Equalization or Will We Ever Be There?

September
2004
Ian Walton, Vice President

INTRODUCTION

In March 2004 we examined the 75/25 Faculty Obligation Number in a Rostrum article subtitled "Why are We Not All There Yet?" Equalization is a somewhat similar issue in the sense that it has a long complex history, has had many attempts at solution, and depends heavily on arcane formulas and calculations. The basic goal of equalization is to provide all districts with similar levels of funding, regardless of their location, history or the wealth of their surrounding community.

At one level, equalization is simple: in most discussions of the subject, all participants will agree that the California Community Colleges desperately need a "fair" funding system. But beyond that fundamental philosophy, there is almost no agreement on how to define "fair", let alone how to create a funding mechanism to implement that definition. And then there's the additional minor detail of how to obtain funds for any agreed definition and actually achieve the desired fairness. So a successful solution to the equalization problem requires at least four ingredients:

a funding formula that is visibly fair,
a formula that is stable and predictable,
a formula that is easy to understand and explain both inside and outside our system,
a formula that has sufficient political support to receive funding in the state budget.

Further, on many of the task forces dedicated to this problem, the Academic Senate representative participated with the expectation that any changes should produce the greatest overall benefit for our system and students at large. Most other representatives simply evaluated any proposed solution or formula by the criterion of whether it provided maximum benefit to their own home college or district. This naturally made it hard for the group to reach agreement.

An often-heard solution is to simply equalize funding dollars per student unit across the system. At an Academic Senate Plenary Session breakout in Spring 2004, it was observed that this proposal was analogous to all people in the world receiving the same hourly compensation rate-regardless of where they lived or what work they performed. While some faculty members who are children of the radical sixties might secretly support this concept it seemed an unlikely model to resolve our equalization dilemma and gain the support of a Republican Governor. It does respond, though, to the desire of many legislators for a "simple, understandable" funding formula. But in a system as large and complex as ours, "simple" is not necessarily good, and on its own is not sufficient. And of course, equalization alone does nothing to solve the much more fundamental problem that our system has always been seriously under-funded. Both the original program-based funding formula and the more recent Board of Governors Real Cost of Education project produce documentation that the system receives approximately only 50% of the funding necessary.

This article summarizes the contorted history of the equalization issue, reviews Academic Senate positions, and recaptures the past year's activity and its relationship to last minute changes in other areas of the 2004-05 system budget.

HISTORY

One of the more obvious origins of the equalization problem emerged when Proposition 13 was enacted in 1978. That initiative transferred funding authority from the local to the state level, freezing local inequities in place. At the very least, it removed the local ability to address equalization by adjusting the local tax rate.

Additionally funding and growth formulas of program-based funding, established by the passage of AB1725 in 1989, magnified pre-existing problems. These formulas use percentage increases; and so, over the long-term, inequities compound through neglect and simple arithmetic rather than through any deliberate intent. Occasional ad hoc attempts to address the problem have failed to produce any enduring effect. Unlike the K-12 system, the community colleges had no court mandate1 for equality in funding.

ACADEMIC SENATE POSITIONS

The Academic Senate has a series of resolutions regarding the equalization issue, calling for equity without specifying a particular mechanism. They also support the philosophy of the program-based funding model of AB1725 and draw attention to the importance of academic quality measures. The complete wording of the resolutions is available on the Academic Senate website at: www.academicsenate.cc.ca.us.

Resolution 5.06 in Fall 1999 called for an examination of equalization issues and suggested a blended approach using both FTES (Full Time Equivalent Student) measures and program-based funding formulas. Resolution 5.01 in Spring 2001 reaffirmed support for the quality and academic integrity elements of program-based funding and called for their preservation in any revised funding mechanism. Resolution 5.03 in Fall 2003 cited a per FTES funding rate that varied from a low of $3,493 to a high of $8,209 and again called for the Academic Senate to explore the issues of equalization.

