Legislative Analyst's Office
February 22, 1995

California Community Colleges (6870)

The California Community Colleges (CCC) provide instruction to about 1.4 million adults at 107 colleges operated by 71 locally governed districts throughout the state. The system offers academic and occupational programs at the lower- division (freshman and sophomore) level, basic skills education, and citizenship instruction.

The proposed 1995-96 CCC budget is $3 billion. This is an increase of $91.9 million, or 3.2 percent, above the amount provided in the current year. Of the proposed $3 billion, $1.2 billion is from the General Fund, $1.4 million is from local property tax revenues, and the remaining support is from student fees and a variety of other sources.

Figure 31 shows that actual full-time equivalent student (FTES) enrollments at the CCC have declined from 917,839 in 1991-92 to an estimated 868,277 in 1994-95. This represents a decrease of 49,562 FTES. The 49,562 FTES includes a 15,576 FTES reduction in Bachelor of Arts (BA) degree holders in 1992-93. Figure 31 also shows that the state has not made funding reductions commensurate with the reductions in enrollment. Funding from Proposition 98 sources and related sources--primarily state General Fund, local property taxes, and student fees actually increased somewhat, by $103 million. As a result, funding per actual FTES served at the community colleges has increased by $281. This reflects an increase, on average, of about 3.2 percent per year. Since this rate of growth outpaces the rate of inflation during the same period, community colleges actually have seen some growth in spending per pupil beyond what was necessary to protect the purchasing power of 1991-92 per-FTES spending.

Legislative Oversight Needed

We recommend that the Legislature take action to hold the CCC accountable for budgeted enrollment levels.

In the Crosscutting Issues section of this chapter, we have suggested certain principles to guide the development of budgets for the University of California (UC), the California State University (CSU), and the CCC. Figure 32 shows how the major budget proposals for the CCC address these principles.

The budget proposal for the CCC is generally consistent with the principles we have suggested. We recommend, however, that the Legislature take the following steps to hold the CCC accountable for the enrollment levels funded in the budget:

We discuss these recommendations in detail below.

CCC Should Spend Growth Funding For That Purpose

We recommend that the Legislature adopt Budget Bill language and supplemental report language to ensure that the CCC uses current- and budget-year growth funding to support increased enrollments.

Under the state's Master Plan for Higher Education, the CCC is charged with being the point of access to higher education for the great majority of Californians. For this reason, preservation of access to the CCC has been a major priority for the Legislature.

Out of concern for protecting access to the CCC, the 1994 Budget Act directed the CCC to allocate $31.5 million to fund an increase in FTES enrollments, based on adult population growth. Instead of using these funds for growth, however, the CCC used them to partially backfill a property tax shortfall that it forecast for the current year.

The Chancellor's Office offered two reasons for taking this action: (1) protection of districts' base budgets should take priority over funding enrollment growth, and (2) allocation of growth funding as directed by the Legislature would disproportionately hurt fiscally troubled districts.

Diversion of Growth Funds Disadvantages High Growth Areas. In response to the first reason, we note that the Legislature directed the Chancellor's Office to fund growth, but also provided, through the Supplemental Report of the 1994 Budget Act, a mechanism to accommodate reduced revenues related to fee or property tax shortfalls by reducing district workload levels across the board. The Chancellor's Office, to be consistent with the Budget Act and this language, should have first allocated growth funds and adjusted district FTES workload accordingly, then reduced workload across the board by the amount necessary to accommodate reduced revenues. By acting as it did, the Chancellor's Office shifted general-purpose funding among community college districts, generally from districts located in rapidly growing population centers (generally in rural and suburban areas) to those located in established urban areas. This is because the CCC, in effect, allocated the $31.5 million in proportion to districts' base funding level, not in proportion to districts' adult population growth, as directed by the Legislature. As a result, districts in urban areas such as Los Angeles, San Diego, and San Francisco benefited from the CCC action and those in areas such as the Sierra foothills and various desert communities got less than they would otherwise have received.

