Legislative Analyst's Office Analysis of the 2001-02 Budget Bill

California Community Colleges (6870)

The budget includes a $360 million increase (8.3 percent) in California Community College (CCC) Proposition 98 funding in the budget year. This is $216 per student, or 5.1 percent, more than the revised estimate of per-student expenditures in the current year.

The CCCs provide instruction to about 1.6 million adults at 108 colleges operated by 72 locally governed districts throughout the state. The system offers academic and occupational programs at the lower-division (freshman and sophomore) level. Based on agreements with local school districts, some college districts offer a variety of adult education programs including basic skills education, citizenship instruction, vocational, avocational, and recreational programs. Finally, pursuant to state law, many colleges have established programs intended to further regional economic development.

Figure 1 (see next pgae) shows the budget from all significant sources for community college education for the budget year and the two previous years. As the figure shows, CCC spending from all sources is projected to increase by $447 million, or 7.7 percent, above the current-year level.

The CCC's Share of Proposition 98. The Governor's budget includes a total of $4.7 billion in Proposition 98 funding for the community colleges for 2001-02. This is about 76 percent of overall community college funding. K-12 education and several other state agencies, such as the Departments of Mental Health and Developmental Services, also receive funding from Proposition 98. Historically, the share or split of Proposition 98 funding is based solely on the total amount allocated to K-12 education and the community colleges. Based on this split, the community college share in the budget year is 10.27 percent, with the remainder allocated to K-12 education (89.73 percent). The community college share in the budget year is the same as its share in the current year.

Major Budget Changes

Figure 2 shows the changes proposed for community college Proposition 98 funds in the budget year. Of the $360 million increase in funds, three-fourths is proposed to cover growth in the number of students and inflation:

• $114.5 for enrollment growth, based on a projected increase of 3 percent in 2001-02.
• $153.8 million to provide a 3.91 percent cost-of-living adjustment.

The budget includes funding for two new major proposals:

• $62 million to assist districts in making part-time faculty salaries more comparable to full-time faculty salaries for similar work.
• $11 million for outreach activities to ensure that all eligible students apply for Cal Grants. Of this amount, approximately $2.7 million would be distributed equally ($25,000) to all 108 colleges, and $8.3 million would be allocated proportionally to colleges based upon their number of Pell Grant recipients.

As Figure 2 shows, the budget also provides $36.7 million for expansions to existing programs (including $20 million for maintenance, instructional equipment, and library materials) and a savings of $18.6 million from base adjustments.

Proposition 98 Spending by Major Program

Figure 3 shows Proposition 98 spending for community college programs. "Apportionment" funding (available for the districts to spend on general purposes) accounts for $3.6 billion in 2001-02, or about 77 percent of total Proposition 98 expenditures. The state General Fund supports about 49 percent of apportionment funding, and local property taxes provide the remaining 51 percent.

"Categorical" programs (expenditures earmarked for a specified purpose) are also shown in Figure 3. These programs support a wide range of activities from services for disabled students to maintenance/special repairs.

Part-Time Faculty Issues: Changing the Focus to Education Outputs

In this section, we evaluate three budget requests totaling $70.2 million to increase resources for part-time faculty and one long-standing state policy intended to limit the use of part-time faculty on CCC campuses. In doing so, we recommend that the Legislature, consistent with principles it set forth in the Partnership for Excellence, allow districts flexibility in using faculty and other resources to meet goals for improving student outcomes.

Proposed Funding for Part-Time Faculty Restricts District Flexibility in Meeting Local Needs

We recommend the Legislature provide local community college districts with the authority to allocate faculty resources to meet local campus needs, while it continues to hold districts accountable for improving student outcomes. Specifically, we recommend the Legislature redirect the $70.2 million requested for part-time faculty salaries ($62 million), part-time faculty office hours ($7.2 million), and part-time faculty health insurance benefits ($1 million) to the Partnership for Excellence. This would give districts greater flexibility to improve education services to students.

The budget requests $70.2 million that districts could use only to increase part-time faculty salaries ($62 million), office hours ($7.2 million), and health benefits ($1 million).

