Summary of LAO Findings and Recommendations on the 2013-14 Budget

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	Program	Budget Issue	LAO Finding Or Recommendation	Last Updated
Go Back	Teacher credentialing	Fees for accrediting teacher preparation institutions and programs.	Consider whether accreditation activities need to be restarted in 2013-14. If restarted, establish fees to recover the full cost of accreditation activities.	3-21-13

Detailed Narrative
Background *Core Mission and Existing Revenue Streams.* The Commission on Teacher Credentialing (CTC) accredits teacher preparation institutions and programs, approves professional development programs, credentials teachers, and oversees discipline of credentialed teachers and administrators. The commission’s budget is largely covered by teachers and other education professionals paying fees for credentials and examinations. The commission’s annual budget is approximately $20 million, with approximately $15 million coming from the Teacher Credentials Fund and $5 million from the Test Development and Administration Account. Currently, CTC does not levy fees for accreditation activities or disciplinary reviews. *Previous Operating Shortfall.* In spring of 2012, CTC expected to have a current-year operating shortfall of approximately $5 million, largely due to a decline in the number of individuals pursuing a teaching credential. The 2012-13 Budget Act included a number of steps to address this operating shortfall, including increasing the teacher credentialing fee from $55 to $70 and increasing testing fees. The2012-13 Budget Act also included provisional language tasking CTC with (1) examining what further efficiencies it could achieve and (2) identifying additional sources of revenue. (For more information, please see our 2012-13 analysis on CTC’s operating shortfall.) *Accreditation Fees as a Potential Revenue Source.* In response to the provisional language, CTC has raised the option of establishing fees for specified institutional and program accreditation services as a potential means of recovering at least some of the costs of providing these services. Under the option, CTC would charge a fee for initial accreditation. This fee would apply to both new teacher preparation institutions and programs. In addition, CTC would impose fees on institutions and programs that do not meet the commission’s accreditation standards and therefore require additional CTC visits and reviews in order to become or remain accredited. Fees per review would be in the $500 to $3,000 range. Under the option, CTC believes it would raise enough revenue to cover associated travel costs. *Fees Common for Other Types of Accreditation.* Accrediting agencies typically charge associated fees, but, unlike the fee option identified by CTC, other fee policies typically generate sufficient revenue to cover the bulk, if not all, of accreditation costs. For example, both the Western Association of Schools and Colleges (WASC) and the National Council for Accreditation of Teacher Education (NCATE) charge fees for accreditation. The WASC charges fees to institutions based on the type of accreditation visit required and the travel cost associated with the visit. Similarly, NCATE charges both an annual membership fee and a size-based fee when an institution is undergoing NCATE accreditation (with larger institutions paying a higher accreditation fee). *Accreditation Activities Currently Suspended.* In the current year, CTC is not conducting accreditation activities due to budget constraints. This suspension applies to both programs seeking first-time accreditation and those seeking to renew accreditation. The accreditation system also was suspended from December 2002 through June 2007 due to the confluence of declining CTC budgets and changes to the accreditation system. As a result of these suspensions, 60 to 80 teacher preparation programs—out of 261 active programs—have not participated in ongoing accreditation activities in more than ten years. The commission believes the lack of consistent accreditation activities has amplified a few ongoing issues in teacher preparation programs, including selecting quality instructors and placing intern teachers in appropriate supervised field instruction. *Accreditation Set to Restart in the Budget Year.* The commission’s staff is taking steps to prepare for accreditation activities to restart in the budget year. It is unclear, however, whether CTC will have sufficient resources, even if the new fee option is adopted, to restart accreditation unless the commission reorders its priorities for the budget year. To date, CTC has not explicitly identified the activities it would suspend in 2013-14 in order to be able to restart accreditation activities. If CTC lacks the willingness or ability to redirect resources from other activities to accreditation, then the commission would need to take action to suspend accreditation for an additional year. Governor’s Proposal *Institute Some Accreditation Fees.* The administration proposes to implement CTC’s option of imposing fees to recover nonsalary costs for new accreditation reviews and extraordinary accreditation activities. Since the fees would cover only nonsalary cost (such as travel), fees per review would be relatively modest. The commission would be required to notify the Legislature and the Department of Finance 30 days prior to establishing or adjusting the fees. The Governor’s budget assumes these new fees would generate additional revenue of $200,000 in 2013-14. LAO Assessment and Recommendations *Governor’s Proposal Assumes CTC Accreditation Process Is Necessary.* By proposing that CTC establish accreditation fees, the Governor’s proposal assumes that accreditation is an important state service which should resume. Suspending accreditation multiple times over the last decade without significant negative repercussions suggests, however, that accreditation might not be an essential state activity. Moreover, many institutions are accredited not only by CTC but also by WASC and NCATE, suggesting that state accreditation could be redundant in light of the requirements of other regional and national forms of accreditation. Furthermore, in addition to the accreditation process, CTC evaluates teacher quality through the credentialing process. Thus, under the current system, CTC is evaluating both the inputs (accreditation) and the outputs (credentialing) of teacher preparation. For all these reasons, we recommend the Legislature carefully consider whether CTC accreditation needs to be restarted. *Governor’s Proposal Assumes Existing Accreditation Process Is Well Designed.* The Governor’s fee proposal also assumes that the current accreditation system is designed as cost-effectively as possible. We are concerned, however, that the current process remains heavily input-based—requiring a significant amount of CTC staff time to conduct extensive interviews and document reviews. We also are concerned that the existing accreditation process provides little publicly accessible information about the quality of teacher preparation institutions and programs—particularly on key performance measures such as subsequent teacher employment and retention. In addition, we are concerned that the existing accreditation system does not sufficiently target CTC services to those teacher preparation institutions and programs that show signs of poor performance. If the Legislature were to determine that CTC accreditation is a vital state service, then we recommend the Legislature consider various modifications to the state accreditation process to make it more cost effective, including annual reviews of a relatively small set of meaningful performance data and more targeted interaction with poor performers. *Governor’s Proposal Helps Address Budget Shortfall . . .* If accreditation activities are resumed and the accreditation process is redesigned to be as cost-effective as possible, then we think the Governor’s proposal to raise fees to cover associated accreditation costs is reasonable. Allowing CTC to raise new revenue through accreditation fees would put CTC in a more viable funding position and help it address its ongoing budget challenges. *. . . But Does Not Cover the Entire Cost.* The Governor’s proposal, however, does not allow CTC to recover the entire cost of its accreditation activities. That is, the proposed fees would cover only travel costs, not the ongoing accreditation activities of CTC staff. We do not see a rationale for raising fees to cover only a portion of the cost. Moreover, in the case of CTC’s credentialing and test-related activities, fees are set such that they cover the entire cost of associated activities. For these reasons, we recommend the Legislature authorize CTC to set fee levels sufficient to cover the entire cost of required accreditation activities.

