STATE OF CALIFORNIA
CALIFORNIA COMMUNITY COLLEGES
CHANCELLOR’S OFFICE
1102 Q
STREET
S
ACRAMENTO
, C
A
95814-6511
(916) 445-8752
HTTP
://
WWW
.
CCCCO
.
EDU
ACCOUNTING ADVISORY NO. 2000-01
July 24, 2000
TO:
District Chief Business Officer
FROM:
Frederick E. Harris, Director
College Finance & Facilities Planning
SUBJECT:
Proposition 20 - Lottery Funds for Instructional Materials
Synopsis: At the Primary Election held on March 7, 2000 California voters approved Proposition 20 -
Cardenas Textbook Act of 2000. Proposition 20 amended Government Code Section 8880.4 to provide
that beginning with the 1998-99 fiscal year and each fiscal year thereafter, fifty percent of any growth in
statewide lottery revenues for public education above what was allocated in the 1997-98 fiscal year
would be allocated to school districts and community college districts (K-14 districts) for sole purpose of
purchasing instructional materials.
The State Controller’s Office (SCO) is responsible for the allocation of lottery revenue to public
education, including community college districts. The SCO is also responsible for implementing the new
lottery revenue allocation provisions required by Proposition 20. The SCO has recently decided two
previously uncertain implementation issues as follows:
• The SCO interpreted the language of Proposition 20 to require that fifty percent of the total growth in
lottery funds as described above be allocated only to K-14 districts for the purchase of instructional
materials. This interpretation will result in K-14 districts receiving a larger share of lottery funds
because other public education entities (CSU, UC, etc.) will no longer receive a share of half of the
growth in lottery funds. Proposition 20 does not change the way that base lottery revenues and the
other half of the growth are allocated.
• The SCO determined that Proposition 20 will be implemented retroactively. The language states that
its provisions begin in the 1998-99 fiscal year. This means that non K-14 educational entities will
have current lottery revenue reduced to offset the over-allocated amounts provided in fiscal year
1998-99.
The SCO previously determined that interest income should be excluded from the Proposition 20 base
year (1997-98) and payment calculations. An issue that is yet unresolved is whether the SCO should
also exclude unclaimed prizes lottery revenue. Public education receives unclaimed prizes and interest
income in addition to the statutory 34% distribution of sales revenues. Due to this outstanding issue, the
State Controller's Office has not yet finalized the base year amount or the methodology to calculate the
Proposition 20 payments.
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ACCOUNTING ADVISORY NO. 2000-01
2
July 24, 2000
Lottery Payments/Projections
The SCO lottery allocation system is being revised to automatically calculate the portion of lottery
revenue that is restricted for instructional materials and will identify those amounts separately. The funds
are to be distributed on the basis of an equal amount per unit of ADA/FTES for K-14 districts. As stated
above, Proposition 20 provides that fiscal year 1997-98 be the “base year” when calculating the growth in
statewide lottery revenues for public education. In fiscal year 1997-98, approximately $817 million
(including approximately $30 million from unclaimed prizes) was allocated from lottery revenue to public
education.
Lottery revenue for public education for fiscal year 1998-99 increased by approximately $95 million from
the base year amount, half of which is retroactively earmarked for K-14 instructional materials. The
majority of this amount has already been allocated to K-14 districts as regular lottery revenue. The SCO
plans to include the portion not yet allocated in the normal revenue adjustment that will occur in the 1
st
Quarter payment (December) for fiscal year 2000-01. A remittance advice will be provided to separately
identify the portion of the adjustment related to Proposition 20 and therefore restricted for the purchase of
instructional materials. This revenue should be treated as current year restricted revenue in fiscal year
2000-01 and expended in accordance with Proposition 20. K-14 districts will receive the revenue
adjustment to make-up for the under-allocated amounts for fiscal year 1998-99 resulting from the
retroactive implementation of Proposition 20. The SCO will provide K-14 districts their total restricted
amount for fiscal year 1998-99 when the base year amount and the methodology to calculate the
Proposition 20 payments are finalized. Once this information is provided by the SCO, the district should
determine if there were sufficient expenditures for instructional materials for fiscal year 1998-99 to meet
the expenditure requirements of Proposition 20. Any deficiency should be made-up through current-year
instructional materials expenditures. Although Proposition 20 has retroactive provisions, the Chancellor’s
Office will not request that districts modify their lottery receipt and expenditure report (CCFS-311) filed for
fiscal year 1998-99.
