The 2018-19 Budget

California Spending Plan (Final Version)

Chapter 2: Spending by Program Area

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Higher Education

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

California State University

$7.4 Billion Total Spending on CSU’s Core Program in 2018‑19. As Figure 8 shows, $4.1 billion (56 percent) is state General Fund, $3.2 billion (43 percent) is student tuition and fee revenue, and $53 million (0.7 percent) is other state funding (primarily lottery revenue). Core spending increases by $377 million (5.4 percent) over 2017‑18. The increase consists mostly of higher General Fund support, with a small increase in tuition revenue due to enrollment growth. Tuition levels are intended to remain flat from 2017‑18 to 2018‑19.

Reduces General Fund Support if CSU Raises Tuition in 2018‑19. The budget includes provisional language that allows the Director of Finance to reduce CSU’s General Fund appropriation were CSU to increase tuition levels. The amount of any such reduction would equal the amount of estimated state cost increases to the Cal Grant and the Middle Class Scholarship programs resulting from a tuition increase. The provisional language requires the Director of Finance to notify the Joint Legislative Budget Committee at least 30 days before making any such reduction.

Provides $240 Million (6.5 Percent) Ongoing General Fund Increase. As Figure 9 shows, $122 million is an unrestricted augmentation, which CSU intends to use primarily for implementing collective bargaining agreements ratified by the Board of Trustees in 2018‑19 and covering other employee‑related cost increases, including higher health premiums for active employees. The remaining $118 million in ongoing funding is for various other costs, including providing additional instruction and support services as part of the Graduation Initiative and covering higher pension costs and retiree health care costs. The budget includes provisional language requiring CSU to earmark at least $25 million of its base funding to increase the number of tenure‑track faculty above the 2017‑18 level.

Designates $163 Million General Fund for Various One‑Time Purposes. The largest increase is $120 million for enrollment growth of 3,641 full‑time equivalent (FTE) undergraduate students (1 percent over the 2017‑18 level). Provisional language permits CSU to spend these funds over a four‑year period to support the student cohort. Prior to spending these funds, CSU must notify the Legislature and DOF on how it will distribute these enrollment growth slots among its campuses and how much of the total it expects to spend each year. The remaining $43 million in one‑time funding is associated with six initiatives. The largest of these is $35 million for deferred maintenance. This deferred maintenance spending is part of a larger package of spending across numerous agencies discussed later in this report. Outside of CSU’s main appropriation item, the budget appropriates $7 million one‑time General Fund to the Department of Social Services for contracting with an external group to provide legal services to undocumented and immigrant students, faculty, and staff at CSU campuses.

Authorizes CSU to Fund Five Facility Projects. The 2018‑19 state cost of these projects totals $109 million. The associated annual debt service is estimated to be about $7 million. CSU indicates it will support debt service using existing funds. The projects range from a new academic building at the San Luis Obispo campus to equipment at the Pomona campus. A list of all authorized projects is on our EdBudget website. Though CSU and DOF originally proposed funding 27 projects, serious concerns over the quality of the proposals led to the Legislature and administration scaling back project approvals this year.

University of California

$9.1 Billion Total Spending on UC’s Core Program in 2018‑19. As Figure 10 shows, $3.8 billion (41 percent) is state General Fund, $4.9 billion (54 percent) is student tuition and fees, and $437 million (5 percent) is from other revenue sources (including overhead on state and federal research grants and lottery funds) that UC allocates for its education programs. Core funding increases $316 million (3.6 percent) over 2017‑18. The increase consists of higher General Fund support, additional support from nonresident tuition increases, and a small increase in tuition revenue due to enrollment growth. As with CSU, systemwide tuition and fee levels are intended to remain flat from 2017‑18 to 2018‑19, and the budget package contains provisional language reducing General Fund support were UC to raise tuition. As with CSU, the specific reduction is connected to the associated increase in Cal Grant and Middle Class Scholarship costs for UC students. (The language does not apply to increases in the Student Services Fee.)

Provides 3 Percent Ongoing General Fund Increase. As Figure 11 shows, the budget provides UC with a $92 million increase in unrestricted ongoing General Fund support. The university likely will use this amount to cover salary increases, employee benefit cost increases, pension cost increases, and other operating cost increases over the coming year. The budget also includes $10 million ongoing General Fund support to backfill one‑time Proposition 56 monies provided to UC in 2017‑18.

Supports 1.1 Percent Enrollment Growth. The budget provides $20 million to support 2,000 additional resident undergraduate students in 2018‑19 compared to 2017‑18, with the goal of admitting at least one transfer student for every two freshman students. The enrollment is supported with a mix of General Fund and redirected funds. Specifically, the budget provides $5 million General Fund and redirects $15 million from within UC’s budget. The redirections implement a 2017‑18 Budget Act provision requiring the university to identify existing programs from which funds could be redirected. Our EdBudget website includes a table listing all the identified programs, along with the amount redirected from each program for enrollment growth. If UC enrolls fewer than the expected 2,000 students, the 2018‑19 Budget Act contains a provision reducing General Fund support by $10,000 for each student below the enrollment target.

Provides $105 Million One‑Time Unrestricted Increase. This funding is designated for “general university needs.” Though the budget does not specify the exact use of the funds, provisional language states legislative intent that the funds be used to enroll more resident undergraduate students and augment services and programs that improve student outcomes.

