BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 478
                                                                  Page  1

          Date of Hearing:   April 13, 2011

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                   AB 478 (Hernandez) - As Amended:  April 7, 2011 

          Policy Committee:                              Higher 
          EducationVote:9-0

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:               

           SUMMARY  

          This bill eliminates the 2% cap on the level of unemployment 
          exceeding 5% that the California Community Colleges (CCC) must 
          use for purposes of calculating the annual request for 
          enrollment growth funding. This amount above 5% must be 
          determined by the CCC Chancellor's Office and its rationale must 
          be submitted to the Department of Finance.

           FISCAL EFFECT  

          Potential significant Proposition 98 cost pressure to allocate 
          additional funding for enrollment growth during periods of high 
          unemployment.  For example, a 10% unemployment rate would yield 
          a request from the CCC for an additional 3% enrollment 
          growth-equal to about $175 million at current funding rates.  
          Actual funding for CCC enrollment growth is determined through 
          the annual state budget process.

           COMMENTS  

           1)Background  .  SB 361 (Scott)/Chapter 631 of 2005 replaced the 
            CCC's program-based funding with a new allocation mechanism 
            that generally provides a single rate per fulltime equivalent 
            student (FTES) for all CCC districts.  In addition, SB 361 
            requires the CCC Board of Governors to request funding 
            annually for enrollment growth based on the following:

             a)   Weighted average of the adult population-rate change for 
               ages 19-24 and 25-65.
             b)   The amount that the state unemployment rate exceeded 5% 
               in the most recent fiscal year, not to exceed a 2% 








                                                                  AB 478
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               difference.
             c)   Unfunded FTES in the areas of transfer, vocational 
               education, and basic skills.

               The 2% cap ensures that the CCC can never report an 
               unemployment rate greater than 7% (the 5% threshold plus 
               the 2% cap), limiting future cost pressures on the state 
               budget.

           2)Purpose  .  This bill eliminates the 2% cap discussed above.  
            The author argues that the community colleges should be able 
            to include actual unemployment rates in its annual budget 
            request to provide a more accurate representation of their 
            enrollment growth needs.  Unemployment and CCC enrollments 
            historically have a strong positive correlation, and while 
            fiscal constraints may preclude the state from funding growth 
            to the full level of demand, current law prevents the 
            consideration of the correlating increased demand for CCC 
            courses with high unemployment rates.

           3)Prior Legislation  . This bill is substantially similar to AB 
            385 (Block) of 2009, which was never heard in the Senate.

           Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081