Diversion of Growth Funds Does Not Consistently Protect Fiscally Troubled Districts. Staff of the CCC Chancellor's Office advise that the $31.5 million was allocated as a property tax backfill, instead of growth, in order to protect districts already in financial difficulty from further fiscal stress. In fact, it appears that this approach provided little help for districts in the greatest financial difficulty. The Chancellor's Office currently identifies four districts as being in moderate danger of default--that is, they could require emergency state aid in 6 to 18 months if they do not take action to correct existing problems. Based on information we received from the Chancellor's Office, however, it appears that only one of these districts received more general-purpose funds than it would have received if growth had been allocated. Two received less, and one received about the same amount.

The Chancellor's Office also identifies 18 districts that are not in imminent danger of major fiscal problems, but have displayed management patterns that, if continued over the long run, eventually could lead to difficulties. Among these districts, gainers from the CCC action are roughly equal in number to losers. However, losers generally lost more, as a percentage of their total general-purpose funding, than gainers gained.

Budget Control Action Needed. In order to ensure that the CCC allocates growth funding to support enrollment growth, and more generally hold the CCC accountable for the level of enrollment funded in the Budget Act, we recommend that the Legislature take the following actions:

$15.2 Million Funding Reduction Reflects Past-Year Workload Decline

We recommend approval of a proposed $15.2 General Fund reduction related to past-year enrollment declines. We also recommend Budget Bill language that would (1) prevent further enrollment declines as a result of this reduction, and (2) allocate this reduction among districts in proportion to enrollment declines.

The budget proposes a General Fund reduction of $15.2 million related to enrollment declines. Specifically, this reduction is related to enrollment declines that occurred in 1992-93, when the state imposed a sharp mid-year increase in student fees for BA degree holders.

Funding Reduction Consistent With Current Law. Current law-- Ch 8/93 (AB 46, Archie-Hudson), amended by Ch 1132/93 (AB 39, Archie-Hudson)-- permits the state to reduce the CCC budget over a three-year period, beginning in the current year, to reflect the impact of these enrollment declines. Accordingly, the 1994 Budget Act reduced the CCC budget by $15.2 million. The $15.2 million reduction proposed in this year's budget represents the second reduction in the series of three permitted under current law.

No Further Enrollment Reduction Should be Permitted. The 1994 Budget Act permitted the CCC to reduce the number of students served in the current year to accommodate the $15.2 million current-year reduction. We do not believe that a similar reduction should be permitted in response to the 1995-96 funding reduction. This is because the proposed funding reduction corresponds to a reduction in the number of students with BA or graduate degrees that occurred in 1992-93. Thus, if the CCC were permitted to reduce enrollments again in 1995-96, the CCC would have reduced it enrollments roughly twice as much as would be appropriate for a funding reduction of $15.2 million.

Given that the state has already allowed a significant increase in per-FTES spending at the CCC by not reducing funding in response to past-year enrollment reductions, we see no fiscal or policy justification for permitting the CCC to further reduce the number of students it serves in response to the proposed $15.2 reduction.

Reduction Should Be Allocated Where Enrollment Declines Occurred. Last year, we recommended that the current-year $15.2 million reduction be allocated only to those districts where enrollment declines actually occurred as a result of the differential fee. The Legislature, however, ultimately adopted Budget Bill language that directs the CCC to allocate the current-year funding reduction across all districts in proportion to their total enrollments. The Legislature's action was due in part to a concern that some districts already slated for budget reductions due to large enrollment declines would experience a "double hit" if the $15.2 million reduction was allocated on a district-specific basis.

We recommend that the Legislature consider a different approach with regard to the reduction proposed for 1995-96. First, allocation of the reduction in proportion to districts' overall current enrollment is not necessary, because the potential "double hit" can be eliminated through appropriate Budget Bill language. Moreover, allocation in proportion to current enrollment would unfairly penalize districts that experienced little or no enrollment decline as a result of the fee increase for BA-holders. Finally, such an allocation is contrary to Chapter 1132, which states that the district funding reductions for enrollment declines related to the differential fee shall not be distributed on a statewide average basis. Accordingly, we recommend that the Legislature require the CCC to allocate the 1995-96 reduction in proportion to districts' fee-related declines in FTES.