Increasing Part-Time Faculty Salaries Might Not Improve Student Outcomes

The budget requests $62 million to assist districts in making part-time salaries more comparable to full-time faculty salaries for similar work. In its November 2000 budget proposal, the CCC Board of Governors requested $75 million for 2001-02 for this purpose. The board also proposed increasing this funding by $75 million in each of the next two years, for a total of $225 million in funds specifically for increasing part-time faculty salaries.

The Legislature asked both the State Auditor and the California Postsecondary Education Commission (CPEC) for additional information on part-time faculty salaries and compensation. The Auditor issued a report in June 2000 and CPEC issued a preliminary report in January 2001. Both reports conclude that, overall, part-time faculty earn lower wages and benefits for teaching activities than full-time faculty with comparable experience and backgrounds.

Reducing Salary Difference Not Necessarily Linked to Better Education Services. Neither the Auditor nor CPEC report evaluates how local practices for hiring and compensating part-time faculty affect education outcomes. Similarly, the CCC board has not provided any evidence that services to students suffer because of current salary structures. More importantly, the board's proposal has not provided any evidence that local processes for establishing faculty salaries—including collective bargaining—constrain the ability of local districts to hire the faculty they need to provide high quality services to students. In fact, the State Auditor's June 2000 report to the Legislature on part-time faculty salaries observed:

The condition of unequal pay for part-time faculty prevails because districts have been able to attract significant numbers of part-time faculty who are willing to work for less than full-time faculty.

In addition, local districts have the ability, through collective bargaining, to determine the best use of faculty based on local needs and conditions. The CCC Chancellor acknowledged this in a written response to the Auditor's June 2000 report:

Collective bargaining is a well-established function of the local districts, and it has been successful in resolving concerns about salaries and working conditions in context of local needs and resources.

Partnership for Excellence Gives Districts Flexibility to Meet Accountability Measures. While paying part-time faculty more would increase their salaries vis-à-vis full-time faculty, it would not necessarily provide districts with the best opportunity to improve their education services. Some districts might want additional funds to increase part-time faculty salaries—and indeed this might be the best use to which they could put funds—while others might want to use funding for other priorities that offer greater education returns. We recommend that the state allow districts the flexibility to negotiate salaries for both part-time and full-time faculty in the context of local labor markets and staffing needs.

One way to provide that flexibility would be to redirect the $62 million proposed for part-time faculty salaries to the Partnership for Excellence. This would give districts the flexibility to use resources to maximum educational benefit. The Partnership for Excellence framework allows the state to evaluate how districts use funds and whether the districts produce positive results. Unlike the budget proposal to target funds for a specific input factor—part-time faculty salaries—the Partnership for Excellence focuses on program outcomes while allowing districts to choose the best use of the resources.

The Partnership program was established by Chapter 330, Statutes of 1998 (SB 154, Schiff). The program currently receives $300 million per year. The budget does not provide additional funding for the partnership in 2001-02. The act states that the CCC must establish goals in five broad areas. The CCC, with review and input from the Legislature, completed the establishment of these goals in September 2000. Chapter 330 directs the CCC to allocate partnership funds to districts as general-purpose revenue, thereby allowing them maximum flexibility to use the funds to best meet the performance goals the CCC submitted to the Legislature. Chapter 330 also directs the CCC to submit an annual report on the program by April 15 each year. In the reports, the CCC must describe the relationship between how colleges invest funds and what education outcomes resulted. Thus, the partnership program provides districts with budgetary and programmatic flexibility while it allows the Legislature to hold them accountable for improving education outcomes. Accordingly, we recommend that the Legislature shift the requested $62 million to the Partnership for Excellence.

Office Hours Also Should Be a Matter for Local Negotiations

Chapter 933, Statutes of 1997 (AB 301, Cunneen), created the California Community Colleges Part-Time Faculty Office Hours Program to compensate part-time faculty who hold office hours related to their teaching load. The Governor's budget requests $7.2 million on an ongoing basis for the part-time faculty office hour program, an increase of $4.7 million over estimated current-year expenditures. (The budget also requests an additional $3.2 million for the program on a one-time basis.) The requested appropriation is contingent on legislation passing that would reestablish the one-to-one local matching requirement formerly in law. (Last year, Chapter 71, Statutes of 2000 [SB 1667, Alpert], reduced the local share from the one-to-one match to a one-to-two match.)

