LAO 2005-06 Budget Analysis: General Government

Analysis of the 2005-06 Budget Bill

Legislative Analyst's Office
February 2005

California Community Colleges (6870)

California Community Colleges (CCC) provide instruction to about 1.6 million students at 109 campuses operated by 72 locally governed districts throughout the state. The system offers academic, occupational, and recreational 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. In addition, pursuant to state law, many colleges have established programs intended to promote regional economic development.

Funding Increases Proposed. The Governor's budget includes significant funding increases for CCC. As shown in Figure 1, the Governor's proposal would increase total Proposition 98 funding for CCC by $361 million, or 7.5 percent. This increase funds a cost-of-living adjustment (COLA) of 3.93 percent, and enrollment growth of 3 percent. When all fund sources—including student fee revenue and federal and local funds—are considered, CCC's budget would total almost $8 billion.

CCC's Share of Proposition 98 Funding. As shown in Figure 1, the Governor's budget includes $5.1 billion in Proposition 98 funding for CCC in 2005-06. This is about two-thirds of total community college funding. Overall, Proposition 98 provides funding of approximately $50 billion in support of K-12 education, CCC, and several other state agencies. As proposed by the Governor, CCC would receive about 10.3 percent of total Proposition 98 funding.

Figure 1

Community College Budget Summary

(Dollars in Millions)





Change From 2004‑05



Community College Proposition 98





General Fund






Local property tax






  Subtotals, Proposition 98






Other Funds






General Fund






  Proposition 98 Reversion Account






  State operations






  Teachers' retirement






  Bond payments






State lottery funds






Other state funds






Student fees






Federal funds




Other local funds





    Subtotals, other funds






      Grand Totals






State law calls for CCC to receive approximately 10.9 percent of total Proposition 98 appropriations. However, in recent years, this provision has been suspended in the annual budget act and CCC's share of Proposition 98 funding has been lower than 10.9 percent. The Governor's budget proposal would again suspend this provision.

Major Budget Changes

Figure 2 shows the changes proposed for community college Proposition 98 spending in the current and budget years. Major base increases include $142 million for enrollment growth of 3 percent and $196 million for a COLA of 3.93 percent. (This is based on an estimate of inflation that will not be finalized until April.) The Governor also "sets aside" $31.4 million for a potential restoration of funding he vetoed in 2004-05. (We describe this set-aside later in this piece.) In addition to the new Proposition 98 spending shown in Figure 2, the Governor proposes $20 million in one-time Proposition 98 Reversion Account funds for aligning K-12 and CCC vocational curricula. (We discuss this proposal in the "Crosscutting Issues" section of this chapter.)

Figure 2

California Community Colleges
Governor's Budget Proposal

Proposition 98 Spending a
(In Millions)

2004‑05 (Enacted)


Local property tax shortfall


Lease-revenue augmentation per Section 4.30


2004‑05 (Estimated)


Property tax base adjustment


Proposed Budget-Year Augmentations


Cost-of-living adjustment of 3.93 percent


Enrollment growth of 3 percent


Set-aside for restoration of 2004‑05 vetoed funds


Lease-revenue payments


Permanently shift funding for
Foster Parent Training Program to Proposition 98




Proposed Budget-Year Reductions


Adjustment for increased estimate of fee revenue


Technical adjustments




2005‑06 (Proposed)


Change From 2004‑05 (Estimated)






a  Numbers may not add due to rounding.

Proposition 98 Spending by Major Program

Figure 3 shows Proposition 98 expenditures for various community college programs. As shown in the figure, apportionment funding (available to districts to spend on general purposes) accounts for $4.6 billion in 2005-06, an increase of about $312 million, or 7.3 percent, from the current year. Apportionment funding in the budget year accounts for about 89 percent of CCC's total Proposition 98 expenditures.

Figure 3

Major Community College Programs
Funded by Proposition 98

(Dollars in Millions)












State General Fund





Local property tax revenue










Categorical Programs





Extended Opportunity Programs and Services





Disabled students










Services for CalWORKs a recipients





Part-time faculty compensation





Part-time faculty office hours





Part-time faculty health insurance





Physical plant and instructional support





Economic development program b





Telecommunications and technology services





Basic skills and apprenticeships





Financial aid/outreach





Foster Parent Training Program





Fund for Student Success





Other programs










Other Appropriations





Set-aside for possible veto restoration









a  California Work Opportunity and Responsibility to Kids.

b  For 2005‑06, the Governor's budget also includes $20 million from the Proposition 98 Reversion Account to align career-technical education curricula between K-12 and California Community Colleges.

c  Replaces $3 million previously provided by the Foster Children and Parents Training Fund.

