Assembly Budget Subcommittee No. 3 on Education Finance

Good morning still, everybody. I was getting ready to say afternoon because that's what was the expected start time. But good morning to you all. This is the Assembly Budget Subcommittee Number 3 on Education Finance. I'm Chair Assembly Member David Alvarez, and we have a very extensive agenda today. We also know that they are some of our presenters are presenting in the Senate as well.

So we are going to try to navigate this as individuals become available. But appreciate you all being here. What we're going to do today is we're going to give an opportunity for anyone who wishes to make a comment on anything on the agenda at the beginning of the agenda. I will ask you to make an abbreviated version of your comments of 30 seconds, and we will ask you to please pause there, and that will be your opportunity for public comment today.

At the end, anyone who did not speak during the 30 second portion of opportunity for public comment will get an opportunity to share their full minute of their public testimony. So if you are someone who would like to take advantage of the opportunity, we expect this hearing to go multiple hours, likely 4 hours. So if you're here for public testimony, you might need to wait 4 hours to provide your testimony.

And if you want to take advantage of the opportunity to do so now and help us maybe ask some questions and frame some of our discussion on the issues you care about, I would suggest you take advantage of the opportunity now. So if you want to do that, please come forward. And like I said, if you do speak at this portion of the agenda, then we will ask you to please refrain from utilizing other speakers' time at the end of the agenda. But again, we're going to do 30 seconds, so please be concise.

Sure. Hi. Darby Kernan on behalf of the California Food Bank Association as well as GRACE to End Poverty in California. On page 17 of the agenda, you talk about the school meals program. We support the Governor's proposal to fully fund School Meals For All and support continuing that funding. Thank you.

Thank you. Very well done there.

Good morning. Hannah Devine with the Cal State Student Association, which represents the nearly half a million CSU students across the state. We ask that you keep the commitment made in 2022 to enact Cal Grant reform by a one time investment that implements key structural and eligibility changes, as well as create a pathway towards full implementation once the budget outlook is better. We also ask that you maintain the Governor's compact and do not cut crucial funding to the CSU. Thank you.

Thank you very much.

Hi, I'm Leticia Saucedo. I'm a law professor at UC Davis School of Law. I'm also the co-director of the UC Davis Labor and Community Center. I'm here because I'm concerned about the proposed budget cuts to the UC labor centers. And I'm here to express my appreciation for everything that the labor centers have done. From minimum wage increases to earned income tax credits to undocumented workers, the centers provide crucial research that's evidence based and provide evidence based solutions that uplift working families.

Thank you very much.

Cutting the funding would deprived policymakers of rigorous impartial data. Thanks.

Thank you.

Good morning, Assembly Members. Tia Koonse with the UCLA Labor Center. Also here to express concern about the proposed $13 million in cuts to our infrastructure of nine different UC labor centers at every UC campus across the country. So please don't dismantle years of investment in infrastructure. Thank you.

Thank you.

Good morning. Good afternoon. Saba Waheed with UCLA Labor Center. I'm also here to express my concern about the cuts to the nine UC labor centers and the Latina Future Funds Project and are wondering why we're getting targeted over other projects, other centers at the universities. It's an important resource. It's a template for the country. Let's know not roll back this important resource. Thank you.

Thank you.

Hi, my name is Sofia Cardenas with the Sacramento Central Labor Council. I'm also here concerned about the UC labor centers. They're a vital part of our movement and building our movement. And so we're here in solidarity, and we want to defend them. Thank you.

Thank you.

Hi. Dominique Donette here representing EdVoice, concerned about possible cuts to the Golden State Teacher Grant Program. Just here to thank you for your investment and ask that you protect it. One of the greatest issues facing public education at this time is the teacher shortage. And so as students are facing many cuts in other areas, we ask that there remain stability in their classrooms. Thank you so much.

Thank you.

Good morning. Sabrina Means on behalf of the Institute, I'm sorry, the Institute for College Access and Success, also known as TICAS. Also quickly, on behalf of Cerritos Community College. For TICAS, were grateful for protecting the Cal Grant program from cuts, but unfortunately, unfortunately disappointed about that, the trigger for the funding mechanism for Cal Grant reform wasn't triggered.

We urged the Legislature to consider phasing in Cal Grant reform and ask for support and continue investment into the California College Guidance Initiative and the Cradle Career Data System, as well as the Bureau for Private Postsecondary Education. Very quickly, on behalf of Cerritos College, we. We ask for support for the student housing. We are concerned about the...

Your time is up. Thank you very much. The 30 seconds go by very fast.

Mikala Hutchinson on behalf of the Student Senate, representing all 2 million community college students. We deeply appreciate the efforts to retain adequate funding for the community colleges, even in a deficit year. However, we are disappointed the Governor did not trigger the funding mechanism for the Cal Grant Reform Act. To move Cal Grant reform forward, we encourage the Legislator to implement key structural and eligibility changes to the Cal Grant programs this year. Thank you for recognizing the value of California community colleges and its students.

Thank you.

Good morning. Paige Clark with the National Center for Youth Law. We respectfully ask the Legislature to maintain the proposed $2.5 million federal funding allocation for Homeless Education Technical Assistance Centers. Thank you.

Thank you.

Good morning. Kevin Wehr, Professor of Sociology at Sac State and Chair of Bargaining for the California Faculty Association. We're in support of the current proposal of the budget for the CSU. We want to make sure that there are no ongoing cuts to the base. That would trigger some contingency language in our contract that would, it would upend labor peace, quite frankly. We had some hard fought wins and some great progress, and we seek to maintain that. Thank you.

Thank you.

Marvin Pineda, Mr. Chair and Members, on behalf of the UCLA Latino Policy and Politics Institute, in support of the Governor's proposal to maintain the $3 million to maintain the center. That's for staff and to maintain operations. And we respectfully request your support to maintain that one time allocation for Unseen Latinas, as it's a very important project for a lot of community groups and women in our communities. Thank you.

Thank you.

Kimberly Rosenberger with SEIU. I disagree with the two buildings at the same time. So we're appreciative of the efforts to make schools as a whole as possible despite the deficit. However, we are seeing a number of layoffs and hours reduced so that they're losing their benefits. So we would encourage, as we try to make them whole, considerations to ensure that stability trickles down to classifieds who are first on the chopping block and include guardrails when it comes to CSU and UC.

I echo the comments of the previous where we are heartened to see the commitment to the compact, but we want to ensure that no labor contracts are impacted by it and the method of funding where we have made a lot of progress. And then, finally, on the UC, we are really concerned and disheartened to see the cut to the UC labor centers. We get a lot more value than the cost. Thank you.

Thank you very much. Thank you all. Appreciate your input here early on. We'll definitely get into those issues, and you got an opportunity for us to ask some more specific questions about the things you care about. So congratulations for those of you who were brave enough to speak up first, even for an abbreviated period of time. Again, the rest of the public comment will be taken after all of the items are heard. So with that, let me just confer to see who is in the room to make sure that we call up the right people. Give me 1 second.

Okay, so we are able to begin in order right at the moment anyway, so we will ask the University of California panel to please come forward so that we can review the May revision proposals for UC. We also asked Department of Finance, Legislative Analyst assigned to this to please join the UC here for this panel.

We'll give an opportunity to the Department of Finance to start this conversation, and then we'll turn it over to LAO and the UC.

Good morning, Chair Alvarez and members. Gabriela Chavez with the Department of Finance. The May revision reflects a continued focus on achieving the goals of the multi-year compact with the University of California. Although this focus remains, the state's current and long-term fiscal conditions require one-time and ongoing fiscal adjustments across higher education.

The May revision includes a one-time reduction of 125 million general fund in 2024-25, and starting in 25-26, it proposes a 7.95% ongoing general fund reduction. The May revision also includes several one-time and ongoing adjustments necessary to balance the budget regarding the College of the Law San Francisco starting 2025-26.

The May revision proposes a 7.95% reduction in the segments operational budget. Happy to answer any questions you may have.

Thank you. I'm going to just interrupt the flow here to make some statements that I hope are reflected in the comments by the remainder of the panel here on UC. Our top priority is for the UC to be more provide more access for Californians.

We have heard that theme over and over in these hearings and really over the years here in this committee. But we also want to be realistic of our current budget situation, so cuts appear to be necessary, and so what we're hoping is that UC can talk about how to best make those cuts that do not impact the core mission at the UC campuses and to allow UC to continue growing enrollment into the future. We want to be focused on enrollment growth going forward.

There are dozens of state-funded programs at UC, so it could make sense to trim funding in those areas, some from all those areas, rather than again really harm enrollment and access for students.

We also want to continue decreasing nonresidents at Cal, UCLA, and UC San Diego. We have been very clear about that in prior subcommittees and replacing them with Californians. But this is an expensive program, $31 million a year additional every single year.

We want to think about whether UC should increase, as we've asked before, a nonresident tuition to support the program growth for Californians. I also hope to work more closely with UC and hear from CSU in a sec. Also, on providing programming at the Chula Vista higher education site.

We know that UC San Diego is running out of classroom space but wants to continue to expand access, which we appreciate and applaud. And we think that Chula Vista site could help the community help UC's mission. So, hopefully, the next two panelists will help reflect on some of those comments and add more to the conversation.

LAO, please proceed.

Thank you very much, Mister Chair. Ian Klein with the LAO. We recommend that a more transparent and straightforward approach be taken for UC's budget. Our concern with the May revision for UC is basically the same as it was under the Governor's budget but now heightened.

The May revision maintains the base funding increases and deferrals for UC as originally proposed under the Governor's budget but then simultaneously proposes to reduce base funding beginning in 24-25. The base reductions are part of the administration's larger proposal to trim funding in state operations.

This approach, with a proposal to increase base funding, a proposal to reduce base funding, and some proposals buried within others, is unnecessarily complicated and opaque. We continue to recommend that UC contains their spending in 24-25, given the state is facing a large budget problem, even larger than what was estimated in January.

Along the same lines, we continue to recommend not making specific funding commitments for UC in 25-26 that the state may not be able to fulfill.

After deciding what base reductions, if any, to make to UC's funding in 24-25 the legislature could revisit UC's base funding in 25-26 once more information becomes available at that time regarding the state's budget condition.

Now, the legislature also has choices regarding the size of the cuts that could be taken as part of balancing the 24-25 budget. The kegislature could make base cuts to UC. It could approve the May revision cut level of 125 million, or it could make a larger or smaller cut at UC.

A base general fund cut would be mitigated by increases in tuition revenue. UC is raising their tuition charges in 24-25 and is expecting to generate an additional $116 million in additional net tuition revenue. Furthermore, UC does have some reserves that could be used to offset a cut.

Additionally, even with short notice, UC would be able to make some changes to reduce their operating costs in 24-25. For example, they could reduce professional development, adjust their spring 2025 course offerings, or rely more on nontenure track faculty.

Beyond implementing these types of strategies, base reductions could mean UC undertakes less new hiring and leaves vacant positions open. The legislature also has choices regarding how the cuts are made.

If the legislature decides to reduce UC's funding as part of balancing the budget this year, it could take the May revision approach just simply reducing the court budget, or it could give, which gives UC discretion in deciding how to accommodate those cuts.

Alternatively, the legislature could take a more targeted approach and reduce funding for select areas of university operations. For example, research or institutional support or for earmarks such as specific research, outreach, or student support programs. We could assist the committee as it considers the options it would like to pursue.

If specific programs are identified that are outdated, due duplicative, ineffective, or lower priority, then we would recommend eliminating funding for those programs.

Before reducing UC's core budget, we also recommend to revert more unspent prior year, one-time general fund. Although the May revision proposes to revert some unspent funds from prior years, the administration continues to miss opportunities in this mark. We recommend that the legislature revert more prior year unspent funds.

We've worked with UC to identify unspent funds from prior year initiatives and have identified 225 million in additional potential budget solutions that remains available as of April 1 of this year.

Of these initiatives, a $20 million matching fund commitment from the US Department of Energy for the UC San Diego Scripps Research vessel and one initiative we do not have in April, an update as of April 1.

However, if these two initiatives were excluded from that total, there would still be over $180 million remaining from the remaining initiatives. We recommend that the legislature revert 175 million of the unspent prior year funds and giving UC some flexibility to recover those funds.

