Education Initiative by $10 million, bringing ongoing annual funding to $20 million. The new funds primarily will pay for ongoing subscription costs for all colleges to use Canvas, the CCC’s common course management system. In addition, the funds will support annual subscriptions to an online tutoring platform; additional software that permits students and their academic counselors to meet virtually (over the Internet); and various accessibility, plagiarism detection, and student authentication features.

Augments Part-Time Faculty Office Hours. The budget adds $5 million, bringing total funding for this program to $12 million. The program reimburses districts that compensate part-time faculty members for office hours related to their teaching assignments. Districts must provide a one-to-one match for state funds.

Directly Funds Umoja Program. The budget provides a new $2.5 million ongoing state appropriation for the Umoja program, which seeks to close achievement gaps by promoting awareness of African and African-American culture. (The program already exists on 45 campuses but, to date, it has received only one-time student equity funding.)

Guided Pathways

Funds Guided Pathways Initiative. The budget provides $150 million one time for an initiative focused on helping colleges (1) integrate myriad existing student success programs and services; (2) build their internal capacity for data analysis, leadership, planning, and program implementation; and (3) develop structured academic course sequences for all entering students.

Allocates 90 Percent of Funds Directly to Colleges, Reserves 10 Percent for Statewide Assistance. Of the $135 million designated for colleges, the Chancellor’s Office is to allocate 45 percent based on each college’s share of the state’s Pell Grant-eligible students, 35 percent based on each college’s share of FTE enrollment, and 20 percent as a fixed base grant for each college. To qualify for funds, colleges must demonstrate their commitment to implementing guided pathways by attending a state workshop and submitting specified letters and work plans. Funding is to be allocated in stages, based on each college’s progress toward implementing guided pathways. Colleges may use the funds for faculty and staff release time, professional development, coordination and communication, and information system upgrades related to pathways implementation. Colleges may not use funds for ongoing purposes, including to provide instruction or support services. The Chancellor’s Office has broad discretion in deciding how to use the $15 million designated for statewide assistance.

Includes Accountability and Reporting Requirements. Trailer legislation requires the Chancellor’s Office to develop indicators measuring: (1) early outcomes of guided pathways implementation, (2) the share of students at each college participating in certain required activities, and (3) each college’s alignment of courses with students’ education plans. By July 1, 2018 and annually thereafter for four more years, the Chancellor’s Office must report on these indicators and provide information about participating colleges’ work plans, use of funds, and implementation progress. These reports also are to summarize the Chancellor’s Office’s efforts to support guided pathways implementation as well as provide recommendations on statutory or regulatory changes needed to enhance colleges’ implementation of the initiative.

Other One-Time Initiatives

Funds Additional Innovation Awards. The budget provides $20 million one-time funding for community college innovation awards. The state previously funded innovation awards in 2014-15 (providing $50 million for all three public higher education segments) and 2016-17 (providing $25 million solely for community colleges). Trailer legislation creates a similar award program for 2017-18. Like the 2016-17 awards, the 2017-18 program is to prioritize innovations that both address specified groups of underrepresented students and use technology to improve instruction and support services. The new program is different, however, in that it eliminates the award committee appointed by the Governor and Legislature and tasks the Chancellor’s Office with making award decisions directly. The trailer legislation requires the Chancellor’s Office to submit interim and final reports on these awards by January 1, 2020 and 2022, respectively.

Provides Special Appropriation for Compton Community College District. Following the loss of its accreditation in 2006, Compton College has operated as a “center” under the supervision and accreditation of neighboring El Camino Community College District. In June 2017, Compton College regained initial accreditation under El Camino’s governing authority. Over the coming year, the Compton Community College District will work to restore core oversight and operational functions as a prerequisite to seeking accreditation under its own authority. The district identified certain costs associated with these efforts, including purchasing a new information system, supporting associated personnel, conducting extra outreach, and re-establishing a police department and personnel commission. Trailer legislation appropriates $11.3 million one-time funding for these efforts. (The appropriation results from repurposing some 2015-16 Proposition 98 funds.) The trailer legislation, however, requires the district’s governing board to perform the duties of the personnel commission until July 1, 2029, at which time the district is to have paid off an emergency state General Fund loan dating back to 2006. Trailer legislation also protects the district’s budget from any drop in enrollment (compared to the 2017-18 level) for four years following the college’s accreditation under the authority of its own governing board.

Funds Development of Statewide Integrated Library System (ILS). The budget provides $6 million for the CCC Technology Center to procure and operate an ILS. Typical functions of an ILS include acquiring and cataloging books and other materials, providing ways for library users to search catalogs and access materials, and tracking the circulation of these materials. The CCC Technology Center will use a portion of the funds to assist colleges with local implementation, which generally involves migrating existing catalogs and databases to the new system, integrating the ILS with their student information and learning systems, and training library and college personnel to use its features.

Several Other One-Time Augmentations. Trailer legislation funds various other one-time initiatives using repurposed 2015-16 Proposition 98 funds. It provides $8 million for workforce grants to community college districts in distressed economic areas. It provides $7 million for veterans resource centers. Of this amount, $5 million is to establish or enhance centers that meet specified standards and $2 million is for Norco College to expand the capacity of its center as well as establish mechanisms for awarding course credit for prior military services. Trailer legislation also provides $4.5 million to support mental health services and training, $2.5 million to address student hunger at community colleges, $2.5 million to help colleges comply with state and federal requirements regarding preventing sexual harassment and violence, and $1 million for the CCC Academic Senate to support the course identification numbering system.

State Operations

Increases Chancellor’s Office Staffing. The budget provides six new positions and $1.1 million in additional resources to improve the Chancellor’s Office’s capacity to provide leadership and expertise to colleges. The augmentation is based on a review of central operations conducted by staff from the Department of Finance and Chancellor’s Office over the course of spring 2017. Of the total augmentation, $618,000 is General Fund. This amount is to support two additional information technology specialists, a new administrator to oversee guided pathways implementation, and a second deputy chancellor who will fill an existing vice chancellor position that has been vacant for some time. The remaining $454,000 is reimbursement authority for two research specialists and an attorney. Colleges and third parties (such as research organizations) will be able to use the services of these individuals on a fee-for-service basis. In addition to these ongoing appropriations, the budget provides $250,000 to the Chancellor’s Office on a one-time basis to work with the Underground Scholars organization at the University of California at Berkeley to replicate its existing program on community college campuses. The Underground Scholars Initiative helps currently and formerly incarcerated adults earn undergraduate and graduate degrees.

Exempts Office From Competitive Bidding Under Certain Conditions. The budget package exempts the Chancellor’s Office from competitive bidding requirements when contracting with districts to perform activities on its behalf. Specifically, trailer legislation exempts the Chancellor’s Office from competitively bidding new district contracts of $20 million or less (Proposition 98 funding) and all renewal district contracts. The legislation sunsets this exemption on July 1, 2022.

Facilities

Provides Physical Plant and Instructional Support Funding. The budget includes $77 million one-time funding that districts may use for scheduled maintenance, special repairs, hazardous substances abatement, architectural barrier removal, certain seismic retrofit and water conservation projects, and replacement of instructional equipment and library materials. The funds are allocated to districts based on their FTE enrollment.

Funds Planning for 15 New Capital Outlay Projects. The budget allocates $17 million for the preliminary planning phase for 15 capital outlay projects. The funds are from Proposition 51.

Reappropriates Facility Funding for One Project. The budget reappropriates $33 million for various utility system upgrades at the College of the Redwoods, Eureka Campus. The project requires more time to complete construction due to delays in earlier project phases.