The 2025-26 Budget

Community College Facilities

Summary

Post Raises a Few Issues Related to Community College Proposition 2 Projects. In November 2024, voters approved a new education facilities bond, Proposition 2, that provides $1.5 billion for facilities at the California Community Colleges (CCC). The Governor’s budget proposes to fund 29 new capital outlay projects in 2025-26, committing roughly half of Proposition 2 funding. The CCC Chancellor’s Office selected these projects using a relatively new scoring system. Although we think parts of the scoring system are reasonable, we identify a few potential issues. First, the share of funds allocated for modernization projects versus growth projects could be too low. Whereas modernization projects receive about 65 percent of available funds under the new scoring system, they account for about 80 percent of CCC’s identified capital outlay needs. Second, nearly one-third of the selected projects are gymnasiums, as opposed to facilities that more directly support instruction. Third, the rationale is unclear for a couple of the scoring metrics, which provide more points to projects located on larger campuses and in certain regions of the state. We recommend the Legislature direct the Chancellor’s Office to justify these aspects of the scoring system during the spring. If these issues raise notable concerns for the Legislature, it could direct the Chancellor’s Office to adjust the scoring system and select a revised set of projects for 2025-26.

Introduction

Post Focuses on Community College Capital Outlay Projects. In this post, we first provide background on CCC facilities and capital outlay financing. We then describe the Governor’s proposals to fund many new CCC capital outlay projects, assess those proposals, and provide an associated recommendation.

Background

CCC Has Many Facilities. The CCC system includes 72 local community college districts that operate 115 college campuses, as well as a number of off-campus centers and district offices. Based on the system’s most recent five-year capital outlay plan, these sites have a combined 87 million square feet of building space. This includes both academic space (such as classrooms, laboratories, libraries, and faculty offices) and nonacademic space (such as parking structures, bookstores, and cafeterias).

State Often Pays Portion of Academic Facility Project Costs. Academic facilities are eligible for state support. The state and districts often share the cost of academic capital outlay projects. Though the share of costs varies among projects, the state commonly covers about half of the cost, with the district covering the rest using local funds. In contrast, the state typically does not support nonacademic facilities, as these facilities generate their own revenue to cover their costs.

State Uses General Obligation Bonds to Finance Its Share of Costs. The state sells general obligation bonds to receive up-front funding for project costs. It then repays these bonds with interest over a period of time (typically about 35 years) using non-Proposition 98 General Fund. Under the State Constitution, voters must approve general obligation bonds. From 2002 through 2016, voters approved four state general obligation bonds for education facilities. The most recent of these bonds, Proposition 51, provided $2 billion for community college facilities. The vast majority of Proposition 51 funding has already been committed to specific projects, with the Chancellor’s Office estimating that approximately $80 million remains available.

Voters Recently Passed a New State Education Facilities Bond. In the November 2024 election, voters approved a new education facilities bond, Proposition 2. This measure provides $1.5 billion for community college facilities. (Proposition 2 also provides $8.5 billion for K-12 school facilities.) These funds may be used for various purposes, including constructing new buildings, renovating existing buildings, acquiring land, and purchasing equipment. The measure does not specify how the funds are to be allocated among these specific purposes. In addition to this state general obligation bond, voters in the same election approved 14 local general obligation bonds totaling $9.9 billion for community college facilities.

Chancellor’s Office Is Using New Scoring System to Select Projects. To receive state bond funding, community college districts must submit project proposals to the Chancellor’s Office. The Chancellor’s Office selects among these project proposals using a scoring system adopted by the CCC Board of Governors. The Board of Governors adopted a new scoring system in September 2020. Because the majority of Proposition 51 bond funding had already been committed by that time, relatively few projects under that earlier bond were selected under the new scoring system. The Chancellor’s Office intends to use the new scoring system, however, to select projects under Proposition 2.