Detailed Narrative

Background

Core Mission and Existing Revenue Streams. The Commission on Teacher Credentialing (CTC) accredits teacher preparation institutions and programs, approves professional development programs, credentials teachers, and oversees discipline of credentialed teachers and administrators. The commission’s budget is largely covered by teachers and other education professionals paying fees for credentials and examinations. The commission’s annual budget is approximately $20 million, with approximately $15 million coming from the Teacher Credentials Fund and $5 million from the Test Development and Administration Account. Currently, CTC does not levy fees for accreditation activities or disciplinary reviews.

Previous Operating Shortfall. In spring of 2012, CTC expected to have a current-year operating shortfall of approximately $5 million, largely due to a decline in the number of individuals pursuing a teaching credential. The 2012-13 Budget Act included a number of steps to address this operating shortfall, including increasing the teacher credentialing fee from $55 to $70 and increasing testing fees. The2012-13 Budget Act also included provisional language tasking CTC with (1) examining what further efficiencies it could achieve and (2) identifying additional sources of revenue. (For more information, please see our 2012-13 analysis on CTC’s operating shortfall.)

Accreditation Fees as a Potential Revenue Source. In response to the provisional language, CTC has raised the option of establishing fees for specified institutional and program accreditation services as a potential means of recovering at least some of the costs of providing these services. Under the option, CTC would charge a fee for initial accreditation. This fee would apply to both new teacher preparation institutions and programs. In addition, CTC would impose fees on institutions and programs that do not meet the commission’s accreditation standards and therefore require additional CTC visits and reviews in order to become or remain accredited. Fees per review would be in the $500 to $3,000 range. Under the option, CTC believes it would raise enough revenue to cover associated travel costs.

Fees Common for Other Types of Accreditation. Accrediting agencies typically charge associated fees, but, unlike the fee option identified by CTC, other fee policies typically generate sufficient revenue to cover the bulk, if not all, of accreditation costs. For example, both the Western Association of Schools and Colleges (WASC) and the National Council for Accreditation of Teacher Education (NCATE) charge fees for accreditation. The WASC charges fees to institutions based on the type of accreditation visit required and the travel cost associated with the visit. Similarly, NCATE charges both an annual membership fee and a size-based fee when an institution is undergoing NCATE accreditation (with larger institutions paying a higher accreditation fee).

