BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                          AB 478 (Hernandez)
          
          Hearing Date: 08/25/2011        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: 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 
          on factors likely to impact CCC enrollment rates, and needed 








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          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.