Legislative Analyst's Office
Analysis of the 2001-02 Budget Bill
Since 1998-99, the Legislature has strongly encouraged the University of California (UC) and the California State University (CSU) to serve more students during the summer by implementing year-round operation. Although there are an array of options which can be used to serve more studentsincluding enhancing distance learning technology and promoting intersegmental programsexpanding the summer term is one of the most cost-effective ways of significantly increasing enrollment and significantly reducing the costs associated with constructing new classrooms and campuses. Despite these advantages, no UC campus and only five CSU campusesHayward, Humboldt, Los Angeles, Pomona, and San Luis Obispocurrently offer a relatively extensive summer term. The number of student course hours these five campuses provided in summer 2000 was equivalent to serving approximately 5,600 matriculated full-time equivalent (FTE) students over an entire year.
In the following analysis, we discuss the specific actions the Legislature has recently taken to encourage UC and CSU to expand their summer terms. We then discuss the 2001-02 Governor's Budget proposal to provide $33.1 million for UC and CSU to expand their summer terms. Lastly, we identify options the Legislature has for increasing the incentive UC and CSU have to expand summer enrollments as quickly as possible.
In the last three years, the Legislature and the Governor have undertaken two major efforts in an attempt to encourage UC and CSU to expand their summer term as quickly as possible.
Same Fee Rate for All Academic Terms. Chapter 383, Statutes of 2000 (AB 2409, Migden), prohibited UC and CSU from charging students more in summer than in fall, winter, and spring. (The legislation also allowed UC and CSU to offer summer "discounts." See shaded box entitled Experimenting with Summer Fee Policies.) The 2000-01 Budget Act appropriated a total of $33.7 million from the General Fund to UC ($13.8 million) and CSU ($19.9 million) to compensate the universities for revenue they would lose by reducing summer fees. Beginning in summer 2001, student fees at every UC and CSU campus will therefore be at least as low as fees for fall, winter, and spring. (Prior to summer 2001, summer fees were approximately 15 percent higher than the regular fee level at UC and between 120 percent and 160 percent higher than the regular fee level at CSU. During this time, UC and CSU labeled their summer term as "self-supported" because student fee revenue alone supposedly covered all instruction-related costs.)
Marginal-Cost Funding for All Enrollment Growth. In 1998-99, the Legislature and the Governor agreed to provide "marginal-cost funding" for all students enrolled in summer teacher preparation programs. (The state funds enrollment growth at UC and CSU based upon a "marginal-cost formula," which estimates the cost of educating one additional FTE student.) Then, in 1999-00, the Legislature and administration agreed to provide marginal-cost funding for all additional FTE students enrolled in all programs at UC and CSU regardless of whether they enrolled in fall, winter, spring, or summer. (Prior to 1998-99, the state provided marginal-cost funding only for FTE students enrolled in fall, winter, and spring.)
Additional Funding for Existing Summer Enrollment Unresolved . The state has not yet determined whether UC and CSU should receive additional funding to compensate them for students they were already serving in summer, prior to the state's decision to provide marginal-cost funding for all enrollment growth. In 1999immediately preceding the decision to fund summer enrollment growthUC and CSU were serving 6,381 and 8,232 annualized FTE students in the summer, respectively. As discussed earlier, the 2000-01 Budget Act compensated UC and CSU for fee revenue it lost by reducing summer fees. This will give UC the equivalent of $2,163 per student for 6,381 FTE enrollments in summer 2001, and CSU $2,417 per student for 8,232 FTE enrollments in summer 2001. The UC and CSU maintain that the state should provide more funding for these preexisting summer enrollments in recognition that they have not previously received "full" marginal cost funding for them. Specifically, UC and CSU seek the difference between the full marginal-cost fundingwhich in 2001-02 is $9,158 and $6,360 per FTE student at UC and CSU, respectivelyand the funding they receive for reducing summer fees.
The 2001-02 budget requests $33.1 million for precisely this purpose. Of this amount, the budget requests $20.7 million for UC to support 3,422 FTE enrollments associated with its Berkeley, Los Angeles, and Santa Barbara campuses. It requests $12.4 million for CSU to support 3,138 FTE enrollments associated with its Fullerton, Long Beach, San Diego, and San Francisco campuses. According to the universities, they will request additional funding next year based on the balance of summer enrollments on their other campuses.
Experimenting With Summer Fee Policies
Chapter 383, Statutes of 2000 (AB 2409, Migden), permits the universities to craft flexible summer policies to meet local conditions, including the option of discounting summer fees so they are lower than fall, winter, and spring levels. (Such a pricing policy is similar to the corporate practice of using lower "off-peak" prices to encourage customerssuch as telephone usersto use off-peak periods. This strategy reduces a company's capital costs.) Several campuses have already begun experimenting with new summer fee policies.
No Detail on Quality Enhancements. The UC and CSU state they need this additional funding if they are to enhance the quality of their summer terms. Neither UC nor CSU, however, can provide detail on how they would expend these additional funds or how they would improve summer offerings. Moreover, by providing marginal-cost funding for all enrollment growth, the Legislature will provide resources for UC and CSU to enhance the quality of their summer terms over time. Indeed, as summer enrollments (or annual enrollments) increase, campuses can hire additional faculty and provide ancillary services and financial aid just as they do during the other terms.
Additional Funding Could Be Incentive to Expand More Quickly. Although the state has already agreed to fund UC and CSU for all summer enrollment growth and UC and CSU are unlikely to need additional funding to cover their instructional costs in the summer, the Legislature might provide additional funding to encourage UC and CSU to expand summer enrollments more quickly than they otherwise could. For example, UC and CSU might use additional funding to offer students further fee discounts, to expand their course offerings more quickly, or to increase their summer support services more substantially.
Governor's Proposal Provides No Guarantee Funds Will Enhance Quality or Increase Enrollment. Unfortunately, the Governor's proposal provides no guarantee that UC and CSU will use additional funds in these ways. Indeed, under the Governor's proposal, UC and CSU receive additional funds regardless of whether they provide summer enhancements or increase summer enrollments. Technically, under the proposal, summer enrollments at the seven targeted campuses could remain the same, or even decline, despite the universities receiving additional funds.
We recommend the Legislature provide the additional funding needed to obtain "full" marginal-cost funding for existing summer enrollments, but adopt budget bill language that conditions the additional funding on summer enrollment growth.
To ensure the additional General Fund support requested by UC and CSU increases summer enrollments, we recommend the Legislature provide the funding contingent on such increases occurring. In the budget year, we recommend the Legislature provide a "bonus" of $6,036 for each additional, annualized FTE student that UC enrolls in summer, up to the $20.7 million the budget requests for UC. Similarly, we recommend the Legislature provide a bonus of $3,943 for each additional, annualized summer FTE student CSU enrolls in summer, up to the $12.4 million the budget requests for CSU. This funding would be a bonus because the state is already providing UC and CSU with full marginal-cost funding for these students (based on its 1999-00 decision to fund all enrollment growth at the full marginal cost). Under our recommendation, UC and CSU would receive the requested funds only if they make meaningful progress in increasing summer enrollments.
In sum, rather than providing additional funding to UC and CSU without making them accountable for results, we recommend the Legislature tie additional funding to summer enrollment growth.