CA EDGE Coalition’s Budget Summary of the 2020-21 May Revision

California Governor Gavin Newsom unveiled the May Revise to the 2020-21 State Budget, and as expected, there are heavy adjustments and cuts to various initiatives and proposals due to the fiscal impact of the COVID-19 crisis. Although the newly proposed budget shows a challenging path ahead, responsible budgeting within the last decade has proven that critical investment to the state’s reserves and the passage of a balanced budget will assist California’s response to the ongoing public health and economic crisis. In response to the May Revise, Governor Newsom stated that 26% of the deficit will be made up by cuts to existing programs and pulling back on January proposals, like the expansion of preschool-for-all programs, health care coverage, and investments in apprenticeships. Another shocking budget cut being proposed is a state worker wage cut of 10%, including the Governor and his staff. Also worth noting, the proposal mentions throughout that severe cuts will only be triggered if the federal government is unable to provide an economic relief package for states to financially recover.

In spite of the unprecedented crisis, EDGE acknowledges and praises the tremendous work made thus far by both the administration and legislature by taking swift action in addressing the socio-economic needs of millions of individuals and families throughout the State. However, we understand there are still significant inequities that remain in the areas of unemployment, distance learning, and the overall economic mobility for all Californians. With that said, below is an overview of the May Revise, focusing on higher education and workforce proposals, including other budget items of interest for the CA EDGE Coalition and our stakeholder partners.

Higher Education
The May Revise proposes substantial reductions across the education segments, including community colleges, where the majority of adult learners and low-income students attend — seeking certifications, training, and degrees. According to the proposal, roughly $44 billion in General Fund dollars are included to support schools and community colleges and $6 billion in additional federal funds to supplement state funding. Some of those proposals include:

➢ Preserves two years of community college free tuition.
➢ Maintains Cal Grants for college students, including the grants for students with dependent children established in 2019. This is of particular importance since many low-wage workers return to community colleges and job training programs after losing employment.
➢ Sustains current funding levels for certain categorical programs, including the Educational Opportunity Programs and Services Program.
➢ Maintains $106 million Prop 98 General Fund dollars to support the proposed CCC System Support Program.

The May Revise also proposes $2.8 million in additional resources from the Public Utilities Commission to identify which areas of the state lack sufficient access to broadband connection.
In terms of financial aid, the May Revise maintains all student aid programs with significant adjustments to the Cal Grant Program. The budget proposes an increase of $599.7 million General Fund dollars in 2020-21 to account for the following:

➢ Student Participation Estimates: A decrease of $348,000 in 2020-21 to reflect a decrease in the estimated number of new recipients in 2019-20. The May Revision also reflects increased costs of $11.89 million in 2019-20.

➢ Temporary Assistance for Needy Families Reimbursements (TANF): A decrease of $600 million in 2020-21, which increases the amount of General Fund dollars needed for program costs by a like amount. This is considered a technical adjustment and reflects increased TANF needed in the state’s CalWORKs program.

➢ Student Loan Debt Workgroup: A modification of $4.5 million one-time General Fund dollars to revise the proposal for the Student Debt Loan Workgroup and Outreach to only support the workgroup, and no longer provide outreach grants to higher education institutions.

Unfortunately, we also see a decrease in funding to the following proposals impacting community colleges:

➢ Fighting Student Hunger: A decrease of $11.4 million ongoing Proposition 98 General Fund dollars to establish or support food pantries at community college campuses. The May Revise proposes statutory changes to support this effort within available Student Equity and Achievement Program funding.

➢ Dreamer Resource Liaisons: A decrease of $5.8 million ongoing Proposition 98 General Fund dollars to support Dreamer Resource Liaisons. The May Revise proposes statutory changes to support effort within available Student Equity and Achievement Program funding.

The following proposed allocations have also been withdrawn from the initial January budget:

➢ Zero-cost Textbooks: $10 million one-time Proposition 98 General Fund dollars to develop and implement zero-textbook cost degrees.

➢ Instructional materials: $5 million ongoing Proposition 98 General Fund dollars to provide instructional materials for dual enrollment students.

➢ Cost-of-Living: $9.3 million ongoing Proposition 98 General Fund dollars, of which $1 million is attributable to a revised cost-of-living adjustment at the May Revision, for a 2.31 percent cost-of-living adjustment for various categorical programs.