Under New Scoring System, Funding Is Allocated Among Three Categories of Projects. As Figure 1 shows, the old scoring system used six funding categories reflecting the purpose of the project (life safety, modernization, or growth) and the type of space (instructional, institutional support, or other). In contrast, the new scoring system uses the three categories reflecting the purpose of the project but does not distinguish among different types of space. In allocating funding among the three categories, the Chancellor’s Office first designates funding for life safety projects. These projects must be accompanied by a third-party study identifying imminent health or safety risks, seismic risks, or failing infrastructure. The district is generally required to cover at least 25 percent of the associated project costs. The Chancellor’s Office may designate up to 50 percent of state funding each year for life safety projects, though the amount needed to fund all project proposals in this category is typically much lower. After addressing life safety projects under the new scoring system, the Chancellor’s Office then allocates 65 percent of the remaining funding for modernization projects that renovate existing space and 35 percent for growth projects that add new space.

Chancellor’s Office Then Ranks Projects Within Each Category. Districts typically submit more modernization and growth project proposals than available state bond funding can support. Each year, the Chancellor’s Office uses certain scoring metrics to rank projects within these two categories. As Figure 2 shows, modernization projects receive points based on the age and condition of the facility. Meanwhile, growth projects receive points based on projected enrollment growth at the campus, as well as how its existing space capacity compares to its enrollment level. Projects in both categories also receive points based on the amount of the local contribution, with districts generally required to cover at least 25 percent of total project costs and receiving more points for covering a larger share. In addition, projects in both categories receive points for certain other metrics, including campus size and region.

Proposals

Governor Proposes Funding Many New Capital Outlay Projects. Using the scoring system described above, the Chancellor’s Office selected 29 new capital outlay projects to request Proposition 2 funding for in 2025-26. The Governor proposes to fund all of the requested projects. As Figure 3 shows, the Governor’s budget includes $51 million Proposition 2 bond funds for the preliminary plans and working drawings phases of these projects. The total cost across all phases of these projects is $1.6 billion, with the state covering $729 million (46 percent) and districts covering $842 million (54 percent). Of these projects, 17 are modernization projects, 8 are growth projects, and 4 are life safety projects. (The Chancellor’s Office indicates it has submitted one additional life safety project with an estimated total state cost of $61 million to the administration for inclusion in the May Revision.)

Governor Also Proposes Funding Two Continuing Capital Outlay Projects. As Figure 3 shows, the Governor’s budget also includes $29 million in 2025-26 for the construction phase of two projects initiated in previous years. These projects are funded under an earlier state general obligation bond, Proposition 51 (2016). The total cost across all phases of these projects is $84 million, with the state covering $31 million (37 percent) and districts covering $53 million (63 percent). Both of these are modernization projects. We have no concerns with the proposed funding for these two projects.

Assessment

Key Factors to Consider in Deciding How Much Proposition 2 Funding to Commit Now. Under the Governor’s budget, the state would commit roughly half of CCC Proposition 2 funding. (The Chancellor’s Office intends to request about $400 million in Proposition 2 funding for additional projects in 2026-27 and the remainder in 2027-28.) The Legislature could choose to allocate a different amount of Proposition 2 funding in 2025-26. One factor to consider in making this decision is cost escalation. Allocating a significant portion of the available bond funds in the first year allows districts to begin projects as soon as possible, avoiding cost escalation that typically occurs due to inflation over time. Beyond the projects included in the Governor’s budget, the Chancellor’s Office reports that districts submitted an additional 25 eligible project proposals for 2025-26, with total associated state costs of roughly $650 million. The quality of projects, however, is another basic factor to consider. These additional 25 projects scored lower than the projects included in the Governor’s budget. Moreover, districts submit a new round of project proposals each year, and some new projects submitted over the next year or two might have stronger justification (thereby scoring higher) than these additional projects for 2025-26. Furthermore, additional life safety projects could emerge over the next couple of years.

New Scoring System Has Several Positive Aspects. The Proposition 2 projects included in the Governor’s budget were selected using the Chancellor’s Office’s new scoring system. We think parts of the new scoring system are reasonable. First, the scoring system reflects a consistent, transparent way of reviewing districts’ project proposals. Second, the scoring system places the highest priority on life safety projects, with requirements in place to ensure that districts submit only immediate needs under this category. Third, the system uses several relevant scoring metrics to rank all other projects, namely facility age and condition for modernization projects and enrollment projections and existing capacity for growth projects. Finally, the scoring system requires districts to provide a local contribution for all categories of projects and creates incentives to provide more than the minimum local contribution for modernization and growth projects.

