Summary of LAO Findings and Recommendations on the 2012-13 Budget

Create a summary list by choosing a Policy Area OR Department below, and clicking Go.



Budget Issue
LAO Finding Or

Last Updated
 Go Back  Commission on Teacher Credentialing (CTC) CTC's $5 million 2012-13 operating shortfall Adopt Governor’s proposals to: increase credentialing and tests fees on an ongoing basis, permanently eliminate 17 positions, and achieve one-time technology-related savings. Additionally, recommend authorizing a small budget-year transfer and directing CTC to explore options for achieving greater efficiencies and instituting fees for accreditation services. 4-13-12

Detailed Narrative


State law establishes CTC and entrusts it with credentialing teachers, accrediting teacher preparation programs, and monitoring teacher misconduct cases. The commission is composed of three main divisions that perform these key functions: the Certification, Assignments, and Waivers Division (CAW); the Professional Services Division (PSD); and the Division of Professional Practices (DPP). Teacher credentialing fees and test administration fees support CTC’s budget. In 2011-12, CTC expenditures totaled $19.2 million—with $14.5 million covered from the Teacher Credentialing Fund (TCF) and $4.7 million covered from the Test Development and Administration Account (TDAA).

Revenue From Credentialing Fees Support Most CTC Functions. The TCF is CTC’s largest funding source—accounting for about 75 percent of CTC’s total revenue. The TCF consists of revenue from a variety of fees for credentials that CTC issues, including first-time credentials and credential renewals (teachers must renew their credential every five years). Given its dependence on the associated revenue, the annual volume of credential applications is particularly important for CTC. The annual budget act sets forth the maximum credential application fee level that the commission may charge each year. Currently, CTC charges a fee of $55 for all renewal credentials and half that amount ($27.50) for first-time credentials and certificates of clearance (COC).

Testing Fees Are a Smaller But Still Important Revenue Source. Fees collected by CTC for test administration are the commission’s other primary source of revenue (contained in the TDAA). Some of the exams CTC administers are the California Basic Educational Skills Test (CBEST), Reading Instruction Competence Assessment (RICA), and California Subject Examination for Teachers (CSET). As specified in state law, CTC has the authority to establish the fee structure for tests it administers upon approval from the Department of Finance (DOF), without explicit approval from the Legislature. The fees for the different tests administered range from $41 to as high as $385.

Revenue Shrinking as Credential Applications and Test Taking Declines. The number of credential applications and tests taken has been decreasing in recent years. As shown in Figure 1, the number of credential applications has fallen by more than 70,000 (or 27 percent) since 2007-08. Similarly, the number of tests taken has decreased by more than 65,000 (or 32 percent) since 2007-08. Because CTC is supported almost entirely with revenue from credential application and test fees, these significant drops in volume have led to a notable reduction in CTC’s underlying revenue streams.

Governor’s Proposal

Administration Projects $5 Million Budget-Year Shortfall. The administration proposes to address this operating shortfall through a combination of four actions:

 (1) Increase teacher credentialing fee to generate $3 million in additional revenue on an ongoing basis. (The administration appears to assume all credential applicants are charged an additional $15.)

(2) Increase test fees to generate $500,000 in additional ongoing revenue.

(3) Eliminate 17 positions for associated ongoing savings of $1 million. Of the 17 positions, nine come from the PSD, seven from the CAW, and one is a general administrative position. Of these positions, most are currently vacant. In an effort to ensure CTC can achieve these savings, the Governor proposes accompanying budget bill language directing CTC to work with the State Board of Education (SBE) to streamline the teacher preparation and credentialing processes.

(4) Achieve one-time operational savings of $500,000 from reduced information technology costs.


We recommend adopting all components of the Governor’s proposal for closing CTC’s operating shortfall as well as adopting two additional components. Specifically, we are concerned that the Governor likely is overestimating how much new application fee revenue his proposal will generate. We also are concerned that, even with adopting all components of the Governor’s proposal, CTC likely will remain in a precarious fiscal position in 2012-13 and 2013-14. To address these two concerns, we recommend (1) making a small, additional transfer from the TDAA to the TCF in 2012-13 and (2) directing CTC to explore additional options for achieving greater efficiencies and raising revenue by instituting fees for accreditation services.

Adopt All Components of Governor’s Proposal

We think all components of the administration’s proposal to address CTC’s budget problem have merit.

Increase in Credential Fee Reasonable After Long Period of No Increase. The Governor’s proposal to increase the credentialing fee by $15 raises approximately $3 million in 2012-13—which provides a substantial amount towards addressing CTC’s ongoing budget problem. While raising fees for teachers is difficult in tough economic times, we think the fee increase is reasonable for two reasons. The state has not raised fee levels since 1999. Further, had the 1998 fee level (of $60) been increased annually for inflation, the fee level today would be $97—notably higher than the rate would be under the Governor’s 2012-13 proposal.

Increase in Test Fees Needed to Ensure CTC Recovers Associated Costs. Statute specifies that the commission collect test fees to recover the costs associated with test development and administration. Nonetheless, the commission changed its fee structure in 2011-12 from a full-cost recovery model to a fee structure that reduced costs for test takers. As a result, the fund no longer will be self-sustaining. The administration proposes to raise fees to ensure associated revenues cover all test administration costs. We recommend the Legislature approve the Governor’s proposal, thereby ensuring the fund is self-sustaining and helping to address CTC’s overall operating shortfall.

Eliminating Positions Would Achieve Savings Without Significant Workload Disruptions. The administration is targeting reductions in the PSD and CAW divisions because it believes CTC has achieved efficiencies in teacher accreditation and credentialing processes. In particular, CTC has implemented online credential processing, which has resulted in a significant decrease in the time and workload associated with processing credentials. In addition, even if the 17 positions were eliminated, CTC retains six vacant positions to address staffing needs in other divisions.

Authorize A Small Budget-Year Transfer From TDAA to TCF. Although we recommend the Legislature approve the proposed credential application fee increase, we believe the administration has overestimated the amount of new revenue the fee proposal will generate. In arriving at its $3 million estimate, the administration assumed the credential fee would be raised by $15 for all applications (as a result of raising the fee from $55 to $70). This assumption does not take into account CTC’s current policy of charging first-time applicants half of the total fee (currently $27.50, under new policy $35) for the COC and the other half of the fee upon issuing the first-time credential. If CTC retains this existing policy, a more precise estimate of the amount of fee revenue likely to be raised is $2.7 million, or almost $300,000 less than the Governor’s estimate (based on the commission’s current projection of credential applications in 2012-13). Since the Governor’s plan in 2012-13 leaves CTC with a very small reserve, this revised revenue estimate would result in the commission ending the fiscal year with a small deficit. To ensure CTC enters the fiscal year with sufficient resources to cover approved costs, we recommend the Legislature authorize a $250,000 transfer from the TDAA to the TCF in 2012-13. 

Explore Additional Long-Term Fixes

Explore Greater Efficiencies and Cost Recovery for Other CTC Functions. We think the component of the administration’s proposal that tasks CTC to work with SBE to find efficiencies in credentialing teachers and accrediting teacher preparation programs has merit. We recommend the Legislature adopt this provisional language but expand it to also require CTC to explore options for instituting fees for accreditation services. While credentialing and test administration fees support CTC’s entire budget, the commission provides other services that have significant costs. Most notably, staff activities relating to accrediting institutions and maintaining teacher preparation standards account for a significant portion of the commission’s costs. The 261 teacher preparation programs in the state, however, do not pay any fee for the CTC accreditation services they receive. Moving forward, we recommend CTC be directed to explore options for charging accreditation fees that could cover associated accreditation costs.