State Spending Plan for 1996-97
Chapter 3, Part I

Major Features of the 1996-97 Budget Plan

This chapter provides a description of the major features of the 1996-97 budget plan. It includes individual discussions of the budget actions within each of the major program areas, as well as discussion of the budget actions that affect revenues.

K-12 Education

In this section, we describe the major features of the budget package as they relate to the Proposition 98 minimum funding guarantee and K-12 schools.

K-12 Proposition 98 Provisions

The K-12 portion of the Proposition 98 budget package includes:

1996-97. Overall K-12 funding of $4,773 per pupil in 1996-97, which represents an increase of $148, or 3.2 percent, above the 1995-96 revised amount.
1995-96 and Prior Years "Settle-Up Funding." Provides overall K-12 funding of $4,625 per pupil for 1995-96, or $190 more per pupil than anticipated in the 1995 Budget Act.

Figure 1 summarizes for 1995-96 and 1996-97 the effect of the budget package on K-12 schools, community colleges, and other specified agencies. The budget proposes $29.1 billion for Proposition 98 in 1996-97. This represents an increase of $1.7 billion, or 6 percent, from the revised 1995-96 funding level. Almost all of this increase is from the state General Fund because local property taxes are projected to increase only slightly in 1996-97.

Proposition 98 funding for K-12 schools totals $25.9 billion. This represents an increase of $2.5 billion, or 11 percent, from the funding level included in the 1995 Budget Act. This large increase results from two sources. First, the 1995-96 minimum funding guarantee increased from the budgeted level by $1.1 billion due to higher-than-anticipated General Fund revenues. Second, the budget assumes the 1996-97 K-12 share of Proposition 98 funds will increase by $1.4 billion, or 5.9 percent. As a result, a total of $2.5 billion in new funds is included in the 1996 Budget Act for K-12 education.

As Figure 1 also shows, community college funding in 1996-97 increases by $170 million from the revised 1995-96 level. We discuss the community colleges' budget in the higher education section of this report.

K-12 Program Impacts

1996-97 Baseline Increases. As discussed above, compared to the 1995 Budget Act, K-12 Proposition 98 funding increased by $2.5 billion in 1996-97. Of this amount, the budget allocates $1.2 billion to provide inflation and growth adjustments. Specifically, the budget includes about $400 million to accommodate a projected 2.6 percent increase in the student population and $800 million for a cost-of-living adjustment (COLAs) (3.2 percent) for K-12 programs.

The budget allocates the remaining $1.3 billion for other purposes, including new programs and existing K-12 categorical programs. Figure 2 displays the major K-12 Proposition 98 appropriations for 1996-97.

Class-Size Reduction. The budget dedicates a major portion of the remaining funds to provide $771 million to reduce class sizes in kindergarten through grade three. The features of this new program are as follows:

Schools must reduce class sizes to no more than 20 students to qualify for funding.
Schools will receive $650 per student if classes are reduced for a full day and $325 per student if classes are reduced for half the school day.
The appropriation of $771 million is sufficient to permit smaller class sizes in three grades.

Other 1996-97 Initiatives. As Figure 2 illustrates, the budget contains a number of other program increases. The budget includes an additional $178 million for revenue limit increases ($147 million to equalize school district revenue limits and $31 million for general revenue limit increases). Chapter 203, Statutes of 1996 (AB 3497, Richter) contains the statutory changes needed to implement the equalization provisions. The enacted bill also contains a provision that directs the use of any additional Proposition 98 funds that may become available during the year. It provides that additional funds shall be used to provide further increases in revenue limit equalization (50 percent) and across-the-board increases in district revenue limits (50 percent).

1995-96 and Prior Years Settle-Up Funding. Proposition 98's minimum funding levels are determined by one of four specified formulas, each using a set of specified factors. Because the factors change during the year, the minimum funding guarantee under Proposition 98 also changes during the year. Any additional amount needed to fund any increase in the guarantee is referred to as Proposition 98 "settle-up" funding.

The budget contains approximately $1.3 billion in settle-up funding for K-12 programs. Figure 3 (next page) displays the major allocations of these monies. The Legislature appropriated most of these funds for one-time activities. More than half of the one-time funds were distributed in the form of local block grants. Specifically, the budget allocates a total of $387 million in block grants to local school sites for one-time expenditures. Each school will receive about $70 per student, with no school receiving less than $25,000. In addition, the budget provides $200 million in block grants to school districts. Under these grants, each district will receive about $37 per student.

