State Spending Plan
July 12, 2017

The 2017-18 Budget

California Spending Plan

(Preliminary)

Higher Education


In this section, we discuss notable budget changes for the California State University (CSU), University of California (UC), Hastings College of the Law (Hastings), California Student Aid Commission, and the California State Library.

California State University

Total Core Funding of $6.9 Billion in 2017-18. As Figure 7 shows, $3.7 billion (54 percent) is state General Fund, $3.1 billion (45 percent) is student tuition and fee revenue, and $55 million (0.8 percent) is lottery funding. Total core funding increases by $305 million (4.6 percent) over 2016-17.

Figure 7

California State University Core Funding by Source

(Dollars in Millions)

2015-16
Actual

2016-17
Revised

2017-18
Enacted

Change From 2016-17

Amount

Percent

General Fund

Ongoinga

$3,271

$3,479

$3,722

$243

7.0%

One time

5

110

21

-89

-80.8

Subtotals

($3,276)

($3,589)

($3,743)

($154)

(4.3%)

Tuition and feesb

$3,022

$2,963

$3,115

$151

5.1%

Lottery

58

55

55

Totals

$6,357

$6,607

$6,912

$305

4.6%

aIncludes funds for pensions and retiree health benefits.

bIncludes funds that CSU uses to provide tuition discounts and waivers to certain students. In 2017-18, CSU plans to provide $704 million in such aid.

Provides $243 Million (7 Percent) Ongoing General Fund Base Increase. As Figure 8 shows, $157 million is an unrestricted base augmentation, which CSU intends to use primarily to cover costs of collective bargaining agreements ratified by the CSU Board of Trustees in spring 2016. In addition, the budget designates a total of $85 million for the following augmentations: (1) $39 million for increased pension costs, (2) $21 million for higher retiree health care costs, (3) $20 million to serve 2,487 (0.7 percent) more resident FTE students in 2017-18 compared with 2016-17, and (4) $5 million for higher lease-revenue debt service for previously approved capital projects. The budget also provides CSU with $2 million ongoing from the State Transportation Fund for transportation research, pursuant to Chapter 5 of 2017 (SB 1, Beall).

Figure 8

2017-18 California State University General Fund Changes

(In Millions)

2016-17 Revised Spending

$3,588.5

Ongoing Augentations

Unrestricted base increases:

Funding per Governor’s original long-term plan

$131.2

Redirected savings from Middle Class Scholarship modifications

26.0

Subtotal

($157.2)

Restricted base increase:

Pension adjustment

$39.3

Retiree health benefits adjustment

21.0

Enrollment growth

20.0

Lease-revenue bond debt service adjustment

5.1

Subtotal

($85.4)

One-Time Initatives

Graduation Initiative

$12.5

Palm Desert center

3.0

Hunger-free campus program

2.5

Equal employment opportunity programs

2.0

Open educational resourcesa

1.0

Subtotal

($21.0)

Remove one-time funding provided in prior year

-$87.0

Other adjustments

-22.6

Total Changes

$154.1

2017-18 Enacted Spending

$3,742.6

aFunding authorized pursuant to Chapter 633 of 2015 (AB 798, Bunilla).

Designates $21 Million General Fund for One-Time Initiatives. The budget also funds CSU for various one-time initiatives: (1) $12.5 million for CSU’s Graduation Initiative, (2) $3 million for CSU San Bernardino’s Palm Desert satellite campus to expand student outreach and faculty resources, (3) $2.5 million for campuses to address student hunger, (4) $2 million for campuses to create or expand equal employment opportunity programs, and (5) $1 million for open educational resources (a project previously authorized but receiving funding over multiple years).

Authorizes CSU to Fund 27 Capital Outlay Projects. The state authorizes CSU to undertake 27 projects totaling $1.6 billion. CSU indicates that it plans to fund 12 of these projects in the budget year using $1 billion in university revenue bonds. The associated annual debt service is estimated to be about $50 million. CSU indicates it will support this debt service using existing funds. This is possible because CSU freed up a like amount of monies from expiring debt on other projects as well as restructuring outstanding State Public Works Board debt.