2003 - 04 DISCUSSIONS

In summer 2003, the equalization issue suddenly gained political visibility when a bill to solve another long-standing funding problem of community college funding-property tax backfill-unexpectedly failed during the final moments of legislative horse-trading. Some blamed this collapse on pressure from the self-styled "low-revenue" districts who expected to benefit from any equalization proposal and who vigorously lobbied their local legislators. As a result, the back-fill bill failed. However, the increased visibility resulted in a series of activities throughout the Fall. The Community College League (CCLC) and its Director of State Budget Issues, Scott Lay, crafted proposals and labored to gather constituency support. Lay presented this material both at an Academic Senate Executive Committee meeting and at Fall (2004) Plenary Session. The Legislative Analyst's Office joined the discussion in December. Several political hearings were also held, ranging from testimony at the Assembly Committee on Higher Education to special hearings at San Bernardino and Grossmont Colleges. A group called the Underfunded Districts Caucus was particularly active in this discussion. At one point, a group of CEOs attempted an alternative solution. Ultimately both the Academic Senate and the Board of Governors supported the essence of a proposal that the Governor unveiled in his January budget proposal.

Meanwhile, in October, Senate President Kate Clark, had charged the Educational Policies Committee with providing her advice on this issue throughout the year. In addition to regular meetings and session breakouts, the committee arranged a January 2004 telephone conference dedicated to equalization. Additional faculty members from some of the "low-revenue" districts joined this conference and in February 2004 the Educational Policies Committee sent a memo to President Clark that included the following recommendations regarding the Academic Senate's position on equalization:

1. That whatever formula ultimately adopted not take funds away from any district. In addition, it is recommended that growth funds be distributed in a differential fashion to equalize lower districts "upwards." Likewise, it is recommended that, if system-wide cuts are imposed before true equalization is achieved, those cuts be differential beginning with the highest revenue districts.

2. That the principles of program-based funding be retained, while recognizing that, in the short term, it is necessary to correct the inequitable starting point vis a vis growth. It is further recommended that the "Real Cost of Education" proposal be supported as the long-term ongoing solution.

3. That, if an FTES-based formula is selected, both quality and the need for an institution to be comprehensive must be safeguarded. This is perhaps the highest priority for the Academic Senate. As a practical commitment to such safeguards it is further recommended that attainment of existing standards such as the 75/25 full-time faculty ratio, the 50 percent rule, and counselor and librarian ratios be enforced and that a standard of accountability and timeline for achievement be established as a first step.

4. That whatever formula is adopted address the "over-cap" question by establishing more realistic population targets and enforcing them by clearly applying equalization to funded students. It is further recommended that such a formula include a mechanism to address districts that have reached maximum population growth, and that a standard of enrollment accountability be established.

5. That differential marginal funding be used to equalize total funding within five years and to reach a 90 percent level, with a goal of coming closer to full equalization in subsequent years. To ensure this, it is recommended that a group which includes the Academic Senate monitor the effect of the changes and review and revise the formula regularly.

6. That the Academic Senate should refrain from comment on the issue of college level equalization vs. district level equalization based on the principle that this is a local issue best determined by local governing boards.

A significant difference between the proposals of statewide faculty groups in general (including the Academic Senate in particular) and the proposals from other groups was a concern about the effect any proposed changes would have on academic quality. For example, changes might promote simple "head-hunting" by college enrollment managers that could result in the loss of high-cost programs such as nursing. Academic quality and the principle of a comprehensive college were originally protected to some extent by the program-based funding model that examined costs in different categories. While there is general agreement that the program-based funding model has been unsuccessful in securing additional funding from the legislature, those who describe it as a failure ignore the fact that funding levels have traditionally hovered near 50% of the level called for by the model-hardly a fair test of the model's success. The Academic Senate proposed that if program based funding were to be abolished, then there needed to be other guarantees of quality, for example better achievement in such traditional areas as the 50% law, 75/25 ratio, and library and counseling standards.

A somewhat depressing piece of information routinely highlighted by Community College Council President Marty Hittelman is that there seems to be no obvious connection between districts that are "well funded" and any of the above "quality" measures. For example, some "poorly" funded districts have excellent full-time, part-time faculty ratios. Individual college spending choices seem to be the determining factor; a simple funding increase will not automatically improve any of the quality measures.