Reverting prior year unspent funds would help the state retain more of its reserves for budget year plus one. As it faces multi-year deficits, having more reserves in budget year plus one would allow the state to minimize potential disruptions to ongoing court programs.

Finally, for the College of the Law San Francisco, we recommend rejecting the proposal to provide the school with 2.2 million ongoing year, which would then be followed by a reduction of 2.1 million the following year.

The May revision approach is more disruptive programmatically than leaving the school's funding flat for the next couple of years and revisiting once the state's budget condition improves. The school is also increasing tuition charges in 24-25, estimated to generate an additional $2.3 million in tuition revenue, which would support some of the college's spending increases in 24-25.

Though the May revision does not include a base cut for the school in 24-25 we would like to note that the school does have reserves equivalent to roughly three to four months of expenditures that it could use in the near term as it adjusts its budget if needed. Thank you and I'm happy to answer questions.

Thank you, Chair Alvarez and Assemblymember Muratsuchi, for having me here today. I'm Saya Virtanen for the University of California. The state is facing a significant budget challenge, and the proposed reductions to the University of California reflect the reality of this budget period.

The May revision proposes to reduce the university's budget by an unallocated 125 million in 2024 to 25.

For 2025 to 26, the proposal is to provide the university with a series of reductions and increases that, once totaled, would leave the university with a net increase of 252 million, or 2.4% over the 2023 to 24 budget in 2024 to 25.

In the budget year, the university will receive 125 million base budget reduction at the same time as the campuses are expected to see cost growth of 258.8 million, that was expected to be covered with state general fund. This combined 383.8 million in 2024 to 25 will impact campus operations and will be painful to absorb.

This amount needs to be covered either through revenue growth or cost-cutting. The university's options for revenue growth are limited since our student fees are already set for 2024 to 25, and the legislature has directed us not to grow nonresident students beyond the 18% of undergraduates. So this leaves cost cutting at the system wide level.

This includes salary programs, salary negotiations, UC retirement program contributions and negotiating health care costs. And I want to make certain when I say salary programs, I mean the non represented salary programs. We have no intent to reduce represented salary programs for 2024 to 25.

UC is unable to change some of these costs, but they are under consideration for 2025-26 year. The campuses receive state general funds through an allocation formula, and we intend to pass the reduction to the campuses through this formula. The campuses will then determine how to implement the reductions at their individual campuses.

Methods utilized in the past that we expect will be part of the solutions again include not filling positions as they become vacant. UC campuses are currently experiencing about an 8% turnover in positions.

In real terms, this would mean longer wait times for advising appointments and for financial aid assistance. Because there will be no new funding for ladder rank, faculty hiring, more courses will be taught by lecturers, and we may see larger course sizes as well.

Campuses would need to put off maintenance that was not absolutely critical, leading to ever-increasing deferred maintenance needs, and technology contracts that could have brought efficiencies will need to be delayed. It could also mean ending newer programs that have shown real promise to help first-generation students and students from traditionally underrepresented groups, such as early summer start.

These cuts will be painful and students will see an impact on the services that they will receive. However, with this challenge is also embedded an opportunity to envision new ways of connecting with students and ensuring that the university examines educational program offerings. A great deal of uncertainty remains for 2025 to 26.

The university is grateful that the compact funding will be part of the 25-26 funding. I would like to request that the committee and Governor consider some exceptions to the proposed 7.9% base budget reduction to the university.

The first of these is the exclusion of bond payments from the 7.9% calculation since the university cannot spend those funds on campus operations. The second is to allow for reductions to some legislatively mandated programs that would otherwise be kept whole while campus budgets are reduced. Thank you for your time today.

Thank you. Why don't we get started?

Pardon me, I'm so sorry. And I'm so sorry to come up unexpectedly. My name is Rhiannon Bailard, and I'm the COO of UC Law San Francisco. So, I was hoping to have an opportunity to respond to the LAO's suggestion.

Sure.

Is that okay?

That is okay. Go ahead.

Perfect. So, what I did want to just share with you all is certainly understand the suggestion that not doing the increase now and we're doing the reduction next year, keeping it flat would be the least complicated. And certainly it seems like that when we're just thinking about that purely from a monetary perspective.

However, given the fact that we have already set our enrollment, we've already set our tuition for next year, and we've already considered the January budget from the Governor and been relying upon that 2.1 million. That puts us in a programmatic deficit. What this allows us to do the may revise by doing the 2.1 million now.

This allows us to do the appropriate planning, as the UC system just stated, with respect to appropriate revenue reductions or revenue enhancements and cost reductions. And really, what it gets us is time. So we're in agreement with the May revisie, and it will have dramatic programmatic implications.

And the other thing I would mention is it's a very small number relative to the overarching problem. Thank you.

Thank you. I was going to get into all of the confusing or unorthodox maybe of keeping some commitments but then making reductions, such as was just expressed with the budget for UC College of the Law. So I appreciate you anticipating that.

I think I'll still have a question, but let me just start with something that came up primarily in the LAO's presentation. There's 225 million of unspent funds that we have discussed here prior, previously in other hearings. Is there an update from either finance or UC on the status of that?

Because I know that we've been checking on some that have been of higher interest, and at least the feedback is that the figures that we had back with the March 30 is different. So, do you have any update on the $225 million in funding that was described by the LAO?

I'll defer to the UC on a specific expenditure.

Thank you, Chair Alvarez. I don't have the specific list of cuts in front of me. There have been some additional expenditures that took place between January 1 and April 1. There are still unexpended funds from that list of programs that, if the legislature were to choose, you could sweep back.

These programs do have expenditure plans. Each one of them was an addition, a one-time addition to the UC's budget that came from either the legislature or the Governor.

I think what I'd ask for us is information, and this would have to come within the next few days, is which one of these expenditures that are listed here are, as you said, with an expenditure plan, what that plan is of when that will be expended by and responsive, whether the similar 7.95% reduction to all of these would harm the effectuating all these programs.

Is that clear?

That is a clear question. Thank you, sir. I will get that response to that question.

I would ask the same - thank you. Appreciate it.

I would ask the same of the some of the set asides that are in the UC's budget for the different types of programs, specifically because of the concern raised by the public today and prior to today on things like the reduction of 13 million to the labor centers, which is a very specific reduction that was made here.

And I assume this reduction of this specific program was made by the administration. Was this in consultation with UC, or was this only decision made by the administration?

This is a proposal by the administration. And as the Governor mentioned, none of these decisions were taken lightly.

Yeah. So, there are a lot of other expenditures that are listed as set aside for specific programs beyond the labor center. And so I would. Do you have anything to add as to the specific cut that you can share.

The labor center cut was, as far as I know, was not consulted with the University of California. There will remain $6 million in the base budget after the $13 million cut. But those are specifically for the UC Berkeley and UCLA labor centers. So, the other centers would lose their funds.

Oh, I see. So, the 6 million that would remain...

Is only for Berkeley and LA. That funding was put into the budget by the legislature in 2016 for those two centers specifically. And then at a later time, the legislature increased the funding by 13 million.

And so the budget that I have in front of me from UC from 22-23, which Berkeley and LA had a $6 million allocation, what that 13 million did was double them from three to 6 million. Is that?

That is correct.

Okay, so in the same to the previous question, if we applied a 7.95% reduction of all of these. Very, very rough math. Very rough. Well, over $40 million would be served, saved here from all the other programs, which would not need a decimation of, you know, two-thirds of the budget for UC labor centers.

So I'd like to get your feedback on if we made those reductions of 7.95 to these other programs, what impact that would have to those programs.

I will get you more specific impact statements at a later time. Providing an across-the-board cut to both the campuses and specific programs seems like a fair approach.

Okay, I appreciate that you said at a later time, but we ain't got a lot of time. Just want to remind you we got a few days, so appreciate a prompt response to that. I have several other questions, but I don't want to.

And I will get to them, but I want to provide my colleague some opportunity to do that as well. Mister Muratsuchi.

Thank you, Mr. Chair. I just want to follow up on the questions about the UC labor centers. It sounds like the Administration is proposing this without consulting with the UCs. Why the labor centers?

As the Governor mentioned during the budget release, none of these decisions were made easily and we are providing the legislature with a budget that is balanced. We took those hard decisions, but none of them were taken lightly.

I understand these are all difficult decisions for all of us, but of all the programs in the University of California, why the labor centers?

Thank you for your question, Assemblymember. I'm happy to take your feedback. May revision, just like the Governor's budget, is the starting of the conversation, and we'll take back your feedback. This is just to start the conversation on getting a budget.

Okay, I'm actually not providing feedback. I'm just asking the question: why the labor centers?

As I mentioned before, none of these decisions were taken lightly.

You're not answering my question honestly. I mean, I'm asking why were the labor centers selected out of all the long-listed programs with the University of California?

Assemblymember Muratsuchi, we are providing a budget that is balanced, and we had a lot of the-

Why the labor centers?

It's a really difficult time. We have so many.

Why the labor centers out of all the other programs? If you don't know, then I appreciate information as to why the labor centers were selected, but you're not answering my question.

It's a difficult time. I mentioned before the Governor mentioned itself that it's really difficult to make the decisions. None of this were taken lightly. Not choosing one particular project.

You need to stop reading your talking points and answer the question, why the labor centers?

Yeah.

Happy to take your feedback as some of Assemblymember Muratsuchi.

It's not feedback, it's a question. I expect the answer to the question promptly.

The Governor indicated how difficult these times are.

You're not answering my question. Why the labor centers?

I can tell you exactly where the decision was made, but we look at the programs that UC had available funding. There was the list of the LAO. We decided to make the difficult decisions, to start the conversation, present the balanced budget. And this was the proposal that we came on.

Why?

Because the budget needs to be - have a balance.

Why specifically the labor centers? If you don't know, then tell me.

I'm saying, like, the response that I have Assemblymember Muratsuchi is that we have very difficult decisions to make.

Out of all the programs, why the labor centers?

Look at all the available resources. We took the difficult decision of choosing and presenting it to the egislature, and I'm happy to start the conversation. We look forward to work with the legislature and find better solutions. Okay.

I look forward to you answering my question. University of California. Miss Vertinen, we all are proud of the University of California, and it pains me; it pains all of us, that we have to make tough decisions in terms of not giving the full compact proposals with the proposed one-time, as well as ongoing cuts.

I want to reinforce the Chair's questions that I believe he's going to follow up on in terms of the - well, did you want to talk about the? You know, our previous discussions, ongoing discussions for years that I've been on this subcommittee, in terms of the legislature's desire to admit more California residents. I understand that in order to continue to work toward our goal of limiting, you know, especially at the highly impacted or the most impacted campuses of Berkeley, UCLA, and UC San Diego, to limit the nonresident enrollment to 18% of the undergraduates.

That the deal was that the legislature would provide additional funding to make up for the loss in the nonresidential tuition revenues.

Can you respond to the proposal that the Chair and myself had raised earlier at our earlier hearing in terms of the possibility of a nonresident tuition increase, if not for this upcoming year, for 2025-2026 and going forward?

Thank you for the question, Assemblymember Muratsuchi. So nonresident students pay not only for themselves but also for 1.7 resident students because their fees are so high. So when we're enrolling nonresidents, we're able to have revenue that helps support our resident enrollment as well as campus operations. We use that money across our campuses.

It's baked in there. When we lose those nonresidents, we need revenue to backfill for the funds that are currently supporting campus operations. Regions are looking at raising nonresident tuition further for the 25-26 fiscal year.

At this point, we have what's called a tuition stability plan, which fixes our fees, student fees by cohort, and we had already set the fees for the 25-26. Sorry. For the 2024-25 year, the fees have been set. If we were to raise the fees for fall of 2024, we might be subject to lawsuits.

We have been sued twice before and have lost significantly for raising student fees too close to the start of the term after students had accepted admission based on different sets of fees. So, yes, we're looking at increasing fees.

I think there was some hope within UC that we could use those increases to supplement our base budgets rather than simply replace nonresidents, which would keep the budgets basically flat for the campuses. So, I think that is an ongoing discussion. The regents are open to having that discussion.

But I want to emphasize that we do need those funds to pay for our base budget operations.

And I think the legislature, we have recognized that.

Yes, you have. Thank you. Thank you for that.

But, yeah, I just want to reiterate, if it has already been clear that we want to, even in these difficult budget times where we have to make difficult budget decisions, that we hope that we'll continue our commitments to our constituents, to our California residents, that we want to continue to make sure that the University of California, first and foremost, is serving California residents and not our nonresident students.