Share of Funding Allocated for Modernization Projects Could Be Too Low. At the time the new scoring system was adopted in September 2020, the allocation of funding between modernization projects (65 percent) and growth projects (35 percent) generally reflected the system’s identified capital outlay needs. Over the past few years, however, those needs have shifted. In CCC’s most recent five-year capital outlay plan, modernization projects account for about 80 percent of the capital outlay needs identified for 2025-26 through 2029-30, while growth projects account for only about 20 percent. The shift away from growth projects likely reflects in part the increase in online education, which reduces the need for colleges to add new space. The use of online and other distance education at CCC remains significantly above pre-pandemic levels, accounting for an estimated 42 percent of full-time equivalent (FTE) students in fall 2024, compared to 17 percent in fall 2019. The Chancellor’s Office has not yet revisited the split of funding between modernization and growth projects to reflect this trend. Under the current split, modernization projects are somewhat more likely to go unfunded. Of the project proposals that districts submitted for 2025-26, 17 out of 36 eligible modernization projects (47 percent) were included in the Governor’s budget, compared to 8 out of 14 eligible growth projects (57 percent). Whereas modernization projects address deficiencies with existing space, growth projects add new space, thereby contributing to higher ongoing operational costs.

Nearly One-Third of Selected Projects Are Gymnasiums. Gymnasiums account for 9 of the 29 new projects included in the Governor’s budget—a much higher share of projects than in previous years. For comparison, only 8 out of more than 100 projects funded under the previous facilities bond, Proposition 51, were gymnasium projects. This shift is likely related to the new funding categories. Under the old scoring system, gymnasium projects (along with projects relating to child development facilities, performing arts facilities, and certain other noninstructional facilities) were in a separate category eligible for up to 15 percent of available funding. Under the new scoring system, gymnasiums compete with all other types of facilities within each category. That is, gymnasiums effectively are treated the same as other academic space. Given that Proposition 2 funding covers only a portion of CCC’s identified capital outlay needs, the state faces trade-offs between funding gymnasiums and funding other facilities that more directly support instruction. Although colleges use gymnasiums for courses in physical education and related disciplines, some of these courses are not core to CCC’s instructional mission. For example, these courses commonly include practice and conditioning time for intercollegiate athletics teams, as well as fitness courses.

Rationale for Certain Scoring Metrics Is Unclear. Although the new scoring system includes several relevant scoring metrics, it also includes a couple of metrics for which the rationale is less clear. First, projects receive more points if they are located on a campus with more FTE students. The Chancellor’s Office indicates this is because larger campuses require more space than smaller campuses. Other scoring metrics, however, already provide more points based on enrollment growth and having insufficient existing space. Second, projects receive more points if they are located in the Central Valley, Sierras, Inland Empire, and Far North regions. The Chancellor’s Office indicates this metric is intended to target funding toward regions that have historically had lower educational attainment rates. The state likely has more direct ways, however, to increase educational attainment in these regions, such as by continuing to provide districts with supplemental funding for enrolling and supporting low-income students under the Student Centered Funding Formula.

Recommendation

Direct Chancellor’s Office to Justify and Potentially Adjust Parts of New Scoring System. During spring hearings, we recommend the Legislature direct the Chancellor’s Office to further explain the rationale for the current split of funding between modernization and growth projects, the large number of gymnasium projects selected for funding, and the inclusion of campus size and region in its scoring metrics. If these or other issues raise notable concerns for the Legislature, it could direct the Chancellor’s Office to adjust its scoring system accordingly. For example, this might mean allocating a larger share of funding toward modernization projects or capping the amount of funding for gymnasium projects. The Chancellor’s Office could then use the adjusted scoring system to select a revised set of projects for 2025-26.