2009/10 Support Budget II

Budget Development Message

Meeting demand for student access and increasing graduation rates at the CSU are a direct step toward addressing California’s critical workforce needs.

The 2009/10 California State University (CSU) budget represents an essential opportunity for investment in California’s economy. Meeting demand for student access and increasing graduation rates at the CSU are a direct step toward addressing California’s critical workforce needs, which in turn will generate tax revenue critical to the fiscal solvency of the state. In three recent years (2005/06 through 2007/08), the governor and the legislature approved a CSU budget under the Compact for Higher Education that resulted in the funding necessary to enhance student access as well as to increase resources for libraries, technology, and deferred maintenance. In addition, the Compact has included funding for the CSU’s ever-increasing health benefits and energy costs and provided funding to begin to address salary lags for all employee groups. In some years, the state has helped the CSU to better address critical workforce needs for the preparation of nurses and K-12 math and science teachers, by providing above-Compact funding for these programs. However, in 2008/09, the state’s fiscal realities meant that the CSU had to forgo the state funding increases called for by the Compact, and rely solely on a revenue increase generated from a 10 percent increase in student fees. While the governor and the legislature continue to recognize that investment in the CSU is an investment in California’s future, even one year of underfunding greatly affects the CSU’s ability to produce the type of return that can be possible when fully funded.

Prior-year increases in state funding enabled the CSU to increase the number of underrepresented students enrolled at campuses and resulted in a record number of 92,000 CSU graduates in 2008. Expanding higher educational opportunities for all Californians will not only stimulate the economy by producing an educated and technologically prepared workforce, it will inevitably curb the need for taxpayer-supported state programs. The funding requested in the 2009/10 budget is a valuable investment in California’s future, particularly given the state’s current budget challenges.

California is facing a difficult fiscal climate, with a state operating deficit of $1.5 billion already projected for the 2009/10 fiscal year. In recent history, the method for fixing the state’s ailing fiscal condition has been to reduce programs and services that do not have constitutional funding guarantees, state or federal mandates, or court-ordered funding. This approach resulted in a reduction of over $500 million in state support to the CSU during the earlier part of this decade and a dramatic increase in student fees. Now more than ever, the state needs to return to treating higher education as an investment in California’s future.

The 2009/10 CSU budget proposes total core operating revenue of $4.8 billion including $3.3 billion from the state General Fund and $1.5 billion in student fee revenue. Consistent with the Compact, the CSU assumes a $341.2 million budget augmentation consisting of $302.5 million from the state General Fund and $38.7 million from student fee revenue related to increased enrollment. The revenue augmentations are based on the following elements:

CSU Compact Revenue Augmentation Need ($ Millions)
General Operations Increase (4 percent) $116.6
Academic Infrastructure (1 percent) $29.1
Enrollment Growth (2.5 percent or 8,572 FTES) $69.9
General Fund Augmentation in Lieu of Fee Increase $86.9
Fee Revenue from Enrollment Growth $38.7
Total CSU Compact Revenue Augmentation $341.2

The CSU is recommending to the Board of Trustees, the governor, and the legislature the following expenditures for the 2009/10 budget:

CSU Compact Expenditure Augmentation Need ($ Millions)
Mandatory Costs $33.5
Enrollment Growth (2.5 percent or 8,572 FTES) $83.5
Financial Aid Set-Aside $6.8
Compensation $173.3
Academic Technology $35.0
Library Acquisitions $3.0
Deferred Maintenance $6.0
Center for California Studies $0.1
Total CSU Compact Expenditure Augmentation $341.2

This 2009/10 Support Budget documentation book provides details on the revenue and expenditure assumptions under the Compact for Higher Education. In addition, the CSU has identified the need to restore $116.7 million in core Compact revenue that was forgone in 2008/09 and $153.5 million in funding for additional budget challenges as follows:

Other Needs Need ($ Millions)
Core 2008/09 Compact Recovery $116.7
Clinical Nursing Support $5.0
Algebra Readiness $3.0
Special Education Teacher Preparation $1.2
Additional One Percent Compensation Increase $31.5
Student Services for Success and Authentic Access $24.6
Increasing the Ratio of Tenure/Tenure-Track Faculty $42.0
Applied Research and Services $16.0
Addressing Off-Campus Centers’ Fixed Costs $5.2
Deferred Maintenance (Beyond Compact) $25.0
Total Other Needs $270.2

The 2009/10 CSU Support Budget is consistent with the Board of Trustees priorities and, upon approval by the Board, will be transmitted to the governor’s office and the legislature.

Robert Turnage
Assistant Vice Chancellor
for Budget

Rodney M. Rideau
Director of the Budget