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December 18, 2012 - Over the last two years, an unanticipated funding shortfall in Amador and San Mateo Counties cut city and county reimbursements for two complex state-local financial transactions: the triple flip and VLF swap. It is likely this funding insufficiency, commonly called insufficient ERAF, will continue in future years, requiring state action if the affected local governments are to receive their full triple flip and VLF swap payments. In addressing claims of insufficient ERAF in future years, the Legislature will be faced with the difficult decisions of how much compensation cities and counties should receive and how the compensation should be provided. In this report we describe the causes and potential future development of insufficient ERAF and outline a framework that could be used in developing a remedy for insufficient ERAF.
December 13, 2012 - In this report, we assess UC’s ability to recruit and retain tenured and tenure-track faculty. We find that (1) UC has been hiring candidates who have received their highest degree from some of the most selective universities in the nation, (2) UC has a long history of hiring its top choice faculty candidates, (3) most new entry-level faculty stay at UC long enough to earn tenure, (4) less than 2 percent of faculty resign from UC each year, and (5) UC’s faculty compensation is competitive with other top universities. These findings indicate that UC generally has been successful in its faculty recruitment and retention efforts. In light of these findings, coupled with the continuing need to prioritize limited state funding, the Legislature will need to assess the relative trade-offs between providing funding for faculty salary increases and other competing budget priorities involving faculty and higher education more generally.
December 5, 2012 - A century and a half after the founding of adult education in the state, we find that the system faces a number of major problems and challenges, including: (1) an overly broad mission; (2) lack of clear delineations between adult education and collegiate coursework at community colleges; (3) inconsistent and conflicting state-level policies; (4) widespread lack of coordination among providers; and (5) limited student data, which impairs the public's ability to hold the system accountable for performance. Given adult education's numerous and significant challenges, we believe the system is in need of comprehensive restructuring. This report lays out a vision and roadmap for a more efficient and effective system. Our package of recommendations includes: (1) a state-subsidized system focused on adult education's core mission; (2) common, statewide definitions that clearly differentiate between adult education and collegiate education; (3) a common set of policies for faculty and students at adult schools and community colleges; (4) a dedicated stream of funding that creates incentives for cooperation among providers, with new adult education funds allocated based on regional needs; and (5) an integrated data system that tracks student outcomes and helps the public hold providers accountable for results.
November 29, 2012 - Property taxes and charges are a major source of revenue for thousands of local governments in California, generating more than $55 billion in revenue in 2010-11. At the same time, many elements of California's property tax system are complex and not well understood. The purpose of this report is to serve as an introductory reference to this key funding source. In the report, we answer some common questions about the state's property taxes, such as: what taxes and charges are on the property tax bill, what properties make up California's tax base, which local local governments receive property tax revenue, and how does the property tax affect the state budget. We also identify some policy concerns related to how property tax revenue is distributed among local governments and evaluate the property tax system relative to common tax policy criteria.
November 8, 2012 - In recent years, the state has entered into public-private partnerships (P3) to finance, design, construct, operate, and maintain two state infrastructure projects in order to achieve benefits that they might not have obtained under a more traditional procurement approach. In this report, we find that the P3 practices of these recent projects are not necessarily aligned with the P3 best practices identified in research. Based on our findings, we identify several opportunities for the state to further maximize its benefits when deciding to procure a state infrastructure project as a P3. Specifically, we recommend that the Legislature (1) specify P3 project selection criteria in statute, (2) require a comparative analysis of a range of procurement options in order to better determine which procurement option would most effectively benefit the state, (3) require the existing Public Infrastructure Advisory Commission (PIAC) to approve state P3 projects, and (4) modify the structure and responsibilities of PIAC to better provide state expertise on P3s.
August 7, 2012 - Recently, three California municipalities filed for bankruptcy relief under Chapter 9 of the federal bankruptcy code: Stockton, San Bernardino, and Mammoth Lakes. These filings—occurring just months after the City of Vallejo completed its three year Chapter 9 process—have raised questions about the use of Chapter 9 in California. In this report, we answer some of the common questions about the Chapter 9 process for California local governments such as: which local governments are allowed to file for bankruptcy protections and under what circumstances, what are the major steps of the bankruptcy process, and what types of obligations can be changed or eliminated through bankruptcy.