Lottery revenue for fiscal year 1999-2000 is projected to increase by $123 million from the base year,
half of which is restricted for instructional materials. The restricted portion represents approximately $8
per FTES ($116 for the regular lottery allocation). The Controller's Office is planning to make fiscal year
1999-2000 Proposition 20 payments in the 4
th
Quarter payment (September). Lottery revenue for fiscal
year 2000-2001 is projected to increase by $152 million from the base year, half of which is similarly
restricted. The restricted portion represents approximately $10 per FTES ($119 for the regular lottery
allocation) per FTES.
Please note that the projected payment schedule is contingent on a timely resolution of the issue related
to unclaimed prizes lottery revenue and successful testing of programming changes to the lottery
allocation system. Also, the above projected Proposition 20 revenue per FTES could change if the SCO
determines that lottery revenue from unclaimed prizes should not be included the Proposition 20 base
and payment calculations and/or the statewide ADA/FTES total is revised.
Guidelines for Instructional Materials Expenditures
The Chancellor's Office Legal Office has issued Legal Opinion O 00-16 regarding the definition of
"instructional materials" as used in Proposition 20. The Opinion provides the following conclusion:
"We find that the definition of instructional materials contained in Education Code Section 60010(h) is
comprehensive in that it contains a list of items that constitute the universe of materials deemed to be
Page 3
ACCOUNTING ADVISORY NO. 2000-01
3
July 24, 2000
instructional. While Education Code Section 60010(h) applies directly only to elementary and secondary
school districts, our review of the community college statutory and regulatory authority on the subject of
instructional materials revealed no definition which was in any way contradictory to the broad definition
provided in Education Code Section 60010(h). Furthermore, we find no evidence that Proposition 20
was designed to apply a definition of instructional materials to community colleges that is different from
the one applicable to elementary and secondary school districts. We therefore conclude that the
Legislature and the voters intended community college districts and K-12 school districts to share a
common definition of instructional materials for purposes of Proposition 20 and that the applicable
definition is contained in Education Code Section 60010(h)."
Therefore, the expenditure of Proposition 20 funds should conform to Education Code Section 60010(h),
which states that "Instructional materials means all materials that are designed for use by pupils and their
teachers as a learning resource and help pupils to acquire facts, skills, or opinions or to develop
cognitive processes. Instructional materials may be printed or nonprinted, and may include textbooks,
technology-based materials, other educational materials, and tests."
Accounting for Proposition 20 Revenues
Lottery revenue restricted for instructional materials must be accounted for in the restricted sub-fund of
the General Fund and recorded to revenue account 8680 State Non-Tax Revenues-State Lottery
Proceeds. The expenditures are to be recorded within the subsidiary categories of Object 4000 Supplies
and Materials: Software; Books, Magazines and Periodicals; and Instructional Supplies and Materials as
appropriate. Also included are educational software licensing expenditures recorded within Object 5000
Other Operating Expenses and Services-Contract Services and expenditures recorded within Object
6300 Library Books. The expenditures should be for Activities 0100 through 4900, 6110 Learning
Center, and 6120 Library. To the extent possible, 1999-2000 lottery revenue should be accrued. You
should also note that Proposition 20 does not contain any supplanting language and that unspent
balances can be carried over.
Lottery revenue not restricted for instructional materials will continue to be considered unrestricted
General Fund revenue to be used exclusively for the education of pupils and students and cannot be
used for acquisition of real property, construction of facilities, and financing of research.
Action/Date Requested: This Accounting Advisory is for your information and should be used in
conjunction with the Budget and Accounting Manual to record and report Proposition 20 revenues.
Please file this advisory in the Appendix of your manual behind the tab "Accounting Advisories". We will
continue to inform you as decisions are made regarding implementation of Proposition 20 and whether
there are any changes in lottery projections.
Contact: If you have any questions, please contact Elias Regalado at (916) 445-1165 or by e-mail at
eregalad@cccco.edu.
Cc:
District Superintendent/President
Thomas J. Nussbaum
Patrick J. Lenz
Elias M. Regalado
Page 4


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