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Joint Analysis Enacted 2021-22 Budget July 13, 2021

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Joint Analysis Enacted 2021-22 Budget July 13, 2021 Joint Analysis Enacted 2021-22 Budget July 13, 2021 Table of Contents BACKGROUND ..........................................................................................................3 INTRODUCTION ........................................................................................................3 BUDGET OVERVIEW ..................................................................................................3 Budget Shaped by recovery from covid-related Recession .............................................. 3 Investments focus on relief and recovery for californians................................................ 4 CALIFORNIA COMMUNITY COLLEGES FUNDING ..........................................................5 Immediate Action Package ............................................................................................... 5 Proposition 98 Estimates.................................................................................................. 6 California Community Colleges Funding Levels ............................................................... 6 Changes in Funding .......................................................................................................... 7 Local Support Funding by Program ................................................................................ 17 Capital Outlay ................................................................................................................. 21 State Operations ............................................................................................................ 25 LOCAL BUDGETS .................................................................................................... 26 CONCLUSION ......................................................................................................... 28 APPENDIX A: EXPENDITURE DEADLINES .................................................................. 29 APPENDIX B: OVERVIEW OF THE STATE BUDGET PROCESS ........................................ 30 APPENDIX C: BOARD OF GOVERNORS’ BUDGET AND LEGISLATIVE REQUEST COMPARED TO ENACTED BUDGET ............................................................................................. 31 APPENDIX D: DISTRICT'S FISCAL HEALTH ................................................................ 34 Joint Analysis: Enacted Budget, July 13, 2021 | Page 2 Background This analysis of the enacted state budget for the 2021-22 fiscal year builds on a May 14, 2021 analysis of the Governor’s May Revision budget proposal (and a revised version from May 19). In this update, we present details about the 2021-22 budget as enacted by the Governor and Legislature. The analysis primarily focuses on appropriations and policy changes included in Senate Bill 129, the 2021 Budget Act, and Assembly Bill 132, the higher education trailer bill. This analysis was developed by the California Community Colleges Chancellor’s Office (Chancellor’s Office) with support from the: • Association of California Community College Administrators (ACCCA), • Association of Chief Business Officials (ACBO), and • Community College League of California (League). Introduction On July 12, 2021, Governor Newsom signed the 2021 Budget Act. In total, the 2021-22 budget reflects state expenditures of $263 billion, including $196 billion in General Fund expenditures. Below we describe major changes made in the overall state budget framework and Proposition 98 programs, including the California Community Colleges. We then review budget adjustments for the community college system in detail. Budget Overview The Budget Act includes components of the Governor’s May Revision and additions or modifications adopted by the Legislature on June 14, along with other agreed upon changes between the Legislature and Governor. The 2021-22 budget provides total additional resources of $3.5 billion to California Community Colleges apportionments and categorical programs, including full repayment of the $1.5 billion in deferrals of system funding in 2020-21. BUDGET SHAPED BY RECOVERY FROM COVID-RELATED RECESSION The public health emergency associated with the coronavirus disease 2019 (COVID-19) pandemic resulted in enormous hardship for families, businesses, and governments at all levels. In addition to massive impacts on general health and health systems, the emergency caused a seismic downward shift in the state’s economic conditions that was reflected in the 2020-21 budget. The enacted 2021-22 budget reflects a correction to the overestimated deficit of the prior year along with the substantial recovery to the state’s finances in recent months, focusing investments on supporting California families and businesses that continue to struggle in the aftermath of the pandemic. The budget outlook has greatly improved since the initial release of the Governor’s Budget on January 8. The state’s primary revenue sources—the personal income tax, sales tax, and corporate tax—have been coming in ahead of projections, bringing in Joint Analysis: Enacted Budget, July 13, 2021 | Page 3 significantly more revenues than anticipated in the Governor’s Budget. The enacted budget now projects total revenues of $203.6 billion and total reserves of $25.2 billion (equal to nearly 13% of General Fund expenditures). The budget includes overall state General Fund spending of $196.4 billion, an increase of approximately 18% compared to 2020-21. The unanticipated robust nature of the windfall also caused lawmakers to consider implications of the State Allocation Limit (SAL or Gann Limit), approved as a constitutional amendment by the voters in 1979 to limit state spending. Since its passage, the State Allocation Limit had only been triggered once. Absent specific policy decisions to exempt spending from the SAL, half of the revenue above the limit must be returned to the taxpayers with the other half going to K-12 and community colleges. INVESTMENTS FOCUS ON RELIEF AND RECOVERY FOR CALIFORNIANS The enacted budget continues the state’s focus on maintaining reserves as protection against the next economic downturn, including: • Deposits totaling $7.4 billion into the Budget Stabilization Account (BSA, also known as the “rainy day fund”), resulting in a balance of $15.8 billion in what is the state’s largest reserve, created in 2014 by Proposition 2 (it requires that a minimum of 1.5% of General Fund revenues be set aside every year, with half going into the BSA and the other half used to pay down state debts); • A deposit of $4.5 billion in the Public School System Stabilization Account (PSSSA), also established by Proposition 2 and requiring deposits during years when revenues are strong and there is substantial growth in the Proposition 98 minimum funding guarantee; • A discretionary deposit of $450 million into the Safety Net Reserve, created by the Legislature in 2018 to set aside funds to protect the Medi-Cal and CalWORKS programs, resulting in a balance of $900 million; and • A total of $4.0 billion in the Special Fund for Economic Uncertainties (SFEU), the state’s discretionary reserve that is equal to the difference between General Fund resources and General Fund spending and provides the state with flexibility to adapt to unexpected changes in revenues or spending needs during the year. In terms of spending priorities, the budget focuses on helping the state recover from the COVID-19 pandemic, including: • $8.1 billion in direct relief to Californians with income of up to $75,000 through a second Golden State Stimulus program; • $1.5 billion in grants to small businesses and non-profits that suffered losses, and additional grants and tax credits to support businesses; • Investments in early care and education, including additional child care slots, increased pay rates for child care providers, and initial phase-in of universal transitional kindergarten; Joint Analysis: Enacted Budget, July 13, 2021 | Page 4 • Support for low-income K-12 students through expansion of afterschool and summer enrichment programs, universal school meals, and accessible health and wellness services through a community school model; • Access to higher education and financial aid through additional university enrollment slots and expansion of Cal Grant and the Middle Class Scholarship; • Investments in homelessness and anti-poverty programs, including support for local governments to address homelessness; and • Funding for infrastructure, including education facilities, transportation, affordable housing, and broadband access. California Community Colleges Funding The Budget Act increases overall funding for community colleges by more than $3.5 billion over 2020-21 levels through a combination of ongoing and one-time funds. It fully pays off the deferral from 2020-21, and makes a number of investments, including in deferred maintenance, student basic needs, and support for faculty. Many of the new investments are one-time, focused on needs revealed or exacerbated by the pandemic. The budget is largely aligned with the System Budget priorities, as shown in Appendix C. IMMEDIATE ACTION PACKAGE Senate Bill 85, passed in February 2021, amended the Budget Act of 2020 by adding $121.1 million in one-time local assistance funds to provide funding for immediate COVID-19 response and relief efforts, while making investments for an equitable, inclusive and broad-based economic recovery. Specifically, the package included: • $100 million for emergency student financial assistance grants; • $3.1 million for outreach and application assistance to students
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