In summary
A cost-of-living increase meant to help community colleges adjust to a new funding formula is expiring, leaving some districts to cut positions and classes.
This June, struggling California community colleges will stop getting yearly cost-of-living increases to their budgets. These increases have kept many districts afloat for the past six years while community colleges adjusted to a new funding method based on district performance rather than enrollment numbers alone.
Most districts are surpassing the system’s goals, while struggling districts have been making cuts to bridge their budget gaps. With yearly cost-of-living increases being eliminated, those struggling districts will need to make even more cuts.
This year, Cabrillo College in Santa Cruz announced it would cut 5% of its course offerings and pause hiring for unfilled positions as it faces a $5.9 million deficit in the 2025-26 academic year. That deficit is projected to double in three years.
In Oakland, the Peralta Community College District had to close an $11.8 million deficit this year. It has eliminated 68 positions, including financial aid support staff at each of its four colleges. Peralta administrators have also discussed reducing the number of colleges in the four-campus district, possibly by consolidating operations, to decrease costs.
Population decline sparked new funding model
The way that most of California’s community college districts earn their funding changed in 2018. Nine districts in the wealthiest areas of the state, called basic aid districts, continued to receive funding through local property tax revenues only. But for the 63 remaining districts, the new formula split the funding they receive from the state into three buckets – 70% based on enrollment, 20% based on the number of students receiving financial aid and 10% determined by “student success” metrics like the number of those who successfully transfer or receive certificates.
Previously, the funding model for non-basic aid districts was based solely on enrollment. However, the former chancellor for the state college system, Eloy Ortiz Oakley, predicted that an ongoing decline in state K-12 enrollment signaled a corresponding decline in future community college students.
“Community college enrollment and K-12 enrollment mirror each other, but lag each other,” he said in a recent interview with CalMatters. Oakley is now the president and CEO of College Futures Foundation.
Oakley said he spent over a year traveling the state and consulting with the system’s administrators and employees to develop a new model that diversified its approach. Today, the funding model uses over 30 measurements to calculate funds based on full-time enrollment, economic demographics and student success outcomes. For example, students who earn transfer degrees net their colleges a larger amount than those who earn trade certificates, although both count for additional funding.
To help colleges that stood to lose money under the new model, the state guaranteed them the same amount of funding they received before the change. California Community Colleges State Chancellor Sonya Christian said that the system supports its underperforming college districts by preventing them from losing money each year “even if a district’s calculations otherwise suggest a lower level,” according to an emailed statement. This stopgap will continue until further notice.
To account for rising costs of building maintenance, educational materials and employee benefits, the state also included incremental cost-of-living adjustments in each district’s budget, allowing administrators to keep up with economic inflation. This temporary adjustment was originally set to last three years. It was extended twice, which let districts keep growing their budgets despite periods of enrollment declines exacerbated by the COVID-19 pandemic. Now, these yearly increases will expire for good on June 30.
Five of the San Francisco Bay Area college districts that rely on the updated funding formula are underperforming, plus Cabrillo and Santa Monica further south. Without a guaranteed annual cost-of-living increase, these districts will be forced to find some other way to meet rising costs.
Struggling colleges voice concerns about the funding formula
College officials who spoke with CalMatters for this story unanimously supported the funding model’s goals of helping all students to successfully graduate in a timely manner. But some administrators also voiced concerns about their ability to grow their budgets under the formula moving forward.
Due to its proximity to UC Santa Cruz, Cabrillo College attracts a high number of students looking to transfer to the local university. These students generate additional revenue for Cabrillo. But the college’s president, Matthew Wetstein, said many other students don’t. Either their educational goals don’t include a degree for transfer, which is prioritized by the formula, or their household income prohibits them from qualifying for financial aid.
The Peralta Community College District in the East Bay faces a projected $11.8 million deficit for the upcoming fiscal year. Greg Nelson, Peralta’s newly hired deputy chancellor and chief operations officer, said that high turnover among leadership and dwindling enrollment have left Peralta “not prepared” for the cost-of-living increases to go away. He said that he will now prioritize ways to meet the formula’s metrics as he tries to reverse Peralta’s decline.
For Ron Gerhard, the district chancellor of Chabot-Las Positas, eliminating the yearly cost-of-living adjustments “effectively amounts to a cut” to his district and others in high-cost communities in the San Francisco Bay Area – particularly “in this time and age where inflation is high.” He said that his two-college district has had to make reductions that don’t impact classes so the district could keep up with rising costs.
Chabot-Las Positas’ institutional research shows that students in the region are “least likely” to receive financial aid compared to the rest of the state. This is because students have to work more hours and earn more money to afford the higher regional costs, limiting both their ability to attend school and their eligibility to qualify for financial aid. Other similarly affected districts in the region, including Peralta and Cabrillo, supported the research findings.
Oakley argues that the funding formula is fair, saying that eligibility for Cal Grants and Pell Grants includes the cost of living, and it’s up to colleges to make sure they are accurately reporting that cost. However, federal Pell Grants only consider a student’s cost of living when awarding grants to full-time students, according to the Congressional Research Service. As of Fall 2024, about 74% of community college students in California are part-time.
How a winning formula looks for one campus
Some colleges experiencing enrollment declines have leveraged other parts of the formula to stay afloat, such as focusing on class offerings that result in degrees and making sure eligible students are applying for financial aid.
Lake Tahoe Community College District is bringing in 30% more funding under the new formula.
Times were not always easy for Lake Tahoe, President Jeff DeFranco said. His district grappled with pandemic enrollment declines, followed by the massive 2021 Caldor Fire that destroyed hundreds of neighboring homes.
In response, he says the college made academic counseling appointments mandatory to keep students on track and explain the value of attaining a degree. The new model, he said, calls for more collaboration. “Our front line staff understand it’s important. Our counseling staff understand it’s important. Our administration and our boards understand it’s important,” he said.
DeFranco also mentioned that the college now focuses on transfer degrees, leading to an increase in completed degrees every year. He said certificate awards are at an all-time high for the college.
“We’ve improved the student success metrics and our enrollment; it can’t just be one or the other. It really has to be both,” DeFranco said.
But as DeFranco noted, where state budgets are concerned, there is no such thing as perfection.
“[It’s] an imperfect system but I don’t know that there is a perfect system out there,” he said. “The thing I do believe is, what gets measured gets done. That’s a basic leadership principle.”
Desmond Meagley and Lylah Schmedel-Permanna are fellows with the College Journalism Network, a collaboration between CalMatters and student journalists from across California. CalMatters higher education coverage is supported by a grant from the College Futures Foundation.