Budget Details Emerge: Student Housing and Deferred Maintenance

As of Monday morning we are still awaiting news of a final FY 2023-24 budget deal between the Legislature and Governor. On Saturday, the Legislature released a number of new trailer bills, indicating that the bills reflect the discussions that have taken place between the Legislature and Governor in recent weeks. Trailer bills provide additional detail and policy changes to implement the budget. The Senate and Assembly have floor votes planned for Tuesday, June 27 to continue their budget work. The Legislature previously passed budget bill SB 101 on June 15, and the Governor has until tomorrow to sign or veto that bill. As such, we expect more information in the next day or so regarding a final budget deal. One of the final sticking points is the Governor’s proposed infrastructure and CEQA reform package, including a proposal that would speed development of the Delta Conveyance Project.

The proposed budget package includes General Fund expenditures of $225.9 billion and estimated state reserves of approximately $37.8 billion. The Legislature indicates that these reserves need to be maintained due to “significant uncertainties about the economy and tax revenues to be paid by California’s high-income tax filers in October.” The Legislature’s key budget goal is to protect the state’s core ongoing programs in education, health care, human services safety net, and more.

This week we expect the Legislature to take action on a few bills that would affect community college facilities, including the higher education trailer bill, AB/SB 117. This bill includes the following provisions:

Student Housing

Higher Education Student Housing Grant Program

The proposed budget package would make changes to the funding mechanism for the Higher Education Student Housing Grant Program – to both previously-funded and future projects. The proposal shifts the fund source for prior, newly authorized, and future student housing construction projects from state General Fund to local revenue bonds issued by the community college. The proposed budget would provide $78.5 million General Fund on an ongoing basis to support debt service for these projects (this appropriation is contained in trailer bill AB/SB 102). All program requirements, including affordability commitments, remain in place.

Policymakers are aware that there are many questions regarding the implementation of this change. It appears the state remains committed to funding the construction of previously-approved and newly-approved projects. There are many details that will need to be finalized, especially for the 12 community college projects that were previously approved as part of the FY 2022-23 budget, some of which have already commenced construction. State support for UC and CSU student housing projects will also be shifted from state General Fund to bonds issued by UC and CSU.

The budget package approves the following 7 new community college student housing projects worth $464.1 million for FY 2023-24 using the local revenue bond financing mechanism:

• Merced College (with UC Merced) - $50.0 million
• Riverside College (with UC Riverside) - $75.0 million
• Cabrillo College (with UC Santa Cruz) - $111.8 million
• Cerritos College - $68.0 million
• College of the Redwoods - $28.4 million
• College of San Mateo - $55.9 million
• San Diego City College - $75.0 million

Additionally, the budget package authorizes $81.3 million in additional construction grants using local revenue bond funding issued by community college districts, subject to future legislation.

Student Housing Revolving Loan Fund

The proposed budget provides $200 million (one-time General Fund) for the Student Housing Revolving Loan Fund and includes intent language to provide $300 million each year through 2028-29. Of this funding, 75% would be available for university projects, and 25% would be available for community college projects. There is also trailer bill language that would allow a shift in unused funds toward a segment with higher demand.

Deferred Maintenance

The proposed budget package would reduce funding for the current year (FY 2022-23) deferred maintenance and instructional support program by $494.3 million (one-time Proposition 98 General Fund), leaving $346.4 million. This is a larger reduction than was previously approved by the Legislature in their June 15 version of the budget. The proposed budget would allow colleges to use remaining funds from the COVID-19 Block Grant, student retention and recruitment, and deferred maintenance for any of these purposes. The amount available for these activities is about $1.1 billion.

Community College Operations Budget

The proposed budget provides an 8.22% cost-of-living adjustment for:

• Apportionments – $678 million (Proposition 98 General Fund)
• Select categorical programs – $95.5 million (Proposition 98 General Fund)
• Basic needs centers, mental health services, rapid rehousing, NextUp, MESA, Puente, Umoja, and veterans resource centers - $16.9 million (Proposition 98 General Fund)

Capital Outlay

The budget provides a total of $232.3 million in General Obligation bond funds for two new start projects and twelve continuing projects.

Next Steps

We are awaiting word from the Governor and Legislature on a final budget deal. CCFC will share additional information on the status of the budget, likely later this week.

Rebekah Kalleen

CCFC Executive Director