May 31, 2012 - The Governor’s Proposition 98 budget package is built on two main assumptions regarding the creation and payment of “maintenance factor.” These two assumptions produce unreasonable outcomes for schools and the rest of the state budget in the near term and long term. In particular, the Governor’s approach would ratchet down the Proposition 98 base in some years (including 2011-12), ratchet up the base in other years (including 2012-13), and, in some cases (including 2012-13 and 2014-15), lead to schools receiving almost exclusive benefit from any growth in state revenues. We recommend the Legislature reject the Governor’s approach and adopt a budget package based upon a more reasonable approach. Specifically, under our recommended approach, maintenance factor is created any time school funding falls below the level otherwise needed to keep pace with growth in the economy, and maintenance factor is paid such that school funding is built up to the level it otherwise would have been absent the earlier shortfalls. We believe our recommended approach both keeps the underlying rationale for the creation and payment of maintenance factor linked and goes furthest in honoring the intent of Proposition 98 and Proposition 111.
May 16, 2012 - In April 2012, the California Department of Corrections and Rehabilitation (CDCR) released a report (referred to as the “blueprint”) on the administration’s plan to reorganize various aspects of CDCR operations, facilities, and budgets in response to the effects of the 2011 realignment of adult offenders, as well as to meet various federal court requirements (such as reducing the inmate population to meet specified population cap targets). In this brief we (1) summarize and assess the major aspects of the blueprint and (2) present alternative approaches that are available to the Legislature. In our view, much of the administration’s blueprint merits legislative consideration. However, the General Fund costs of the planned approach—in particular, an estimated $78 million in annual debt service—is a significant tradeoff. We find that the state could meet its facility requirements (including those for medical and mental health treatment) and specified population cap targets at much lower ongoing General Fund costs than proposed by the administration, potentially saving the state as much as a billion dollars over the next seven years.
May 11, 2012 - In an attempt to fundamentally reform the state’s transfer of students between the California Community Colleges (CCC) and the California State University (CSU) system, the Legislature and Governor enacted Chapter 428, Statutes of 2010 (SB 1440, Padilla). The legislation requires community colleges to create two-year associate degrees for transfer. Students who earn such a degree are automatically eligible to transfer to the CSU system as an upper-division (junior) student in a bachelor’s degree program. Our review finds that since the legislation was enacted, CCC and CSU have made some progress, but additional work needs to be done by both segments to achieve SB 1440's intended goals. For their part, community colleges need to increase the number of associate degrees for transfer they make available to students. It is incumbent on CSU, meanwhile, to maximize the number of academic programs to which these degrees can be applied. Toward these ends, we recommend the Legislature provide additional guidance and clarification to CCC and CSU on their responsibilities, as well as continued oversight to track their progress.
May 2, 2012 - This report summarizes findings from our third annual finance survey of California public school districts. Survey responses indicate that districts have experienced notable changes as a result of recent budget reductions, including a smaller workforce, larger class sizes, shorter school years, and less extensive programmatic offerings. Given the slow pace at which the economy is recovering, combined with uncertainty over the outcome of the November election, school districts indicate they are planning for additional reductions in 2012-13. Given these findings, we recommend the Legislature take immediate actions to assist districts in managing their fiscal challenges in 2012-13, as well as initiate long-term improvements to the K-12 funding and accountability systems.
April 30, 2012 - The FI$Cal project recently completed a procurement and selected the vendor who will build FI$Cal, the state's single, fully integrated financial information system. Project staff has submitted several documents to the Legislature, including a special project report that updates the project plans, a report to the legislature that includes information on the procurement, and a budget request for $89 million ($54 million General Fund) and 86 new positions in order to begin the first year of system development. This report (24 pages): (1) provides an extensive background on the project; (2) describes the innovative procurement process that state staff conducted to secure vendor services to build the FI$Cal system, including information on the procurement results; (3) reviews the FI$Cal project plans as explained in project documents; and (4) analyzes features of the project’s proposed plans and offers recommendations to the Legislature as it considers the budget request and the future of the system. Based upon our analysis of the proposed plans and review of project status, we believe that the benefits of proceeding with FI$Cal development at this time outweigh the costs of the project. In addition to the inherent benefits derived from having a modern, fully integrated financial information system for the state, proceeding with FI$Cal would also avoid substantial costs associated with replacing various individual financial management systems over the next several years. However, we recognize the tight budget times requiring the Legislature to make difficult decisions regarding programmatic reductions. Therefore, should the Legislature wish to proceed with the project, we offer alternative funding options that reduce the state’s reliance on General Fund monies to pay for the project in the short term. These options include the state's GS $Mart loan program, vendor financing, and advanced payments from the special funds for the first few years of system development. Additionally, we point out ways the project’s change management and staffing plans to implement FI$Cal statewide could be improved to reduce risk and maximize project benefits.
