Chancellor's Recent Speeches

Remarks by Charles B. Reed
Chancellor, California State University
AOA and FOA Conference
Newport Beach, CA
January 9, 2011

Thank you very much. It is an honor and a pleasure to be here, speaking to both our auxiliaries and our financial officers. This is my 13th appearance at this conference, and I hope it is getting better every time.

I want to begin by acknowledging Bob Hassmiller, CEO of the National Association of College Auxiliary Services.

NACAS provides training and educational opportunities for auxiliary professionals across the country. Bob has been attending AOA since he became CEO of NACAS, and we truly appreciate his support.

I also want to recognize two individuals from the CSU who have key leadership roles at our supporting organizations:

Frank Mumford from Cal State Fullerton, serves as president of the NACAS Board of Directors.

Cynthia Teniente-Matson, Vice President for Administration and CFO from Fresno State, serves as chair of the Board of Directors of NACUBO – the National Organization for College and University Business Officers.

And finally, I would like to recognize a former CSU employee that recently received the highest award given by NACAS for distinguished service. Marti Gray, who recently retired from Sacramento State, received the Robert F. Newton Award at the recent NACAS national conference.

Please join me in recognizing these CSU employees for their volunteer service to their national associations.

Tonight I want to give you a brief overview of the budget, and then a short look at where we stand with our most pressing auxiliary and financial issues.

You will hear more on the budget from Ben Quillian later in the conference, but I want to lay some groundwork now so that we have a good foundation for our discussions. Mostly I want to deliver this message to all of you: Fasten your seat belts. We are in for a rough ride.

Budget

The California State University was built on a mission of providing access to students. We strive to offer every qualified student an opportunity to attend the CSU.

But each year, with California’s growing budget crisis, providing access has become one of our greatest challenges. This year, the legislature passed the budget 100 days late.

Of course we never want to turn away students who need and want the opportunity to learn. But not knowing our final budget restricts our ability to plan, and it impacts every part of our operation.

We did get a partial restoration in our budget for 2010/2011. The governor and the legislature restored almost $260 million dollars to our budget and provided an additional $106 million dollars in one-time federal funds.

This will allow us to restore access to almost 30,000 students beginning with the current winter/spring term. It will also enable us to add course sections and provide some of the student services we have had to cut.

But we are still in a precarious situation. Our state support is the same as it was five years ago, yet we have 25,000 more students to serve. And the demand continues to run high: This fall we set a new record with 611,000 applications received during the priority enrollment period.

Now California is facing a $28 billion state deficit. And we expect this to be one of the worst budget seasons in memory because everyone will feel the pain.

We are expecting a general fund reduction of about 20 percent or $500 million when the new governor releases his budget tomorrow. These cuts will be devastating not only because of the direct impact on our institution, but because of the ripple effect throughout the workforce and our state’s economic development efforts.

Despite this bad news, we have had some tremendous successes this year. I want to call attention to three CSU-sponsored bills that were passed into law this year that will have a major impact on our students and on California.

First, the Community College Transfer Bill will make life much easier for community college students. This bill establishes a transfer Associate of Arts Degree that will streamline the transfer process. This will allow us to serve tens of thousands of more students and save more than $100 million dollars in the process.

Second, we will be able to offer a Doctor of Nursing Practice Degree and a Doctor of Physical Therapy degree. With these programs, the CSU will help the state meet a critical demand for nurses and physical therapy professionals.

Last, our Affinity Programs bill will allow our alumni associations at our 23 campuses to continue to use affinity partners to provide services to alumni. The revenue from these programs supports scholarships and other student and alumni services.

These bills made it to the finish line because many of you came together and worked to ensure their success.

The good work does not stop there. We’ve made valuable progress in:

  • Our outreach to underserved communities, through our Super Sunday African American events, and through our outreach to thousands of Hispanic families with PIQE and Es el Memento.