Budget Bill Language Needed. We recommend approval of the proposed $15.2 million reduction. Moreover, we recommend that the Legislature add the following Budget Bill language to Item 6870-101-001 to (1) prevent the CCC from reducing its FTES workload in proportion to this reduction, (2) require that the CCC allocate this reduction in proportion to district-specific FTES declines, and (3) ensure that this reduction does not apply to the extent that a district has already recognized fee-related workload declines under existing regulations (to avoid a "double hit"):

"Notwithstanding any other provision of law, the Chancellor of the California Community Colleges shall reduce base apportionments by a total of $15,181,000 to reflect funding that has not been provided in Schedule (a) of this item. These base adjustments are related to an estimate of one-third of systemwide attrition resulting from the differential fee of $50 per unit authorized in January of 1993 for students having bachelor's or graduate degrees. These base apportionment adjustments shall be made for each district in proportion to its total actual FTES workload decline resulting from the fee, as determined by the Chancellor. They shall not apply to the extent that a district's base apportionment has already been adjusted due to declines in workload that are recognized under existing regulations and are related to the differential fee. No district's FTES workload obligation shall be reduced as a result of these base apportionment adjustments. This provision shall not be construed to further reduce the amount available for expenditure contained in Schedule (a) of this item."

Other Budget Issues

Budget Proposal Balances Fee Levels and Program Quality

We recommend approval of budget proposals to (1) increase regular student fees from $13 per credit unit to $15 per credit unit, and (2) continue the differential fee for BA holders at $50 per credit unit.

The budget proposes to increase student fees from $13 per credit unit to $15 per credit unit. The budget also proposes to continue a fee of $50 per credit unit for BA holders. Implementation of either proposal would require legislation. This is because the statutory authority for regular student fees expires on July 1, 1995, and the statutory authority for the differential fee for BA holders expires on January 1, 1996.

We believe that a $2 per unit increase in regular student fees meets the Legislature's concern that higher education fee increases be gradual and predictable. The full-year cost of attending a community college for a full-time student would increase by $60, from $390 to $450 per year. At $450 per year, California's community college fees would remain the lowest in the nation. Moreover, fees are waived entirely for the students in greatest financial need. The budget funds an increase of $17 million in fee waivers, on the assumption that more students will successfully apply for waivers as a result of the fee increase.

Given the state's fiscal condition, and the Legislature's statutory determination to make a cost-of-living adjustment (COLA) for K-12 general-purpose spending its highest priority within Proposition 98 programs, we believe that it is reasonable to increase regular student fees and continue the differential fee for BA holders. To the extent, however, that the Legislature wishes to increase the overall level of state support for higher education, we realize that moderating the proposed fee increase may be a high legislative priority. If the $2 per unit increase is not adopted, $19.5 million in Proposition 98 funds would have to be redirected to community colleges apportionments from K-12 education programs in order to maintain the level of apportionment spending supported by the budget. If the differential fee is not continued, an additional $6.8 million would have to be redirected. Redirections of this magnitude would increase the challenge already faced by the Legislature in its efforts to fund COLAs for selected K-14 programs.

Some Puente Project Funding Should Be Redirected

We recommend approval of a proposed $245,000 General Fund augmentation to support expansion of the Puente Project. We recommend that the remaining $125,000 augmentation provided for the Puente Project in Item 6870-101- 001 be redirected to other K-14 programs, because it would supplant existing private support for the project. The budget provides $904,000 in Proposition 98 General Fund support for the Puente Project, an increase of $370,000, or 69 percent. The budget proposes this increase in order to fund expansion of the program from 31 to 45 colleges, and provide state support for some program personnel currently funded by private donors.

Background. The Puente Project seeks to increase the success of Mexican American/Latino students in transferring from the community colleges to a baccalaureate institution (primarily the University of California). Participating colleges support the project from their apportionment funding by dedicating an English teacher/counselor team to the project. The goals of each team are to (1) provide intensive instruction that will move students to college-level writing capability within one year, (2) help students develop clear academic and occupational goals, (3) link students with community mentors according to their academic and occupational interests, and (4) monitor student progress and provide ongoing support and assistance in student efforts to transfer to a baccalaureate institution.