Higher Tuition to Go Into Effect in Fall 2017. In March 2017, the CSU Board of Trustees adopted the following systemwide tuition levels for 2017-18: (1) $5,742 for resident undergraduate students, a $270 (4.9 percent) increase; (2) $6,660 for credential programs, a $312 (4.9 percent) increase; (3) $7,176 for graduate (master’s level) programs, a $438 (6.5 percent) increase; and (4) $11,880 undergraduate nonresident supplemental tuition, a $720 (6.5 percent) increase. In addition, tuition for each of CSU’s doctoral programs increases by 6.5 percent. CSU expects to collect an estimated $151 million in additional gross revenue ($109 million in net revenue) resulting from the tuition increases and enrollment growth. CSU intends to use $75 million of the increase for the Graduation Initiative, with the remainder used for various other operational purposes.

Requires CSU Trustees to Submit Report and Approve New Policies. The budget package requires the CSU Board of Trustees to do the following:

  • By January 2018, report on (1) opportunities for campuses to make available more courses by reducing the number of excess units taken by students and (2) the specific activities campuses have taken and spending on those activities in support of CSU’s Graduation Initiative.
  • By May 2018, change university policies related to placement of students in remedial coursework, including placing “significant weight” on high school grades rather than placement tests.
  • By May 2018, approve a policy that requires campuses to give first priority to CSU-eligible local students applying to impacted programs.
  • By May 2018, approve a policy that automatically redirects eligible applicants who are denied admission to an impacted program to similar programs at other campuses that have space.
  • Add enrollment and completion targets to CSU’s existing March performance report (rather than its November report—commonly referred to as the Sustainability Plan—which the budget eliminates).

University of California

Total Core Funding of $8.5 Billion in 2017-18. As Figure 9 shows, $3.5 billion (41 percent) is state General Fund, $4.6 billion (54 percent) is student tuition and fees, and $396 million (4 percent) is from other revenue sources (such as lottery funds and indirect cost recovery on federal and state research grants) that UC allocates for its education programs. Total core funding increases $283 million (3.4 percent) over 2016-17.

Figure 9

University of California Core Funding by Source

(Dollars in Millions)

2015-16
Actual

2016-17
Revised

2017-18
Enacted

Change Over 2016-17

Level

Percent

General Fund

Ongoing

$3,135

$3,279

$3,367

$88

2.7%

One time

124

262

176

-86

-32.9

Subtotals

($3,259)

($3,541)

($3,543)

($2)

(0.1)

Tuition and feesa

$4,087

$4,393

$4,623

$229

5.2%

Other core funds

318

309

360b

51

16.6

Lottery

38

36

36

Totals

$7,665

$8,243

$8,526

$283

3.4%

aIncludes funds that UC uses to provide tuition discounts and waivers to certain students. In 2017-18, UC plans to provide $1 billion in such aid.

bIncludes $50 million in Proposition 56 funding designated for graduate medical education.

Provides $131 Million (4 Percent) General Fund/Proposition 56 Base Increase. As Figure 10 shows, the budget provides UC $81 million in new unrestricted General Fund support. The remaining $50 million base increase is associated with a Proposition 56 (2016) implementation decision. Specifically, the budget package provides $50 million in Proposition 56 funding (including $10 million carried over from 2016-17) for graduate medical education at UC, freeing up $50 million in General Fund formerly dedicated for that purpose. The shift would change the mix of funding but not the total funding level for graduate medical education. The shift would result in unrestricted General Fund support increasing a total of $131 million.

Figure 10

2017-18 University of California General Fund Changes

(In Millions)

2016-17 Revised Spending

$3,540.6

Ongoing Augmentations

Unrestricted base increasea

$81.2

Graduate student enrollment growth

5.0

San Joaquin Valley PRIME programb

1.9

Summer Institute for Emerging Managers and Leaders

0.3

Subtotal

($88.4)

One-Time Initiatives

Pension liabilities

$169.0

Hunger-free campus program

2.5

Marine mammal rescue

2.1

Equal employment opportunity programs

2.0

Remove one-time funding provided in prior year

-261.6

Subtotal

(-$86.0)

Totals

$2.4

2017-18 Enacted Spending

$3,543.0

aDoes not include additional $50 million in freed-up General Fund due to providing $50 million in Proposition 56 funds for graduate medical education.

bThe original $1.9 million appropriation in the revised 2015-16 budget (pursuant to Chapter 2 of 2016, AB 133, Committee on Budget) was unspent and carried forward to 2016-17. The 2017-18 budget resumes base funding for the program.