Districts Can Already Require Part-Time Faculty to Hold Office Hours. Districts are free to negotiate working conditions with part-time faculty or their labor representatives, including the amount of office hours they expect both part-time and full-time faculty to provide students. We have not seen any evidence that districts do not have adequate authority or funds to negotiate office-hour expectations in labor agreements with part-time faculty. While some districts might use additional funding to increase compensation of part-time faculty in exchange for more out-of-class services, other districts might choose to use additional funds to meet other higher priorities.

As with our recommendation on the budget proposal for part-time salary funds, we recommend that the Legislature—in keeping with its intentions in creating the Partnership for Excellence—not target funds for specific input purposes but rather allow local districts to decide how best to allocate resources to meet performance goals. We therefore recommend redirecting the $7.2 million proposal for part-time faculty office hours salaries to the Partnership for Excellence.

Districts Can Also Negotiate Benefits With Part-Time Faculty

The budget requests $1 million from the General Fund for districts to provide additional health insurance benefits to part-time faculty and their families. Chapter 943, Statutes of 1996 (AB 3099, Campbell), established the Part-Time Faculty Health Insurance program with the intent of providing part-time faculty and eligible dependents with access to health insurance. The act appropriated $500,000 from the General Fund and required districts to match these and any future state appropriations for this purpose with local funds on a dollar-for-dollar basis.

As noted above, districts are able to negotiate with faculty (either individually or through union representation) terms of employment, including salaries, working conditions, and provision of health insurance benefits. We do not find any basis for restricting districts in the use of state funds for this specific purpose.

Consistent with our recommendations above, we recommend redirecting the $1 million proposed for part-time faculty benefits to the Partnership for Excellence.

Revisiting the 25 Percent "Cap" on Part-Time Faculty Staffing

We recommend that districts be allowed to employ part-time and full-time faculty in whatever ratio maximizes education outcomes.

We examined above three budget proposals related to part-time faculty and recommended that the Legislature redirect funds for these purposes to the Partnership for Excellence. The Legislature, in creating this program, expressed its intent to give districts budgetary and programmatic flexibility to meet local needs and to hold districts accountable for improving measurable education outcomes. In light of this recent policy of focusing on outcomes rather than prescribing inputs, we felt it appropriate to examine a long-held notion that all districts should employ full-time and part-time faculty in no less than a 75 to 25 ratio.

Chapter 973, Statutes of 1988 (AB 1725, Vasconcellos), among other things, expressed legislative intent to "recognize and make efforts to address long-standing policy of the Board of Governors that at least 75 percent of the hours of credit instruction in the CCC, as a system, should be taught by full-time instructors." As Figure 4 shows, full-time CCC faculty currently provide 63.2 percent of credit hour instruction statewide. It also shows the ten districts with the highest ratios and the ten districts with the lowest ratios.

No Analytic Basis for One Full-Time/Part-Time Faculty Ratio. Full-time faculty provide cohesion for academic departments. They provide direction and leadership for program planning, context, and content. However, it is widely acknowledged that part-time faculty can provide many benefits. For example, they can bring special and practical expertise to the classroom. They can also allow colleges to respond quickly to changing student demands and labor market needs.

As Figure 4 shows, ratios of full-time to part-time faculty vary significantly among districts. Whether a district hires part-time or full-time instructors for particular courses depends, for example, on various factors, such as local labor markets and shifting demands among students for various courses and types of instruction. While it is in the state's interest to ensure that districts employ faculty to maximize education outcomes, we have not seen any evidence that prescribing a specific ratio for full-time and part-time faculty will do this. We have not seen any evidence, for example, that districts in Figure 4 with high ratios provide better education services than those with low ratios.

In its 1998 policy paper titled Enhancing Faculty Productivity: A State Perspective, the Education Commission of the States (ECS) said the following about California's goal of obtaining a 75/25 split between full-time and part-time faculty:

State policies sometimes impose specific ratios of full-time to part-time faculty, making the implicit assumption that the employment of part-timers is, at some point, detrimental to the student's learning experience. Yet, research to date offers little evidence either way about the comparative teaching effectiveness of full-time and part-time faculty members.