Thank you, Mister Chair.

Thank you, Mister Muratuchi. I would just to continue on that thread. Yeah, we had a very robust and honest conversation about this. I look forward to the region's reflecting.

I do not agree with the premise that the nonresident tuition increases, especially for the three campuses, should be utilized for base, but instead to ensure that more Californians are actually able to enroll and to diminish the impact of subsidy that we are giving to UC for just three specific campuses in order to do what this body has said continuously and what the public, as was stated by Mister Muratsuchi says, which is to enroll more Californians.

So I'll look forward to that continued discussion but expect that going forward, we will not continue to authorize $31 million on an annual basis to subsidize this effort.

But we do encourage UC to raise those fees for nonresident students, which are, by our research, lower fees than at schools that are, we would consider of equivalent in terms of caliber, standing or however you want to measure the schools. And so that's my expectation.

It was what we said at committee months ago and so expect that that's what happens going forward. Let me ask about this increase, this cut, this increase, and then this cut. It is, as the LAO stated, rather unorthodox or confusing.

We heard from UC College of the Law on, I think, what appears to be a rational reasoning as to why an increase this year makes sense and then to be able to plan for next year if the cut has to happen. That is not necessarily the way this proposal for the rest of UC is laid out.

We're doing a $125 million cut now, which then comes back next year.

In addition to that, we are - the May revise says we will defer 5% of the augmentation from what was supposed to happen in 25-26 and in 24-25, I guess. We will say we're going to pay it back, but then we're going to reduce you by 8%. So we're really only going to give you 2%.

I want to just get real clarity as to why we're doing it this way and why not just accept the fact that we are not giving a 5% this year, not giving a 5% next year, but committing to a 2% of that year, which is 25-26 because that is essentially what we are doing.

So I'll ask finance first to correct me if that's not what we're doing because it's not like we're going to give 227 million, put it into the fund for UC, and then say, write us a check back. I don't think that's going to happen. I think we are just not going to give that amount.

We are only going to give that 2% in 25. That's our commitment today, anyway, in this May revision: to give 2% in 25-26. Can you clarify that for me?

Thank you. Chair Alvarez, you're correct on how the payments will be made. The 125,000,000 one-time that is happening at 24-25. It's a lot less than what it would be, a 7.95%.

What would be the 7.95%?

Get back to you on that math. But roughly, the budget is a 5 billion general fund, so take it, leave. It's like about 400 on that. But most agencies and departments are experiencing a 7.95% by a year.

And as a College of the Law San Francisco mentioned, this is very difficult for higher education segments when they already plan their classes and their size. They have a budget already ongoing. We're about to start classes in a couple months.

So the administration took into consideration how far we are in the year, the school year: to make a 7.95% reduction.

Can I just ask, just because I want to go point by point to fully understand. So 125 million cut is not 7.95%. We don't know what it is. But do you have an estimate? Do you see what that would it be?

7.9% would be about 370 million. So we're getting less. Yeah.

Okay. So you're kind of getting like a 4% cut? Essentially, yeah. And was that done in consultation with UC to make sure that the fall enrollment and plans and school year isn't disrupted?

This is the May revision proposal by the Governor.

Okay, so it was not done in consultation?

Correct.

Okay.

The goal was that all entities, most departments are experiencing that 7.85% of by a year. We're trained higher education segments. They're more special because of that reason on how their budgets operate. But at the same time, we feel the need that everyone has to contribute during this difficult time.

I understand that, but I want to give UC an opportunity to respond to what, that 125 million, or roughly 4%. There is an impact to that. You're also not going to get the 5% that was part of the compact. So you made plans, you know, and you do multi-year forecasting as well.

What is, what is this going to mean? Is it going to create any disruption for access for students for this coming year?

We have no intent to change our enrollment plans for the 24-25 year. It will create difficulties on our campuses in that we will have fewer funds to take care of more students. So what that means is longer wait times for advising. We won't be able to go out and hire increased numbers of ladder rank faculty, necessarily.

We'll have to hire more lecturers or other, you know, look for less expensive ways to increase course offerings to help take, you know, offer courses to all these new students that we've just admitted. So those are some of the impacts. We intend to freeze hiring.

So one of the ways that we can try to be as painless as possible is as people voluntarily separate from campuses, we don't refill their positions, and we get savings that way. That allows us to do very few layoffs if we have to, but it means that students get less services.

Okay, thank you. That's, that's clear. I appreciate that. So we've, I think, clarified what this does. We've heard the response from UC as to how that they would deal with this. So then walk me through the rest, which is a 7.95% ongoing cut in 25-26. So that one's pretty clear.

There will be a cut of 7.95% based on prior year allocation. Or what is that cut?

It's based on the 23-24 governance budget proposal.

Okay, thank you. And then? And then this is where there will be no real exchange of dollars or funding here. The 5% deferral will not happen in 25-26, correct?

No, that's incorrect. The Governor's budget proposal for the deferral is still on the table. The administration is still committed that there will be a 5% payment, 25-26, which will be the 24-25 in addition to the 25-26 payment schedule for the compact.

Okay, so you are going to take away 376 million and then give them 227 million.

Let me get back to the numbers to someone. Chair Alvarez. Yes, please.

Legislative Analyst Officer?

The action that's going to be undertaken is that the base augmentation, the 5%, is going to be deferred this year. That's the 227 million. It's then going to be provided under the May revision under the Governor's proposal. Governor's Budget. It's going to be provided next year on a one time basis that 227 million.

It's then going to be provided ongoing, an additional 227 million. And then on top of that year, four of the compact funding is also going to be applied on top of that. So again, this complicates things further, but then that adds, on top of it, an additional 241 million.

On top of that, there is also the deferred nonresident replacement funding, which you've already mentioned to not really consider. But hypothetically, if that were to be included, that would be an additional 93 million. That would be on top of all that. It's a quite extensive list of items that are coming up.

Tell me, please, what that means in terms of dollars, because there is a ongoing roughly 8% cut of 376 million. So you've got to deduct that from those augmentations. So, there is a net.

The net increase will be about a 2.05%.

What is that in dollars?

Roughly? The UC budget is about 5,000,000. So...

100?

100, yes.

Is that your calculation that they? So in 25-26, going forward with an ongoing cut of 376 million, in an ongoing augmentation of 227 million, there will be really a net increase of augmentation of 100 million? Not counting the out of the nonresident tuition.

We're going to be publicizing these numbers on our website shortly so I'll get back to you to confirm the numbers exactly. I don't want to state incorrect numbers here, but we are looking at an increase next year over this year.

Chair Alvarez?

Yes. What do you understand of this?

UC had calculated that with all these increases and decreases, it would be about 252 million in additional funding in 2025-26. But our number included the nonresident replacement.

So about 220 in net, you think, in net with the 8% reduction and the 5% augmentation ongoing of about roughly 220 million.

Ongoing. Yeah, we thought 252 and then you have to minus 60 for that. So 190.

Oh, I see. Okay. Well, looking forward to the...so now we kind of sort of have a ballpark figure of what this means in terms of dollars. Why are we doing this this way?

The demonstration perspective was to provide the segments with time to plan ahead. As we've been talking, they already have their schedule of how they're going to spend this upcoming calendar year. So, our goal is to maintain the compact commitment and the deferral, but at the same time, we see the 7.95% as an across-agencies reduction.

So we see the two things separate. What we're providing is a one year of them to plan ahead and then implement the actual reduction of 7.95%. But it's still committed to the compact payments.

So -

What you're hoping to accomplish, I think it sounds like, is that the UC participates in the sharing of the pain of the 8% cut, but also what you're hoping to accomplish is to continue the augmentations that were stated in the compact. That's correct.

Even though on the, on the net, at least on an annual basis, we're actually cutting more than we're giving to the UC's. Okay, so let's talk about the compact.

Sorry. Just to correct the record, there were actually the net, there would be a net increase at the end, after two years in the coming 25 - 26 about a year.

Right. Two years. There would be. What is the augmentation of the 5% supposed to Fund in terms of student enrollment?

The compact provides different goals for the segment. It doesn't allocate per specific goals. So enrollment is one of the goals of the compact.

What is the specific goal of enrollment?

Increase of 1% students every year for the UC during the completion of the compact.

And in terms of number of students, what is that?

We have it per year. So for the next, for the 2425 that will be enrollment of 2927 additional students.

We're talking about California students, yes, residents, and then a 1%, obviously a year after that. And we've heard from UC there's a commitment to maintain that growth.

Is there a commitment to maintain the growth as outlined as it relates to only specific, and I know there's more goals in this compact, but as it relates to student enrollment growth, that commitment remain, and it's something you can execute, given this may revision proposal.

At this moment, President Drake and the chancellors do remain committed to growing California resident access. Growing access by the 2947 students in 2025 - 26 would cost us about $61 million additional.

So, the funding that we're getting from the 190 million we would get in 25 - 26 will be eaten up by our enrollment growth mostly during that time. We'll see base budget growth as well that we'll be struggling to cover. The items in the compact that may be more difficult to cover will be closing graduation gaps.

What we find is closing graduation gaps is a very labor intensive endeavor. We need more advisors who meet with a student once a month or at least once every term. We find the summer early start bootcamps are very effective in increasing student retention from one term to the next and things like that.

But they are very, they require new employees. They require a lot of intensive time with a student.

So I'm going to interrupt you because I really appreciate what you're saying, because I don't know that I've heard this level of detail, what this compact actually will accomplish. You're talking about the. We've heard about the 1% increase. That's been very clear.

But there are very specific, targeted initiatives that you're taking on that you feel that may be more challenging to accomplish that are part of this compact. As a result of this funding, we.

Will try to close graduation gaps. We want to make certain all our students are successful, but the closing of graduation gaps is a more expensive endeavor, and we may see that that goal may not be met.

Have we had a breakdown, either to the LAO or certainly to UC, about the compact, its goals, and the cost of each one of their goals prior in the Legislature? Not for each specific goal.

Okay. And have you done anything specific to define the cost of each of the specific goals, like this summer program that helps you achieve graduation gap reduction?

We have not. We have not added up the cost of each individual goal, only the increased enrollment.

I think given the fiscal impact that you're going to, if this may revision is approved the way it is, that will be burdened on you. I certainly, and I don't think, I think I speak for our colleagues, do not want to see the reduction of enrollment growth that needs to continue.

But we need to know exactly what other initiatives are in jeopardy, and we need to know that graduation achievement gaps potentially are in jeopardy, because then that makes us. We will have to have a conversation about, is that an investment? We wish to continue.

So what I would ask, or the LAO and of UC is to help us identify those cost breakdowns by goal so that we know what those decisions, the impact of those decisions.

I will have to go back to the campuses and gather information on their programs and the costs. Unfortunately, because of the way our accounting systems work, I'm not able to get that to you by next Monday. It's going to take several weeks for us to pull that together again.

The most important thing to me is that we continue to increase student enrollment. You've given me the cost of that. It's a $61 million cost to increase by 1% California resident student enrollment as part of this compact.

So to me, that tells me that this 61 million, if we want to continue to that commitment, for that 1% growth of students in this compact, we've got to at least find $61 million to help cover. That's the level of detail we're looking for. Thank you.

The UCLA Latino Policy and Politics Institute also is the other targeted program to be reduced out of a list of many others. Is there any specific feedback that can be given about that program and where it currently stands? According to May revise, it's a $15 million reduction.

But according to, I believe at least as of March 30, in consultation with UC, that was down to 13.7 million. Because some of that was encumbered, we have received additional information that that's down to below 10 million. Do we have updated figures first and second? Do we have more information as to why that program was targeted?

At the time when we were making decisions at the maid revision, the amount not spent was 13.7. That's what we are presenting. As I mentioned before, none of these decisions were taken lightly. It's difficult to choose a specific program. Okay.

We're not going to get into that back and forth. We ask difficult questions, especially this year, because it's a difficult decision. So I hope that we all understand that it's done with the respect as I think is intended, but also understand that we need to get information as to why decisions are made.

We need to get into the granular about why specific decisions are made. Because there are impacts to students and there are impact to individuals who work on campus, that people's lives will be impacted. And we know everybody's got to make difficult decisions, but we've got to make informed decisions and that's why we ask these questions.