Categorical programs (whose funding is earmarked for specified purposes) are also shown in Figure 3. These programs support a wide range of activities—from services to disabled students to part-time faculty health insurance. The Governor's budget proposes increases of 5.9 percent for the three largest categorical programs (to fund a COLA and enrollment growth), but for most other programs he proposes no changes. In addition, the Foster Parent Training Program would be funded entirely from Proposition 98 General Fund support, replacing $3 million previously provided by the Foster Children and Parents Training Fund.

Student Fees

The Governor proposes no change to the existing student fee level of $26 per unit. Under the Governor's budget, student fee revenue would account for 4.6 percent of total CCC funding. (In the "Student Fees" intersegmental piece earlier in this chapter, we recommend raising the CCC fee to $33 per unit. This would increase total revenue available to the state, and maximize federal reimbursements for students paying the fee.)

Enrollment Growth

Enrollment Changes Over Time

The CCC is the nation's largest system of higher education, enrolling about 1.6 million students in fall 2004. As shown in Figure 4, enrollment has gradually increased over the past two decades by about 420,000 students, although it has fluctuated on a year-to-year basis.

Figure 5 compares the cumulative change in enrollment over the past two decades with the cumulative change in the adult population, as well as the cumulative change in the traditional college-age population (18- to 24-year-olds). As the figure shows, CCC's enrollment has far outpaced the college-age population, and has generally matched growth in the adult population.

Figure 5 suggests that CCC's adult participation rate has generally remained constant, with temporary ups and downs, over the past two decades. Although participation rates can provide a rough sense of whether "access" to CCC is increasing or decreasing, it does not provide any obvious guidance as to what the participation rate "should" be. Based on comparisons with other states, however, California's college participation levels stand out. For example, the National Center for Public Policy and Higher Education recently found that California has some of the highest participation rates in the nation. Specifically, the National Center determined that California ranks fourth (tied with four other states) in college enrollment among 18- to 24-year olds, and that it ranks first in college enrollment among 25- to 49-year-olds.

Recent Slight Decline in CCC Enrollment— The Story Behind the Numbers

Over time, CCC's enrollment has fluctuated. These fluctuations respond to changes in a variety of factors, including the size and age distribution of the underlying population, cost factors (such as fees and the availability of financial aid), convenience of course schedules, and so on. As observed in Figure 4, CCC's enrollment increased through the late 1980s, declined in the early 1990s, and then rose significantly through the second half of the 1990s until 2003. In that year, CCC's enrollment dropped by about 115,000 students, or about 6.6 percent. What accounts for this enrollment decline?

Some Enrollment Decline Explained by Concurrent Enrollment Change. Some of the decline in enrollment was an intended result of statutory and budget changes to address a problem. Beginning in 2002, the Legislature and Governor both became concerned that a number of districts were inappropriately, and in some cases illegally, claiming state funding for a rapidly increasing number of high school students who were "concurrently enrolled" in CCC. While statute does make provision for some such enrollment, it was generally found that this provision was being abused. In response, the Chancellor called on districts to rein in these practices, and for 2003-04 the Legislature reduced funding for concurrent enrollment by $25 million and tightened related statutory provisions. As a result, high school students concurrently enrolled in community college courses dropped from a peak of about 94,000 in fall 2001 to about 80,000 in fall 2002 and 49,000 in fall 2003.

Thus, more than one-quarter of the system's overall headcount drop between fall 2002 and fall 2003 can be explained by the drop in these high school students.

Cause of Remainder of Decline Unclear. The 2003-04 Budget Act required the Chancellor's Office to report on changes in CCC enrollment for the 2003-04 academic year. Although a final report was due September 1, 2004, at the time this analysis was prepared (early February 2005), CCC could only provide preliminary data and draft reports. Available information suggests two main causes for the remaining enrollment decline (that is, not explained by the tightening of concurrent enrollment regulations):

Little Enrollment Decline Using Full-Time Equivalent (FTE) Measure. While headcount is a useful indicator of "access" in that it measures the number of individuals receiving instruction, it does not accurately reflect the amount of instruction being provided. This is because headcount measures do not distinguish between a full-time student taking 30 units per year and a part-time student taking, say, 6 units per year. For instance, although student headcount dropped about 6.6 percent between fall 2002 and fall 2003, the number of total course "slots" that were taught declined by less than 2 percent. This suggests that, on average, the individual students making up the 6.6 percent headcount decline had been part-time students taking fewer than the average number of units. Indeed, anecdotal evidence suggests that many of these students were taking only one or two courses per semester.

