Chancellor's Recent Speeches

Remarks by Dr. Charles B. Reed
Chancellor, California State University
CSU Financial Officers Association
San Diego, CA
April 20, 2008

Thank you, Carol, and all of you so much. It is a pleasure to be here.

I’ve spent a lot of time in Sacramento during the last few weeks and months, and now that I am here with you I can say this: It is nice to be able to talk about some good news for a change.

The good news, of course, is how well we are doing with our financial management functions – especially given how many changes we have gone through in the last 18 months.

I am so proud of the fact that we have taken on new responsibilities and we have proven that we excel in these management areas. I want to commend all of you for creating such a bright spot in an otherwise dark budget time.

I’d like to give just a few more details on our achievements in the past year and then take a look at where we are headed for the future.

Achievements in the Past Year

First: our Revenue Management Program: Last year’s Executive Order 1000 set the framework for our Revenue Management Program and you have done an outstanding job on the implementation.

This program has realigned roles and responsibilities at each level of the CSU organization. It has helped us develop more efficient business processes for managing CSU resources.

Many of you here participated directly in the development of the new policies and procedures that made these changes possible, and for that, I want to thank you. Many of you are continuing to work on making changes required for this year-end, and I appreciate how hard you are all working to ensure our continuing success.

Currently, we are working on an integrated policy manual to help us implement the executive order.

Also the Revenue Management Program has been nominated for special recognition by NACUBO. That means the CSU is poised to be national leaders in this area.

I’m proud to be on the leading edge of the new movement toward greater efficiencies and responsiveness in university business operations.

Second: The establishment of the “Bank of CSU”: We have entered the 21st century with our ability to manage our own finances and interact with all of our students and partners on a real-time basis.

We have been centralizing our cash management and treasury operations.

We have also made a transition to a single commercial banking relationship with Wells Fargo, providing real-time access to banking services.

And we have created on-line account statements for System Wide Investment Fund Trust (or SWIFT) participation accounts, which essentially gives us real-time, immediate access to all of the critical information for these accounts.

We are now able to provide the level of service that our students and partners need and expect in a high-tech, wired age.

And last but not least: The creation of the SWIFT investment pool: We consolidated our campus fixed income investment assets into a centralized investment pool, and we divided the pool into two parts – one for each investment manager – which promotes competition for performance.

The results so far have been extremely promising: The pool has grown from $1.3 billion on July 1, 2007, to $2.2 billion – generating more than $35 million in new revenue to the CSU, coming from the investment of our own student fees.

I want to commend all of you for what a great job you have done since we have taken on our own treasury function. The outcome has been truly impressive.

That said, we cannot rest on our laurels. We are being watched very closely by the state, and we will continue to be audited. We will have to maintain due diligence every step along the way.

Our new roles are important to us as we maintain our autonomy and raise our status within the state and in the eyes of our legislators and the public. We need to demonstrate that we are more than capable and that we can carry out these functions successfully.

Challenges Ahead

Looking ahead, the biggest issue facing the entire CSU system is the future of our budget.

We all have spent the last few weeks hearing about how California’s budget is in deep trouble.

At the moment, the CSU is facing a 10 percent cut – or $312 million – from our 2008/09 budget. That’s on top of $522 million in cuts we took between 2002 and 2004.

But that’s not all. The $73.2 million in General Fund revenue needed to buy- out a student fee increase is not included in the proposed budget. That would create a combined loss of $386.1 million in state funding for the CSU next year.

We have been forced to think hard about what we would do if we suffered that kind of loss. During the last major budget crisis of the 1990s, the CSU eliminated classes and we suffered a major drop in enrollment.

In recent years we’ve had more budget ups and downs. We’ve had budget increases, and then more cuts once again. Throughout these cycles we have tried to compensate by operating more efficiently – offering evening and weekend classes, using technology to reach more students, and so on.

But now we are essentially at a place where we are cutting down to the bone. If we take an additional cut of $386.1 million now, we will have to increase student fees and turn away 10,000 qualified students.

At this point the big-picture question that our state needs to address is, how are we going to continue to invest in California’s future? Our state is on the road to building world-class prisons and second-class universities. That is a false investment.

I believe that we need to stay focused on our message of the importance of access.

Right now, more students want to come to the CSU than ever before. And the CSU is an essential pipeline to California’s economy.

We graduate more than 90,000 students each year into California’s workforce. If our universities are threatened, that also means a threat to the major industries that our universities support.

Also, two-thirds of the students who are in the K-12 pipeline right now are students from traditionally under-served communities. It is critical to the state’s future that more students from these groups get to college.

Put all of these things together and you understand why our message is so important.

I ask you to help us spread the word that it is critical to preserve the CSU’s budget and invest in higher education and California’s future.

We have to make sure our policymakers understand how the CSU makes a difference in California, and we need their full commitment to continue to make an impact.

We need to get people to realize that the CSU is an investment that pays long-term dividends in terms of personal achievement, workforce development, and economic growth for the state of California. And we need to work as hard as we can to prevent our university system from taking any more cuts. For every $1 the state invests in the CSU, we return $4.41 in economic activity.

Whether you’re on campus, in Sacramento, or in your community with friends and family, I hope that you are able to share this message and reinforce in peoples’ minds the importance of the California State University system. The message is Access, Workforce and the Under-Served.

I want to thank you again for all of the important work that you have done and continue to do.

You and your staffs are playing a major role in helping the CSU become such an important institution for the 21st century.

I hope that you continue to do outstanding work, and I wish you a very successful conference.

Thank you very much. I would be happy to take your questions.