Ask SSC . . .
How Will the Lottery
Securitization Change the
Character of Community College Funding?
Q. I keep reading about the proposed “budget deal” which includes a “buyout” of school Lottery revenues, which will then be replaced by additional Proposition 98 funding.
In the “50 Percent Law” calculation, many districts (because it’s allowed) exclude expenditures paid for by Lottery revenues. Will this budget-deal change the character of future funding and cause this current calculation-exclusion to no longer exist? If this is the case, this could prove problematic for those districts close to the edge of the 50% calculation.
A. In our judgment, General Fund money provided community colleges (CCC) in lieu of the current Lottery revenues going to CCC would continue to be excluded from the calculation of the Current Expense of Education for the purposes of determining compliance with the 50 Percent Law, as Lottery revenues are now pursuant to page 3.17 of the Budget and Accounting Manual.
Here is our rationale. AB 1654 (Committee on Budget), the Budget Trailer bill that would add a new provision to Government Code Section 8880.5.5 governing the annual General Fund appropriations that would be made to community college districts and other educational entities in lieu of the current Lottery revenues has the following language:
(f) Commencing with the 2009-10 fiscal year, references in law to lottery education funds, to funds allocated pursuant to Section 8880.5, to funds allocated from the California State Lottery Education Fund, or similar references in law to the proceeds of lottery revenues allocated for the benefit of public education to the entities described in subdivisions (a), (b), (f), (g), and (h) of Section 8880.5 shall be deemed to be references to the funds appropriated pursuant to this section. This subdivision shall be broadly construed to effectuate its purpose.
The Code of California Regulations (see California Code of Regulations [CCR]
Title 5 § 59010) incorporates most of the California Community Colleges Budget
and Accounting Manual into the CCR, thus making most of the Manual a part of
the regulatory law governing community colleges. The provision on page 3.17 of
the Manual would be a “law” under the new Government Code Section 8880.5.5, and
would govern the funds appropriated pursuant to the new Government Code
provision. Thus, “Amounts expended from lottery revenues are excluded from the
calculation of the Current Expense of Education for the purposes of determining
compliance with the 50 Percent Law (EC § 84362 and CCR §59200 et seq.).”
Our interpretation also makes sense because the amount initially transferred from the General Fund would not be new funding but would simply replace the current level of Lottery revenues provided. Caveat: The sum initially appropriated would be adjusted annually for the cost-of-living adjustment (COLA) and student growth, and the COLA and growth could arguably be considered new funding.
The Chancellor’s Office is aware of the issue and will no doubt do its own analysis. It’s important to remember, however, that the provisions to “modernize” the Lottery, including those described above, would have to be submitted to and approved by the voters. A special election will be called for next year, probably in June, but whether any of this becomes law and is actually implemented will depend upon whether the voters agree to it.
—Deborah Harmon