As Figure 3 illustrates, the budget also includes $200 million to provide support for "portable" classrooms that districts will need in order to reduce class sizes in the primary grades. The budget specifies that schools will receive $25,000 per portable. Therefore, this funding is sufficient to purchase about 8,000 new classrooms. The budget also appropriates $167 million for a reading initiative. Of this amount, $152 million is for new instructional materials, $13 million is for staff development, and $2 million is for district leadership training.

Higher Education

Figure 4 shows the change in funding, from selected sources, for each major segment of higher education for 1996-97.

University of California

The 1996 Budget Act provides $131 million (6.8 percent) more in General Fund support for the University of California (UC) in 1996-97 compared to 1995-96. The budget assumes no general increase in undergraduate or graduate student fees, although the third year of a four-year planned increase in graduate professional program fees (including law, medicine, dentistry, and veterinary medicine) is expected to generate $10.4 million in revenues for the UC in 1996-97.

The Legislature approved a budget plan for the UC that includes:

$78 million in employee compensation to provide a 2 percent cost-of-living increase for all employees (effective October 1, 1996), an additional 3 percent "parity" salary increase for faculty (also effective October 1, 1996), and merit salary increases for eligible faculty and staff.
$12.5 million to offset the impact of inflation on goods and services.
$9 million to increase student enrollment by 1,500 (1 percent).
$7.5 million, matched by an equal amount from other sources, to increase support for ongoing facilities maintenance. This was intended as the first year of a four-year effort to fully fund maintenance spending. The Governor, however, vetoed this augmentation.

California State University

The 1996 Budget Act provides $102 million (6.1 percent) more in General Fund support for the California State University (CSU) in 1996-97 than in 1995-96. As with the UC, the budget assumes no general increase in student fees.

The Legislature approved a budget plan for the CSU that includes:

$64 million to provide a 4 percent pool of funds for employee compensation increases. How these funds are used (for COLAs, merit increases, and parity adjustments) will be determined through collective bargaining.
$11.8 million to increase enrollment by 2,000 students (0.8 percent).
$17.1 million to increase support for ongoing facilities maintenance. This was to be the first year of a three-year effort to increase maintenance spending at the CSU to more adequate levels. The Governor, however, reduced this augmentation by $7.5 million.

Community Colleges

Because of the major increases in Proposition 98 funding in 1995-96 and 1996-97, the 1996 budget package contains major funding increases for community colleges (see the Proposition 98 section for more details). Specifically, General Fund spending for community colleges totals $1.6 billion in the budget year. This represents a $307 million, or 24 percent, increase above the funding level included in the 1995 Budget Act. Because the 1995-96 community college share of Proposition 98 funds also increased (by $145 million, due to higher-than-anticipated General Fund revenues), the projected year-to-year increase in General Fund spending for community colleges shown in Figure 4 is $162 million, or 11 percent. The budget does not contain any increase in student fee levels. (Fee revenues, however, will increase slightly due to enrollment growth.)

1996-97 Expenditures. Figure 5 illustrates the major program increases provided with the additional funds in 1996-97. The budget includes $54 million to fund additional enrollment growth at new centers ($20 million) and new facilities at existing campuses ($24 million). These centers and facilities had been built during the early 1990s but never received additional funding for growth in student attendance. The total of $54 million also includes additional maintenance funding for these centers and facilities ($10 million).

Vetoed Funds. The Governor vetoed $26 million included in the Budget Bill for program improvement. Senate Bill 1233 (Costa), which was passed by the Legislature at the end of the session, instead would appropriate $25.6 million for additional apportionments growth funding in
1996-97. This would bring apportionments growth funding in the 1996-97 budget to a total of $63.5 million.

Settle-Up Expenditures. The budget includes $166 million in settle-up funding for four one-time activities. Of this amount, the budget allocates $75 million for district block grants, which will be allocated on a per-student basis. The budget also provides $60 million to increase support for deferred maintenance and $20 million for removing architectural barriers to disabled persons. Finally, the budget contains $9.4 million to provide funding that was lost in 1995-96 when property tax revenues to community colleges were lower than expected.

Student Aid Commission

The budget appropriates $267 million for the Student Aid Commission in 1996-97, which is an increase of $26 million, or 11 percent. Of this amount, $20 million represents an increase in the Cal-Grants program, which provides financial aid to higher education students in California. The augmentation provides a $10 million increase in the number of new financial aid awards in all Cal Grant aid categories and $10 million to increase the maximum grant amount for students attending private colleges and universities.

Continue to Chapter 3 - Major Features of the 1996-97 Budget Plan, Part II

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State Spending Plan for 1996-97 Chapter 3, Part I