PRIME = Program in Medical Education.

Sets Expectations on Receiving $50 Million. The 2017-18 budget conditions $50 million of the base increase on UC meeting numerous expectations. Many of these expectations pertain to implementing recommendations made by the State Auditor in an April 2017 report. The audit report recommends that the UC Office of the President (UCOP) implement certain improvements relating to budgeting, transparency, and accountability by April 2018. The remaining budget expectations attached to the $50 million increase are enrolling at least one new transfer student for every two new freshmen, completing activity-based costing pilot programs at three campuses, adopting a policy that prohibits UC from making supplemental retirement payments for any newly hired senior managers, and disclosing more UCOP fiscal and program information. The Department of Finance is to release the $50 million if UC provides sufficient evidence by May 1, 2018 that it made a good faith effort to satisfy all of these expectations.

Creates New Line Item for UCOP in State Budget. The state budget itemizes funding for UCOP, implementing one of the recommendations from the April 2017 audit report. Specifically, the budget earmarks $349 million General Fund for the office. This amount is an estimate of what UCOP would raise if it continued its recent practice of charging each campus an “assessment” to reimburse a portion of its costs. (The amount includes $52 million for UCPath, UC’s new payroll system.) The state budget includes provisional language prohibiting UCOP from charging this assessment in 2017-18 and requiring UCOP to certify that overall campus revenue will be greater in 2017-18 than the prior year. The line item reflects less than half of UCOP’s total budget, which is comprised of numerous other restricted and unrestricted revenue sources. Accounting for all funding, the budget for UCOP’s administration and systemwide programs is $798 million in 2017-18.

Sets Undergraduate and Graduate Enrollment Expectations. Regarding undergraduate enrollment, the budget expects UC to enroll 1,500 more students in 2018-19 over the 2017-18 level and to enroll at least one new transfer student for every two new freshmen. That is, the budget expects at least 500 of the 1,500 additional undergraduate students to be new transfer students. The budget does not designate funding this year to support 2018-19 enrollment growth but indicates that the state and UC are to share the associated cost in 2018-19. To cover UC’s share of the 2018-19 cost, the budget expects UC to identify options for redirecting funds from UCOP’s existing programs. To this end, UC is to consult with the Legislature and Department of Finance and submit redirection options by December 1, 2017. Regarding graduate enrollment, the budget provides $5 million for UC to enroll 500 more resident graduate students in 2017-18 over the 2016-17 level.

Authorizes UC to Undertake Seven New Capital Outlay Projects Totaling $111 Million in State Funding. Six of these projects (totaling $61 million in state funding) would correct seismic and life-safety deficiencies for specific academic building at the Los Angeles, San Francisco, and Berkeley campuses. The other project (associated with $50 million in state funding) is to construct a new science building at the Irvine campus. UC estimates the annual debt service for these projects to be $7.2 million. To finance these projects, UC will sell university bonds and then pay the associated debt service using its main state General Fund appropriation.

Authorizes Additional $50 Million for Deferred Maintenance. In addition to these seven projects, the administration authorizes UC to use $50 million in university bond funding for other facility efforts. Of the $50 million, $15 million would fund a team of experts to visit each campus and assess the current condition of academic facilities. The goal of the assessment would be to provide a more accurate estimate of the system’s total deferred maintenance backlog and prioritize each facility according to its current condition, likelihood of failure, and life-safety risk. The remaining $35 million would fund deferred maintenance projects. UC estimates the annual debt service for these projects to be $4.2 million. As with the projects referenced above, UC would pay this debt service using its main state General Fund appropriation. In an associated action, corresponding trailer legislation (Chapter 23) adds deferred maintenance to the list of allowable types of state-supported capital outlay projects.