This broad discussion was reflected during a spirited Spring 2004 breakout session where the following resolutions were crafted for later adoption by the body. Pat Setzer from Cuyamaca College deserves especial recognition for helping participants reach a consensus position. It was also agreed in the breakout discussions that successful resolution and funding for equalization would require a comprehensive political package that included progress on two related issues: the disparity in credit and non-credit funding rates and correction of certain anomalies in the growth formula that affected several large districts who had suffered an unusual enrollment loss. Executive Committee members and session delegates crafted a package of resolutions that seemed to capture all the components necessary for a comprehensive political solution:

clarification of historical definitions and formulas,

improvement of non-credit funding rate,

correction of historical problems with growth formula, anomalous declines and over-cap enrollment,

preservation of academic quality and integrity standards tied to funding formulas,

support for a three to five year short-term plan and a longer-term plan based on the Real Cost of Education,

support for the principles contained in the Governor's January budget proposal on equalization.

Delegates then defeated a resolution that would have designated equalization money as "program improvement funds." This designation triggers a requirement for the hiring of full-time faculty under the 75/25 regulations, but it is only one possible approach to the quality issues described in the resolutions.

The complete text of these Spring 2004 resolutions, 5.01, 5.02 and 5.03 is available at the Academic Senate website.

2004 - 05 BUDGET ACTION

Surprisingly, the Governor's January budget proposal contained $80 million targeted for equalization. Many speculated that this addition appeared because a member of the Governor's transition team is president of a college that expected to benefit from equalization. The Governor proposed a formula that set a target of the 90th percentile funding level. Later proposals from the Chancellor's Office sought to reintroduce the concept that small and midsized colleges should receive an increased rate. The Governor's budget also included limited recognition of the non-credit and growth problems.

As budget negotiations proceeded throughout the spring, the equalization amount was reduced to $60 million as the administration sought to fund COLA and then restored to $80 million in the Governor's May Revise. An Assembly proposal reduced equalization to $40 million in return for a smaller student fee increase.

During legislative hearings in May, the question arose as to what data year should be used to qualify for equalization payments. Some colleges that would have qualified for equalization under old data (2003-03) had cut so many sections that their current dollar/student unit funding rate had significantly increased, and they no longer qualify under current data (2003-04). The Academic Senate generally supports the use of the most currently available data; that, however, was not the methodology ultimately recommended by the Department of Finance.

Legislative hearings also aired the statewide unions' continuing desire to ensure "quality" by designating equalization money as program improvement funds. This concept had previously failed to secure consensus in Consultation Council, although it was supported by all faculty groups and echoed by an Assembly proposal that designated $20 million of the equalization funds as program improvement. In keeping with our adopted resolutions, the Academic Senate argued again that there must be a mechanism to safeguard quality, but that the specific program improvement designation was not the only possible such mechanism.

When the Budget Act finally received the Governor's signature in July, it still contained the full $80 million amount for equalization. Unfortunately, the distribution formula will rely on old rather than current data and there is no provision for program improvement designation or any of the other "academic quality" mechanisms supported by faculty. Funds were added to non-credit matriculation, but this does not solve the non-credit "rate" problem. Student fees were significantly increased to $26/unit. And finally, several related budget changes were made at the last minute. Funds were designated for "over-cap" growth and the Governor vetoed a portion of Partnership for Excellence funds. This combination of equalization, growth and Partnership changes has a complicated effect on whether individual districts realize a net loss or gain of funds.

Early in the year, all discussions of equalization agreed that "complete" equalization would require an additional two years of comparable funding. Rumor already suggests that this is unlikely to occur.

We're not there yet.

1 In "Serrano v Priest" (1971, 1976), the California Supreme Court declared California's property-taxbased K-12 finance system to be unconstitutional because it was a violation of equal protection principles.

The articles published in the Rostrum do not necessarily represent the adopted positions of the academic senate. For adopted positions and recommendations, please browse this website.