The amount provided for the Puente Project in the current year, $534,000, supports a central office staff that is responsible for providing technical assistance and training for Puente teams, site monitoring, statewide student activities, and evaluation activities. Other support for central office functions is provided by private donors (largely for personnel and program improvement grants), and the University of California Office of the President (largely through in-kind contribution of office space and equipment).

State Funding Should Not Supplant Private Support. The $370,000 increase proposed in the budget would support:

Given past legislation commitment to this program, we do not take issue with its expansion. Accordingly, we recommend approval of an augmentation at the level of $245,000, which would improve support of existing Puente sites and would support the proposed program expansion.

Additional state funds, however, should not be provided to supplant existing private support of Puente. Private support for the program appears to have been reasonably consistent since 1992-93, in the range of $135,000 to $170,000 annually. Moreover, one of the 4.7 additional positions funded by the proposed program expansion would be a fund raiser. With a new position dedicated to fund raising, private support of Puente can be expected to increase. Accordingly, we recommend that the Legislature redirect $125,000 from Schedule (d) of Item 6870-101-001 to other higher priority K-14 education needs.

GAIN: Additional Federal Funds May Be Available

We recommend that the Chancellor's Office report to the budget committees by April 1, 1995 on the number of Greater Avenues for Independence (GAIN) FTES served by the community colleges for whom federal matching funds are not claimed.

As part of the Aid to Families with Dependent Children (AFDC) program, adults may participate in the GAIN program to acquire academic or occupational skills as a means of improving their chances of getting a job. The GAIN program is operated by county welfare departments and offers adult education, job search, and job training. In addition, GAIN participants receive child care and transportation assistance needed to permit each individual to attend education or training.

The GAIN program is funded with state and federal funds. The federal portion pays for 50 percent of the program's costs. California, however, does not use its entire allotment of federal funds. According to the Department of Social Services (DSS), California could claim up to $30 million more in federal funds if state matching funds were available. For more information on this issue generally, please see our analysis of the GAIN program in the Health and Social Services section.

State May Be Able to Claim Additional Federal Funds for GAIN FTES. The community colleges provide basic skills, English as a second language, and vocational instruction to GAIN participants. These services are funded in two ways. First, to the extent possible, community college districts claim apportionment funding for these students. No federal match is claimed for apportionment-funded GAIN recipients. If they serve GAIN recipients in excess of their apportionment-funded workload, districts claim categorical funding from the Chancellor's Office. The budget proposes to provide $16 million in categorical funding for this purpose ($8 million Proposition 98 General Fund, $8 million federal funds).

Our analysis indicates that the state could claim federal matching funds for services provided to GAIN participants that are currently funded from apportionments. These additional federal funds could be used to expand education and training services for AFDC recipients, or to free up General Fund monies that could be used for any Proposition 98 activity.

We are unable to advise the Legislature at this time of the number of GAIN recipients who are served by community colleges or of the number for whom no federal reimbursement is claimed. The Chancellor's Office is currently in the midst of its annual process of estimating these numbers. To inform the Legislature about the budget implications of pursuing additional federal matching funds, we recommend that the Chancellor's Office report to the Legislature by April 1, 1995 an estimate of the amount and cost of GAIN FTES workload for which no matching federal funds are claimed.

Outcome Measures and Accountability

In our general discussion of higher education outcome measures--please see the Crosscutting Issues section of this chapter--we recommend that the Legislature begin to focus more directly on outcomes of higher education, rather than inputs and processes. Last year, we made some recommendations to move the UC and CSU toward accountability for student time to degree, ethnic diversity of degree recipients, and providing programs that meet the state's work-force needs. This year we extend our discussion to the community colleges.

Outcome Focus Can Help Balance State's Interests and Local Flexibility

The Legislature has worked over a period of years to strike a balance between the state's interests in holding community colleges accountable to their obligations under the state's Master Plan for Higher Education and in allowing them sufficient flexibility to respond creatively and effectively to unique local circumstances. We believe that a budget process that focuses on the achievement of outcomes--and permits broad local discretion as to how they are achieved--is particularly suited to this balance.