Provides $176 Million for One-Time Initiatives. The bulk of this funding—$169 million—is to help address unfunded liabilities for UC’s Retirement Plan. It reflects the third consecutive year of such payments. As with the previous two payments, the $169 million is scored as a Proposition 2 (2014) debt payment. The budget also provides one-time funding for three other purposes: (1) $2.5 million for campuses to address student hunger; (2) $2.1 million for a grant program at the Davis campus to assist marine mammal rescues, representing the third consecutive year of funding; and (3) $2 million for equal employment best practices, representing the second consecutive year of funding.

Several Other Notable Actions. The budget includes various other General Fund, special fund, and policy adjustments affecting UC. Specifically, it includes two other notable General Fund adjustments: (1) $10 million one time (budgeted in the Office of Planning and Research) for precision medicine, reflecting the third year of funding; and (2) $300,000 ongoing for a summer business leadership seminar for undergraduate students from Historically Black Colleges and Universities and Hispanic-Serving Institutions. In addition, the budget makes two notable special fund augmentations: (1) $82 million (including $18 million carried over from 2016-17) in Proposition 56 funding for tobacco-related disease research and (2) $5 million from the State Transportation Fund for transportation research pursuant to Chapter 5. Finally, the budget makes several policy changes through trailer legislation. Pending legislation extends the sunset dates of the California Health Benefit Review Program (to July 1, 2020) and the Umbilical Cord Blood Collection Program (to January 1, 2023). Chapter 23 requires UC to use its employees for routine maintenance on state-supported capital outlay projects (this provision is to sunset June 30, 2024). The budget also eliminates a November report commonly referred to as the Sustainability Plan and trailer legislation (Chapter 23) shifts associated goal-setting requirements to a March performance report.

UC Approved Student Tuition and Fee Increases. In January 2017, the UC Board of Regents approved tuition and fee increases. Specifically, for the 2017-18 academic year, it raised systemwide tuition to $11,502, a $282 (2.5 percent) increase; it raised the Student Services Fee to $1,128, a $54 (5 percent) increase; and it raised undergraduate nonresident supplemental tuition to $28,014, a $1,332 (5 percent) increase. In addition, the board increased supplemental tuition for several professional degree programs, including business, medicine, and nursing programs. For affected professional programs, increases ranged from $150 (1.9 percent) to $2,124 (5 percent). The board also began applying a supplemental tuition charge of $6,000 to two existing graduate programs (an engineering program at Berkeley and an urban planning program at Irvine), resulting in a $6,336 (52 percent) increase in total tuition and fees for resident students in those programs. UC expects to collect an estimated $229 million in additional gross revenue ($194 million in net revenue) resulting from the tuition increases and enrollment growth.

Hastings College of the Law

Total Core Funding of $56 Million in 2017-18. Of this amount, $41 million (74 percent) is gross tuition and fee revenue, $13 million (23 percent) is state General Fund, and $1.6 million (3 percent) is other funding, such as investment income, that the college allocates for its education programs. (The General Fund amount does not include debt service for general obligation bonds, which is estimated to be $1 million in 2017-18.) Though the 2017-18 budget provides the law school a $1.1 million (9.2 percent) unrestricted General Fund base increase, the increase is offset by a $2.6 million decline in other core funding. After accounting for all changes, core funding decreases $1.4 million (2.5 percent) over 2016-17.

Core Spending of $64 Million. Of this amount, $22 million (35 percent) is for instruction-related expenses, such as faculty salaries and benefits; $19 million (30 percent) is for tuition discounts to students; $12 million (19 percent) is for administration and executive management; and the remaining $10 million (16 percent) is for Hastings’ other operating costs. Hastings’ budget continues an initiative begun in 2015-16 to offer larger tuition discounts in an effort to attract additional higher-performing students. Hastings’ tuition discounts are budgeted to increase by $2.9 million (17.9 percent) over 2016-17. This increase is largely offset by operational and other savings identified by the college, with overall core spending expected to increase $431,000 (0.7 percent) from the 2016-17 level.

