Chancellor's Recent Speeches

Remarks by Dr. Charles B. Reed
Chancellor, California State University
Auxiliary Organizations Association Conference
Pasadena, CA
January 11, 2004

Good evening. It is a pleasure to be with you here tonight. I appreciate the opportunity to speak with you again at this event. It provides me with the chance to give you an update on CSU issues and to hear more about what is on your mind.

It seems fitting that we’re here in Pasadena so soon after the New Year and the Rose Parade and Rose Bowl. I’m always amazed at how quickly they clean up the streets and get things back to normal. All of the Michigan fans probably packed up their RVs and left early.

The Rose Parade float designed and built by Cal Poly students from Pomona and the San Luis Obispo campuses won the parade’s Founders’ Trophy for the best volunteer-built float. The float was a sunken pirate ship with animated sea creatures playing musical instruments.

They called it "Bob’s Barnacle Band." Perhaps a better name might have been "Charlie’s Crazy Cruise" since I feel a little like the commander of a ship not knowing when the next shot across the bow will be fired. Or in our case, what the next round of budget cuts will bring. I know the theme for this year’s parade was "Music, Music, Music," but for the CSU, the theme has been "Budget, Budget, Budget."

Speaking of budgets – which I will in a moment – I wanted to give you an overview of what has been happening since I first spoke to this group six years ago. California and the CSU have gone through many changes. The good news is that we’ve made significant progress and continued to improve our efficiency. That is encouraging in light of the financial woes the state and the CSU have faced. I want to give you some sense of some of the challenges.

Overview of past six years

  • Over the past six years, California’s economy – and the CSU’s budget – has gone from the greatest of boom times to a period of significant cutbacks.

  • This year we experienced the largest budget cut in our history, with a net fiscal impact of $304 million. And, there will be more cuts, which I’ll detail in a moment.

  • At the same time, the CSU has also felt the full effects of "Tidal Wave II" as the children of baby boomers reach our institutions. We had a record enrollment of 409,000 students, our largest student body ever. This marked our 9th straight year of enrollment growth, and even with the budget cuts, I am proud that the CSU was able to continue to serve more students. We accommodated 13,782 additional full-time equivalent students throughout the system. We were able to do this because our presidents did an outstanding job of careful planning the past 18 months in anticipation of what was coming.

  • The people of California recalled the Governor in October

  • Adding to all of this, we are now working with an entirely new administration in Sacramento.

Budget Update

This winter, we have had to manage another $23.7 million mid-year cut – on top of the $304 million already slashed from our budget. We pledged not to raise student fees mid-year if the cuts remain at that level. But as a result, we reduced our enrollment growth from the approved 4.3 percent in the budget to 3.3 percent.

As you may have heard, the Governor released his budget proposal on Friday and the news isn’t good. The Governor has proposed a $240 million or 9 percent reduction for the 2004-05 fiscal year.

The proposed cut, together with the 2003-04 general fund budget cut of $531 million, brings the total of two-year general fund cuts to the CSU to $771 million. Under the governor’s proposal, California will invest less in higher education and the CSU is faced with the prospect of accepting fewer students.

The newest budget proposal will mean the CSU may have to reduce enrollment by as many as 23,000 students. We will not be able to provide access to every student who wants to attend our universities.

In addition, the proposal recommends redirecting 10 percent or 4,200 of CSU first-time freshmen to the community colleges.

Enrollment reductions will affect all of your operations – so plan for it.

The governor’s budget also forces the CSU to significantly reduce spending in university operations by keeping $57.4 million of 2004-05 mandatory cost increases unfunded. These costs include collective bargaining commitments, rate increases in health benefits and insurance, and energy costs increases.

The good news is that the Governor called for a more stable fee policy in his State of the State address. This is something the Trustees and I have been advocating for a long time.

We will continue to experience tough budget years for the foreseeable future. Regardless of what happens with our budget or our enrollment, we remain focused on fulfilling our mission of providing a high-quality, accessible education to California’s students.

Although the auxiliaries may not be directly affected by these budget cuts, it is important for you to understand what is happening. I am sure that California’s budget will be the topic of discussion for the next several years.

The Coming Year for the Auxiliaries
I want to take a moment to update you on a couple of areas and talk about some of the auxiliary programs we’re working on.

  • The best practices guidelines that were developed last year for the auxiliaries are in place and working well. I want to thank all of you for putting this into action.

  • When we first started auditing the auxiliaries, the initial report contained more than 100 findings that needed to be corrected. I am pleased to report that our latest audits have shown tremendous improvements. Thanks to the auxiliaries for strengthening their internal controls and adhering to standards put in place.

  • This week, I updated an Executive Order that clarifies the roles and responsibilities between auxiliaries, the Universities and the administration of sponsored programs. This was done with a great deal of input and cooperation from many of you.

We have also been working on several initiatives resulting in large cost savings. Six years ago, we started a program to provide less expensive insurance coverage to auxiliary organizations. There are now 81 participating organizations in this insurance pool, saving more than $1 million a year.

Starting this spring, auxiliaries will be able to purchase worker’s compensation insurance through a similar pool at a much lower rate. With skyrocketing worker’s comp premiums, this is a real, moneysaving benefit.

We have formed a trust fund task force to provide guidance to the campuses in the use of these funds.

We are also taking a closer look at employee roles in the management of federal grants and contracts. Jackie McClain, our vice chancellor of Human Resources, will be providing more details in one of your breakout sessions. We worry that all employees working on contracts and grants are CSU employees. We have to address this. I urge you all to attend – it will be very informative.

Now more than ever, we need to continue our efforts to reinforce the CSU message: CSU is working for California. We need to remind policymakers that our university system is vital to job creation and to the state’s economic prosperity.

Our 23 campuses are separated by hundreds of miles. The 85 auxiliary member organizations are diverse in nature. But, together as the CSU family, we can continue to build support for the mission of our institutions and serve California’s students.

I want to thank all of you for the improvements we have made the past six years. There have been many challenges along the way and there are certain to be tougher ones ahead. But I appreciate and applaud your achievements and look forward to working together toward greater success.

Thank you very much.

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