Well, we'll have to look at, again, the information we received as to where that expenditure is at.

And again, I appreciate hopefully by next week, Monday, looking at more across the board, you know, cuts and what that would mean to help ease the difficult decision on these two particular programs, the labor Center for sure, maintaining that, and also making sure that the work that was initiated by the Latino Policy Institute is terminated. It's completed.

So, Mister Mercurci, do you have any additional questions? Okay, thank you. I think there's some work that remains to be done in order for us to be able to make decisions on this. We'll be having a hearing again, I believe, next week.

So you being here, and we will move on to our next item, which is the California State University system here. Our top priority, just like with UC, is to ensure that access remains for Californians.

Again, we want to talk about the best ways to make cuts that do not interfere with the campus's core mission, which is to allow them to grow enrollment on a going forward basis to provide more access for students. I also want to work with CSU to limit the non.

We do need to talk about non resident enrollment at the campuses that have higher levels of enrollment from out of state students. I think that we can do better and CSU can do better addressing equity gaps and graduation rates.

That is something that really continues to be something of concern, of grave concern at CSU, and we want to focus our state dollars on that work and like with UC, hoping that CSU can become more involved in our discussion, particularly locally in Chula Vista on that site, to utilize it and bring higher education to more Californians.

San Diego State is another very impacted program and we could really have a great partnership with San Diego State University at the site and looking to having further conversations about that. So with that, we will begin this item with the Department of Finance and then we will go to the Lao and the CSU chancellor's office. Please begin.

Good morning chair Alvarez, Assembly Member Muratsuchi, Devin Mitchell with the Department of Finance the mayor revision includes multiple proposals for the CSU. I'll discuss first the items in the budget year, that's fiscal year 2425 and then the administration's plan for the following Year 2025-26.

The mayor revision proposed a one time decrease in base support for the CSU for CSU operations of 75 million in fiscal year 2024-25. To clarify, this is in place of the 7.95% reduction that will start for nearly all departments in 2024-25.

Additionally, the mayor revision proposes an increase of 5.5 million ongoing General Fund to support the estimated costs of chapter legislation expanding the fee waiver for Medal of Honor recipients, children of Medal of Honor recipients, and dependents of service injured veterans attending the CSU. That was AB 1745.

The mail letter also requests that intent language in provision five a of CSU's main item be updated so that the target resident undergraduate enrollment growth number in 2024-25 is 9866 full time equivalent students.

This is a technical fix that aligns the 2024-25 target with the number that was in the 2023 Budget act, not a substantive policy change. Okay, so that's 24-25. Moving on to 25-26.

So the CSU's ongoing General Fund based support will be adjusted downward by 7.95% beginning in 25-26 to help address the long term budget problem. As you've heard, this is an across the board reduction that will affect all state departments with a one year delay for the UC and CSU.

Additionally, the Administration still intends to make a deferral repayment that's 240.21,000,001 time General Fund and the ongoing compact payments beginning in 2526. Those total approximately 492.5 million General Fund and still expects the CSU will maintain its commitments to the shared priorities outlined in the multi year compact.

That was my remarks, but certainly will defer to my fellow panelists and can answer questions at the same time. Thank you.

Good morning, chair and Assembly Member Muratsuchi, Lisa King with the Legislative Analyst's office. I'll be brief as our comments on the May revision proposals for CSU largely mirror what my colleagues shared for UC. We believe that the proposed approach of simultaneously reducing, increasing and deferring based funding for CSU is unnecessarily complicated and opaque.

We recommend taking a more straightforward and transparent approach, deciding how much in base reductions, if any, to make to CSU funding in 2024 to 25 and then revisiting that funding level in 2025-26 once more information is available in the state's budget condition at that time.

As with UC, there are some factors that could mitigate the impact of General Fund cuts at CSU, including anticipated increases in tuition revenue in 2024-25 as well as the availability of University reserves.

In addition, as we discussed earlier this spring, CSU is currently receiving funding for thousands more students than it is currently enrolling, which could provide it with some more room to adjust its costs.

As we discussed in the previous issue, the Legislature does have choices regarding how cuts are made at CSU, meaning it can choose whether to provide an unallocated base reduction, as the may revision does, or to take a more targeted approach and reduce funding for specific purposes.

Finally, consistent with our recommendation in the previous issue, we recommend reverting unspent funds from prior year allocations to CSU. As of April 1, CSU has identified 341 million in those unspent prior year allocations, of which 184 million is for deferred maintenance and the remaining 157 million is for other one time initiatives and capital projects. Thank you.

I'll conclude there, but happy to take questions.

Good afternoon, chair and Assembly Member Muratsuchi. My name is Ryan Storm. I'm the assistant vice chancellor for budget for the California State University. We appreciate the opportunity to discuss our reaction to the May revision and its impact on the system. The deferral and the cuts in the May revision present several challenges to the CSU.

Each campus is preparing and developing specific strategies to address their budgets, which may include consolidating programs, adjusting class sizes, freezing new hires, and offering voluntary separation programs, all to reduce expenses while carefully minimizing disruptions to students and staff.

Despite preparations and reductions, the projected $345 million operating budget gap for 24-25 represents a significant financial challenge for the CSU. This gap that I just referenced is akin to the entire budget of the CSU Bakersfield as well as CSU Stanislaus campuses.

An example of a significant cost increase that we're dealing with for the upcoming year is healthcare premium increases. They have ballooned over historic increases by six fold without any increase in benefit coverage.

As far as the unallocated cut is concerned, we are principally opposed to cuts, as you would imagine, but we recognize that the fiscal climate of the state is currently in and appreciate the flexibility of any unallocated cut as was proposed in the May revision.

This approach using an unallocated approach would allow the CSU to pinpoint those reductions with the least disruption to our core missions. So we also appreciate the differentiation between the segments in this cut, which recognizes the limitations and contrasts of funding between the two systems.

On enrollment our enrollment is on an upward trajectory, with enrollment for the current academic year up two extra points, percentage points, or more than 7500 students.

We also enrolled our largest freshman class as reported in this Committee earlier, and we recognize the administration's intent to keep the compact goals, their intent to keep those compact goals intact, including enrollment growth, as this is a goal shared by all of us, all parties involved.

However, it does not go without acknowledging the enrollment threats that we are facing head on. So there are several that are on the cusp of occurring. The first impacts that we anticipate in enrollment may be the mixed status student and the challenges to complete the FAFSA.

Additionally, depending on the extent of the middle class scholarship reductions that are before you as a proposal with the May revision, that could also prompt students to reconsider their enrollment at the University. So that's one of the headwinds in terms of the upcoming year on enrollment.

And then lastly, any legislation that would duplicate the route to a bachelor's degree causing competition from enrollment between the CSU and UC could also impact our enrollment in the future as well. So despite these challenges, the CSU remains committed to and we will do our best with less to fulfill the goals outlined in the compact agreement.

Also, we will continue to work with the Administration Legislature for the speediest return to new state investments in the CSU to ensure successful outcomes for our students. With that, I end my comments. Thank you.

Thank you. Okay.

All right. I think we can save a little bit of time on this panel because I had obviously the same questions about the one time cut, the 795, the 8% ongoing, the augmentation.

So let's skip that because I think unless you it's any different for CSU than the way it was explained for UC in terms of how that cut in augmentation would work.

I think we understand that you're skeptical of the approach, but I don't have much to add. Okay.

Just like we asked them, and they didn't have a number or there was a ballpark that we exchanged that I would be interested in. And if you don't have it today because of all the, you know, adding and subtracting, get that. But do you have an anticipated number.

For what the 7.95% is?

Of what the net is of the 7.95 ongoing cut versus the 5%, you know, deferral, that then is one time, but then the ongoing augmentation beyond that.

Yeah. So, I mean, it would be different in the budget year. And 25-26 you're asking about which year.

Yeah, what is your 25-26? We have a two year budget. You're presenting to us what is the 25-26 anticipated net increase or decrease. Decrease to CSU as a result of all the adding and subtracting.

Yeah. So I have to factor in the chapter of legislation, but I think it would be around a little under a 70 million cut in the budget year, and then an increase, I think, above about a little over 2%, which would be maybe 96 million.

I'll defer to my colleague Chris.

I would put that abruptly at 200 million. So, 8%, their budget overall is roughly 5 billion. A little bit under 8% of 5 billion would be roughly 400 million. So if we were at 2%. Yeah, it would be around 100 million, give or take, in total net increase. Right.

2% would be about 200 million.

Yes. Sorry, 200 million.

200 million. And in 25-26 CSU. Do you agree with that figure? Beginning 25-26 under this may proposal, you will receive an augmentation in the LAO concerning chime in of 200 million, ongoing 25-26.

You're asking for what's your take home pay for each of the years. So for 24-25 if you're looking at just the operating budget, whether there's a cut or an increase, you're looking at a $75 million reduction in 24-25 and a net increase of two, as was described by my colleague at finance.

And we estimate it $97 million. So we're very close. My colleague here estimated 96. We at CSU estimate 97.

$97 million increase in 25-26 and beyond. Okay.

This is rough math to be clear.

Of course. Yeah, no, no, I get it. But it gives us a magnitude, because now you can expect to receive that as the augmentation for 25-26 not that we're now doing multi year, and I think that's fine. We can talk about. So in 26-27 then this proposal would, is that the fifth year of the compact.

So there would be an additional 5% increase.

There would. There wouldn't be the one time repayment that year, though. It would be the.

Just the 5%. Right? Right. Okay. Let's talk about what the compact does for CSU and the goals in the compact. So you have the same 1% growth. We're talking about 1% for you is what, 40 thousand, 30 something thousand students, 1% undergraduate.

1% undergraduate resident enrollment growth is 3484. Right. Full time equivalent students in 24-25. And if you just compound that 1% more, you're looking at 3518 for the following year 25-26. Okay. Costing $55 million. That was my next question.

Good job.

Going first. You're gonna go first next time.

It helps with the University of California.

55 million for the 3300. That's the cost. Okay. And I also asked them. So the other components of the compact for you?

Very similar. Graduation rates, equity gap narrowing.

But I believe for you, on graduation rates, we have a different line item in the budget to help support graduation rate.

That's correct, yes.

Okay. So I, again, I understand this might take some time, and I think it's an exercise worth, worth us doing at some point and understanding what this compact components cost on an ongoing basis and what are the difficult decisions that you might have to make with lack of resources as it relates to that. So I'd like to.

That will definitely be a follow up. Does the LAO have anything else to add on that conversation?

No. Okay. Is there any impact? UC was very clear. I want to make sure we're clear with CSU, with our representative employees and the agreements.

No.

Yeah, it's hard to tell at this point. Right now, we have the governor's proposal on the table. We still have the Assembly's plan to come forward and the Senate's plan, and then a final agreement.

We typically finalize all of our adjustments and actual implementation of our pay once the final budget act is signed, sealed and delivered, and then we can make those adjustments. As of right now, as you heard during public comment, there is contingency language in various current agreements. There's a group, I would say I would kind of join.

I would group them together in these two ways. There's a few unions, union group, represent our agreements that have contingency language that says that ongoing funding cannot be cut, and then the agreement will remain in place.

And then another group of agreements suggest that ongoing funding must increase by the levels of the compact as envisioned by the Governor. So there's two different tranches of agreements where those contingency languages have been, have been developed in terms of determining when and how and if there's any of those triggers that will occur.

Again, it's back, it's pegged to the final budget act about whether there is actually new ongoing funding or ongoing reductions to the budget. So it's to be determined at that point.

So today in this proposal, you have agreements that you've bargained with different units, so you've got different language in each one of what. But under this proposal, there are some ongoing cuts which would then, in your opinion, would have an impact on those agreements.

I think one thing that's hard to interpret here is, is the compact being honored? One of the conditions here is that, is this funding actually going to be arriving for the fiscal years in which it's intended to be? And does the deferral to the 25-26 year account as actually funding of the, of the compact?

And then that triggers. Triggers a downstream decision about whether that does meet the terms of the collective bargain agreements. So it's highly complicated at this point.

So it's not-- but there is also an ongoing cut, and you mentioned that there's language about ongoing impacts.

That would be for the. That would be for. Effective for the 24-25 year.

Yes. For the 25-26. Well, a group of 25-26 is ongoing. 24-25 is one time, right? Yeah. So were you consulted on that as it relates to those agreements?

