Legislature Reviews the Governor’s Prop 2 CCC Capital Outlay Budget Proposal

We are entering the home stretch for development of the FY 25-26 state budget. The Administration and Legislature are grappling with significant uncertainty driven by the impacts of fire recovery and recent Federal economic and public policy changes. Over the past few months, the Legislature has been reviewing the Governor’s January budget proposals in detail, including implementation of Proposition 2 and the community college capital outlay program.

The Governor’s January Budget proposed to fund 29 new community college capital outlay projects, providing $51.5 million in Proposition 2 bond funds for preliminary plans and working drawings (and in one case for performance criteria). These projects are worth approximately $700 million through construction. 

These projects were selected using the scoring metrics developed by the Chancellor’s Office and adopted by the Board of Governors in September 2020, intended to align capital outlay priorities with the Vision for Success. The update collapsed priority funding categories from 6 to 3 and revised the metrics used to determine priority points. Additionally, the distribution of funding across categories was modified as follows:

• Category A – Life and Safety Projects – Receive up to 50% of total available funding
• Category M – Modernization Projects – Receive 65% of remaining total funding
• Category G – Growth Projects – Receive 35% of remaining total funding.
  
  

Proposition 2 is the first major funding source to utilize the new scoring process.

The Legislative Analyst’s Office (LAO) reviewed the Governor’s budget proposal and raised a number of issues for consideration by the Legislature in a recent report, including:

• The share of funding allocated for modernization projects could be too low. LAO acknowledged that at the time the new scoring system was adopted in September 2020, the allocation of funding between modernization and growth projects generally reflected the system’s identified capital outlay needs. However, in the most recent five-year capital outlay plan, modernization projects account for about 80 percent of the capital outlay needs (in dollars) identified for 2025-26 through 2029-30. LAO indicated that the increase in online education reduces the need for colleges to add new space.
• Nearly one-third of the selected projects are gymnasiums (9 out of 29 proposed new projects). LAO explained that under the old scoring system, gymnasiums and other facilities for activities such as performing arts and child development were in a separate category capped at 15 percent of available funding (the former “campus completion” category). However, under the new scoring system, gymnasiums compete with all other types of facilities and are treated the same as other academic space. LAO asked the Legislature to consider the trade-offs between funding gymnasiums or other facilities that “more directly support instruction.”
• Rationale for certain scoring metrics is unclear. LAO raised questions about two scoring metrics, including additional points for projects on a campus with more FTE students and for projects located in “Regions of High Need” (the Central Valley, Sierras, Inland Empire, and Far North). 
  
  

LAO suggested that the Legislature could direct the Chancellor’s Office to adjust its scoring system to address these issues. 

Both houses of the Legislature have discussed this issue in detail during budget subcommittee hearings. On Tuesday, May 6, the Assembly Budget Subcommittee No. 3 on Education Finance discussed this during a broader hearing on funding needs for higher education facilities. LAO presented their report and raised the questions highlighted above. These concerns seemed to resonate with the subcommittee members, including Subcommittee Chair David Alvarez and Assembly Member Mike Fong, co-author of AB 247 (which placed Proposition 2 on the ballot) and chair of Assembly Higher Education Committee. Chris Ferguson (Executive Vice Chancellor of Finance and Strategic Initiatives, Chancellor’s Office) assured the subcommittee that gymnasiums house academic programming, and that more gyms are prioritized now because prior bonds weren’t able to fund them. This was an information-only hearing that did not include any action, but the subcommittee did find the argument that too few resources were directed to modernization projects to be compelling.

CCFC is advocating in support of the Governor’s budget proposal to fund 29 new capital outlay projects using the proceeds of Proposition 2. During the recent subcommittee hearing, CCFC Legislative Advocate Rebekah Kalleen testified in support of the Governor’s proposal. While members of the Legislature and their staff were asking important questions to ensure effective distribution of the funding, it would be highly disruptive to change the criteria used to evaluate project proposals well after they have been submitted. If the Legislature chose to go back to the drawing board and direct the Chancellor’s Office to develop new scoring criteria before funding any Prop 2 projects, this would likely create years of delay – meaning fewer projects would ultimately be funded by the $1.5 billion provided to community colleges due to cost escalation. 

Next Steps – The Governor will release his May Revision budget update by May 14, reflecting tax revenue information through April. The Legislature will review the May Revision and work toward adopting a budget by the constitutional deadline of June 15. 

Click here for a list of the projects included in the Governor’s January budget proposal.

Click here for LAO’s recent report on this issue.

Rebekah Kalleen
CCFC Executive Director