SMC has the worst fund balance in the state, second only to College of the Canyons, report finds; and other budget updates
According to cash receipts, the state of California prospered in February, but Santa Monica College (SMC) is still floundering. Out of 73 California Community College (CCC) districts, the fund balance to expenditures ratio is second lowest at SMC, at 12%; only one school, College of the Canyons in Santa Clarita, is lower, at 11.4%. Legislative advisors are recommending California cut back on funding special programs and focus on core costs and Proposition 98 funding at community colleges.
In addition, recent District Planning and Advisory (DPAC) budget committee findings reveal that the college’s budget deficit will most likely fall between $3 and $9 million.
“It’s a sobering and scary time in the entire state of community college(s),” said SMC trustee Anastasia Foster, who was inducted to the SMC Board of Trustees in December 2024.
At the Board’s monthly meeting on April 1, Vice President of Business and Administration Chris Bonvenuto delivered “really great news” from California’s Department of Finance, based on their March bulletin. The Department releases memos in every month except for January and May.
According to this release, in February, California’s General Fund revenue exceeded the Governor’s budget forecast by $2.3 billion, or 24.9%. This also brings that months’ year-to-date collections to above forecast, by $4.6 billion, or 3.8%, as a result of higher personal income taxes (PIT) and higher corporation taxes, as well as “federal reimbursements for prior years’ disasters.”
Sales taxes were $263 million, or 1.1%, below forecast; however, according to Bonvenuto, the $4.6 surplus in collections indicates a positive trend that will materialize in benefits for the college if it continues.
“The stronger the state budget is, the better chances that community colleges will have a better budget situation in the coming year,” Bonvenuto said. Economic prosperity at the state level would result in more Prop. 98 funding, which would assist in mitigating SMC’s deficit, but, Bonvenuto said, “it’s also important to note the opposite could happen.”
“It’s not fair that any organization has to budget based on the whims of billionaires and complete unknowns in an economy that we don’t fully control,” said Foster.
The California Legislative Analyst’s Office (LAO), a nonpartisan agency that advises state legislature on financial matters, is continually publishing documents aimed at addressing the 2025-26 budget “situation,” including its impacts on taxes, K-12 and higher education, childcare, health and human services, the judiciary, natural resources, transportation, housing and homelessness. A report issued on March 5 analyzed the Governor’s spending proposals for CCCs. The governor’s budget will pass in June, and modifications will follow throughout the summer in the form of trailer bills.
Per the report from LAO, the governor plans to allocate $19 billion to CCC, a 1.6% increase from 2024-25. 72% of those funds are set to be derived from Proposition 98, which establishes funding levels for schools and community colleges and consists of both the state’s General Fund and local property tax revenues. However, the proposal is still $1.6 billion less than what is ensured by Prop. 98, which Bonvenuto asserted seems intentional.
“This essentially means that the governor is purposefully proposing less in Prop 98, which is the guaranteed funding for K-14, assuming that if something were to decrease in the state revenues, he’d have room to go down,” Bonvenuto said. As of now, the disparity in the proposal establishes a $1.6 billion “settle-up” obligation for the state to pay in the future.
For community colleges, the main expense is compensation. In the 2023-24 academic year, salaries and benefits made up 80% of CCC spending. In the Santa Monica Community College District (SMCCD) specifically, salary and benefit costs make up 91% of expenditures.
Other cost pressures include health care, insurance, utilities, and equipment. Reserves constituted 34.4% of the district’s expenditures in 2023-24.
Another strain is academic pensions, as in the California State Teachers Retirement System (CalSTRS). The district increased their contribution rates for employees’ pensions in this system from 8.9% in 2014-15 to 19.1% in 2024-25. More district pensions come from the California Public Employees’ Retirement System (CalPERS), which also increased their rate over the same time frame from 11.8% to a current 27.1%.
SMCCD employs 1,778 persons as of Fall 2023, at the time of the conduction of the latest publicly available Diversity Report. SMC Superintendent and President Dr. Kathryn Jeffrey implemented a hiring freeze for all nonessential positions in February 2025, but college representatives announced a new “Disaster Coordinator” position at a recent DPAC meeting. Upon hiring, the position is projected to cost an additional $160,000 per year.
The position’s announcement was “fairly contentious,” Associated Students (AS) president David Duncan said at the April 7 meeting of the Board of Directors, due to the hiring freeze and the new role’s responsibilities already overlapping with those of the SMC police chief.
Out of all CCC colleges, Feather River College in Quincy retained the highest proportion of its fund balance to its expenditures of 77.9%; a higher percentage is supposed to indicate a district both retains a substantial portion of its reserves and minimizes expenditures.