Resulting Deficit of $8 Million. Due largely to the school’s decision to increase spending on tuition discounts, Hastings has incurred operating deficits in recent years. The school anticipates running an $8.3 million deficit in 2017-18, a $1.9 million increase over the estimated deficit in the 2016-17. Hastings plans to fund this deficit by drawing down its reserve. The school projects it will end 2017-18 with a reserve of $10 million, a significant drop compared to its reserve of $26 million at the end of 2014-15.

Student Financial Aid

Provides $2.3 Billion for Student Financial Aid in 2017-18. As Figure 11 shows, $1.2 billion (53 percent) is state General Fund, $1.0 billion (46 percent) is federal Temporary Assistance for Needy Families (TANF) funding, and $23 million (1 percent) is state special funds and reimbursements. Financial aid spending from these sources increases a net of $143 million (7 percent) from the revised 2016-17 level. Ongoing spending increases $144 million and one-time spending increases $546,000. These increases are offset by $2.3 million in reductions to state operations due to backing out prior-year one-time funding. Year over year, General Fund support increases by $25 million whereas TANF support increases by $118 million.

Figure 11

California Student Aid Commission Budget

(Dollars in Millions)

2015-16
Actual

2016-17
Revised

2017-18
Enacted

Change From 2016-17

Amount

Percent

Expenditures

Local Assistance

Cal Grants

$1,861

$1,986

$2,111

$125

6%

Middle Class Scholarships

44

74

96

22

30

Assumption Program of Loans for Education

14

10

7

-3

-27

Chafee Foster Youth Program

11

14

14

Student Opportunity and Access Program

8

8

8

National Guard Education Assistance Awards

2

2

2

Other programsa

1

1

1

b

-7

Subtotals

($1,941)

($2,095)

($2,261)

($165)

(7%)

State Operations

$14

$17

$15

-$2

-11%

Totals

$1,955

$2,112

$2,255

$143

7%

Funding

General Fund

$1,419

$1,163

$1,188

$25

2%

Federal TANF

521

926

1,043

118

13

Otherc

16

23

23

b

b

aIncludes Cash for College, Child Development Teacher and Supervisor Grants, Graduate Assumption Program of Loans for Education, John R. Justice Program, Law Enforcement Personnel Dependents Scholarships, and State Nursing Assumption Program of Loans for Education for Nursing Faculty.

bLess than $500,000 or 0.5 percent.

cIncludes College Access Tax Credit Fund, Student Loan Authority Fund, and other federal funds.

TANF = Temporary Assistance for Needy Families.

Covers Higher Cal Grant Costs. The budget increases Cal Grant funding by a total of $125 million in 2017-18. Three factors comprise this increase. Updated Cal Grant participation estimates account for $74 million of the increase. Participation is expected to increase 6 percent in 2017-18 over 2016-17. Another $49 million reflects higher Cal Grant costs for students attending CSU ($28 million) and UC ($21 million). These changes conform to CSU’s and UC’s scheduled tuition increases (5 percent and 2.5 percent, respectively). Lastly, $1.7 million reflects a doubling of the Cal Grant C book and supply award for CCC students. The financial aid budget also includes $5.6 million from the College Access Tax Credit Fund. These monies provide a $2 increase to the Cal Grant B access award, raising this piece of the award to $24. This amount supplements the base Cal Brant B award of $1,648, bringing the total Cal Grant B access award to $1,672.

Maintains Private, Nonprofit Cal Grant Award Amount, Adds Reporting Requirement. The 2012-13 budget amended state law to lower Cal Grant A and B awards for students attending private, nonprofit institutions from $9,084 to $8,056 starting in 2014-15. Subsequent budget actions have postponed the scheduled reduction. The 2017-18 budget again postpones the reduction for one additional year. The budget, however, adds intent language that private, nonprofit colleges and universities participating in the Cal Grant program make a good faith effort to enroll more low-income students, enroll more transfer students, and offer more online courses. The legislation requires these institutions to report on progress towards meeting these goals by March 15 of each year.