We received the news. Okay.

Can I ask then finance, to help us understand what you think will be the implications of the decision? One of the things I want to. It's hard. It will be very difficult, especially because we just saw this also, and we're going to have to take action very, very quickly.

But I want to know as much as I can possibly know as to what to expect as a result of these decisions. What is this going to mean for some of the agreements that CSU has, and by extension also UC, if there is any of that impact on the ability to ensure that those, those agreements are respected?

Chris Ferguson with finance so we don't get at finance, we don't get involved in the matters of collective bargaining between the CSU and its employee unions. So we would not be able to comment directly on that aspect.

We could comment on the overall goals of the compacts, which, from our perspective, still remain in place given the out year perspective on the 5% increases.

So if we were to just define if those agreements have, and I haven't seen them, so I don't know what the language says refer to as compact, then what finance is saying is that the compact in this proposal remains, even though there's ongoing cuts which might have a conflict in some of your agreements.

Yeah, the language is available on our website. We have all of our agreements posted. You can read all the nitty gritty of it all you want. I would hesitate reading all of that. There's quite a few of those.

But the bit of the portion of the agreements that is contingent on funding is really a description of ongoing funding. It's not a citation necessarily of the words compact. It's ongoing funding included in the State Budget act of 2024.

Well, I certainly look forward to more input from the CSU and from our bargaining groups, faculty, staff, to make sure we are all understanding what the implications of this proposal would mean for that.

Because worst thing that could do is we make a decision now and then it creates an unintended consequence there which we do not want to see happen. So with that, turn it over to Mister Muratsuchi.

Thank you, Mister Storm. I want to make sure that I understand, you know, how all of these numbers actually translate into what it means for students and staff. The chair asks you the questions about the impacts on the collective bargaining contracts. What I heard you saying.

What I heard you saying is that the contracts, by and large, are dependent on whether the compacts are fulfilled and to what degree the compacts are funded. Is that generally what, did I hear you correctly?

If you use the words compact and ongoing funding interchangeably, then they're consistent. Yeah. The key use of word is ongoing funding. Whether there is ongoing funding in the budget, whether it's flat, or if it actually increases. Those are the two pieces of language under debate when we get to that debate.

But as I understand it, given this overall give and take type approach that finances is proposing that what is being offered in 25-26 can be taken away. Is that correct?

I think I'd have to look at each of the contracts. It would depend, and it also would probably depend on what actually occurs in 25 - 26 even as an example, one of the things is we had different numbers about what that impact is. It really depends on what the Administration.

How they would stack this funding, the cut first, or do they build in the 5% and then 10% and then back down? It's going to vary. It's also going to be in the range of $100 million.

But obviously with contracts, for example, one of the things that we typically report out, especially for 2425 is that most of our employee groups have had a 5% increase. That costs about $300 million for all groups within the University. Obviously $300 million versus 100 million in 25 - 26. There's a big gap between there.

So, the consequence to students and to even, you know, employee groups potentially could be quiet, quite challenging. Right. In terms, of course, offering services. And then also similar to what the UC reported, we're employing a number of strategies like hiring freezes, waiting for folks to separate, and then keeping those positions vacant, etcetera, etcetera.

So, we're going to try to do the least damage as possible as we go through having these challenging budget times. But there will be challenges and there will be damage done, obviously, if things go as projected according to the administration's assumptions.

Okay, you started your comments by saying, I think you said $345 million budget cap, right? That's correct.

Just in 24 - 25.

Just in 24 - 25. And that that is bigger than the.

Entire budget for Bakersfield and Stan State, both of those campuses.

Okay. And so you talked about the hiring freeze. I think you also mentioned class sizes, program consolidations. But I mean, just for us to have like a, you know, a qualitative impact, like, you know, how are the CSU students statewide? What are the top line impacts that they're going to see?

Are they going to see bigger class sizes? Are they going to see, like the University of California talked about, less advisors, less summer programs. What are the biggest?

I would imagine all of the above. I think you'll have an increase in class size, most likely. You'll probably have a reduction in the types of courses that are available to fit your schedule as a student, you may have a decrease in actual services on the campuses, especially if they're General Fund and tuition supported.

Our goal, of course, is to make it more of a haircut so the students can see as little as possible in terms of direct impact. That's the starting point, of course. It just depends on how deep.

And how long this down cycle goes before we see potentially increases in challenges for our students like we did in the great Recession right when things were very difficult at that point. But at this point, we're going to do our best to mitigate as much as we can.

And at this point, you're not projecting any, any tightening of enrollment or limiting of enrollment?

No. One of the things that we have really been pursuing actually is a growth of our enrollment. As we've discussed in this hearing before, we are currently 4.4% under our enrollment target, system wide enrollment target.

And so we have implemented a plan called our enrollment target and budget reallocation plan, where we actually are moving funding and seats from significantly under enrolled campuses to those that have greater demand.

So year over year, we're looking at potentially, based on the way that we've structured this move, anywhere from 2700 to 3500 students from one set of campuses to another. We have a three year plan for that.

And obviously, depending on the outcome of, of the state budget and the goal to increase enrollment by 1%, we could do about another 3500 per year on top of that, potentially in terms of our enrollment. So we're pretty aggressive, actually, in terms of our enrollment. And by doing that too, it also increases the amount of tuition revenue.

When you have more students, you have more revenue to potentially help with some of this reduction. Not significantly, but nevertheless, it could help buffer some of the challenge here. All right, thank you.

Thank you. Just a couple of follow ups, you know, on some of the identified unutilized funds. I would also ask about taking the approach of doing the 8% cut from those in order to help spread the pain, if you will, and not cut certainly the core services that are important to you, serving students and student outcomes.

I think I also caught you saying that perhaps you'd like to have the ability to make those, some reductions based on what you might identify as. I mean, say that this way, but non essential. Is that what you're asking as part of this budget?

No, I don't. I wouldn't say anything is non essential, right?

I use that word, yeah, yeah.

I would suggest, I think one of the approaches that you have at your disposal and the Administration has at its disposal is this idea of an unalledicated cut that then we, the executors, you know, writ large across the state, would make the calculated decisions about what is the highest priority and what is of lower priority, you know, in terms of maintaining so that we can do what the sub Member mentioned, which was maintain services to students the other approach would be more strategic, where you are deciding what precisely is to be cut.

Our preference would be obviously an unallocated reduction so that we can make those decisions, especially as that 75 million comes to the University as a cut, particularly potentially in 2425. We could strategically, either at the chancellor's office level or the universities.

The 23 universities could make those decisions at the local level on their campuses and make sure that they are not creating those unintended consequences that you had mentioned earlier. So I think that's probably the best approach.

That's been our approach since I've been here for 10 years, to always advocate for unallocated increase as well as unallocated increases if you have to go that route.

Okay. Is there any response from finance on that approach?

I think our. I mean, the logic of the compact and how this is done is that the systems are gonna be most familiar with their operations, and so we're in the best position to make those decisions.

So essentially supportive of that concept anyway. Okay. The other thing, and I did not ask this when UC was up, but some of the bond obligations and there's cuts, I think the 7.95 is also assumed in debt repayment. Is that also the case for you?

Yes, that was a great point that was raised by my colleague from UC. We have about $440 million that is tied up currently in debt service payments on our academic facilities and infrastructure. So one of the things that's about roughly just shy of 10% of our operating budget. So from the State of California.

So, one thing that you could consider would be, if you are entertaining the idea of an unallocated reduction in, say 25 - 26 you could pull that roughly 10% out. First apply the cut to operations. The challenge, of course, that you'd be dealing with is you would have less savings by roughly 10% to deal with.

So that's a tradeoff. And then you'd have to trade off elsewhere to gain the same sort of savings.

I just wanted to recognize that I had forgotten to mention it during UC, and I think it's an important thing to remember.

I would also like to ask, on the question of the non resident students, we have two campuses in particular, that there seems to be some growth year over year that seems to be significant, and we definitely don't want to be in the position where it reaches a level that we take more or request more forcible action on that.

And so what I would ask is that, particularly for those two campuses, which is San Diego and San Luis Obispo, that we look at how we're going to regain some resident Californians to not be in a more disadvantaged position in order to get admittance into those campuses. I'm very concerned about that.

Certainly from San Diego's perspective, where we have two University, public University, two systems that have very impacted campuses, which means a lot of students don't have access to students that want to even stay within their own region, which there are a lot of placebo students from our community college system.

I would like to continue to hear from you on how we can achieve that. And then the same thing about nonresident tuition.

I don't know what your policy is at CSU on non resident tuition and how we can, perhaps especially at those two campuses that seem to have an interest, give the authority or the ability, if you already have it, encourage you to increase the non resident tuition for those campuses in order to utilize that to help make sure that more Californians are enrolled.

Do you have any thoughts on that approach?

I think on the non resident tuition point, that's obviously under the purview of the board of trustees to decide whether they want to pursue that. Obviously, I'll take that comment back to them for their consideration.

I think the one thing that I would point out, that one thing that has been a challenge over the years in this hearing has been the discussion about how non resident tuition revenue at the University of California has made it more difficult in terms of budget decisions that the state has had to make. Right.

Just discussed the buying out, so to speak, of non resident. So the more and more, if we were to, as the board of trustees at the CSU, if they were to raise tuition for non resident students, that becomes more and more of a dependency on non resident tuition.

Right now, our nonresident tuition is really pretty closely pegged to the cost of educating them as a student. So, there's no state subsidy for them. It's essentially, they're covering the cost of their education. So that's one. That's one hesitation that I have to offer.

And what I would suggest, I fully understand it's the same argument that UC uses. But what I would say is, you know, if we are seeing this increase, it's clearly the desire from non resident students to attend those universities.

There is some, as is reference to elasticity or some bound that you could probably raise it and not lose those, those non resident students who can continue to pay their own way but also continue to support more California. So I'd ask you that you take a look at that as well.

Yeah. The other thing, if I could add, about the resident student situation on both of those campuses. So both of those campuses actually are currently the recipients of that budget, or, I'm sorry, the enrollment target and budget reallocation plan. They are recipients there of funding for resident Californians.

They are also recipient campuses for also new enrollment growth that is tied in with the compact. So we are seeing an increase in resident students at San Diego State and Cal Poly as well. But duly noted on the non resident.

That is correct. That was an important policy decision made, so I appreciate you reminding us of that. I think that's it on this matter. Thank you all for being here. We will move on to our community college system. We're visiting the May revision proposal, so we will ask the Department of Finance to begin with the proposals.

Then the legislative analysts provide a response and the California community colleges to also provide some response, just in comments. As the panel is joining us here, there is a concern that remains among here the Assembly about the administration's Proposition 98 structure, which really obviously impacts specifically our community colleges.

And we hope that there's a pathway forward to make that all make fiscal sense again. Cuts also may be needed here, and we know that there's more than $1.0 billion in unspent funds.

We reviewed a lot of that during our hearing a few weeks back, and those funds may be more appropriately repurposed to plug in the deficit and allow colleges support enrollment growth at their core programs. I am concerned about one time sources being used for ongoing costs.

This is something that the Legislative Analyst has pointed out time and again, and we see that happening, particularly in 98 and in community colleges, and hoping that the Administration can walk us through the proposal of the student housing state lease revenue bond, because we still don't have that, at least as of yesterday.

I don't know if that's been released. You posted last night. See, I'm glad I said that because I have not seen it going forward. I hope to have much more data and discussion in the coming months to better understand the funding formula. We've also discussed that, and I think that's a discussion to be left for the future.

Bob. So with that, we'll kick it over to the Department of Finance.

Good afternoon, chair Alvarez and Assembly Member Mark Suchi. I'm Justin Hurst with the Department of Finance, and I will be covering the changes in the Proposition 98 investments as pertaining to the California community colleges.

The May revision proposes the following workload adjustments to the California Community College's budget, an increase to the apportionment's cost of living adjustment of 31.1 million over Governor's Budget and ongoing Proposition 98 General Fund to reflect a revised cost of living adjustment of 1.07%. This brings the total investment that is proposed to $100.2 million.

Funding for the 0.5% enrollment growth is decreased by nearly 1.5 million. Ongoing Proposition 98 General Fund to reflect revised estimates and that total investment is now proposed at 28.1 million. The cost of living adjustment for select categorical programs in the adult education program, also at that same rate of 1.07%, is increased by 3.8 million.

