Governor's FY 22-23 May Revision Budget: CCC Capital Outlay & Deferred Maintenance

Today the Governor released his May Revision budget, which is an updated budget proposal for FY 2022-23 based on April tax filings. The May Revision budget includes $300.7 billion in total spending ($227.4 billion General Fund), representing a 5% increase from the January budget proposal. The Governor estimates a discretionary surplus of $49.2 billion, up from an estimated $45.7 billion at the January budget, with 94% of this proposed to be spent for one-time purposes. The May Revision reflects $37.1 billion in budgetary reserves, and the Rainy Day Fund is now at its constitutional maximum of 10% of General Fund revenues.

Despite the positive revenue forecast, the Governor said that the state should be cautious given increased economic uncertainty tied to the war in Ukraine, global supply chain disruptions, and record rates of inflation. The Governor’s plan includes a package of $18.1 billion in direct relief to Californians to offset rising costs, with proposed new funding for rent relief, child care, health insurance premiums, and utility bills. It includes a previously-announced $400 rebate to households based on registered vehicles and a temporary reduction to the diesel sales tax rate. The Legislature has its own priorities for direct relief to Californians.

The Governor stated that the May Revision budget remains below the State Appropriations Limit (aka Gann Limit). The May Revision projects a $19.6 billion increase in the Proposition 98 Minimum Guarantee for K-14 schools over the three-year period ending in FY 2022-23. Proposition 98 funding is estimated at $110.3 billion in FY 2022-23. 

Capital Outlay Bond Program Funding

The May Revision proposes $403 million (one-time General Obligation bond funding) for the construction phase of 19 projects anticipated to complete design by Spring 2023 [up from 17 projects at the January budget], both the working drawings and construction for 1 project, and the design phase of 2 projects [up from zero new projects at the January budget]. This is the next installment of the $2 billion available to CCCs under Proposition 51. 

Deferred Maintenance

The May Revision includes an increase of $1.1 billion (one-time Proposition 98 General Fund) to support deferred maintenance and energy efficiency projects at community colleges, bringing the cumulative total to more than $1.5 billion ($863 million from 2022-23, $563.5 million from 2021-22, and $96.5 million from 2020-21).

Student Housing

The May Revision does not propose any modifications to the student housing proposal. The January budget proposes $750 million (one-time General Fund) for the second installment of a planned $2 billion one-time General Fund appropriation over a three-year period, with $1 billion committed to community colleges. See below for additional comments on CCFC’s advocacy on student housing funding. 

Additional Items

Below is a selection of additional items of interest to community colleges in the May Revision budget proposal:

• Five-Year Roadmap – The May Revision announces that the Administration recently finalized a five-year roadmap with the California Community College (CCC) system, with a focus on equity and student success. The Roadmap builds upon existing efforts and goals established in the CCC Vision for Success. Most of the Roadmap goals now reflect clear baselines and measurable targets for improvement within defined timelines. 
• Base Increase – An increase of $250 million (ongoing Proposition 98 General Fund) to increase the Student Centered Funding Formula (SCFF) rates for the base, supplemental, and success allocations. Additionally, includes an increase of $125 million (ongoing Proposition 98 General Fund) to augment the Formula’s basic allocation within the base, in recognition of the significant digital footprints that districts have developed to accommodate long-term shifts in student learning modality demand.
• Discretionary Block Grants – An increase of $750 million (one-time Proposition 98 General Fund) for discretionary block grants to address issues related to the pandemic and to reduce long-term obligations.
• Apportionments Cost-of-Living Adjustments and Growth – An increase of $83.5 million (ongoing Proposition 98 General Fund) to reflect a change in the cost-of-living adjustment for apportionments from 5.33 percent to 6.56 percent, and an increase of $1.3 million (ongoing Proposition 98 General Fund) to sustain 0.5 percent enrollment growth.
• Chancellor’s Office Staffing – $2.6 million (ongoing non-Proposition 98 General Fund) to support shifting 10 positions proposed in the Governor’s budget for 2023-24 to 2022-23, as well as 7 additional positions to support the implementation of the Cradle-to-Career Data System, assist colleges with affordable student housing, and build capacity to accommodate the increase in contracts and reporting requirements. Combined with the Governors January budget proposal, this proposes a total of $3.9 million for 26 positions in 2022-23. 
  

CCFC Budget Advocacy

CCFC is advocating for $3 billion non-Proposition 98 General Fund for the community college capital outlay program and student housing projects on community college campuses. Of that, $332 million would fund construction of 7 additional community college projects under the SB 169 Higher Education Student Housing Grant Program. This would ensure that all 12 community college student housing construction projects (including one intersegmental CCC-CSU project) deemed eligible by the Department of Finance in the program’s first application cycle would be funded. We are concerned that delayed allocation of student housing funds would result in fewer beds being built due to aggressive cost escalation that makes projects more expensive over time. 

Senate Democrats released their updated budget priorities on April 28. This included a plan to provide an additional $1.5 billion for student housing (above the previously-committed $2 billion), including $500 million in additional funds for community college projects. Senate Budget Committee staff have indicated that the additional funds would be used to fund all community college projects deemed eligible by the Department of Finance in the first funding cycle. While the Assembly has not released details on their student housing priorities, they continue to express a commitment to the cause.

The remaining $2.6 billion would be used for growth and modernization projects in the community college capital outlay program. It is important to note that efforts for capital dollars are proceeding on a parallel track, with advocacy underway for both a General Fund appropriation and a new state school bond. The Legislature and Governor will need to make a decision on which path to take by June 2022 in advance of a potential November 2022 state bond ballot measure. 

Next Steps

The Assembly and Senate will quickly review the Governor’s revised budget proposal and close out action on individual proposals within their respective houses in the next few weeks. We are hearing that the Legislature may bypass the use of Conference Committee, a method typically used to publicly reconcile differences between the two legislative houses. This would mean negotiations would occur in private and the Legislature would present a united front as they enter final discussions with the Administration. The Legislature is working to pass the main budget bill by the constitutional deadline of June 15.

Rebekah Cearley
CCFC Legislative Advocate