The College of the Canyons has the lowest fund-balance percentage of 11.4%. SMCCD sits right above at 12%, ranking 72nd out of 73 districts in CCC.
“I had not realized that we’re 72nd in the state in terms of fund balance. That actually surprised me. That’s a hard reality,” said Donald Girard, senior director of Government Relations and Institutional Communications. “It’s a very sobering conversation.”
Girard, who shared his department’s efforts to improve District funding with the Board, said there is a “reasonable chance” of obtaining a one-time block grant from the state, “most likely” around or less than $1 million; even in this case, “it’s not enough to change the direction of what actions we need to take.”
More importantly, he said, the college will continue lobbying for an extension of the district’s hold harmless status for one year, and an additional five years of hold harmless as a disaster response for wildfire relief.
In the March report, the LAO issued several recommendations to Gov. Gavin Newsom, to defund certain ongoing proposals and redirect the funds to core, or essential, costs and Prop. 98 guarantees.
The analyst’s office approved some of Gov. Newsom’s proposals, such as implementing a 2.43% cost-of-living adjustment (COLA) which amounts to $230 million in Prop. 98 funds; and allocating $30 million to fund a .5% enrollment growth. Full-Time Equivalent Students (FTES) have continually increased since 2022-23, and about 40% of CCC districts returned to or exceeded pre-pandemic levels in 2024-25.
All of those districts experiencing growth were in the Central Valley or the Inland Empire, which have seen overall population growth since 2018; the rest of the districts remain below pre-pandemic levels, and the Bay Area has seen the greatest decline in enrollment.
But the LAO recommends redirecting other COLA expenditures, for special categorical programs like Disabled Student Programs and Services (DSPS) and CalWORKs employment services, towards bigger priorities, such as core costs. This is a deviation from the norm, as these categorical programs tend to receive increased funding each year.
The governor also proposed expanding the Rising Scholars Network, which advocates for incarcerated and formerly incarcerated CCC students, by funneling an additional $30 million into the program. The LAO noted the proposal was not requested by any of the community colleges, is unclear on the intended use of the funds, and overall lacks rationale; again, the LAO suggested redirecting this money towards core costs instead.
The LAO also recommended the state legislature reject Gov. Newsom’s fund proposals for the Common Cloud Data Platform, Common Enterprise Resource Planning System (ERP), Credit for Prior Learning (CPL), and Career Passports. Rather than expand these programs, these funds should be redirected towards priorities, the recommendation argues.
SMCCD has also taken actions in response to the budget deficit announced in February. The actions include a 5% reduction in hourly instruction and non-instruction; another 5% reduction in counseling schedules; shifting funds for the Big Blue Bus and for facilities to different sources; and a discretionary budget reduction for supplies and contracts. The savings from the above actions are confirmed to add up to $5 million.
Additional actions are also projected to save money, but those funds are not yet confirmed. For instance, the district may receive substantial reimbursements from foundations, a projected provision of $395,765; as of now, only $195,765 from foundations is confirmed.
In addition, attrition is projected to save the school $3.3 million, but only $1.5 million is currently confirmed. Attrition refers to students and staff leaving their positions, which is largely fulfilled at SMCCD through retirements, three of which were announced at the April 1 meeting.
But “the big one,” said Bonvenuto, is enrollment backfill, or state funding of student vacancies under extreme conditions, which the district argues applies in the case of the Greater LA wildfires. Trustee Rob Rader said attrition and backfill are the only budget action items that are completely uncertain. Backfill is hoped to provide $4.1 million, but so far it is fully unconfirmed whether the state will provide it at all.
All these figures are calculations, but projections, and when third quarter information comes in, Bonvenuto said, “we will need to continue to look at these numbers and make further changes.” As of the end of the second quarter, SMCCD’s deficit is a striking $15.7 million.
So far, budget actions have confirmed saved $6.7 million, which will reduce the deficit to $9 million. In a best-case scenario, in which savings from attrition, foundation reimbursements, and enrollment backfill are maximized as projected, the school could save $12.7 million, and shrink the deficit to $3 million.
“We are not out of the woods. We still have a lot of work to do to balance our budget in the coming months,” Bonvenuto said.
Foster emphasized the importance of the district’s own budget mitigation actions, compared with the impersonal trickle-down effects of the state.
“We have to take immediate measures. We can’t count on, ‘maybe the state comes through,’ ‘maybe a trailer bill has a budget request for us,’ ‘maybe the governor decides to cut pet projects,’” Foster said. “We have to take steps as if our life depends on it.”
Foster gestured to her fellow trustees: “All seven of us will be fired, and the state will step in, if we don’t do something, and do it across the board.”
“I look forward to many years of strategic budget planning and making it right,” she said.