Ongoing Proposition 98 General Fund for a new total of 13.1 million. The Governor's Budget has proposed to withdraw funds from the Proposition 98 Rainy Day Fund, otherwise known as the public school system Stabilization Account, to provide fiscal stability for k 14 schools and colleges to support the student-centered funding formula.

Specifically, the May revision proposes an increased withdrawal of 29296.6 million in the current year and a decreased withdrawal of 104.7 million in the budget year.

The updated total withdrawals for the student centered funding formula now stand at 532.5 million in the current year and 381.5 million in the budget year to support community colleges with updated property tax revenues.

Between now and Governor's Budget, there is a decrease of 68.7 million ongoing Proposition 98 General Fund in the student centered funding formula to offset those revenues.

As the Governor has announced, there will be an across the board cut of 7.95% to state operations affecting nearly all agencies in the budget year, and the community colleges chancellor's office is included in this proposal.

Unlike the UC and the CSU, there will not be a delay relative to other state agencies and this will be implemented in the budget year to add on to the rough math that equates to something like $2 million.

And then finally, the may revision proposes a reappropriation of one time Proposition 98 General Fund Dollars that will support the implementation of some vision 2030 demonstration projects and promote the efficiency of the community college system in pursuit of the goals therein.

This support, utilizing savings from both apportionment and student success completion grant funds, includes the following a supplement of approximately 227 time support for the current year student centered funding formula costs an increase of 12,000,001 time support for the continued development of e transcript California, as well as providing grants to districts related to one time connectivity, setup and integration costs an increase of 12,000,001 time support for a common cloud data platform demonstration project an increase of 6,000,001 time support for a demonstration project that will embed credit for prior learning policies into education pathways.

And finally, an increase of 5,000,001 time support for a demonstration project that will focus on developing educational pathways for Low income working learners. That concludes my overview and I'm happy to take any questions at the appropriate time.

Good afternoon. Paul Steenhausen with the Legislative Analyst Office our comments for community colleges echo much of what you heard in the community college budget hearing just last month, and what you will hear in a little bit when you have the Proposition 98 overview.

And then in addition, I'll touch on the housing proposal and the chancellor's office proposal, and happy to elaborate more on any other issues that you heard about, such as one time initiatives.

So the Department of Finance didn't mention this just now, but there's actually a proposal to increase the amount of money that would be accrued to future years. Additional pressure on the non-Proposition 98 side of the budget to address the issue and the challenge the budget problem in 22 - 23. So that's the so-called funding maneuver.

So, the Governor would add to that for community colleges, the community college share would be about one billion in 22 - 23 money that was Proposition 98 that would be reclassified as non 98 and eventually recognized in out years on the non 98 side of the budget.

We think that, we continue to think that's, that sets a bad precedent. It's bad policy, and it, of course, worsens the out your deficit for the non 98 side of the budget.

As you're going to hear later in the Proposition 98 section of this of the agenda, the Administration estimates that the constitutional minimum funding guarantee for schools and community colleges is down total of $3.7 billion across the three-year budget window 22 - 23 through 24 - 25. Most of that decline is attributable to the current year to 202324.

As the office, as our office said at the community college hearing last month, the Legislature has opportunities to revert unused, unallocated, unspent community college funds to address that drop the drop in the current year guarantee.

Now, the May revise to its credit does include this strategy by reverting and re appropriating about $227 million to cover current year apportionment costs. So it's a good start. But as you mentioned just now, Chairman Alvarez, there's a lot more unspent money that our office, working with the chancellor's office, identified.

We estimate more than $600 million above what the Governor is already proposing, and so that could be used to achieve budget savings. Budget solution in the current year and perhaps other years. And using unspent funds is a good strategy because it minimizes the disruption to the field.

So with regard to the budget year, even under the governor's relatively optimistic revenue forecast, the Prop 98 minimum guarantee would be insufficient to cover proposed spending on the colleges in the budget year. As you heard from the Department of Finance, they would use reserves in the budget year because they don't have enough.

There's not enough money under their budget proposal to cover those existing apportionment costs, let alone what the governor's proposing with these cost of living adjustments and some other spending.

So our issue, and Chairman Alvarez, you just raised this yourself, our issue is using one time money to Fund ongoing base costs is kind of a dangerous game because we don't know what 2526 will bring. We don't know what the guarantee will be, what revenues will be.

And so it really sets the Legislature up potentially to have to make some really hard choices in budget year plus one in 2526 when you have this funding hole of at least $450 million being carried into 2526.

So to minimize that ongoing shortfall, we recommend the Legislature not provide a cost of living adjustment in the budget year to apportionments or any categorical program and then revisit the available funding next year on student housing. The language just dropped yesterday evening.

The Legislature will want to, of course, study it carefully and hear from colleges that would be part of this new lease revenue bond program to see if they have concerns.

In addition, legislative staff likely will want to hear and legislators hear from the Public Works Board, which will be issuing, which will be issuing the bonds to pay for the projects and administering the statewide program.

And Legislature will also want to look at other things, such as what the costs would be in the out years for the debt service payments and what are the assumptions behind those estimates. With regard to the 7.95% proposed cut to the chancellor's office?

We would note that the Legislature just provided the chancellor's office a relatively large augmentation, providing an authorization of 26 new permanent positions to the chancellor's office in 2223. So that was an increase of 15% of staffing at the time.

Our office had recommended against a few of those 26 positions because they were either duplicative of existing positions of the chancellor's office or would be performing limited term work.

And so we didn't see justification for permanent ongoing positions in a few cases so the Legislature could revisit those positions if it wanted to adopt some cuts to the chancellor's office.

But I would note that the proposal from the Governor is not to have the Legislature weigh in and go through what might be cut, how this savings might be achieved were the Legislature to agree to such a cut.

Instead, what the Governor is proposing is an unallocated cut, which is problematic, we believe, for the Legislature, because it delegates authority to the Governor to decide on what the governor's priorities are and where the Governor would like to see cuts.

It lacks detail as to the decision making process that would be used by the Administration to identify reductions to get to that 7.95% cut that the governor's identified. And it also lacks detail on how the Legislature and the public would be informed of any reductions made under the proposal.

So with that, I'll end my comments, but happy to answer any questions you might have on what we talked about or on the four initiatives that are proposed.

Good afternoon, chair Alvarez, Members of the Committee, Committee staff Doctor Daisy Gonzales, Deputy Chancellor at the California Community College's chancellor's office I will be brief in my remarks so that I can answer all of your questions along with the other panelists. So, I will just share briefly.

First, deep gratitude for having this conversation with all of you today.

Gratitude to the Governor for prioritizing California's community colleges and offering our colleges and districts the given this difficult fiscal climate, I also want to acknowledge that I have heard this Committee discuss several times how California's community colleges serve the largest percentage of low-income students, first generation students, and students of color.

And so, as your conversations continue as we answer these questions, I will bring us back to that point and keep reminding us, as my districts and college leaders remind us, every single day, that they are the workforce and economic engine for California. I also want to address just two key components of the May revise proposal.

And then, since my colleagues here on the panel have addressed other components, I also want to add just one more component of our conversation. Number one, we are strongly supportive of the May revise, specifically the investments to expand California's community college's opportunities to train the next generation of nurses here in the State of California.

We are not just doing it now. We are ready. We are prepared, and that is a $60 million appropriation for California's community colleges to address the ongoing nursing shortage. We're also extremely optimistic because in prior years, we also signed a compact, except it was called a roadmap for California's community colleges with the Governor.

And as a part of that, our Board of Governors developed Vision 2030. All of the goals and metrics address close closing equity gaps, regional gaps, and making key transformations to get our students to their finish line much faster.

So the four key demonstration projects that you see in the May revise are to address that compact, that specific commitment. So we are extremely supportive and optimistic to see investments related to Low income adult learners. This is our partnership with the United Domestic Workers here, as well as other employer represented organizations.

We're also extremely optimistic and grateful to see recognition to ensure that we are embedding credit for prior learning so that we can help veterans, military veterans and other students get to their finish line much faster, as well as creating and building a secure and reliable data infrastructure for our system.

I also want to acknowledge the reduction since it came up. It is a 7.95% reduction across all state agencies. But I want to put it into context so that you understand the state chancellor's office, the 7.95 actually equates to 2.1 million. And it is roughly 35 positions at the state chancellor's office.

That is really important to us because we currently have authority for 200 state employees for the largest system of public higher education. We oversee 116 colleges and 73 districts. And to put it into further context, our CSU colleagues operate with 700 positions at their state chancellor's office, who serve half a million students in 23 campuses.

And our UC colleagues operate close to 2000 positions in their system office, serving 300,000 students and 10 campuses. We know that it is difficult conversations and difficult decisions ahead, and so we look forward to working with this Committee, with the Assembly, with the Administration, and all of the colleagues to find better solutions. Thank you.

Thank you. Anyone else on that panel? Okay, so then we will begin with questions. Does the may revised proposal utilize one time sources for ongoing expenditures?

I would. Justin Hurst, Department of Finance I would say yes. You could categorize the withdrawal from the Proposition 98 rainy day Fund as a one-time expenditure, and that is a significant withdrawal.

What is the amount?

I can pull it up for the. I have it broken down by current year and budget year. So I'll give you the two numbers. The current year is 532.5 million, and the budget year is 381.5 million. And that's just in reference to the community colleges. There is withdrawals for k two as well.

Lao, you can jump in on this as well. What does that leave over the two years for this particular Reserve to be utilized in other years?

Is there anything that's left? Chris Ferguson with Finance. No. The Proposition 98 package would fully deploy the available Reserve, which is roughly 8.4. Billion across k-14, education and all 532.

I would go to the LAO now, a million of the withdrawal for current year and roughly the same amount for budget year. All that is being utilized for ongoing programming.

No, there's a portion that's used for current year to address the current year shortfall. But when you look at the budget year, it's actually, finance is saying 380. It's our understanding it's more like $450 million in one time reserves would be used in the budget year for ongoing apportionment costs.

So that's something I calculated yesterday, was looking at. What is the total cost for apportionments under the governor's proposal? It's getting up to $10 billion. And then what's actually available in ongoing resources? General Fund, property taxes, fees. And it's about $450 million less than the cost.

So that's what the governor's proposing to use at may revise to plug that hole with $450 million in Reserve money.

Okay.

I think the big, so as we found out, all of us, especially very publicly this year, there's ways that things are calculated differently from finance and from the LAO and so that, but I think the big picture from a perspective of what is available for future years, of concern for those of us who are going to be here for or hope to be here for a longer period of time, is that after these, after the use of these reserves for current year and budget year, we have none left.

Okay. All right. Obviously, what concerns us the most about when there's cuts in this Committee, you hear the theme UCSU. Same here is what, what does this mean for students? And so we have some questions that are focused around students. What do the cuts mean?

And certainly the, the chancellor's office can respond or if the finance has any input in terms of what does this mean for students and certainly enrollment and then strategies that are used for their success at a community college. What can we expect happen?

Thank you, Mister Chair David O'Brien with the California Community College's chancellor's office, we're still evaluating what the impact of potential agency reduction would be. As Doctor Gonzalez noted, we have some numbers, but it's important to note as the person that sort of oversees all of these things.

On average, the Legislature adds between about 10 and 20 new programs, initiatives or mandates to the community colleges every year through accommodation of budget trailer Bill, budget action and policy bills. The overwhelming majority do not come with new funding or new positions for the chancellor's office.

As Mister Steenhausen noted a couple of years ago, we did sort of our best attempt to what we call the true up to estimate, you know, the value, what the workload of the last several years worth of those mandates were. And we're successful in working with finance and the Legislature on having those positions added to our agency.

But ultimately, just the last couple of years, since then alone, you've seen a significant expansion of our remedial education reform efforts, a major new effort to strengthen and streamline the transfer process, things like our, you know, our work to support binational students.

Thanks to your leadership and others, you know, oversight of our colleges, hiring a full time faculty through the funds that the Legislature has added, again, without having specifically gamed out what the impact would be.

Those are all some of the things that our office currently, I don't want to say, struggles to oversee, but currently with 200 positions and very rarely getting new positions or capacity added when these new mandates come out. An additional agency reduction could have an impact on our ability to provide that oversight at the system level.

