California State University, University of California and Gov. Schwarzenegger Reach Agreement on Long-term Funding Plan for 2005/06 to 2010/11

The “Compact” will provide CSU with funding for enrollment growth and salary increases that will allow CSU to maintain quality and access for students

Contact: Colleen Bentley-Adler, (562) 951-4801, cbentley-adler@calstate.edu

(May 11, 2004) – Governor Arnold Schwarzenegger, California State University Chancellor Charles B. Reed and University of California President Robert C. Dynes today reached agreement on a six-year “Compact” that will ensure quality, access and affordability at the nation’s top public university systems.

The Higher Education Compact also recognizes the overwhelming demand for student access and proposes to fund 2.5 percent annual enrollment growth through 2010/11, ensuring educational opportunities for an additional 8,000 CSU students and 5,000 UC students per year. These funds will allow both systems to stem the student enrollment decreases that each has been experiencing because of the state’s fiscal crisis.

The Compact, which will take effect in 2005/06 and continue through 2010/11, will provide the CSU and the UC systems a 3 percent state General Fund increase in 2005/06 and 2006/07.

Beginning in 2007/08 and through 2010/11, the state will provide an increase of 4% to the prior year's base budget for basic needs including salary increases, health benefits, maintenance and inflation.

“Gov. Schwarzenegger is to be congratulated for his exceptionally strong commitment to higher education, particularly given that the state still is experiencing fiscal difficulties. He clearly knows CSU’s and UC’s impact on the state’s economy, and recognizes that to keep the state strong, higher education must continue to produce graduates for the workforce and to provide research capabilities and community service that benefit the state and its residents,” said CSU Chancellor Reed.

“We also want to thank members of the state Legislature for their continued support of the CSU, and for keeping the public informed of the budgetary issues facing higher education. We look forward to working with them on this year’s budget and into the coming years when the Compact is in effect. Together, we can keep the quality high in our educational institutions,” Reed said.

“I applaud President Dynes and Chancellor Reed, and everyone involved for helping to get us through the worst of our budget crisis. Together, we have found a compromise that will protect the quality of our world-renowned higher education system. We have made a long-term commitment for greater investments in our schools and equipping California’s workforce with the best and the brightest for years to come,” said Gov. Schwarzenegger.

By providing fiscal stability in the initial two years of this Compact, the state will prevent further erosion of support for higher education. Funding commitments in the third year and beyond reflect the Governor’s belief that the state will experience moderate economic growth. This will allow some recovery for CSU and UC, such as improving salaries and addressing several years of under-funding of core programs.

“Economic growth, the health of our people, and our collective quality of life as Californians all depend in large part on the teaching and research being done in our universities. They are where ideas start, where new jobs start, where cures to disease start, and where better futures start,” said UC President Dynes. “This compact provides the support that will allow our faculty, staff, and students to preserve and enhance that positive impact on the lives of all Californians.”

In exchange for the commitment of funds, both CSU and UC have agreed to a series of accountability measures, and will make annual reports to the Governor, Secretary of Education, fiscal committees of the Legislature, the Legislative Analyst’s Office and the Department of Finance by October of each year.

Student Fees:
While most of the Compact does not apply to 2004/05, student fees are mentioned specifically. The Compact proposes a three-year level of fee increases for CSU and UC undergraduate students that will average 10 percent in each of the coming three years. In 2004/05, student fees will increase 14 percent, and in 2005/06 and 2006/07, they will increase 8 percent each year.

For graduate students, the fee levels are different at CSU and UC. At CSU, in 2004/05, graduate fees will increase 25 percent, except that teacher credential candidate fees will increase 20 percent. At UC, graduate student fees will increase 20 percent in 2004/05. For the following two years, it is expected that both CSU and UC graduate fees will increase by no less than 10 percent.

The CSU Trustees must vote on the 2004/05 fee increases. Action is expected at the May 19 board meeting. If approved, undergraduate fees would increase by $288 (14 percent), qualified credential program participants by $450 (20 percent) and all other post-baccalaureate and graduate students by $564 (25 percent). One fifth of the revenue from these fee increases will be set aside for State University Grant financial aid.

The Schwarzenegger administration expects both CSU and UC graduate student fees to eventually reach levels that make them 50 percent higher than undergraduate fees in recognition of the cost of these programs and the expected higher earnings these students will make once in the workforce.

