Legislature Passes a Preliminary Budget Bill; Student Housing Details Still TBD

On Thursday, June 13, the Legislature passed a budget bill and two accompanying budget trailer bills to meet the constitutional deadline to pass a balanced budget for FY 2024-25 by June 15. Despite this action, there is still not final agreement between the Legislature and Governor on a budget for FY 2024-25. The Governor has until June 27 to sign or veto these bills; we anticipate further negotiations and discussions will take place between now and then. This action is colloquially referred to as adopting a “placeholder budget” to meet constitutional deadlines, however, this year key legislative staff firmly rejected that terminology while insisting the Legislature is meeting its obligations by passing a budget that reflects its policy priorities. To be clear – last Thursday’s action does not represent the final budget, and changes are highly likely before the FY 2024-25 budget is finalized.

The Legislature’s budget plan includes $211.3 billion in General Fund spending in FY 2024-25 (click here to view the Legislature’s budget plan). We are hearing that major sticking points include the Governor’s proposed cuts to housing programs and other social services, and proposed increases in prison spending. The Legislature indicates their plan includes approximately $5 billion more in General Fund revenues than the Governor’s plan, allowing for more school spending and restoration of some social services, health, and housing program spending. The Legislature states that their plan solves the budget problems in both FY 2024-25 and FY 2025-26, but projects deficits in later years.

The Legislature’s budget plan includes a modified version of a recent proposal to suspend Proposition 98. The Legislature indicates that the state budget cannot currently cover all Proposition 98 obligations over the two-year period beginning in 2022-23. As such, the Legislature’s budget accrues $6.2 billion that was previously appropriated to schools for 2022-23 over several years beginning in FY 2026-27 – meaning those funds would be accounted for in the General Fund over several future years, instead of the year in which they were appropriated.

The bills that the Legislature passed include:

• AB 107 – Budget Act of 2024 – Reflects the “joint legislative budget plan.”
• SB 154 – Suspends Proposition 98 minimum guarantee for school districts and community colleges in FY 2023-24. This creates an estimated $8.314 billion in maintenance factor, which will be repaid to schools and community colleges in future years. The first maintenance factor repayment is estimated at $4 billion in FY 2024-25. (Use of $8 billion from the Proposition 98 reserve helps protect classroom funding despite the proposed suspension.)
• SB 167 – Revenue and taxation – The bill includes statutory changes necessary to implement the Legislature’s Budget Act of 2024, including a business credit cap, Net Operating Loss deduction suspension, and more.

The joint legislative budget plan includes (but is not limited to) the following provisions for community colleges:

• 1.07% cost-of-living adjustment for apportionments and select categorical programs.
• 0.5% enrollment growth.
• Deferral of $231.7 million Proposition 98 General Fund to the 2025-26 fiscal year.
• A modified expansion of nursing programs. The Governor proposed $60 million (one-time Proposition 98 General Fund), and the Legislature instead creates the program within the 2024-25 Strong Workforce program funding. The Legislature’s budget includes placeholder trailer bill language to develop a grant program to support ADN, ADN-to-BSN programs, and community colleges BSN programs if the policy is approved through the legislative process.
• Capital Outlay – approves the Governor’s Budget proposal to support the construction phase of the Siskiyou Joint Community College District, College of the Siskiyous Remodel Theater and McCloud Hall project.

Additionally, the Legislature rejects proposals made in the Governor’s May Revision to provide $12 million (one-time Proposition 98 General Fund) to support the development of e-transcript in California, and $12 million (one-time Proposition 98 General Fund) to support a common cloud data platform demonstration project.

Student Housing

Higher Education Student Housing Grant Program/State Lease Revenue Bond – The Legislature’s budget includes “placeholder” trailer bill language to create a statewide lease revenue bond to support community college student housing grants. This action establishes a commitment to the program and the intent to further develop the details. As part of the May Revision, the Department of Finance released draft trailer bill language to implement this program; key policymakers, legislative staff, and stakeholders are analyzing and discussing the proposal. CCFC has provided feedback on multiple items; see this prior update for more information. The final language could be completed within the next few days or weeks, but it also may not be finalized until August.

Revolving Loan Fund – The Legislature’s budget approves the Governor’s proposal to eliminate funding from the Student Housing Revolving Loan Fund and forego planned future funding, pending legislation to allow the program to be funded through internal state borrowing. Assembly Member McCarty is authoring AB 2076, which would transfer $200 million in FY 2024-25 from the Pooled Money Investment Account (which is administered by the State Controller) to the Student Housing Revolving Loan Fund for the purpose of funding loans to student and workforce housing projects at community colleges, UC, and CSU. These loans would be repaid at a 3% interest rate, and the principal and interest must be fully repaid by June 30, 2035. The bill is pending in Senate Appropriations Committee.

Rebekah Kalleen
CCFC Executive Director