Most of the workload is done locally by our colleges and thus comes out of their apportionment. But our office does provide that key role in, you know, guidance, what data they need to collect, bringing together communities of practice so they can share best practices with one another on what's working, what's not working, all of those things.

And those are some of the things that could be limited in terms of the impact to students.

You know, we wouldn't want to see a situation where colleges are uncertain of how to implement a new expectation of the Legislature or looking to our office to provide guidance that we're struggling to get out because we're, because we've been cut and we're busy focusing on previous year mandates, things of that nature.

Totally appreciate that and understand that reductions to the chancellor's office will potentially have an impact, as you said, on oversight and accountability for the programs that there are expectations for.

And on a going forward basis, at least in our and in the Assembly, our speaker has been very clear, I think the Governor has been very clear in interactions. I have been a part of that. Any new programs and expenditures related to it are going to be challenging, if not impossible.

So I think that message is loud and clear. I think what I'd like to know is these proposals and what that means more specifically. You said you're evaluating that still.

I think that's information that's important for us, as you probably heard with UC and CSU, as we make these really difficult decisions, we need to be best informed as to what that means.

And if there are expectations from the Legislature for you to continue to fulfill your obligations for X, Y and Z program, you need to let us know that this proposal will impact that and in which ways. And that's the information that's critical for us to have, not generalities, but specifics. That's where we're at at this point.

I want to, and particularly focused always on students. We started this Committee, it's very first hearing. We had a panel of students, community college, UC and CSU. We always got to keep them front and center as we have all these discussions and ask all these questions. So that's what I'm interested in.

How are we going to impact student access and student success as it relates to these proposals? I hope we hear some specific feedback from you. There are four new programs that are proposed of which I've definitely heard the vision by the chancellor and appreciate the thoughtfulness that was undertaken to accomplish that.

One of the things, though, that I think is important for us to do, and it's our duty, especially in these committees, is to understand exactly what this funding will accomplish. It's great to Fund things and to say we are working on something, but there's got to be accomplishment and metrics of success.

And so I know that, for example, one of the programs that I particularly believe in is the Fund for pathways for Low income workers. But even to those who advocate for this worker, I am being very specific in requesting information on metrics. How many students are going to get served?

How many students are going to, how many individuals are going to move from a Low wage type of employment into, you know, being trained to do something else? What, what exactly are they going to be learning? What can the current community college system not offer them? Or maybe an adult education system.

So there are, those are the questions that remain for me on that specific project, but in program, and we're trying to do that due diligence. But I think I would ask the same questions of the other three. What exactly is this going to deliver?

Is this one time an expenditure that's going to deliver an e transcript program for California? And what does that actually mean? What do we accomplish with a fully developed, continued development? So I don't know if this is not going to fully develop it, how much more is left to develop?

So do you want to provide any feedback on these one by one?

Thank you. Thank you, chair Alvarez. As I mentioned earlier, these are directly tied to the roadmap for California's community colleges and the Board of Governors Vision 2030. I will address them in the order in which they appear in your agenda. So I'll start off with e transcript. This is already a program that exists.

What was funded by the state several years ago was actually the technology platform. It's currently funded at $1.2 million. Ongoing. The 12 million, the portion that you see here, it's really to Fund student success and student access. Why and how? That's what I want to share with you now. The how is e transcript?

While it is now an online technology platform, it needs to be expanded. It's currently not utilized. So we have a technology platform now. The colleges, UC and CSU need to access it so that they can communicate freely across all segments.

The concept and the goal here is that we would have one unitary system where any student taking a course or a class or earning a degree or a credential at a California community college can communicate across districts.

But as well as with our four year partners, our public and our nonprofit partners, this is a key component of the cradle to career platform as well, and developing that specific data set.

So I was going to ask about that as a follow up because we hear about this same exact initiative in cradle secure. We've heard it in there's like six database systems of which is supposed to be information for students to be able to share data with other campuses to ensure financial aid and coursework matches up.

There are a lot of initiatives out there, and so I'm just curious, how is this different additive or really, why is it necessary?

And why can't we augment or look at other initiatives, technology initiatives, and be part of that and not create a whole entire system that's going to require its own it support and its ongoing maintenance and ongoing expenditure?

I'll let Department of Finance address cradle to career, but what I will share about e transcript is this is the way that you operationalize cradle to career career.

So e transcript becomes the tool where you can collect all of the student information from their personal contact information to their grades, to the articulation across segments so that they could actually transfer and get credit for the courses that they have taken.

The 12 million would be to, and this is one time to then not only update that development so that it actually matches what UCCSU and our four year partners need, but in addition to that, expanding it to all 116 colleges fully.

Right now, our colleges have a reliance on third party transcripts, so that impacts our students and their families as they are.

Meaning each college has their own system.

Their own system or even a third party vendor that they go through.

And then will this information be able to be accessed by, like CSAC, the.

Student Aid Commission that is envisioned as a part of the cradle to career, and the MOUs that have been signed.

Will this $12 million investment allow that to occur?

It would develop the platform and bring in the new technology, essentially variables, the metrics that are for your partner's need, so that e transcript would become the vehicle that cradle to career would take on and administer.

Department of Finance, do you have, do you have more to add? No, I think that's accurate in that we're trying to integrate e transcript within the cradle to career data system.

And this is about being able to have that transcript portability, that information portability between campuses that also can include at that point, the Student Aid Commission as well, because that data is also being integrated within the create all the career data system.

I could probably ask a bunch more questions about this, I think. Is there an RFP already available? No, no. I think questions remain as to what is, what are we getting for this? I have to be really honest. It doesn't sound like we're getting anything tangible to deliver. Like it's setting platforms and progress.

Like I'm not getting a sense that we're actually gonna have, we can say we're spending $12 million and we are gonna have e transcript and it's gonna be done, and it's gonna be done next year. And that's the sort of information. And if it's not, it's okay.

But let me know what that means, because you're going to probably come back and ask for more funding, and I want to know what that means for the following year. As we are discussing now, you know, a two year budget.

Lao has some comments, really, just to. Echo a lot of your same questions. We had the same reaction when we saw the May revise proposal. This Committee heard the proposal a few weeks ago, about $600,000 from government operations agency budget that would be re appropriated.

And the way it was explained was for stakeholder engagement and to crystallize the vision for what a revamped e transcript California would look like. And then this proposal comes along. And so it's not clear how this proposal meshes with the proposal to develop a vision.

And so we have the same questions about what would the product be, what would be the cost, what would be the timeline, what would be the scope. Miss Gonzalez said, mentioned that the current system is not being fully utilized. Why is that so? Understanding user needs, all these things need to be, I think, addressed.

And especially we'd say that bars should be very high this year with a multi year budget deficit before initiating new spending. And especially when you have the chancellor's office that might see cuts of dozens of positions who would actually oversee this project and do the work. So lots of questions that we have, we share with you.

So I think that will continue. And just as a sort of aside, but related with the Committee, we've had all of these different data systems sort of come through.

And one of the things, the goal for, I think, for this next fall and oversight hearings is what exactly are we doing in terms of all these expenditures and what is it going to accomplish? Because one thing we have done, unfortunately, not very well, is systems of technology in the state. We see it like everywhere.

We were talking about insurance yesterday in a different hearing. You know, that those systems are not implemented yet. And I have concerns whether they'll be implemented there successfully as well. So interested, supportive, but like more questions definitely remain for this.

I don't want to monopolize all the time, but those same remain for the other 12 million for cloud data platform. And then are we going to, with this one time allocation in General Fund to mapping?

Does this like get us the mapping and or are we going to be looking to receive, to request more requests for ongoing funding for that? And what is exactly, what is this mapping system actually mean? So I want to give opportunity to my colleagues to ask questions. So I don't know if Mister Fong, let's go first.

Thank you so much, Mister chair. And thank you to all the panelists for this presentation. Just to follow up on Mister Chair's point, I'm looking at the $5,000,000.01 time Prop 98 for the supporting of pathways for Low income workers Demonstration project. Can you share more on that, please?

Yeah, I was actually waiting for the right moment to say, chair Alvarez, you asked me to cover all of them and I didn't get a chance to, but one of the other ones and one that I'm very passionate about, this is a part of Vision 2030 and of course the roadmap to the future, which called this to really and role Low income adult learners in particularly those that have been left behind by a changing industry.

United Domestic Workers is our first labor representative partner in this work. We are also working with other labor partners to bring them on board. But UDW is our first partner, and specifically they have 171,000 IHSS workers, as well as family childcare providers in 45 different counties in California.

The majority of these workers are low-income workers who are seeking access to education. So, what we've done in a period of three months within existing resources, and UDW, bringing in their foundation dollars and going out there to write additional grants together is really enroll UDW Members.

So, everything from high touch enrollment fairs at UDW facilities to on campus orientations for them and their family Members. So, this is about enrolling all UDW Members and their family Members into California's community colleges.

The first three initial pathways that have been created are related to English as a second language, and then very specifically focusing in on those that are interested in the health industry. And so really leveraging existing resources at our colleges for English as a second language within the health space.

Within three months, we were able to enroll three different cohorts, all in the San Diego area. And as a part of this work, we are now expanding to 12 other districts. These are all the high targeted UDW regions in the state and a part of the partnership.

And what the resources would do is it would allow us to expand to the 12 other districts that we are now seeking to bring in UDW Members and their family Members to enroll in, as well as to help those UDW Members enroll in childcare, have their transportation needs met, provide them laptops and electronic devices, such as Wi Fi devices, and helping them with their instructional materials.

This is all a key component of that high touch that our Low income learners need, as we have heard several times.

Thank you so much, Deputy Chancellor Gonzalez. I appreciate the context there. And EDW, I know is expressed, this is a very important area to continue to develop the workforce for IH SS workers and employees and to develop that pathway. If you can share which. Where are the other 12 districts? Do you have that list?

Or is that something you can send to my office?

Yeah, I can definitely send it to your office. LACCD is definitely one of them. We're just looking across the state here.

So just.

Riverside is another key area for UDW Members. A really big base exists in San Diego, county, and then the third largest is in San Bernardino. So we have targeted all of the high population areas within the first year, we want to be able to serve 40% of UDW learners. So I mentioned 171,000 new learners meeting 40%.

And we believe that those 12 new districts, plus the three pathways that we've already created in the other district, will help us meet that goal in the first year.

Thank you. And then secondly, in terms of enrollment projections for 2425 can you provide some of that landscape as to where we are? Where do you see us going forward?

Yeah. Really excited to share that we are in an upward increase and that rebound, right.

Coming back really started in 2223 when we saw an 8% increase in our enrollment, not by mistake, through a lot of hard work by our colleges and our districts, as well as then seeing those same increases, another 8%, as we are looking at our next year. 2324.

And so, given the new projections, as I was preparing for this hearing, we feel very confident saying that we will bounce back to 2.1 million students, which was the initial number before the pandemic started by our 2526. Why do we feel confident saying that?

Number one, we are very close to meeting our annual goal, which we set for dual enrollment. We wanted to increase dual enrollment by 25% by the year 2030. We did that in the first year. We are at 21.5%. Five, an increase in dual enrollment. Why?

Because of the leadership of this Legislature by removing the cap and then providing the resources for us to focus on dual enrollment. The second population that we are increasing enrollment is, is actually rising scholars which are currently informally incarcerated Californians and providing access to educational pathways for them.

So, by 25 - 26, 2.1 million students, and all of that because of the investments that this Legislature and the Administration have made in the last four years.

Thank you so much for that, Doctor Gonzalez. And I might have missed this portion earlier, but I heard the chair also mentioned the student housing piece and the lease revenue bond. Is there more information on that program going forward?

Justin Hurst, Department of Finance my colleague Alex is coming up to answer that question. Thank you.

I believe it's afternoon, so good afternoon, Terran Members Alex Velazquez with the Department of Finance. As you all may have seen yesterday, the TBL free the statewide lease revenue bond was posted on our website that is being presented. It's proposing the financing shift from the General Fund support for the community college projects.

The statewide lease revenue bond program will necessitate a project construction delivery agreement between the Public Works Board, the chancellor's office, and the community college. In addition, the community college district will need to grant ground lease and easements to the chancellor's office.

Once completed, the state public swart board will lease the site and project from the chancellor's office and sublease it to the community college. Bit technical, but the lease payments under the state public's Works board to the chancellor's office will secure the state public's works board bonds.