As we can see, the future of education not only depends on state funding, but also heavily relies on federal funding. The federal CARES Act funding includes a national total of $30.8 billion to support an Education Stabilization Fund. Of this funding, roughly $14 billion is allocated to a Higher Education Emergency Relief Fund. The UC, CSU, and CCC’s are expected to receive at least $260 million, $525 million, and $579 million, respectively, from the relief fund. The methodology for allocating these funds varies, and colleges are required to spend half of the funds to provide emergency grants to students. However, we understand this funding is not enough to cover the steep educational costs for colleges and students. The May Revise indicates that the following reductions will be triggered if the federal government does not provide sufficient funding to restore them:

➢ Student Enrollment: Decrease the $31.9 million ongoing Prop 98 General Fund dollars for enrollment growth.

➢ Apprenticeships: Decrease the $83.2 million Prop 98 General Fund dollars, of which $40.4 million was one-time, for support of apprenticeship programs, the California Apprenticeship Initiative, and work-based learning models.

➢ CCC Strong Workforce Program: Decrease support for the CCC Strong Workforce Program by $135.6 million Proposition 98 General Fund.

➢ Student Equity & Achievement Program: Decrease support for the Student Equity and Achievement Program by $68.8 million Proposition 98 General Fund.

➢ College Administrative Costs: Decrease support for the Part-Time Faculty Compensation, Part-Time Faculty Office Hours, and the Academic Senate of the CCCs by $7.3 million Prop 98 General Fund dollars.

➢ Calbright College: Decrease support for Calbright College by $3 million Prop 98 General Fund dollars.

➢ Song-Brown Healthcare Workforce Training Program: A decrease of $33.3 million General Fund dollars ongoing due to not implementing the 2019 Budget Act action to make funding for the program ongoing.

Despite many uncertainties to fund pending programs and initiatives, the proposed budget provides some assistance to community colleges for their recovery efforts via statutory changes, some of which include:

➢ Suspension of procedures regarding the development of short-term career technical education courses and programs to expedite the offering of these programs and courses.

➢ Reflect the revised 2019-20 Student Centered Funding Formula (SCFF) rates and further utilize past-year data sources that have not been impacted by COVID-19 within SCFF.

➢ Extend the SCFF to hold harmless provisions for an additional two years and require reductions that are necessary to balance the budget to be proportionately applied to all CCCs by reducing the Formula’s rates, stability, and hold harmless provisions.

Coupled with these statutory efforts, restricted fund balance flexibility would be a requirement for colleges. Specifically, any restricted fund balances should first be used to mitigate the impacts to programs and services that support underserved students’ access and to expand the number of students annually served in online courses and programs. Other expectations of colleges include:

➢ All education segments should expand opportunities for competency-based education and for credit-by-exam to enable students to earn credit for a broader range of previous experiences, including on-the-job training, internships, military service, or independent efforts.

➢ All education segments should develop a common approach to awarding credit for similar learning outcomes, regardless of which segment or campus was involved.

➢ Establish system-wide policy goals in the following areas:
○ Percentage of courses using open educational resources and offered online.
○ Percentage of students earning credit through competency-based education and/or credit by exam.
○ Providing registration priority to underrepresented students.
○ Maintaining or further investing in programs that support students’ basic needs particularly for underrepresented students.

Another top pressing issue facing the State is the unemployment rate, which has skyrocketed since the rise of the pandemic. The unemployment rate is expected to peak at 24.5% in the second quarter of 2020, before slowly decreasing to 10.6% by the fourth quarter of 2023 — meaning 1 in 4 California workers will be unemployed. As of May 9th, EDD has processed and approved 4.4 million unemployment insurance (UI) claims that will provide over $12 billion in UI benefits. Although federal investments provided some relief to help stabilize the affected workforce in the short term, these benefits are temporary. Therefore, the May Revise maintains $46 million dollars to continue the implementation of the Benefit Systems Modernization Project. This project will modernize and consolidate the department’s UI, disability insurance and paid family leave benefit systems. This effort comes at a time where it is required more than ever as the crisis has required millions of Californians to access the UI system.

Couple noteworthy highlights that will assist essential workers, dislocated workers, and low-income families are:

➢ Earned Income Tax Credit (EITC): Maintains the newly expanded EITC, which puts a billion dollars in the pockets of working families with incomes under $30,000, including a $1,000 credit for eligible families with children under the age of 6.

