Golden Day for the Golden State?

California state leaders gave their voters a simple but politically perilous proposition: If you want to continue to have a public higher education structure that many consider the best in the world, then you have to vote to pay for it.

And, by and large, voters did, casting votes that many in the state say reflect a desire to fundamentally reform the state’s revenues and expenditures to bring in new money and reinvest in the state’s higher education institutions after several years of deep cuts, as well as further cuts to K-12 education and public safety.

The state’s Democrats and higher education administrators view Tuesday’s election results, in which voters approved a tax increase that staved off big cuts to education; reformed the state’s costly “three strikes” law, which has been driving up corrections costs; and awarded Democrats a supermajority in both houses of the state legislature -- which clears the frustratingly high hurdle for increasing taxes -- as a watershed moment in California’s approach to dealing with the fiscal challenges of the past few years.

“We really think this is as strong a message as you can get from the people of California that they were not liking the austerity approach to higher education and public education,” said Lillian Taiz, president of the California Faculty Association, which represents faculty members in the California State University System, who backed the measure. “The way we should read this is that people don’t want to accept this scarcity model as the new normal. What they want is to reinvest. People are going to pay new tax, and when you get people to say yes to that in these numbers, that’s a good thing.”

"The passage of Proposition 30 represents an opportunity for California and its political leadership to put public higher education back on a pathway toward fiscal stability,” Mark Yudof, president of the University of California system, said in a statement. “This is an opportunity of great importance, not only to the University of California and other higher education segments, but also to the state as a whole, and we cannot afford to let it slip away."

And during a Wednesday phone call with reporters, leaders of the state’s community colleges used words like “relief” and “ecstatic” to describe how they felt about the tax hike’s passage.

Despite the ebullience of the victors, the state and its higher education institutions still have complicated fiscal and political difficulties that could quickly dampen any good feelings. While the tax increase prevents deeper cuts this year, administrators are still struggling with cuts of $750 million for the university systems for this fiscal year. The 112 colleges in the community college system have absorbed $809 million in cuts over four years. And in coming weeks, the systems may take steps that could fracture the coalition that pushed the measure to victory and alienate groups such as student and faculty members.

A Hard-Fought Victory

The result from Tuesday that is likely to have the most immediate effect on the colleges and universities is the passage of Proposition 30, a tax increase slated to bring in $34 billion in new revenues over the next seven years. The measure was backed by Governor Jerry Brown, many of the state’s Democratic lawmakers and higher education administrators, faculty, and student groups. It was the highest-profile contest on a California ballot that included a U.S. Senate race, multiple hard-fought contests for the U.S. House of Representatives, and ballot measures that would curtail union power, end the death penalty, and raise income taxes on almost all households.

Proposition 30 passed 54 percent to 46 percent. Its passage means the state won’t enact $6 billion in “trigger cuts,” many of which were directed at higher education and written into the budget lawmakers passed this summer. It also means an addition $34 billion in revenue over the next seven years that many in state government hope will prevent the budget battles and cuts the state has seen over the past few years.

Thanks to the vote, the California State and University of California systems avoid cuts of $250 million each, and the community college system will get $210 million in new state support this year rather than $338 million in midyear cuts. That means the two-year colleges will be able to serve an additional 20,000 students instead of freezing out another 180,000 this year alone.

Work to bring back slashed course sections began today, said Constance Carroll, chancellor of the San Diego Community College District, which has been forced to turn away 30,000 students since 2008. The district will add courses in January.

“Last night California came to its senses,” she said, and “put a halt to catastrophic budget cuts.”

The California State University System is working to refund a 9 percent tuition increase (about $250 for students who paid full tuition this semester) that took effect this fall, money it will backfill with new state revenues. And administrators at both the UC and CSU systems said they will hold off on any further tuition increases this year.

California State University administrators also said the system will not have to curtail enrollments for next fall. The system had held off on making admissions decisions until after the outcome of the measure was certain.

On Wednesday administrators credited the efforts of students to help turn out the vote.

"I am deeply grateful to all who advocated for Proposition 30, especially the students who worked so incredibly hard to get out the vote, and the many faculty members and alumni who argued so eloquently for its passage," said Sherry Lansing, chairman of the University of California Board of Regents.

“The passage of Proposition 30 shows us two things: that Californians value public education and that young people truly can make a difference in an election,” Pedro Ramirez, vice president for legislative affairs at the California State Student Association and a student at Cal State Long Beach, said in a statement released Wednesday.

But the measure’s passage was not the biggest surprise of the night. That title belongs to the Democrats taking a "supermajority" of two-thirds in both houses of the state’s legislature. Because of a constitutional amendment passed in the 1980s, state lawmakers cannot pass bills that generate new revenue without the support of two-thirds of lawmakers in each house, which is why the state often resorted to alternative measures to balance the budget. The last time any party in the California legislature held a supermajority was 1933.

The supermajorities give broad power to Democrats in the legislature. That includes the power to override Brown’s vetoes, bypass certain legislative rules, and put constitutional reforms to voters, all without Republican support.