In the years 2007/08 to 2010/11, the Governor has recommended that any fee increases be tied to an annual California per capita personal income. However, he has given the two systems’ governing boards, the CSU Trustees and the UC Regents, the power to exceed that number if fiscal circumstances warrant, but not above 10 percent in any given year. Given that the CSU had a net reduction in the General Fund Budget of 20 percent over the last three years, the CSU may have to adjust fees at the higher level to make up for the lost revenue and to enhance quality for students.

“This Compact, when fully funded, has the potential for providing long-term student fee stability that is an overwhelming benefit to students and their families,” said Richard P. West, CSU executive vice chancellor and chief financial officer. “However, the Compact also includes a critical recognition by the Governor that our board may need to increase fees higher in some years to maintain quality and preserve programs, so we are grateful to the governor for having the foresight to think about the future.”

The Governor also has asked both CSU and the UC to develop higher fees for students who take considerably more units than required for their degrees.

“The CSU is working on a multi-pronged policy that will benefit students in the areas of articulation, advising and counseling, so that all students will have a clear path to the courses they need to take to graduate,” Reed said.

Enrollment:
The Compact calls for a General Fund increase to the CSU budget beginning in 2005/06 to support a 2.5 percent growth in student access, or about 8,000 students annually.

This growth will allow the CSU to return to the higher enrollment growth trend line projected by the Department of Finance. In addition, the Compact calls for state supported summer sessions that eventually will serve about 40 percent of the students who take classes in the fall and spring terms.

CSU currently enrolls about 410,000 students but will decrease enrollment by up to 5 percent in 2004/05 (a non-Compact year) because of cuts proposed in the Governor’s January budget.

Core Academic Needs:
Gov. Schwarzenegger has also committed to an additional 1 percent growth in CSU and UC budgets in 2008/09, 2009/10 and 2010/11. These funds will address the annual budgetary shortfalls in state funding for other instruction and research support critical to maintaining the quality of the academic program such as instructional equipment, instructional technology, libraries and building maintenance.

Capital Outlay:
The state will provide funding for debt service to support general obligation bonds of $345 million per year per segment to be used for high priority projects that address seismic and life-safety needs, enrollment growth and modernization of out-of-date facilities. The state will commit to support similar amounts over the life of the Compact.

One-Time Funds:
As the fiscal situation permits, and one-time funds become available, the state may provide one-time funds to address high priority infrastructure needs, such as capital renewal of facilities and deferred maintenance needed to maintain the segments’ capital assets. For CSU, at least $141 million per year is needed for systematic capital renewal of existing facilities and utilities, and the deferred maintenance backlog for high-priority projects exceeds $365 million.

Long-Term Goals for Accountability:
Given the past three years of budget cutbacks, the governor is giving the CSU and UC some latitude in meeting all accountability expectations. However, he is requiring the CSU and UC to collect specific data and begin to develop an annual report on specific accountability measures in exchange for the funds provided by the Compact.

Some of those areas include: efficiency in graduating students, including number of degrees and time-to-degree; utilization of system-wide resources such as student/faculty ratio and change in employee salaries; student-level information, including student proficiency levels and progress on achieving community colleges course articulation agreements; and capital outlay, including five-year plans with priorities by campus.

The CSU and UC had agreements similar to Gov. Schwarzenegger’s Compact with previous Governors Davis and Wilson. Like Gov. Schwarzenegger, they also recognized the value of higher education to the state’s economy. Under those agreements and this one, the CSU and UC are expected to continue to raise private funds to enhance the quality of their education, and to seek contracts and grants for research activities for faculty, staff and students to enhance the state’s vitality.

For additional information on the Compact, please see: www.calstate.edu/BudgetCentral/index.shtml

The California State University is the largest system of senior higher education in the country, with 23 campuses, about 410,000 students and 44,000 faculty and staff. Since the system was created in 1961, it has awarded about 2 million degrees, about 77,000 annually. The CSU is renowned for the quality of its teaching and for the job-ready graduates it produces. Its mission is to provide high-quality, affordable education to meet the ever-changing needs of the people of California. With its commitment to excellence, diversity and innovation, the CSU is the university system that is working for California. See www.calstate.edu.


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Last Updated: May 11, 2004

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