Fee Increase Had No Disproportionate Impact on Students

Budget bill language in the 200304 and 200405 budget acts requires the Chancellor's Office to provide data and analysis on the effect of recent fee increases upon student enrollment. The Chancellor's Office had only been able to provide preliminary information at the time this analysis was prepared. Based on this information, we offer the following conclusions about the changes to the makeup of the student population.

No Disproportionate Effect on Racial and Gender Groups. As shown in the figure, based on available information the recent small decline in enrollment in 200304 had no disproportionate effect on racial groups over the one-year period. Similarly, there was no change in the proportion of female and male students.

Small Effects on Age and Income Groups. The only significant change in the makeup of the student population in 200304 compared to the prior year relates to age. As shown in the figure, the percentage of CCC students under 18-years-old declined by more than one-quarter (largely reflecting the intended decline in concurrently enrolled students). Students between ages 18 and 29 somewhat increased their share of the student population, while those age 30 and above declined slightly.

The CCC's data show no evidence of disproportionate impact on income groups as a result of the fee increase. This likely reflects the fact that needy students are not required to pay fees. (The CCC's preliminary information does suggest there was a "modest" correlation between students' income and their likelihood to be affected by the reduction in course sections in spring 2003.)

Enrollment Funding

The Governor's budget proposes an augmentation of $141.9 million to fund 3 percent enrollment growth at California Community Colleges. This is about one and one-half times the projected amount of enrollment growth due to underlying population increases. We recommend the Legislature fund this projected level of enrollment (1.9 percent), and redirect the remaining proposed growth funding to other K-14 priorities.

Report Overdue on Student Enrollment in 2004-05. For 200405, student fees increased again, from $18 per unit to $26 per unit. The 200405 Budget Act required CCC to provide a report assessing the effect of this fee increase on enrollment by November 15, 2004. As of mid-February 2005, CCC had not yet provided that report.

State law calls for CCC's annual budget request to include funding for enrollment growth that is at least the rate of increase in the adult population, as determined by the Department of Finance (DOF). For 2005-06, DOF projects that California's adult population will increase by 1.9 percent. This growth rate would translate into about 22,000 additional (FTE) students, at a cost of $91.3 million. The Governor's budget proposes to fund enrollment of about one and one-half times this amount: a 3 percent increase in FTE enrollment, which would fund 34,000 additional students at a cost of $141.9 million.

Recommend 1.9 Percent Enrollment Growth Funding. For 2005-06, we recommend the Legislature provide funding for 1.9 percent enrollment growth. The Master Plan calls on CCC to be open to all adults who can benefit from instruction, and DOF estimates that this eligibility pool will grow by 1.9 percent. Other things being equal, an increase in the eligibility pool should translate into a proportionate increase in enrollment. (We independently estimated the increase in CCC's enrollment based on various demographic factors, and arrived at a similar growth projection of 1.8 percent.)

As noted earlier, enrollment growth at the community colleges has been slowing in recent years, and California's college participation rates are among the highest in the country. In fact, preliminary data and anecdotal evidence suggest that many community college districts will serve fewer FTE students than they are funded to serve in 2004-05. For these reasons, we believe aligning enrollment growth funding with population growth for 2005-06 is a reasonable approach.

Funding Growth at 1.9 Percent Would Free Up Proposition 98 Resources for Other Priorities. The Governor's budget for CCC dedicates new Proposition 98 funding for two main purposes: enrollment growth and a COLA. If the amount of funding for growth were reduced to our recommended level of $91.3 million (to fund an enrollment increase of 1.9 percent), $50.6 million would be freed up for other K-14 priorities.

Reduce Enrollment Funding by $50.6 Million. We therefore recommend the Legislature reduce enrollment funding by $50.6 million, leaving $91.3 million to fund enrollment growth of 1.9 percent. We believe that this amount would be sufficient to fund increased enrollment demand at the community colleges.

State's Effort to Equalize District Funding Should Remain a High Priority

We recommend the Legislature continue to support equalization of community college funding. The Legislature and Governor have already established that this is an important goal, towards which they committed about one-third of necessary funding in the current year.