April 30, 2012 - This report provides an overview and assessment of the state's comprehensive system for monitoring the fiscal condition of school districts. Under this system, County Offices of Education review the fiscal condition of school districts at several points during the year and provide additional support for districts showing signs of fiscal distress. In the most serious case—when a district no longer appears able to meet its financial obligations—the state provides the district with an emergency loan and assumes administrative control. Our review indicates that the oversight system has been effective in preserving school district fiscal health and preventing districts from requiring an emergency loan. Most notably, during the more than 20 years the new system has been in effect, 8 districts have received emergency state loans whereas 26 districts required such loans in the 12 years prior to the new system. Additionally, the number of districts experiencing fiscal distress has increased in tight budget times, but without a corresponding increase in the number of emergency loans required. This suggests the system’s structure of support and intervention is serving a critical early warning function—allowing districts to get the help they need while fiscal problems tend to be smaller and more manageable. Given its effectiveness, we recommend preserving the existing system, as it has shown to be a vital tool for fostering the ongoing fiscal well-being of districts.
April 19, 2012 - In 2006, after finding that California had failed to provide a constitutional level of medical care to its inmates, a federal court appointed a Receiver to take over the direct management and operation of the state's inmate medical care program from the California Department of Corrections and Rehabilitation (CDCR). Since that time, the current and prior Receiver have taken a variety of actions to revamp CDCR's medical program. In this report, we (1) provide a status report on the Receiver’s actions, (2) describe how these actions have impacted inmate medical care spending and outcomes, (3) discuss the experiences of other states that have faced problems similar to California’s in delivering inmate medical care, and (4) provide recommendations for delivering a constitutional level of inmate medical care in the most cost-effective manner as possible in the long run. These recommendations include establishing an independent oversight board, taking steps to address current operational efficiencies to bring state expenditures to a more sustainable level, and establishing a pilot project to contract for medical care services.
April 17, 2012 - In April 2012, the California High-Speed Rail Authority (HSRA) released its most recent business plan, estimating the cost of constructing the first phase of the high-speed train project at $68 billion. However, the HSRA has secured only about $9 billion in voter approved bond funds and $3.5 billion in federal funds. The revised business plan also makes significant changes from prior plans, such as proposing to integrate high-speed rail with other passenger rail systems, constructing the southern portion of the system first, assuming lower construction costs, and using “cap-and-trade” auction revenues if additional federal funds fail to materialize. Consistent with the HSRA's revised business plan, the Governor’s budget plan for 2012-13 requests $5.9 billion to continue the high-speed rail project--$2.6 billion in state bond funds matched with $3.3 billion in federal funds to begin construction in the Central Valley. In addition, about $800 million is requested to make improvements to existing passenger rail services and about $250 million to complete preliminary design work and environmental reviews for various sections of the project. In this brief report, we find that HSRA has not provided sufficient detail and justification to the Legislature regarding its plan to build a high-speed train system. Specifically, funding for the project remains highly speculative and important details have not been sorted out. We recommend the Legislature not approve the Governor’s various budget proposals to provide additional funding for the project. However, we do recommend that some minimal funding be provided to continue planning efforts that are currently underway.
April 13, 2012 - Over the last four years, the judicial branch has experienced various one–time and ongoing budget reductions as the state has faced large budget shortfalls. The Governor's 2012–13 budget continues the ongoing reduction to the branch, provides the Judicial Council with full authority to implement the reduction among branch entities, and proposes increasing civil fees to generate $50 million in new revenues to help the branch address their reduction. To the extent the Legislature approves the Governor's proposal, ongoing solutions should be identified and implemented in 2012–13, particularly since recent transfers and loans from branch special funds have greatly reduced the fund balances available as a potential budget solution. Specifically, we recommend the Legislature reject the Governor's proposed budget bill language authorizing the Judicial Council to allocate the reductions, adopt specific actions to achieve ongoing savings in the judicial branch, and require that the judicial branch submit a report on potential operational efficiencies.