Maintains Middle Class Scholarship. The state first funded the Middle Class Scholarship program in 2014-15. The program provides partial tuition coverage for students who do not qualify for Cal Grants but have household incomes and assets each under $156,000. The program was designed to be phased in over four years, with award amounts gradually increasing over the period. The 2017-18 budget includes $96 million for full implementation of the program, up from $74 million in 2016-17. The Governor’s January budget had proposed phasing out the program beginning in 2017-18, but the final budget package rejected the proposal.

Funds College Savings Matching Program. The budget provides $3 million one-time funding to the ScholarShare Investment Board to fund matching grants for new 529 college savings accounts. Specifically, the board is to provide dollar-for-dollar matches of up to $200 for moderate- and low-income families that open new accounts for their children. The minimum amount a family must contribute to open an account is $25. In addition to the state match for opening an account, account holders could earn another $25 for signing up to make recurring contributions of $25 or more per month for a year. Trailer legislation specifies that the board may use up to 3 percent of the appropriation for its administrative costs.

Increases State Operations Funding. The budget includes $546,000 one-time funding for the California Student Aid Commission (CSAC) to continue working on replacing its online grant delivery system. CSAC uses its grant delivery system to process financial aid applications, make aid offers, and process payments. Of the proposed $546,000, $296,000 is to allow CSAC to continue contracting with an external project management team and $250,000 is for required contracting with the Department of Technology.

Makes Various Other Changes and Adjustments. The budget package also:

  • Allows CSAC to make 35,000 initial competitive Cal Grant award offers in 2017-18. It makes no changes, however, to associated funding or the maximum authorized number of new paid awards (25,750).
  • Contains small adjustments in participation and award amounts to several financial aid programs, including the Assumption Program of Loans for Education, the State Nursing Assumption Program of Loans for Education, the Child Development Teacher and Supervisor Grant Program, the John R. Justice Loan Assumption Program, and the Law Enforcement Personnel Dependent Grant Program. The budget decreases by a total of $3 million due to these adjustments.
  • Includes Supplemental Report Language requiring CSAC to review California’s financial aid programs and present options to the Legislature for streamlining or consolidating programs. The report is due by February 1, 2018.

California State Library

Total State Library Funding of $55 Million. Of this amount, $34 million (almost two-thirds) is state General Fund, $18 million is federal funds, and $2.5 million is special funds. Of state General Fund, $16.9 million is for assistance to local libraries and $17.5 million is for state operations and facilities. The budget includes $6.5 million in new General Fund spending—$6 million for local library assistance and $541,000 for state operations. This spending increase is offset by $5.4 million in various downward technical adjustments, resulting in a net year-to-year General Fund increase of $1.1 million (3 percent).

Funds Two One-Time Initiatives for Local Libraries. The entire $6 million increase in local library assistance is for one-time initiatives. Of the $6 million, $3 million is for grants to community groups and other organizations participating in the California Civil Liberties Public Education Program. The grants are to help groups develop education resources relating to the internment of Japanese Americans during World War II, with priority for projects that link this experience with other populations facing civil rights violations. The State Library may allocate these funds over the next three fiscal years. The state has provided one-time funding for these grants five times over the past ten years. The remaining $3 million is for local libraries to expand the Career Online High School program—a high school diploma program for adults that the state first funded with one-time monies in 2015-16. The budget includes associated provisional language requiring the State Library to report by May 1, 2018 on enrollment and outcomes for each library participating in the program. The report is to include evidence of learning gains by students, graduation rates, job placement of program graduates, and other student data. (As mentioned earlier, the budget also provides $3 million ongoing Proposition 98 funding for the State Librarian via Riverside County Office of Education to make online educational resources publicly available.)

Three Increases to State Operations. Of the $541,000 million increase for state operations, $326,000 is ongoing and $215,000 is one time. Specifically, the budget provides $137,000 ongoing to fund an assistant bureau chief position in the State Library Services Bureau. This position will be responsible primarily for day-to-day management of supervisory staff. The budget also provides $189,000 ongoing to cover subscription costs associated with the State Library’s data management system. In addition, the budget provides $215,000 one time to upgrade the State Library’s cataloging and search-engine functionalities.