As a result of tax base differences that predate Proposition 13 in 1978, coupled with somewhat complex district allocation formulas, community college districts receive different amounts of funding for their students. In 2003-04, average funding per FTE student ranged from about $3,500 to about $8,200, although most districts have levels within a few hundred dollars of the state median of about $4,000. Small funding differences may be acceptable or even desirable (if they reflect real cost differences encountered by different districts). However, the funding differences currently experienced by community college districts have little correlation to underlying costs.

Numerous reports and hearings in recent years have recognized this disparity and have called for efforts to "equalize" funding among districts. In general, equalization can foster:

2004-05 Budget Act Initiated Multiyear Equalization Effort. The 2004-05 Budget Act included $80 million toward the goal of equalizing community college district funding over three years. The Legislature also enacted Chapter 216, Statutes of 2004 (AB 1108, Committee on Budget and Fiscal Review), which describes the goal of having at least 90 percent of statewide CCC enrollment eventually receive the same level of funding per FTE student, and specifies how the $80 million should be allocated toward that goal. We estimate that the $80 million moves the state about one-third of the way towards its equalization goal.

The Governor proposed the 90th percentile goal for equalization in his budget proposal last year, and called equalizing CCC and K-12 funding "foremost" among various education provisions enacted with the 2004-05 budget. He does not, however, propose that the state continue to move forward on its CCC equalization goal as part of the 2005-06 budget. We believe it is important to continue the state's commitment toward equalizing community college funding for the reasons mentioned above. It is especially important in light of the state's concern with CCC accountability. (We discuss recently enacted legislation concerning CCC accountability below.)

Consider Additional Funds for Equalization. We recommend, therefore, the Legislature consider allocating additional Proposition 98 funding to equalization, to be allocated in a manner consistent with Chapter 216. While we advise first funding workload increases (such as enrollment growth and cost-of-living increases), we recommend the next priority for additional ongoing Proposition 98 funding go to equalization. We think a target of $80 million—matching the current-year commitment—would make sense, to the extent that funding is available.

Greater Accountability Needed

With over a million and a half students spread across 109 campuses, the CCC system is large and decentralized. It also has a budget of almost $8 billion in public funds. For these reasons, oversight and accountability measures are critical for ensuring that public resources are being effectively used toward the various missions assigned to CCC by the Master Plan and by statute. The Chancellor's Office is generally charged with some oversight responsibilities. At the same time, the Legislature and Governor also have sought more formalized oversight and accountability provisions in statute. In recent years, evidence of fiscal mismanagement, inappropriately claimed reimbursements for nonexistent courses, and other improprieties by some districts have heightened the state's concern with CCC accountability.

"Partnership for Excellence" Has Expired

In 1998, the Legislature and Governor established the Partnership for Excellence (PFE) program through Chapter 330 (SB 1564, Schiff). In general, the PFE provided additional funding to community colleges in exchange for the commitment to improve their performance in five specified areas, such as the percentage of students who complete courses. A key accountability provision of the PFE called for district- and system-level performance in these specified areas to be reported annually. This information would be available to inform state-level budgeting, and could be used (if the CCC's Board of Governors [BOG] so chose) to influence the allocation of funding among districts. The BOG chose not to pursue this linking of funding to performance. The system made some very modest gains in some of the specified areas, such as workforce development, although towards the end of the program, performance again declined and most of those gains were lost. With the PFE sunsetting in December 2004, the Legislature moved the program's funding ($225 million) into districts' base apportionments. This funding thus remains in district budgets beyond the expiration of the program. (The Governor vetoed $31.4 million of this funding when he signed the 2004-05 Budget Act, although as we explain below, he has set aside this amount for a possible restoration in the 2005-06 budget.)

District-Level Accountability to Be Developed

CCC Required to Develop New Accountability Measures. The PFE sunsetted on January 1, 2005. As imperfect as the PFE was as an accountability mechanism, the state now has no comprehensive mechanism for monitoring CCC's performance in various critical areas. Recognizing this, the Legislature and Governor enacted Chapter 581 (AB 1417, Pacheco) as part of the 2004-05 budget package. Among other things, Chapter 581 requires the BOG to develop "a workable structure for the annual evaluation of district-level performance in meeting statewide educational outcome priorities," including transfer, basic skills, and vocational education. The BOG is to provide its recommended evaluation structure to the Legislature and Governor by March 25, 2005.