Allow Local Flexibility While Maintaining Accountability. We agree with the ECS findings. Rather than focusing on whether districts hire part-time and full-time faculty in some specified ratio, the state should be more concerned about whether districts are providing the best possible services to students with available resources. Accordingly, we recommend that districts be allowed to employ part-time and full-time faculty in whatever ratio maximizes education outcomes within available resources.

Other Issues

Give Districts Flexibility With Proposed Financial Aid Administration Funds

We recommend that the Legislature shift $11 million requested from the General Fund for community colleges to help students apply for Cal Grants to the Partnership for Excellence. The Partnership for Excellence gives districts the ability to provide the requested assistance or other services that meet students' needs.

The budget requests $11 million for districts to help eligible students apply for Cal Grants. According to the CCC, it would distribute approximately $2.7 million equally ($25,000 each) to all 108 colleges, and apportion $8.3 million to colleges based on the number of federal Pell Grant recipients they serve.

Campuses Already Provide Financial Aid Counseling. Community college campuses provide financial aid counseling services to many of their students. For example, the CCC campuses already process federal, state, and campus aid totaling over $500 million each year.

Chapter 403, Statutes of 2000 (SB 1644, Ortiz), expanded the Cal Grant program significantly, beginning in the 2001-02 budget year. As a result, many more community college students will be eligible to receive Cal Grant awards. The California Student Aid Commission projects that the number of new Cal Grant B awards (for which many CCC students are eligible) will roughly double in 2001-02.

The CCC is requesting the $11 million to expand financial aid services on campuses to ensure that students avail themselves of the additional Cal Grant awards. They have not provided any evidence, however, that campuses cannot provide this assistance through existing financial aid services.

Partnership for Excellence Would Give Campus Flexibility to Meet Greatest Needs. As mentioned earlier in this item, Chapter 330, Statutes of 1998 (SB 1564, Schiff), established the Partnership for Excellence. The act requires CCC to develop specific and measurable goals to improve student success, including rates of transfer, degrees and certificates completed, successful course completion, work force development, and basic skills improvement. The act expresses the state's intent to provide supplemental funding to invest in program enhancements that will increase performance toward the community colleges' outcome measures. Thus, the focus of this program is to allow local districts to decide how funds should be allocated to reach specific goals. The Partnership for Excellence currently receives $300 million per year. The budget does not provide any additional funds for the program in 2001-02.

Ensuring that all eligible students are aware of and apply for Cal Grants is directly in line with several goals of the Partnership for Excellence, including student transfer. Most, if not all, districts will see the link between Cal Grant availability and the partnership goals. However, not all districts will need to increase financial aid administration to increase student access to and success in college. The partnership program allows districts to assess local needs and respond to those needs based on local conditions. In keeping with our earlier recommendations to give CCC flexibility to meet its accountability goals, we recommend that the Legislature shift the requested $11 million to the Partnership for Excellence.

Request to Expand Teacher and Reading Development Partnership Is Premature

We recommend that the Legislature (1) revert $10 million in current-year General Fund support for the Teacher and Reading Development Partnership program because the program is overfunded in the current year due to a one-year delay in issuing program grants, and (2) deny the $5 million augmentation request because the California Community Colleges has not established that it could use the funds effectively. We further recommend that the Legislature approve the budget request for $200,000 from the General Fund to collect baseline data on the program. (Reduce Item 6870-101-0001 by $15 million.)

The 1999-00 Budget Act included $10 million from the General Fund requested by the Governor to start a Teacher and Reading Development Partnership (TRDP) program in the CCC. The 1999-00 budget proposal stated that the purpose of this new program is to:

• Encourage promising community college students to pursue a career in teaching through development of an articulated internship program with local school districts and California State University institutions.
• Assist elementary students in improving reading skills.

During that budget process, the CCC was not able to provide details on the program. The 1999-00 Budget Act required the Community College Chancellor—in consultation with specified agencies and groups—to develop a plan and criteria for awarding funds to individual community colleges through a competitive process. The act required the Community College Board of Governors to submit the plan to the Office of the Secretary of Education for approval, and required the Chancellor to implement the program upon approval of the Secretary. The administration stated that while the program might not be feasible in all areas of the state, the $10 million provided sufficient funding to structure beneficial programs so that the most needy communities could obtain more teachers.