State's Interest. Under the Master Plan, the state demands a great deal of the community colleges. As the initial point of access to higher education for most Californians, they are open to all high school graduates and others who are at least 18 years of age. The colleges are charged to provide:

Under existing fiscal arrangements, the state also provides a great deal of support to the community colleges. The state General Fund provides about $1.2 billion annually to the community colleges, about 44 percent of the budgetary resources available to them. Local property taxes and student fees (which are set by the state) make up the rest. Since Proposition 13 effectively removed local discretion over the growth of property tax revenues, however, changes in the level of community college funding are at the discretion of the state and are determined as part of the state's budget process.

Local Flexibility. While the state determines the broad mission of the community colleges and largely determines the level of resources they receive, the colleges are regional institutions by history and governance. California has 71 community college districts, each governed by a locally elected board of trustees. Each district has one or more colleges, each with its own administrative structure. Community college districts and individual colleges within districts have significant discretion in determining what programs they offer and how their resources are spent. Any district's or college's approach to its statewide mission is significantly shaped by local needs and circumstances. In order to do their job effectively, particularly in the areas of occupational education, non-credit basic skills, and English as a second language (ESL) instruction, the colleges must structure courses and programs in the context of local needs and in cooperation with local government and business organizations.

Linkage of Outcomes and Resources Could Satisfy State's Interest and Maintain Local Flexibility. Focusing on outcomes would allow the Legislature to ensure that the community colleges efficiently provide a quality education that meets statewide priorities, while continuing to give the colleges significant flexibility to provide educational services in locally appropriate ways. If the Legislature can develop consensus on a set of desirable outcomes, and develop measures that accurately and reliably gauge these outcomes, it could hold the colleges accountable for performance standards based on these measures, while avoiding micro-management of the processes by which the standards are met. Ultimately, the Legislature could implement performance budgeting so that its debate about fiscal inputs could be framed in terms of what is necessary to achieve desired outcomes.

Current Status: Community Colleges Not Accountable to the State for Improving Student Outcomes

In the discussion below, we present a working definition of accountability, and assess the state's efforts to hold the community colleges accountable for outcomes. We also note major federal accountability initiatives in higher education that affect the community colleges. We find that there is currently no system in place under which the state holds the community colleges accountable to produce desirable results. Even though the Chancellor's Office has made some substantial progress in its efforts to develop and report community college outcome measures, it does not yet report some key measures. Moreover, state policy makers have set few standards that define what outcomes they want the community colleges to achieve. Even where policy makers have set standards, there is no structure of outcome-based incentives or penalties that would drive the colleges toward meeting them.

What Is Accountability?

By "accountability," we mean a relationship in which one party--the community colleges--is responsible to other parties--the Legislature or students, for example--for performing to a specified standard. We view a system of accountability as having three key elements:

For example, the Legislature might want to hold the community colleges accountable for improving the success of students whose goal is to transfer to a four- year college or university. A performance measure related to this goal would be a transfer rate--for example, the proportion of successful transfers over a period of years among a group of students who indicated in a base year that transfer was their academic goal. The Legislature could set a performance standard by providing, for example, that the transfer rate should be no less than 50 percent--that is, at least half of the target group should succeed. Incentives could be created by setting aside some portion of community colleges funding to be distributed to districts on the basis of (1) attainment of the standard and (2) increases in the proportion of students in the target group that actually transfer.

State Initiatives in Outcome Measurement and Accountability

As a result of various state requirements, the community colleges Chancellor's Office now collects and reports--or will soon collect and report--data on a wide variety of student outcomes. Figure 33 summarizes the major requirements, including the outcome measures related to each. It also notes that there are few cases in which outcomes are required to meet a specific standard, and none in which failure to meet a standard has any consequence.

AB 1725--Comprehensive Accountability System. Chapter 973 Statutes of 1988 (AB 1725, Vasconcellos) established the existing system of community college governance and the existing method of allocating general-purpose funding (apportionments) to community college districts. It also directed the Chancellor's Office to develop an "educational and fiscal accountability system" which would provide participants in the community college system sufficient information to (1) identify the strengths and weaknesses of the colleges, and (2) improve the educational quality of the colleges. This statute requires the Chancellor's Office to define measures of various outcomes (see Figure 33), and begin collecting and reporting information about these measures.