Consistent with Chapter 581, the BOG has consulted with our office, DOF, and various other higher education experts and interested parties as it has been developing its district-level accountability structure. We will advise the Legislature on the BOG's final proposal once it is completed and made public. In general, the Legislature should determine if the accountability mechanism:

Governor's Budget Proposal Makes Restoration of Vetoed Funds Contingent on CCC's Accountability Mechanism. The Governor vetoed $31.4 million of CCC's apportionment funding when he signed the 2004-05 Budget Act. In his veto message, the Governor indicated that he was willing to restore this funding, which originally had been used to fund PFE-related improvements, if "district-level goals and performance evaluations are incorporated into the accountability structure" called for in the 2004-05 Budget Act and Chapter 581. Accordingly, in his budget proposal for 2005-06, the Governor sets aside $31.4 million in new Proposition 98 support for possible appropriation through separate legislation "pending the outcome" of the BOG's proposed accountability mechanism.

We think it is reasonable to link a portion of the funding originally provided for one accountability-related program (the PFE) to a successor accountability program (the district-level accountability system called for in Chapter 581). However, we are concerned that provisional language in the Governor's proposal purports to express the Legislature's intent that DOF solely judge the adequacy CCC's proposed accountability program and, by extension, decide whether to restore the $31.4 million. We recommend this language be deleted, as outlined below:

4. As a condition of receiving funds appropriated in Schedule (1), the Board of Governors shall continue to assess and report to the Legislature, on or before April 15, data measures required by the current Partnership for Excellence program, scheduled to sunset January 1, 2005. It is the intent of the Legislature that these measures be replaced for reporting and assessment purposes, by district-specific outcome measures being developed by an accountability workgroup established by Chapter 581, Statutes of 2004. It is also the intent of the Legislature that the final accountability measures produced by the workgroup, as approved by Department of Finance, result in the restoration of $31,409,000 to community college apportionments.

We plan to advise the Legislature on the bulk of the $31.4 million potential restoration once the BOG provides its proposal. Later in this section we recommend a small amount (about $1.25 million) of this funding set-aside be appropriated for expanding a performance-measurement data-sharing system that promises to be useful in helping districts make improvements in the areas of state concern expressed by Chapter 581.

Local Autonomy in Course Offerings Should Be Balanced With State Oversight

Course Offerings Should Emphasize State Priorities. Community college districts (which are governed by locally elected boards of trustees) have considerable autonomy in choosing which courses to offer in any given term. In fact, state regulations empower local districts to undertake any activity or initiate any program that is not in conflict with other laws and not inconsistent with CCC's broad mission. For example, a district could emphasize courses that are transferable to public universities and offer relatively few remedial courses. Another district could offer a much larger share of its courses in vocational fields and offer relatively few physical education courses.

At the same time, the Legislature has established various priorities for community colleges. Recognizing that existing statutes and regulations do not clearly prioritize the various components of CCC's mission, the Legislature and Governor in recent years have emphasized three state priority areas for CCC course offerings: student transfer to four-year colleges and universities, basic skills, and vocational/workforce training. Toward that end, the 2003-04 and 2004-05 budget acts have included provisions to help ensure that CCC districts in fact observe these priorities.

Criteria for Allocating Apportionment Funding. The 2003-04 Budget Act included a provision requiring the BOG to adopt criteria for allocating apportionment funding to ensure that courses related to the three state priorities "are provided to the maximum extent possible within budgeted funds." In response, the Chancellor's Office developed a "cap" of 2 percent on the amount of funded credit FTE students that a district could provide outside of the three priority areas. Under the policy, the Chancellor's Office would monitor compliance and work with districts that exceeded the cap to either (1) identify an acceptable reason for exceeding the cap or (2) develop a plan to redirect the district's activity into compliance.

Methodology for Identifying Priority Courses. Concerns were expressed during budget hearings in 2004-05 about how CCC's policy defined and measured (and thus promoted) priority courses. For example, if the criteria for defining a course as meeting the state's priorities were vague or overbroad, the 2 percent cap could become meaningless. To address this concern, the 2004-05 Budget Act included a provision requiring the BOG to adopt a clear methodology for determining which courses address any of the three priority areas. In response, the BOG defined as meeting state priorities all credit courses that are classified into any of five categories:

While the names of some of these categories appear to correspond to state priority areas, we remain concerned that, as a classification scheme, they are very broadly drawn. Indeed, it is unclear which types of credit courses, if any, are not included somewhere in these five categories.

Of greater concern, CCC's methodology excludes all noncredit courses, which make up about 9 percent of funded FTE students. Regulations require only that noncredit courses "meet the needs of" the students who take them. With such vague standards, the Legislature can have no assurance that noncredit courses focus on the state's stated priorities.

