BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                          AB 478 (Hernandez)
          
          Hearing Date: 07/11/2011        Amended: 04/07/2011
          Consultant: Jacqueline Wong-HernandezPolicy Vote: Education 9-0
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          ____
          BILL SUMMARY: AB 478 eliminates the 2 percent cap on the amount 
          of unemployment in excess of 5 percent that the California 
          Community Colleges (CCC) must use for purposes of calculating 
          the annual request for enrollment growth funding. 
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          ____
                            Fiscal Impact (in thousands)

           Major Provisions         2011-12      2012-13       2013-14           
           Fund
                                                                      
          Remove 2% cap           Substantial cost pressure; low hundreds 
          of millions*     General**
           
          * Exact amount will vary each year, tied to the unemployment 
          rate                 
          **Counts toward meeting the Proposition 98 minimum funding 
          guarantee
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          ____

          STAFF COMMENTS: This bill meets the criteria for referral to the 
          Suspense File. 

          SB 361 (Scott, 2006) replaced the CCC's program-based funding 
          with a new allocation mechanism that generally provides a single 
          rate per full-time 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 a formula including: (A) the 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% difference; and (C) the 
          unfunded FTES in the areas of transfer, vocational education, 
          and basic skills.

          The current mechanism seeks to project enrollment growth based 








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          on factors likely to impact CCC enrollment rates, and needed 
          funding to support that enrollment. Unemployment and CCC 
          enrollment trends historically have a strong positive 
          correlation, and that projection is part of the calculation. The 
          2% cap, previously described, ensures that the CCC can never 
          report an unemployment rate greater than 7% (the 2% cap above a 
          5% threshold) as a factor in projecting its enrollment growth. 
          This limits cost pressures on the state budget to provide 
          additional funding for projected enrollment due to higher 
          unemployment. 

          In fiscal year 2010-11, at the time the CCCs were calculating 
          enrollment growth, statewide unemployment was at 11.3 percent, 
          but was capped at 7% for the formula to determine the budget 
          request. This year, CCCs are calculating 2.2% growth and 
          requesting $126 million in growth funding. Removing the 
          unemployment cap of 2% would have resulted in a 4.3% growth 
          rate, and a statutory growth request of $245 million more than 
          the $126 million received. Without the cap, the CCCs could have 
          requested $371 million in total growth in current year.