Lack of Cal. Budget Poses Few Problems -- Yet

2-year colleges can go a few weeks without serious financial difficulties, officials say.
July 1, 2005

For now, the lack of an enacted state budget won't hurt California's community colleges, for the most part. But if political wrangling continues for another two weeks, the situation could be very different.

The 2006 fiscal year began at midnight, and California law bars the state from distributing funds to most public agencies in the absence of a budget passed by the legislature and signed by the governor.

Community colleges and other agencies will receive their budget allocations for June (the last month of the 2005 fiscal year) next week, and most two-year college districts "have enough cash and can borrow enough internally" to cover the July payroll, so they won't have serious problems getting through July, said Scott Lay, vice president for the Community College League of California. The league lobbies on behalf of two-year institutions in the state.

The picture would look much worse if a budget deal was not reached before the July payments are due in early August, said Lay (though he described that prospect as unlikely). "The real concern is payroll, because that's a legal obligation you really have to meet," he said.

Lay said that a quick survey of his members Wednesday night uncovered several that anticipated more immediate problems. One of them, Compton Community College, is in the highly unusual and drastic situation of having its accreditation revoked, in part because of its severe financial situation. "Its options are limited, and the private sector isn't exactly stepping forward" to help, said Lay.

A few other small community college districts, especially in rural areas, have seen their enrollments decline and therefore have smaller reserves, Lay said. While they, too, won't have payroll problems until August, West Hills Community College District said it might have to cut back certain payments to vendors, and the Shasta-Tehama-Trinity Joint Community College District reported that its budget for July would be very tight, according to Lay.

Legislators, state employee unions and Gov. Arnold Schwarzenegger are battling over a series of issues, including some proposed ballot measures in November's election. But on the budget itself, Republicans and Democrats are "only $750 million apart," said Lay, which is a lot less than in some other years. "I'm hopeful we'll have a budget next week."


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