  • Our Graduation Initiative and our Early Start programs, to help students be better prepared to enroll, succeed, and graduate on time.

  • Our industry partnerships, which allow employers to help us prepare our students for a highly competitive workforce.

  • The award-winning accomplishments of our faculty and staff that can be found on every one of our campuses.

Many of you have worked under furloughs and very difficult circumstances and you continue to do remarkable things. The California State University will succeed because we have talented and dedicated people who care and who make a difference.

I will continue to fight for our budget in Sacramento and make sure our message is heard: Investing in the California State University creates jobs, improves the state, and benefits everyone.

Auxiliary Report

Next I want to say just a few words about the draft auxiliary report that we will present to the Board of Trustees later this month.

This draft report pulls together issues that are familiar to many of you. These issues have been part of our ongoing discussions about the future of the auxiliaries.

We all agree that the auxiliaries play an important – even critical – role in supporting the campuses. But it is the job of the campuses and the Chancellor’s Office to make sure that our auxiliaries operate under all of the appropriate policy directives. Our job isn’t optional – it is required of us by legislation.

This report is intended to help people understand the unique nature of auxiliary organizations that exist nowhere else in the postsecondary education universe.

The report will reinforce the fact that our campuses need to pay close attention to the activities and financial arrangements of auxiliaries.

It will ask each campus to look at the authorized functions of its auxiliaries and the composition of the auxiliary boards.

It will also direct the campus chief financial officer to ensure that the auxiliaries are getting enough support and guidance regarding laws, regulations and policies.

In particular, these recommendations address one of the major audit issues that we have been dealing with, which is ascertaining ownership of particular activities by either the campus or the auxiliary.

The plan is that we will issue new executive orders that will deal separately with ownership of activities and auxiliary reimbursement of legitimate costs.

It will also help us clarify ownership by laying out criteria that will help us figure out how to decide who owns what.

Based on the recommendations of the report, we may be working with lawmakers to protect the essential functions of the auxiliaries while meeting the public’s demand for greater accountability and transparency.

I welcome and embrace the recommendations in this report.

Common Financial System

Next, I want to thank all of you who have been going through the process to move to our common financial system, or CFS.

I know that this is an incredible undertaking, and I appreciate all of the time that you have devoted to it.

The current schedule has all of our campuses being online in July. Once we are all up, we will have a data warehouse that will allow us to perform systemwide searches and locate information in a more timely fashion.

I know that this transition is an enormous effort, but I also know that it is the right thing to do, and I am proud that we are doing it. I want to thank all of you who are involved for being on board with this process.

Bond Funding

Last but not least, I want to say a word on general obligation bond funding.

While the legislature has not approved general obligation bond funding since 2006, we are optimistic the governor's budget will include the use of lease revenue bond funding for a limited number of critical projects.

We are anticipating our highest risk seismic project at CSU East Bay to be included in the governor's budget based on the positive support we received from the Department of Finance.

The next step after the governor's budget will be to get the legislature to support additional debt for the state - which is not going to be easy with our current fiscal condition. We hope the job creation for the design and construction sector weighs in our favor to secure their vote.

We also hope that the budget includes funding for capital renewal of our building systems out of remaining GO bonds. The $15M we have proposed is the bulk of the remaining GO bond funds.

The capital renewal funding will be targeted for energy conservation projects in order to leverage utility incentive funds.

In terms of sustainability, we will be presenting a report to the Board this next year on progress towards their goals for energy conservation and on-site generation.

While most of the campus solar projects are expected to be privately funded, owned, and maintained with the campus purchasing power for 20 years, we are working to provide the campuses an option to purchase the system themselves, or finance the project like at CSU Fullerton, via their Auxiliary.

And with that, let me thank all of you for your hard work and another successful year at the CSU.

Not only are we working to educate the next generation – we are also building the workforce of tomorrow and re-invigorating California’s economy.

That’s something that we can all be proud of.

Thank you again. I will be glad to take any questions you may have.