Lawmakers, analysts press for adjustments to Student Centered Funding Formula as districts face hold‑harmless floor and cost pressures

System finance officials and analysts debated how the Student Centered Funding Formula (SCFF) should be funded and adjusted as the Legislature prepares budget decisions.

"We are recognizing that there's about a 1.5 to 2% deficit as it relates to the student centered funding formula," said Chris Ferguson, Executive Vice Chancellor for Finance and Strategic Initiatives. Ferguson told the subcommittee his office values that deficit at approximately $150,000,000 for the 2024–25 fiscal year and said it would likely carry into 2025–26.

Department of Finance and Legislative Analyst's Office representatives discussed the governor's proposed 2.43% cost‑of‑living adjustment for the SCFF and categorical programs. Justin Hurst of the Department of Finance noted the governor's budget includes $230,400,000 for a 2.43% COLA for SCFF apportionments and $31,900,000 for categorical COLAs. Lisa King of the LAO said the proposed COLA "is a reasonable starting point" but cautioned the legislature faces trade‑offs between funding COLAs, further enrollment growth, and other ongoing priorities.

Why it matters: The SCFF determines most operational funding for districts. Some districts remain on statutory hold‑harmless or stability protections; those districts may not receive COLA increases while on the funding floor, creating tension between equity goals and budget mechanics.

Details and concerns raised in the hearing

- Hold‑harmless and stability: Ferguson said approximately 21 districts are on the hold‑harmless provisions as the system transitions from pandemic era baselines; three of the districts that would benefit from funding changes are basic‑aid districts. He cautioned the list changes year to year as enrollment and metrics shift.

- Policy requests: The Chancellor's Office requested two policy adjustments: (1) allow the greater of the three‑year rolling average or the current year FTES to be used in SCFF growth calculations (estimated $20 million ongoing), and (2) lift the 10% local cap on year‑to‑year enrollment growth (costs partially quantified in other enrollment requests; Ferguson cited $15.6 million associated with lifting the cap for six districts).

- Metrics, equity and cost pressures: Committee members and public witnesses — including college presidents, faculty and classified staff representatives — argued the SCFF has structural issues and can produce winners and losers. Testimony raised concerns that the formula does not explicitly reflect regional cost‑of‑living differences and that supplemental metrics (Pell eligibility thresholds, success metrics) may not fully capture local poverty or program costs.

Quotations

"The SCFF is too complex and unstable," said Anna Matthews with the Faculty Association of California Community Colleges. "We need a different funding formula."

"We think the proposed cost of living adjustment or COLA for apportionments is reasonable," Lisa King said, adding the final COLA rate will be set at the May Revision.

Next steps

Committee members urged further stakeholder work to assess structural reforms to the SCFF and to weigh the budget trade‑offs associated with expanding enrollment funding, COLAs for categorical programs and retaining a one‑time cushion in Proposition 98 planning. Staff from the Chancellor's Office, DOF and LAO will continue to exchange data and options ahead of the May Revision.