There is now an expectation that with the new revenues, enough votes to clear the procedural hurdles, and general political wind at their backs, the state’s Democrats will begin to move forward in addressing the state’s structural challenges. "I think we're going to have the opportunity to really look at constitutional changes that improve governance in California -- initiative reform, tax reform," Senate President pro tem Darrell Steinberg told Reuters in an interview Wednesday.

Such structural changes could provide for more long-term stability in funding for the state's colleges and universities.

Ethan Rarick, director of the Robert T. Matsui Center for Politics and Public Service at the Institute of Governmental Studies at UC Berkeley, said the fiscal challenges are driven by the fact that the state’s revenue structure is highly unstable. Because of restrictions on property taxes, the state relies overwhelmingly on income taxes on high-income earners to generate its revenues. The strength of that revenue stream correlates strongly with the general economy. “So as long as the economy is bad or middling, then the state faces serious fiscal problems,” he said.

Rarick said there is little chance that the Democrats will try to reform the tax code in a meaningful way. Voters still overwhelmingly support the restrictions on increasing property taxes and lawmakers are unlikely to increase taxes on middle-income families.

On Wednesday Standard & Poor’s said the passage of Proposition 30, the tax increase measure, was likely to improve the state’s credit standing, since it will move the state away from using one-time measures to balance the budget to a more structural approach. Standard & Poor's notes that if the state does not use the new revenue to pay down its budgetary liabilities and use the time to enact broader budgetary reforms, it could face a worse fiscal crisis when the temporary hikes expire.

A Long Road Ahead

The new revenues generated through the tax measure won’t lead to a radical transformation in the state’s higher education systems. Of the $210 million in new money directed toward the community colleges, roughly $160 million will be used to chip away at the nearly $1 billion that the state has accumulated in annual IOUs to the system in recent years. The remaining $50 million will go to adding classes, system officials said.

Unless the economy turns around, Rarick said, funding for higher education will likely remain level -- no cuts of the magnitude seen since 2008, but no major investments either.

Brice Harris has already had a good run as the community college's system’s new chancellor. Yesterday was his first day on the job. Harris previously led the Los Rios Community College District, which is in Sacramento.

He said the system will continue to push forward with recommendations from a state task force, which about a year ago introduced reforms aimed at giving priority to credential-seeking students. Harris’s predecessor, Jack Scott, called that approach necessary “rationing.” It has been controversial in a state where student access is particularly prized.

“Prop 30 certainly doesn’t put an end to that rationing,” Harris said, but it will help to stabilize the system and allow colleges to slowly begin recovering from budget cuts. “It will take time to restore access.”

The system’s financial crisis has contributed to accreditation problems for several of the colleges. City College of San Francisco faces the most dire of those challenges, and must make a long list of changes in the next few months or risk losing its accreditation and having to shut down, an almost inconceivable fiasco for the state’s largest college.

When he was hired in September, Harris said more colleges around the system would probably face accreditation snags if the tax proposal went down. The vote yesterday might help on that front, he said, as it will assuage some of the accreditor’s concerns about financial stability.

The new tax revenue will be a substantial boost for City College, which also got a lift from a local parcel tax voters passed. That money will “buy the college one more year,” a college official told the San Francisco Chronicle.

Leaders of other community colleges also sounded cautiously optimistic about the future. Helen Benjamin, chancellor of the Contra Costa Community College District, said that while her institutions have weathered the storm so far, it hasn’t been easy.

“Lots of people lost their jobs. Lots of classes were cut,” she said.

While the California State University System is refunding some students, avoidance of the trigger cuts is not stopping the system’s board from considering a raft of fees next week that, while designed to change student behavior more than generate new revenues, could result in higher bills for many students.

The board will weigh fees on students who take more than the required number of credits to graduate, who take more than a full course load in any given semester, and who repeat a course they have already taken. Those proposals have already angered some students.

Students at UC Berkeley began protesting Wednesday to urge that their tuition bills, which have roughly doubled over the past decade, be rolled back because of the state's new revenues.

National Implications

A major question hanging over the results from Tuesday’s elections in California is whether higher education advocates in other fiscally challenged states could be buoyed to seek similar measures.

“In difficult times, with unemployment still high and declining incomes, states' citizens are still willing to spend their own money and invest in p-20 education,” said Dan Hurley, director of state relations and policy analysis for the American Association of State Colleges and Universities. “That is a remarkably powerful message comes directly from millions of state’s citizens who voted for it.”

But a look at how similar measures fared in the rest of the country provides inconclusive evidence. Voters in Arizona rejected an extension of a temporary sales tax, part of which would have gone to education. Voters in Missouri shot down an increase in their tax on tobacco products -- currently the lowest in the nation -- that would have directed some of its revenue toward higher education.

In fact, Washington voters approved a proposition requiring a two-thirds majority in the legislature to pass a tax increase – a measure similar to the California restriction that many policy researchers say is to blame for the state’s fiscal problems.

California leaders say it was the K-12 aspect of the proposition that drove most voters to the polls.

Rarick and Hurley said the California election's outcomes probably reflects local concerns rather than a wholesale change in how the electorate views its commitment to public higher education. "Prop 30 probably reflects the voters' sense that state is broke, the voters' sense that some new revenues were needed for K-12 education, and the fact that, at least on the income tax level, the price won’t be paid for by most voters," Rarick said.