Program Off to Slow Start. The program has been slow to get off the ground. The CCC spent all of the 1999-00 fiscal year planning, obtaining the Secretary of Education's approval, developing and mailing applications to the colleges, and evaluating the colleges' proposals. Local districts submitted a total of 58 applications on behalf of 88 campuses. (Some campuses submitted joint proposals.) The Chancellor gave a passing score to 37 of the applications and allocated the $10 million to 33 of the 37 applications on June 26, 2000. (The Chancellor decided not to fund the remaining four applications.) Because of this timing, the initial $10 million provided in the 1999-00 Budget Act is only now being used in the 2000-01 budget year for the first year of operation.

Program Is Overfunded by $10 Million in Current Year. The 2000-01 Budget Act appropriated an additional $10 million from the General Fund for the program in the current year. As noted above, however, the $10 million provided in the 1999-00 Budget Act is being used for the 2000-01 budget year. Thus, the program is, in effect, funded twice in the current year. We recommend, therefore, that the Legislature revert the current-year amount and use the $10 million for some other one-time purpose.

Information Needed Before Proposed Expansion. The budget requests $5 million from the General Fund to expand the program in 2001-02 from the current 33 programs to approximately 50 programs. We asked the CCC for basic data on how campuses are using the $10 million in the current year. The CCC was able to say how it allocated the $10 million among the 33 award holders, but could not say how the campuses were using the funds. Thus, the Legislature does not have any information with which to assess whether or how the programs should be expanded. We recommend, therefore, that the Legislature deny the request of $5 million to expand the TRDP program at this time.

Request for $200,000 for Baseline Data Justified. The budget also requests $200,000 from the General Fund to collect baseline data on the TRDP program. Our analysis indicates that baseline data would be useful to the Legislature in evaluating the program and recommend that the Legislature approve this request.

Use $5 Million to Increase Access to "Impacted" Programs

We recommend that rather than provide $5 million for employee training in various businesses, the Legislature instead shift the requested funds, on a competitive basis, to community college campuses so that they can expand "impacted" programs in the health care field. The community colleges are not meeting demand for these courses and are allocating scarce program space by lottery.

The budget requests $21.5 million for the CCC's Industry Driven Regional Collaboratives (IRDCs). This is $5 million, or 30 percent, more than provided for these programs in the current year. The budget states that the IRDCs would use the additional $5 million for "specifically addressing high demand for information technology, nursing, and biotechnology workforce development services."

Background. The IRDC program is the largest of five components in the CCC's Economic Development Program (EDP). Chapter 805, Statutes of 1994 (AB 3512, Polanco), reauthorized an existing CCC program and changed its name to the EDP. The purpose of the EDP is to advance the state's economic growth by providing job-related education and services to businesses and organizations. The IRDCs provide grants to community colleges to help train employees of local businesses. The IRDCs have provided 66 grants in the current year to campuses, which are training employees of firms in the manufacturing, information technology, multimedia, health, and other industries. The IRDCs received $16.5 million in General Fund support in 2000-01.

The CCC Should Focus Resources on Impacted Programs. The proposal says that the CCC, through the IRDC program, will address high demand for training in the information technology, nursing, and biotechnology fields. According to the CCC, however, its campuses are currently meeting student demand for classes that provide requisite training for information technology and biotechnology professions.

The CCC reports, however, that in certain health-related fields—nursing and dental hygiene among others—demand by qualified students is so high that admission to these programs on most campuses is by lottery. The CCC has been using lotteries for nursing programs since 1995. In the lotteries, the campuses randomly select from among qualified students who have applied for admission to the nursing or health-related programs. Students not admitted may enter a later lottery or may choose another program. There is a high labor-market demand for graduates of these health care programs, especially nursing.

The CCC says that no campus has resorted to lottery admissions for classes in information technology, biotechnology, or any other class outside health care programs. Rather than direct $5 million to expand the IRDCs in fields for which CCC campuses offer classes to all interested and qualified students, we recommend the Legislature focus such funds where students need them most. Accordingly, we recommend that the Legislature provide the $5 million instead to the CCC for allocation to campuses, on a competitive basis, for the purpose of expanding programs—such as nursing—that currently offer admission to students by lottery.