Recommend Clearer, More Inclusive Methodology. The CCC's limit on nonpriority courses provides little assurance that transfer, basic skills, and vocational education will in fact be accorded highest priority by districts. This is because the methodology for classifying courses as meeting the state's priorities is so expansive. We believe that the methodology should be refined to better identify courses that reasonably can be considered to address the state's three priority areas. At a minimum, noncredit courses as well as credit courses should be evaluated in determining the extent to which districts are advancing state priorities. We therefore recommend the Legislature amend budget bill language concerning these priorities so as to direct CCC to make these improvements.

Item 6870-101-0001, Provision 9. Notwithstanding any other provision of law, funds appropriated in Schedule (3) of this item shall only be allocated for growth in full-time equivalent students (FTES) , on a district-by-district basis, as determined by the Chancellor of the California Community Colleges. The chancellor shall not include any FTES from concurrent enrollment in physical education, dance, recreation, study skills, and personal development courses and other courses in conflict with existing law for the purpose of calculating a district's three-year overcap adjustment. The board of governors shall implement the criteria required by provision 5(a) of the Budget Act of 2003 for the allocation of funds appropriated in Schedules (1) and (3), so as to assure that courses related to student needs for transfer, basic skills and vocational/workforce training are accorded the highest priority and are provided to the maximum extent possible within budgeted funds. These criteria shall apply to both credit and noncredit courses. The Chancellor shall report to the Governor and Legislature by December 1, 2005, on the implementation of this provision.

Cal-PASS Helps Districts to Improve Outcomes, Fosters Accountability

We recommend the Legislature allocate to the California Partnership for Achieving Student Success $1 million of the $31.4 million that is set aside for potential restoration. This funding would permit California Community Colleges to continue and expand a program that has been proven to promote better student outcomes and accountability.

In February 2003, the California Partnership for Achieving Student Success (Cal-PASS) was launched by Grossmont-Cuyamaca community college district using a grant from the Chancellor's Office. The Cal-PASS is a data-sharing system aimed at improving the movement of students from high schools to community colleges to universities.

Student transitions are critical to the success of the educational system. For community colleges they are especially critical. The success of students at community colleges depends in part on how well the K-12 curriculum is aligned with community college courses. In addition, the success of community college students wishing to eventually earn a four-year degree depends to a large extent on how well CCC's curriculum is aligned with that of the universities and colleges to which students transfer. The Cal-PASS collects information on students throughout the state regarding their performance and movement through these various segments. These data are used by faculty consortia, institutions, and researchers to identify potential obstacles to the successful and efficient movement of students between segments. For example, high remediation rates of students who take English at a particular high school and enroll at a particular college could point to a need to better align the English curriculum or standards between these two institutions. Similarly, data concerning course standards and content can help reduce the incidence of students taking unnecessary or inappropriate courses for transfer.

Participation in Cal-PASS by individual institutions is voluntary. Since its inception, the Cal-PASS network has grown from several colleges, universities, and high schools in the San Diego area to more than 700 institutions statewide. Our review has found numerous examples of improved outcomes, increased efficiencies, and cost savings as a result of the Cal-PASS program. Moreover, in 2003 Cal-PASS was endorsed by the Assembly higher education committee, the Senate subcommittee on higher education, and the Joint Committee to Develop an Education Master Plan.

Cal-PASS Can Help Address State's Accountability Concerns. We believe Cal-PASS promotes district-level and system accountability in two ways.

Recommend $1.5 Million Base Funding for Cal-PASS. Although Cal-PASS has expanded far beyond its original inception as a pilot program, its grant funding (from the state Chancellor's Office) has not increased and in fact will expire at the end of 2005-06. Based on our review of equipment, staffing, and other costs, we believe that a base budget of $1.5 million per year would ensure the continuation and further expansion of Cal-PASS.

Given that Cal-PASS still has access to about $500,000 in grant funds for 2005-06, we recommend an additional $1 million be directed to Cal- PASS. We recommend this funding be redirected from the $31.4 million that the Governor's budget has set aside pending CCC's response to the accountability requirements of Chapter 581. This would leave almost $30.4 million of the set-aside funds potentially to be restored to district base budgets. In effect, redirecting the $1 million to Cal-PASS would spread the cost of running the Cal-PASS system across all districts at an average cost of less than $1 per FTE student. We believe this is a reasonable cost for the benefits of Cal-PASS.

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