The Chancellor's Office has begun to report information on some of these outcomes: course completion rates, the number of pupils who obtain degrees and certificates, the number of students who transfer, and the rate at which students persist in community college enrollment from term to term.

Projects are underway that should soon yield information about transfer rates (the proportion of transfer-bound students who actually reach their goal), and about the influence of community college instruction on employment and earnings. A complete picture of the community colleges' performance in preparing students for transfer and success in upper division work at a four-year institution will not be available unless the state develops a student information system that is capable of tracking the progress of individual students between (1) the various community colleges, and (2) the community colleges and the state's other public higher education segments. Such a system would most reasonably be operated and maintained by the California Postsecondary Education Commission (CPEC).

The Chancellor's Office currently does not report information about the relationship between community college occupational programs and state/regional workforce needs, the success of remedial education and ESL programs, and student satisfaction.

AB 1808--CPEC Report on Performance of Public Colleges and Universities. Chapter 741, Statutes of 1991 (AB 1808, Hayden) requires the CPEC to report annually on various indicators of college and university performance. The report will ultimately include information on changes over time in retention rates of various categories of students, degrees awarded by discipline compared to estimated state workforce needs, and degrees conferred by ethnicity of degree recipients.

Various Requirements to Measure Program Effectiveness. Existing law requires the Chancellor's Office to report student outcomes in its annual review of the effectiveness of several restricted-purpose programs. For example, the Chancellor's Office periodically issues reports that compare outcomes of participants in programs for disabled students and socially and economically disadvantaged students with outcomes of non-participants. Outcomes measured include rate of degree completion, rate of occupational program completion, rate of successful course completion, and student retention. The Chancellor's Office requires the colleges to track and report information on similar outcomes for students in historically underrepresented groups as a part of its student equity initiative.

Chancellor's Office Management Information System (MIS). In order to support the various information collection and reporting activities required of the Chancellor's Office under existing law, the Legislature has provided $29.1 million since 1987-88 to establish the Chancellor's Office MIS. Figure 34 summarizes the objectives, funding, and implementation history of the MIS. Among other things, it shows that $24.5 million, or 84 percent, of MIS funding provided by the Legislature went to community college districts to support new information processing requirements of the system. The remaining $4.6 million has gone to the Chancellor's Office for implementation of the system.

At its current stage of implementation, the MIS is capable of providing a great deal of information about current student outcomes. More importantly, it can provide information about progress over time--starting as early as 1991-92--for students of various characteristics that may be of interest to policy makers. How this information will be used to improve outcomes and progress has yet to be determined.

Federal Initiatives in Outcome Measurement and Accountability

Figure 35 summarizes various federal accountability initiatives, and the information that the community colleges will have to report in response to each. Two of these initiatives do set performance standards. In one case, the penalty for non- compliance is potentially severe.

State Postsecondary Review Entity (SPRE). Congress created the SPRE program in 1992 to help prevent fraud and abuse by institutions participating in federal student financial aid programs. Federal statute requires that any postsecondary institution participating in these programs which meet certain review criteria (a high student loan default rate, for example) be referred for review to a designated state entity. The Governor has designated the California Postsecondary Education Commission (CPEC) as California's SPRE.

The CPEC has developed a set of standards according to which it would review referred institutions. As Figure 35 shows, the standards applicable to the CCC include four that are outcome-based. These standards relate to rates of completion, withdrawal, employment, and licensure.

The CPEC has submitted its proposed SPRE standards to the U.S. Department of Education (USDE) for approval, and is seeking legislation to establish them as state regulations. If they are approved, any CCC that is referred to the SPRE and fails to meet the standards would have to pursue corrective action. In a serious case, the USDE could terminate a college's participation in all federal financial aid programs for failure to meet the standards.

Student Right-to-Know. The USDE is currently developing regulations that will require any postsecondary institution that participates in a federal financial aid program to provide certain information about the institution to all enrolled and prospective students. Among the things that community colleges (and other California postsecondary institutions) would have to disclose is a completion or graduation rate for their students.