➢ CalWORKs: Maintains CalWORKs program eligibility to continue supporting low-income residents. May Revise also includes an increase of $82.3 million General Fund/TANF Block Grant for CalWORKs county administration to facilitate enrollment in the program and services to beneficiaries.

➢ Minimum Wage: Maintains the course for an increase in the minimum wage, which is critical for low-wage workers, including many who have been deemed essential employees.

Moreover, the Governor recently convened a Task Force on Business and Jobs Recovery—a diverse group of leaders from business, labor, and the nonprofit sector—to develop recommendations on how the state’s economic recovery can be expedited. The Administration also plans to work with colleges to build improve distance learning and develop a statewide educational program that will allow more students to access training and education through distance learning. This is a step in the right direction, which will assist non-traditional students who are working and parenting the opportunity to complete coursework at their own pace and with flexible hours.

With regards to the state’s workforce training programs, the May Revise proposes to consolidate the programs under the new Department of Better Jobs and Higher Wages. The agency will consist of the California Workforce Development Board, the Employment Training Panel, Workforce Services Branch, and Labor Market Information Division, which are currently housed in the Employment Development Department, and the Division of Apprenticeship Standards, currently housed within the Department of Industrial Relations.

As the state continues to develop economic recovery efforts, small businesses should not go unnoticed and need to be at the forefront of budget discussions in order to support future economic mobility for all. Data shows that small businesses have suffered massive losses as a result of the COVID-19 crisis. They are expected to face increased costs to modify their business operations in order to reduce the risk of virus spread. Given the critical role of small business in our state, the May Revision proposes the following:

➢ Small Business Guarantee Program: Augment the guarantee program by $50 million for a total increase of $100 million to fill gaps in available federal assistance. This increase will be leveraged to access existing private lending capacity and philanthropy to provide necessary capital to restart California’s small business community.

➢ New Businesses: Retain the Governor’s Budget proposals that support new business creation and innovation by waiving the $800 minimum franchise tax for new businesses.

➢ Social Entrepreneurs for Economic Development Initiative (SEED): Maintains a $10 million General Fund investment for the SEED initiative, providing entrepreneurial training for individuals, including those who are undocumented.

Shifting to regional economic efforts, the May Revision maintains a one-time investment to support the Fresno Developing the Region’s Inclusive and Vibrant Economy (DRIVE) initiative’s Fresno-Merced Food Innovation Corridor concept. While recognizing the importance of this regional economic effort, the May Revise points out the State is not fiscally able to allocate funding levels proposed in the January budget, therefore, the proposal is to reduce the remaining funding as follows:

➢ $31 million one-time General Fund dollars to support the Fresno-Merced Food Innovation Corridor concept.

➢ Fresno K-16 Education Collaborative: $17 million one-time General Fund dollars to support a plan designed to create educational pathways to improve social and economic mobility in the greater Fresno Region.

Furthermore, the COVID-19 crisis has shown us that human services are a crucial component to the state’s economic and workforce development. Therefore, the May Revise maintains CalWORKs program eligibility levels in order to support the state’s low-income residents. In addition, the May Revision includes an increase of $82.3 million General Fund/TANF Block Grant for CalWORKs county administration to facilitate enrollment in the program and services to beneficiaries. Regrettably in the area of childcare support, an estimated 10% funding cuts would be imposed if there is no federal support.

Additionally, besides the negative economic impact towards students, displaced workers, and millions of low-income families, the incarcerated populations will also face financial education cuts in the following areas:

➢ Academic Information Technology Modernization: Withdraw investment of $26.9 million dollars to provide laptops to inmates participating in academic and vocational training to better prepare inmates for reentry.

➢ Expanding Higher Education Opportunities: Withdraw investment of $1.8 million dollars for tuition, books, materials, training, and equipment for inmate-students.

In general, although we understand the severity of the fiscal challenges that still lie ahead, we are disappointed to see significant cuts to critical education and workforce training initiatives for low-income students and adult learners. Now more than ever is where we need to prioritize our state’s economic recovery strategies, and that cannot be done if we do not provide supportive services and expand educational training opportunities to the state’s most underserved populations. In all of this budget uncertainty, the CA EDGE Coalition remains committed to elevating common-sense strategies that state and federal lawmakers can enact to invest in workforce education and training to promote our vision – a broadly shared prosperity. EDGE stands ready to work with the administration, legislature, and stakeholder partners in the coming months to ensure sound policies and funding are secured to support the future of California’s economic recovery.

The Legislature is required to pass a balanced budget by June 15.

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