|Budget Issue:||Basic aid districts|
|Program:||California Community Colleges|
|Finding or Recommendation:||Reduce General Fund support for basic aid districts by a total of $5.9 million in 2011-12.|
Background on Funding Practices. The state provides funding for California Community College’s (CCC’s) 72 districts through two primary mechanisms: apportionments (general-purpose funding based on student enrollment), and categorical programs (funding designed to achieve specific educational purposes and allocated based on separate formulas). Each year, the Legislature and Governor specify the total amount of apportionments and categorical-program funding for the CCC system.
All districts receive General Fund monies for categorical programs. However, while categorical programs are funded entirely by the General Fund, apportionment funding comes from three main sources: local property taxes, student enrollment-fee revenues, and the state General Fund. Local property taxes and fees are retained by the districts that collect this funding. The General Fund provides the additional funding needed to meet each district’s apportionment target. In a few districts, however, local property tax and fee revenues alone exceed the districts’ annual apportionment obligation. These districts, commonly referred to as “basic aid” districts, can keep the excess local revenue and use it for educational programs and services at their discretion. (In the current year, Marin, MiraCosta, and South Orange are basic aid districts.) Because they are not dependent on state monies to fund enrollment, basic aid districts are oftentimes insulated from some funding reductions experienced by other districts during state budget crises. For example, basic aid districts will not share in the net $290 million base apportionment cut approved by the Legislature in March for the 2011-12 fiscal year.
Partnership for Excellence Program. Between 1998-99 and 2003-04, the Legislature funded a categorical program known as Partnership for Excellence (PFE). In general, the PFE provided supplementary funding to each district in exchange for its commitment to improve student outcomes in specified areas (such as transfers to four-year institutions). The PFE was allowed to sunset in January 2005. Anticipating this sunset, the Legislature and Governor redesignated PFE monies as apportionment funding in the 2004-05 Budget Act. Notwithstanding this new designation, the budget included provisional language that allowed basic aid districts to receive this funding (which totaled about $6 million for basic aid districts) for that year. This language was not carried forward in any subsequent budgets.
Recommend Reducing General Fund Support for Basic Aid Districts. Despite the absence of explicit budgetary authority, the statewide Chancellor’s Office (which is charged with allocating state funds) has continued to provide basic aid districts with these General Fund monies each year since 2005-06. It is unclear why the state continues to provide these payments to districts that have more than sufficient local funds to cover their apportionment obligation on their own. We recommend the Legislature prohibit the Chancellor’s Office from making any such future payments to basic aid districts. Depending on the state’s fiscal condition, the Legislature may wish to either reallocate the freed-up monies to non-basic aid districts, or use the funds for General Fund savings (a total of $5.9 million).