Carl D. Perkins Vocational and Applied Technology Education Act. The Perkins Act determines how federal funds for vocational education are allocated to the states. It holds community college districts (and other recipients of federal vocational education funds) accountable for outcomes that result from the use of federal funds, and requires them to evaluate vocational programs annually using measurable, objective criteria. In response, the state has developed a system of "core measures and standards" applicable to secondary and postsecondary institutions that receive federal funds under the Perkins Act.

Within this system, community colleges are expected to be at the statewide average or show progress toward the statewide average in each of the following measures:

The Chancellor's Office, in cooperation with the Employment Development Department, is developing a data base which will enable the colleges to track the placement and wages of any student who earns 12 or more units of credit in vocational education courses. While this data base is being developed primarily to provide colleges with the means of fulfilling the Perkins Act requirements for program improvement, it will also be a rich source of information on issues of concern to state-level policy makers:

Community Colleges Should Move Toward Performance-Based Budgeting

To date, the state's investment in a community college performance measurement and accountability system has yielded a quite sophisticated means of collecting and reporting information on student outcomes and the status of the community colleges generally. The Chancellor's Office MIS has the potential of providing policy makers with (1) information about the status of a vast variety of student outcomes, and (2) a means of examining the linkage between program interventions and student outcomes.

At this time, however, there is no clear set of standards that allow this information to be meaningfully interpreted as a measure of performance, and no clear motivational force to drive the community colleges toward program improvement on the basis of this information. In a recent paper, William Armstrong, Director of Research and Planning for the San Diego Community College District, provided the following apt summary of the current linkage between outcome measurement and program improvement: "[It is] an assumption that the collection, aggregation, and dissemination of data will create a climate for accountability that will provide its own impetus for positive change and improvement among staff. However, how this is to occur beyond merely reporting benchmark data is unclear."

The collection and reporting of outcome data may create some momentum for improvement. We recommend, however, that the Legislature take a more direct approach to accountability by (1) ensuring that measures of the key outcomes identified in AB 1725 are reported annually in a public forum, (2) charting the course that it wishes the community colleges to follow by establishing outcome-based performance standards, and (3) providing budget-based incentives that reward improvement toward those standards.

Recommendation of a specific performance-based budgeting system for the community colleges is beyond the scope of this analysis. We do suggest, however, some criteria that we believe such a system should meet. Moreover, we recommend that the Legislature go on record through supplemental report language that it intends for the Chancellor's Office, in consultation with the CPEC and appropriate legislative staff, to develop a proposal for a performance-based budget that could be tried on pilot basis in 1996-97.

Criteria for a Performance-Based Budgeting System

We suggest that a performance-based budgeting system for the community colleges should meet the following criteria.

Focus on Program Improvement. This means that a system should reward value added (improvement from a baseline), as well as attainment of a standard. For example, a standard might be: at least 75 percent of students who successfully complete remedial English courses and enroll in a college-level English course should successfully complete the college-level course. In this case, the system should reward the district that increases its performance from 50 to 60 percent, as well as the district that attains 75 percent. This would recognize that the community colleges start from different levels of performance. By immediately rewarding incremental improvement, it would encourage efforts to make further progress.

Recognize Goal Diversity. An accountability system should contain standards and measures that pertain to the whole spectrum of missions pursued by the community colleges. Degree/certificate completion and transfer rates capture an important part of what the colleges do, but are not the whole story. Policy makers also need, for example, a window to the effectiveness of community colleges efforts in the area of remedial and basic skills education. During our visits to the field last Fall, administrators and faculty told us repeatedly that many students attend the community colleges only long enough to complete a course or two that are necessary for them to retain their existing employment, or to move on to another job. An accountability system, therefore, should also include some general measure of student goal satisfaction and earnings improvement to capture the difference community colleges make for students who, for various personal reasons, do not persist to the point of completing an academic or vocational program.

Reward Efficiency. Based on our four-year outlook for Proposition 98 funding (please see our K-12 Budget Priorities section for details), it appears that even in the best case, community colleges will receive very little funding for program improvement (funds in excess of statutory growth and COLA). Together with K-12 education and a host of other government programs, the community colleges will be challenged to improve student outcomes with few additional resources. Consequently, we believe that an accountability system should reward increases in productivity and efficiency. For example, a college should be rewarded if it is able to maintain or increase the percentage of students who successfully complete freshman English, while reducing through technology or other means the cost per student contact hour of this program. Improved efficiency in the utilization and operation of a college's physical plant could also be rewarded.

