Chancellor's Recent Speeches

Remarks by Dr. Charles B. Reed
Chancellor, California State University
Auxiliary Organizations Association Conference
Sonoma, CA
January 12, 2003

Good evening, and thank you for inviting me to speak here tonight.

In 1999 when I first addressed this group it was the first time a CSU chancellor had appeared before the AOA. This is now my fifth appearance at this event, and I always appreciate the invitation to speak here. This conference gives me an important opportunity to keep you informed about CSU issues and to understand your issues better.

Over the past five years, I think we have made a great deal of progress. Tonight I would like to talk about some of our accomplishments over that time. Then I want to talk a little more about where we need to go from here.

Progress Report

Five years ago when I first came here I talked about three main issues that I wanted us to work on together.

  1. Sending the right message: I felt that there was a mismatch between the mission of the university and mission of the auxiliaries. I thought that auxiliaries needed to fit their messages into the context of the university family.

  2. The relationship of auxiliaries to the university: When I first came here, auxiliaries were part of the family, but they were really more like second cousins once removed. I thought we needed to clarify and strengthen our partnership – and be more like brothers and sisters.

  3. The need for accountability: In Sacramento and Washington our legislators and policymakers are increasingly demanding accountability. And even though we may make the distinction between the university and its auxiliaries, to them we are all the CSU. Your reputation is our reputation. So I thought it was important to make sure that all of our auxiliary policies were implemented properly, in a way that would reflect positively on the entire university family.
I want to thank you for all of the progress we have made over the last five years in these areas. I'm proud of what we have been able to accomplish together:
  • We asked each campus to designate a chief fiscal officer who would act as our primary liaison with the auxiliaries. That seems to be working well. I want to thank all of the vice presidents who serve that role and who are here tonight.

  • We created a task force that spent a great deal of time developing "best practices" guidelines for auxiliaries. I want to thank everyone who worked on this task force and developed these important policies. And I ask all of you to get out that memo and look at it again!

  • We began regular audits of auxiliaries to make sure that our performance matches up to our standards. Thank you for your cooperation and attention to detail.

  • We have been able to use the "best practices" guidelines as a model, and we have made significant progress. We no longer buy property on the East Coast or do laser eye surgery.

  • We created a new systemwide revenue bond program that leverages the financial strength of the entire CSU. It offers a strategic, disciplined approach to debt management. Last week in New York, we sold $350 million in bonds.

  • We established fixed income investment pools for state funds. For auxiliaries, we negotiated a voluntary equity investment program.

  • We have had successful collaborations on policy issues, notably on collective bargaining. I am very pleased that we were able to make this a collaborative effort.
When we step back and look at it all, we really have made a remarkable amount of progress in the past five years. Thank you all for stepping up to the plate and working on these issues. I believe that we are a more effective university because of these efforts.

Looking Ahead for the CSU

As we look ahead to the future, one issue dominates just about every other issue on the horizon for the CSU: California's budget crisis.

The latest estimate shows that California is facing a shortfall of approximately $35 billion. We still don't know how this problem is going to be resolved. But one thing we know for sure is that every Californian is going to wind up feeling some pain.

The CSU has already taken some big hits. For the 2002/03 academic year, the CSU faces a total of $125.4 million in cuts and unfunded cost increases. We tried as hard as we could to manage that amount without disrupting our academic programs. But the total budget impact was still too large to absorb without additional revenue. That's why in December, our Board of Trustees made the difficult decision to implement a mid-year student fee increase. That fee increase will raise $30 million, $10 million of which will go directly back into financial aid for the neediest students.

For the 2003/04 academic year, Gov. Davis on Friday proposed $326 million in cuts for the CSU. In addition, we face another $78.6 million in unfunded mandatory costs, and a $43 million reduction from last year will be made permanent.

These cuts would be devastating to our programs if it were not for the revenue increases called for in the governor's new budget proposal. Gov. Davis has called for an additional $105.8 million to fund a 5 percent student enrollment increase for 2003/04, and $45 million to partially fund the 10,500 students that the CSU enrolled without funding last year. Davis' proposal also anticipates that the Board of Trustees will enact new undergraduate and graduate student fee increases (and use the revenue from this year's mid-year fee increases) to compensate for $142 million of the proposed budget cuts. If approved by the CSU's Board of Trustees, the new fee increase will mean an additional $396 per year for undergraduates, or a total annual undergraduate state university fee of $1,968 for 2003/04.

Even with these revenue increases, the proposed cuts would still be very painful. And they would hit us especially hard because of what I call the "double whammy." That's the combined effect of budget cuts and enrollment increases.

In the past eight years, the CSU has added 87,000 new students. This year the CSU is serving a record total of 406,000 students. And that won't be the end of it. We expect to continue to grow at this rapid rate – and set new enrollment records – through 2010.

But no matter what happens with our budget or our enrollment, we will continue to stand by our historic commitment to access and our non-negotiable commitment to quality. This year, for example, we have pledged to serve all of the students to whom we have promised enrollment – even those students for whom we did not receive full funding.

Although this budget situation may not affect the auxiliaries directly, I hope you will stay informed about this situation and keep your employees informed as well. California's budget crisis is a topic that will dominate almost everything we talk about and do over the next two or three years.

Looking Ahead for the Auxiliaries

Looking ahead for the auxiliaries, we still have a great deal of work to do.

We will need to continue to examine auxiliary policies and help our employees understand the practical applications. For instance, we are looking more closely at employment issues when the campus foundations manage contracts and grants on behalf of the faculty who received them. We had a task force look at this issue and they set out several important issues that need to be addressed. Some issues need to be handled by the campus, and some could go either way. But the important thing is that we need to clarify these responsibilities before there is a problem – not after.

Richard West, Jackie McClain, and Chris Helwick will address this issue and others in their presentations.

We also need to look at new ways we can work together. For instance, I know that you will be having a session on new approaches to faculty, staff, and student housing.

Also, given the precarious situation in Sacramento, I hope we can continue to work together to strengthen our university's message. The CSU is indispensable to California because of its many contributions to the state's economy. We need to help people learn more about everything that the CSU does for California. And we need to speak with a unified voice as a university system. That means all 85 auxiliary organizations and all 23 CSU campuses. Together, we represent the California State University system.


I want to wrap up by thanking you for all of the progress that we have made together over the past five years. I hope you feel good about your success. I do. We faced many tough challenges and we can be proud of all that we have done.

Also, thank you for taking time out of your busy schedules to come here and talk about these issues. I hope that this conference will give you many new ideas and resources to handle all of the challenges we face ahead.

Thank you very much.

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