Cañada College/San Francisco State Proposal Costs Are Absorbable

We recommend that the Legislature approve the proposal by Cañada College and San Francisco State University (SFSU) to allow SFSU to offer upper division courses on the Cañada Community College campus. However, we recommend that the Legislature deny the requests for (1) $375,000 in support funds because currently available funds can be used to establish this program and (2) $625,000 in capital outlay funds because the Legislature has no information on the scope, cost, and relative priority of the project in relation to other community college capital outlay requests. (Reduce Item 6870-101-0001 by $1 million.)

The budget requests $1 million to help Cañada Community College and SFSU develop a proposal for SFSU to offer upper division courses on the Cañada Community College campus. The Legislature approved this proposal last year in AB 2007 (Runner), but the Governor vetoed AB 2007 based on an unrelated provision.

The SFSU and Cañada College in Redwood City together want to offer students a four-year articulated course of study in specific program areas at Cañada College. Approximately six to eight SFSU degree programs would be offered on the Cañada campus with Cañada College offering the first two years of the program and SFSU offering upper division instruction and granting the baccalaureate degree. The plan calls for baccalaureate offerings in high transfer and employment areas, including electrical engineering, teacher education, computer information science, biotech, and health sciences. The first two baccalaureate programs, which Cañada and SFSU believe they could start in fall 2001, are electrical engineering and teacher credentialing. They forecast first-year enrollment between 75 and 100 students, with enrollments increasing to
500 students within three years.

The request for $1 million is for planning and design ($375,000) and renovation and upgrading of labs and equipment at the Cañada College campus ($675,000). The colleges say that they would use the capital funds for building modifications and equipment to accommodate the offering of upper division courses in electrical engineering.

Planning and Design Funds Absorbable. Our review of Cañada College's July 2000 budget proposal for the $375,000 for planning and design indicates that these costs are absorbable within the current budget. For example, the budget proposal for use of the funds includes the following:

• $75,000 for faculty release time at both institutions.
• $75,000 for a labor market forecasting review by the SFSU's Urban Institute.
• $50,000 for first-year marketing costs.
• $30,000 for faculty travel to other states to visit similar programs.

These tasks are part of the normal operation of the institutions (academic planning and/or institutional research) and therefore should be absorbable within current budgets. Cañada College reports that it has already committed up to $100,000 from its Partnership for Excellence funds for implementing and administering the program. Continued use of these funds is appropriate. The SFSU should also be willing to invest academic planning and institutional research funds to get this program started. Accordingly, we recommend that the Legislature deny the request for $375,000 for planning and design because our analysis indicates that currently available funds can be used to establish this program.

Capital Outlay Request. The budget requests $625,000 for renovation and upgrading of labs and equipment at the Cañada College campus to accommodate the offering of upper division courses in electrical engineering. While equipment upgrades to offer upper division courses may be needed, the CCC has not provided any information on the scope, cost estimates, equipment needs, or relative priority of this project among other community college capital outlay requests for 2001-02. Without this basic information, the Legislature is not in a position to evaluate the project request. We recommend that the Chancellor's office review the request in the context of other statewide community college capital outlay needs. If this is a statewide priority, the Chancellor's office should submit the project to the Legislature through the normal capital outlay process. Given the lack of project information and the unknown relative priority of this project on a statewide basis, we recommend that the Legislature deny the request for $625,000. Cañada College and SFSU can continue to move forward with the noncapital related portion of the project pending submission and review by the Legislature of any forthcoming capital outlay request.

Chancellor's Office Seeks Funds Again for Existing Positions

We withhold recommendation on the request for $349,000 from the General Fund to fill four vacant positions because the Legislature should be given more specific information on where the Community College Chancellor's office spent the Legislature's prior appropriations for these positions.

The budget proposes non-Proposition 98 General Fund increases of $1.1 million for increases in administration within the Chancellor's Office, including $349,000 to fill four vacant positions (one in legal affairs and three in student services). The request for funds to fill four vacant positions is unusual. At the time these positions were approved by the Legislature, funds were available to fill the positions. When we asked why it does not have funds for these positions today, the Chancellor's office said that it used the funds to cover other salary and operating expense increases for which they did not receive funding. In order for the Legislature to determine the appropriateness of providing funds a second time, more specific detail on where the CCC spent the prior appropriations is needed. Pending receipt of this specific detail, we withhold recommendation on the request for $349,000.