Focus on Incentives. We make this suggestion for the purely practical reason that incentives (rewards for achievement) are more likely to be consistently applied than penalties (take-aways for failure). In an atmosphere of continued fiscal constraints, with community college budgets expanding a little more or a little less than the rate of inflation, we anticipate that it will be very difficult for policy makers to take resources away from low-performing districts. By the same reasoning, we also anticipate that (1) it will be difficult as a practical matter to redistribute base funding among districts on the basis of performance--even through incentives--and (2) there will be little new money beyond growth or COLA--termed "program improvement" funds in CCC regulations--that could potentially be allocated on a performance basis.

In order to provide meaningful incentives for improved outcomes even when program improvement funds are not available, we suggest that a significant part of the annual COLA be allocated on a performance basis. Should any available program improvement funding become available, we suggest that it also be allocated on a performance basis.

Protect Access. Access to the community colleges is not strictly an outcome. We suggest, however, that it be treated as an outcome for the purposes of an accountability system. This is because maintaining access to higher education for all California adults is a crucial mission of the community colleges. Performance- based budgeting, without appropriate controls, could lead the colleges to informally screen out the students that they believe are least likely to perform well. These may be the very students, however, that the Legislature wants colleges to serve as a high priority. Consequently, the Legislature may wish to reward colleges that improve or maintain access as measured, for example, by improvements in the ratio of regional high school graduates that attend a college, or by increases in enrollment of groups traditionally underrepresented at a college.

CCC Should Pilot Performance-Based Budgeting in 1996-97

We recommend that the Legislature supplemental report language that requires the CCC Chancellor's Office, in consultation with the CPEC, to develop a proposal for a pilot performance-based budgeting program that would, beginning in 1996-97, allocate a portion of state aid to the CCC based on attainment of, or improvement towards, performance standards.

In order to move the community colleges forward toward accountability for student outcomes, we recommend that the Legislature adopt supplemental report language that requires the Chancellor's Office, in consultation with the CPEC, to:

Specifically, we recommend the following language:

Reporting of Outcome Measures. It is the intent of the Legislature that the CCC Office of the Chancellor, in consultation with the CPEC, shall establish and annually report data for a broad range of student outcomes. The outcomes measured shall be generally consistent with the outcomes required to be measured under the comprehensive community college accountability system mandated in Ch 973/88 (AB 1725, Vasconcellos). At a minimum these outcomes shall include: transfer rate, degree and certificate completion rate, average time to degree/certificate or transfer, rate of successful course completion, job placement and earnings improvement for vocational program completers, student satisfaction, weekly student contact hours per faculty member, a measure of the effectiveness of remedial credit education in preparing students for success in college level courses, and a measure of access. Baseline data shall be reported in the CPEC's November 1995 report, mandated by Ch 741/91 (AB 1808, Hayden), on significant indicators of the performance of California's higher education segments. If baseline data on these outcomes cannot be presented in November 1995, the Chancellor's Office shall report to the Joint Legislative Budget Committee no later than November 30, 1995 (1) the reasons that the data cannot be reported, and (2) the steps it will take to ensure that baseline data can be reported by November 1996.

We also recommend the following language:

Performance-Based Budgeting. It is the intent of the Legislature that the CCC Office of the Chancellor, in consultation with the CPEC and appropriate legislative staff, shall develop performance standards related to the following outcomes, that define a level of educational quality that can reasonably be expected of the community colleges: transfer rate, degree and certificate completion rate, average time to degree/certificate or transfer, rate of successful course completion, job placement and earnings improvement for vocational program completers, student satisfaction, weekly student contact hours per faculty member, a measure of the effectiveness of remedial credit education in preparing students for success in college level courses, and a measure of access. No later than November 1996, the Chancellor's Office shall propose a pilot performance budgeting program, together with any necessary statutory or regulatory changes, whereby the Chancellor's Office would allocate no less than one-third of the 1996-97 community colleges COLA on the basis of attainment of, or improvement toward, these standards.

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