Before issuing the bonds, the state Public Works Board will obtain interim financing for projects. Any projects that received an allocation in the 2022 budget actual will use that allocation until the state Public Works Board can obtain interim financing, which will cover the project's cash flow requirements.

Colleges will return unused funds from the 2022 allocation and funds from the interim financing to cover the education code 17201 obligation. This concludes my remarks, and I'm happy to take any questions at the appropriate time.

All right, thank you so much for that. Is that information to share with our Committee?

The TBL is posted. So this is basically a summary of the whole language? It was posted last night. Yeah, posted 04:03 p.m. To be exact. But yes, I can also send these talking points to you guys if that's a little bit of help.

All right. 43 pm. Thank you for that. Of course. And how many number of proposals or student housing projects would that impact when.

Working with the chancellor's office? Our colleagues over at Department of Finance legal and capital LA worked along with the chancellor's office to review all 13 community college applications that were approved in 2022 - 23. As a reminder, the other three were supported by General Fund cash, which is 50.554,000,001-time General Fund.

So this would cover the remaining 13 approved applications that were submitted.

And I know in our. Thank you for that. And in terms of our budget Subcommitee hearing a couple weeks back, we also had a long list of other projects that were in a pipeline going forward. What's the status on that? That's for community colleges.

I would have to defer to community college chancellor's office for that.

Those are under review through our standard process, and we have the scoring rubric that was developed largely pursuant to the legislative guidelines we received and go through phases with those, and then submit to Department of Finance every year in advance of the budget, our recommendations based on that rubric for what should be funded.

I think I can probably speak on behalf of my colleague and say that we will continue our internal process on reviewing those, but of course, everything will be subject to budget decisions on what actually does get funded.

Thank you. And then lastly on the dual enrollment programs, what's the projections going forward? I know you touched upon it briefly, but I know the chancellor is very focused on this. I know the office is very focused on this.

And as a Legislature, we've been very focused on trying to look at reforms to make it much easier and to provide those resources for dual enrollment programs going forward. Do we have a projection of the next five years on this?

I mentioned earlier that this year we had 21.5% increase and our goal for 2030, so we're in the year 2024 was 25%, and our board just adopted that goal in September of last year. So we'll have to go back and change that goal because we will probably meet it by next year.

What I will highlight and say here is, as we're looking at dual enrollment and meeting the governor's vision to ensure that every high school student graduates with at least 15 units by the time they graduate from high school, we are also looking into bringing dual enrollment into career technical education.

Of course, in order to meet workforce needs in the State of California as a part of that, then e transcript, the project that you see in front of you in the May revise becomes really critical, as well as the common cloud data platform, which is really how our colleges will communicate with each other.

We are a decentralized system, as you know very well assume Member Fang. And so when our students are in a high school in one region, and they try to go to a community college somewhere else, they can't communicate with each other.

And so then that is where we see challenges with transfer, loss of unit accrual and things like that.

Thank you. And one final point, as we heard from this partnership at the $5 million for the United Domestic Workers and earlier in the Committee hearing, was really uplifting the UC labor centers and that partnership up and down the state and the crucial work that's being done there.

So, one of that $13 million request that we had earlier MA and then also the UC Latino Policy Institute as well.

As we look at the work being done by the community colleges to scale up and to boost enrollment back to pre pandemic levels, it can be even more critical for our higher education systems and especially the UC and CSU to increase enrollments for our in state residents. Just wanted to uplift that at this moment.

But thank you again to our panelists, and thank you, Mister chair.

Thank you, Mister Fong. A couple more questions on the programs that are utilizing re appropriated funds of one time funds. What funds are being re appropriated for the purposes of the four initiatives, in particular for Department of Finance?

Justin Hurst, Department of Finance. This reappropriation comes from past year apportionment savings as well as savings from the student success completion grant. And I believe we discussed these at a previous hearing on the community college.

What was the amount of the savings in your may revision for each of.

Those, each of the funds portion? Yes. Versus. I don't have that number, but I'd be happy to get back to your staff.

Does the LAO have any information on that?

I just want to add our understanding is there's several programs that would have funds scooped. The apportionments. That, and that's about, that's $31 million. That's apportionments from 22 - 23. That was unclaimed enrollment growth and then some additional money that districts didn't earn in 22 - 23. So that's 31.

There's also a class, there was a new program in 22 - 23 on classified employees summer program that was 9.5 million. Part time faculty health insurance program that was another new program 22 - 23. That's $177 million.

There's some strong workforce program money as well from 21 - 22 but just a small amount, just a portion of, of the unspent money from that year would be scooped by the Administration under May revise.

So we've noticed that the part time health insurance, part time faculty health insurance program is also either very underutilized or if utilized at all. What is going to happen with this on a going forward basis? Are we, what's the May revision say about this specific program?

I will just say that the May revision does not have a proposal related to the specific program. I will say that when we are identifying funds for the re appropriation, we were working with the chancellor's office to identify what would be least disruptive to their operations.

Okay. Chris Ferguson with finance. I would just add that that was the very first year that this program had rolled out and was likely. What you're seeing is the collective bargaining agreements could have already been in place, so districts hadn't yet bargained for that additional health care.

Is there ongoing funding for the part time faculty health insurance program? What is the amount of the ongoing funding above the 177 that remains unspent? Yeah, I believe it's 200 million annual ongoing. What about the strong workforce funding that we discussed also at length that all continues to be highly under subscribed?

What is the intent for that funding?

I can address that.

Chair Alvarez, one of the issues that we have had this spring and really appreciate the patience of our Lao and DWF colleagues here at the table with us and others is because, and I promise it's not a sales pitch, but because of the lack of that common data system, we often don't have, and I realize this sounds a little ridiculous, but we often don't have real time information on how much unspent funds or spent funds remain in various accounts and programs once they've gone out to the colleges.

So part of what we are in the middle of doing very quickly and furiously is making sure that we have that information real time, sending out surveys to colleges and districts, giving them strict deadlines to get back to us.

With strong workforce in particular, we're aware of the concern the Legislature's raised, and we've been very clear to communicate to colleges that they need to have plans in place. They need to have an idea of where the funding is going.

And part of Vision 2030 is retaining some of that flexibility to be able to respond kind of in real time when there's a, you know, emerging industry in a various region which has happened with strong workforce specifically to be able for colleges utilize some of those funds to quickly put together a program that's responsible to employer needs.

Okay. Does Yaleo have a response?

Just two main points. First, we did work closely with the chancellor's office to identify unspent prior year funding for strong workforce. Just the prior year funds alone was about close to $290 million, which is the annual base funding that the Legislature provides the program. So it's a lot of money.

And then we looked at in the current year, how much has been spent through December 31, very little of that money had been spent. Of that $290 million had been spent. Just wanted. So the second point is the chancellor's office brings up this point about they're not able to in real time track actual spending. That's true.

But the chancellor's office does have a system. It's called Nova. It's a platform that strong workforce recipient funding recipients report to, as well as dozens of other programs that the Legislature funds. And so, there's that platform. They typically, the recipients of this money report quarterly on how much they've spent.

So, it's not like the Legislature is lacking or the chancellor's office is lacking information from even a year or two ago. They can tell you how much they spent through December 31 and now very soon, the third quarter of the year. So, there is that information. The strong workforce reports to it.

A number of other programs report using that system, other programs. I have not heard anybody talk about how it's difficult to use or it's not accurately reporting information. So the Legislature does Fund a platform. Could it be better? Could it be more real time?

Yes, but, but using the information we have, which is pretty good and pretty up to date, there is a lot of unspent money still that could be used to address budget solution in this budget.

Don't we also, as a former local elected, we had annual CAFRS, audited financials. Do districts not do that? College districts? I was on the City Council. I was not on a school board or. No. Let's check into that. Okay.

Because that's, you know, as, as detailed as you can get, um, on the nursing initiative, I would just say that I'm certainly interested in.

That is the, is, can someone please provide some clarity as to, uh, does, does the May revise Fund a $60 million program that at some point gets figure it out through a legislative process, or does the May revise Fund a $60 million program that you intend to have be adopted through budget?

Justin Hirsch, Department of Finance I would just say that the 60 million funds, what would be described in trailer Bill Language, which at the previous panel, when we discuss this a couple of weeks ago, I did mention that we, we're still looking for some feedback from the Legislature and continuing to work on hashing that out.

So you're still doing that? Okay. You're interested in feedback. I know that the community college system is interested. I would just say from a perspective of, at this point, sitting up here now, we have two urban community Members where we have universities and community colleges.

I want to recognize the advocacy done by one of our colleagues, Miss Soria from Central Valley, who has a very different dynamic where I think allowing community colleges to provide these degrees probably makes some sense in parts of the state like the ones that she represents in other parts of the state where we also still have deficiencies in nursing, which we have.

And by the way, we discussed, you might remember, about getting more data about what are the real shortages, and we have not seen that from any of the folks that I asked that from. So I hope that we do get that data, as we were.

I know the LA also had referenced some data points, and so I'm looking forward to that, to that data that identifies the needs in different regions. It appears that there's a need in places like San Diego.

And so what I would like to suggest as the language gets worked out is that in places where we do have programs that we not duplicate and create new programs, so if we have, for example, in San Diego southwestern College, who could potentially offer nursing programs, that we not create a whole entire new system, but rather incentivize through this program partnerships with, like San Diego State University, so that we can have more programs off the ground a lot quicker and that we can be creating those fulfilling some of those needs that exist, as opposed to starting a program from scratch and maybe years down the line, have them implemented so we can start to produce nurses.

So I hope that we take that nuanced approach in places like San Diego, and maybe Mister Fong wants to talk about his area.

Thank you so much, Mister chair, and thank you for uplifting the nursing programs as well. So I also want to, we know that there's nursing shortage across the state.

I know when we looked at the LA report and other data sets, also want to second that request for that data as well, because empirically, when I visit different community colleges up and down the state, especially, I hear the backlog of the nursing program shortage. The slots get in.

It takes a year, two years to access the classes, if not longer. So the work that's been done by Missouri, especially in the rural parts of California and her specific district as well, and rural areas across the state, it's critical that we continue to uplift the nursing programs.

And so as we look at this and the $60 million and scaling up programs, how we can continue to partner with regional institutions as well, I know, Cal State LA, just right across the street from my district, is having their impact data more on, they're going to talk about the community college partnerships and the nursing programs as part of that discussion.

But as we look at this across the state, I really want to look at the data as well. So amplify that request. And secondly, if I may, on the strong workforce funds as well. Thank you. Eliot mentioned the $290 million.

I know that we've also restructured the allocation on that, where 60%, I believe goes to the community college district, 40% to the regional consortia. So how are we as a state looking at this Fund?

These programs, I think are very important, but I think also in these very challenging budget times, I think we need, I heard Mister Harvest talk about an oversight hearing and getting some additional information. But as we look at these programs, I know the La Orange County Region consortium made up of the 19 community colleges there.

But as we look at these programs across the state, what parts of the state are doing is better with strong workforce funds, how can we possibly replicate some of those programs? And then as we look at budget shortfalls across the system, maybe there's opportunities to leverage and collaborate on, on some of these funds as well.

So just want to put that out there and thank you, Mister chair.

Thank you. Yes, happy to provide that information.

Of course, Assemblymember Fong, specifically, as we think about the regions, a lot of these regions have done the participatory governance that's required in state law and in the education code, as they're doing that work regionally within their own district with their own stakeholders, as you know, and so going back to them, especially because the dollars did not have reversion, an automatic reversion.

And so now we are needing to collect that information. And I think a part of that will be everything that you just shared with us and understanding from them what would be the regional and the impact to them.

Appreciate that. And again, underscore partnerships. In a time like this, we should not be expending resources to create new things when things maybe already exist. And certainly the goal here should be to produce more nurses throughout our state. But if there are ways to capitalize on partnerships, that's what we should be looking.

And there's parts of the states where their partnerships are much more difficult. And new programs at the community college probably make a lot of sense.

And so I think we want to see that as this progresses, the last thing I'll just ask, maybe from the lao, is remind us if we do some of the funds that are unencumbered and unspent and we sweep those. What does that do to Proposition 98?

And then how can those actually be used to support General Fund expenditures or future, maybe not General Fund because they're Prop . 98 Future Proposition 98 expenditures. Just. Can you explain what the effect that of that would be?