Accreditation Activities Currently Suspended. In the current year, CTC is not conducting accreditation activities due to budget constraints. This suspension applies to both programs seeking first-time accreditation and those seeking to renew accreditation. The accreditation system also was suspended from December 2002 through June 2007 due to the confluence of declining CTC budgets and changes to the accreditation system. As a result of these suspensions, 60 to 80 teacher preparation programs—out of 261 active programs—have not participated in ongoing accreditation activities in more than ten years. The commission believes the lack of consistent accreditation activities has amplified a few ongoing issues in teacher preparation programs, including selecting quality instructors and placing intern teachers in appropriate supervised field instruction.

Accreditation Set to Restart in the Budget Year. The commission’s staff is taking steps to prepare for accreditation activities to restart in the budget year. It is unclear, however, whether CTC will have sufficient resources, even if the new fee option is adopted, to restart accreditation unless the commission reorders its priorities for the budget year. To date, CTC has not explicitly identified the activities it would suspend in 2013-14 in order to be able to restart accreditation activities. If CTC lacks the willingness or ability to redirect resources from other activities to accreditation, then the commission would need to take action to suspend accreditation for an additional year.

Governor’s Proposal

Institute Some Accreditation Fees. The administration proposes to implement CTC’s option of imposing fees to recover nonsalary costs for new accreditation reviews and extraordinary accreditation activities. Since the fees would cover only nonsalary cost (such as travel), fees per review would be relatively modest. The commission would be required to notify the Legislature and the Department of Finance 30 days prior to establishing or adjusting the fees. The Governor’s budget assumes these new fees would generate additional revenue of $200,000 in 2013-14.

LAO Assessment and Recommendations

Governor’s Proposal Assumes CTC Accreditation Process Is Necessary. By proposing that CTC establish accreditation fees, the Governor’s proposal assumes that accreditation is an important state service which should resume. Suspending accreditation multiple times over the last decade without significant negative repercussions suggests, however, that accreditation might not be an essential state activity. Moreover, many institutions are accredited not only by CTC but also by WASC and NCATE, suggesting that state accreditation could be redundant in light of the requirements of other regional and national forms of accreditation. Furthermore, in addition to the accreditation process, CTC evaluates teacher quality through the credentialing process. Thus, under the current system, CTC is evaluating both the inputs (accreditation) and the outputs (credentialing) of teacher preparation. For all these reasons, we recommend the Legislature carefully consider whether CTC accreditation needs to be restarted.

Governor’s Proposal Assumes Existing Accreditation Process Is Well Designed. The Governor’s fee proposal also assumes that the current accreditation system is designed as cost-effectively as possible. We are concerned, however, that the current process remains heavily input-based—requiring a significant amount of CTC staff time to conduct extensive interviews and document reviews. We also are concerned that the existing accreditation process provides little publicly accessible information about the quality of teacher preparation institutions and programs—particularly on key performance measures such as subsequent teacher employment and retention. In addition, we are concerned that the existing accreditation system does not sufficiently target CTC services to those teacher preparation institutions and programs that show signs of poor performance. If the Legislature were to determine that CTC accreditation is a vital state service, then we recommend the Legislature consider various modifications to the state accreditation process to make it more cost effective, including annual reviews of a relatively small set of meaningful performance data and more targeted interaction with poor performers.

Governor’s Proposal Helps Address Budget Shortfall . . . If accreditation activities are resumed and the accreditation process is redesigned to be as cost-effective as possible, then we think the Governor’s proposal to raise fees to cover associated accreditation costs is reasonable. Allowing CTC to raise new revenue through accreditation fees would put CTC in a more viable funding position and help it address its ongoing budget challenges.

. . . But Does Not Cover the Entire Cost. The Governor’s proposal, however, does not allow CTC to recover the entire cost of its accreditation activities. That is, the proposed fees would cover only travel costs, not the ongoing accreditation activities of CTC staff. We do not see a rationale for raising fees to cover only a portion of the cost. Moreover, in the case of CTC’s credentialing and test-related activities, fees are set such that they cover the entire cost of associated activities. For these reasons, we recommend the Legislature authorize CTC to set fee levels sufficient to cover the entire cost of required accreditation activities.