Provides $56 Million One Time for Three Physician Training Programs. These funds are allocated as follows:

• Primary and Emergency Care Residency Slots ($40 Million). Budget documents indicate these General Fund monies are intended to be used to supplement Proposition 56 (2016) funds for physician residency slots primarily in the areas of primary care and emergency care. UC has discretion in how it distributes these funds amongst hospitals.
• UC Riverside School of Medicine Residency Slots ($15 Million). Provisional language specifies that these General Fund monies are for accredited psychiatry programs that use telemedicine. The budget directs UC to report to the Legislature annually on the use of the funds. UC has until June 30, 2023 to spend the funds.
• UC Davis and UC Irvine Psychiatry Scholarships ($1 Million). Provisional language specifies that these Mental Health Services Act monies (passed through the Office of Statewide Health Planning and Development) are for scholarships for physicians enrolling in these two programs. The programs are one year in duration and provide advanced training on primary care psychiatry.

Provides $16 Million One Time for Three Research Initiatives Involving UC. Specifically, the budget provides $12 million to the UC Davis Institute for Regenerative Cures to research “Jordan’s Syndrome”—a rare disorder resulting from a genetic mutation that is thought to cause autism and other neurological disorders. The budget also provides $3 million directly to UC for research on Valley Fever—an infectious disease caused by a fungus that lives in the soil and is acquired by inhaling contaminated dust. (In addition, the budget passes $3 million through the California Department of Public Health for similar research at Kern Medical Center, a nonprofit teaching hospital located in Bakersfield.) The budget also provides $500,000 for the California Vector‑Borne Disease Surveillance Gateway (CalSurv), located at UC Davis, which compiles data on mosquitos and mosquito‑borne health threats.

Provides $74 Million One Time for Other Priorities. These priorities include $35 million for deferred maintenance, also part of the state’s larger deferred maintenance package. It includes $25 million to help UC Berkeley address its budget deficit. The budget conditions these funds on the campus submitting a plan by December 1, 2018 to eliminate its deficit. The remaining $14 million is spread across six other initiatives involving certain staff training activities and certain student services. In addition to these initiatives, the budget provides $150,000 General Fund one time to the Underground Scholars Initiative at UC Berkeley, with the funds passed through the Board of State and Community Corrections.

Authorizes UC to Undertake Nine Capital Outlay Projects. The 2018‑19 state cost of these projects totals $301 million. Four of the projects (totaling $153 million in state funding) involve constructing new academic space and one entails constructing an addition to the Northern Regional Library Facility, located in Richmond. The other projects focus on correcting various seismic and life‑safety deficiencies. All of projects UC originally proposed this year ended up being authorized by the state. A list of all these projects is on our EdBudget website. To finance the projects, UC will sell university bonds and pay the associated debt service using its state General Fund appropriation. UC estimates the annual debt service for these projects to be $22 million.

Adjusts Budgeting of UCOP. Prior to 2017‑18, UC allocated all General Fund support directly to the campuses. To fund UCOP’s core operations and programs, the central office assessed each campus a charge. In an effort to improve transparency and oversight over UCOP’s budget, the state in 2017‑18 changed this arrangement. Specifically, the state budget itemized $349 million of UC’s General Fund appropriation for UCOP and directed UC to eliminate the campus charges. Of this amount, $296 million was designated for UCOP’s operations and $52 million for the UCPath project. UCPath is a payroll and human resource service center ultimately intended to be used by all UC campuses. The 2018‑19 budget makes the following three adjustments to these line items:

• Reduces UCOP Budget. The budget designates $288 million for UCOP operations, an $8.6 million (2.9 percent) reduction from the 2017‑18 level. The budget redirects this $8.6 million to support enrollment growth in 2018‑19, as part of the $20 million funding arrangement described earlier. Of the $8.6 million, $6 million comes from UCOP’s administrative budget, $2 million comes from various initiatives established by the UC President, and $551,000 comes from three other small programs eliminated from UCOP’s budget.
• Specifies Amount Used for Agriculture and Natural Resources (ANR) Division. The ANR Division oversees several agricultural research and outreach programs in partnership with federal and local agencies. Within the $288 million provided for UCOP’s operations, the budget designates $73 million for this division. The earmarked amount reflects the same level of support as provided to the ANR Division in 2017‑18. The earmarking is intended to lend greater transparency to UCOP’s budget.
• Augments Funding for UCPath With Campus Charges. The budget continues to designate $52 million General Fund for the UCPath project but authorizes UC to assess up to $15 million in campus charges to support the project. UC indicates that the augmentation from the campus charges would fund the first year of a two‑year plan to deploy the UCPath center at all campuses.

Office of Planning and Research

Provides $10 Million Ongoing General Fund for New Online Learning Lab. The purpose of the new California Education Learning Laboratory is to expand lower‑division online and hybrid courses at the state’s three public higher education segments. (This is a separate program from the online initiatives the state already funds at the three segments.) At least for the first three years, the program will focus exclusively on STEM courses. After three years, the program is permitted to add online and hybrid courses in other disciplines. The program is to be administered by the Office of Planning and Research (OPR), which is charged with awarding competitive grants to intersegmental teams of faculty. Trailer language allows OPR, however, to contract with another entity, such as a nonprofit organization, to administer the program.

Provides $30 Million One Time General Fund for Precision Medicine. The amount represents the fourth year of funding for research on precision medicine, which aims to improve health care through better use of advanced computing, technology, and data. Funds in previous years generally have supported projects researching new technologies and data tools to monitor and diagnose certain health issues. In addition, a portion of past funding has been used to develop a database of precision medicine research activities in the state and available government and private fund sources to support research projects. The administration indicates that funds in 2018‑19 would support similar projects.

Hastings College of the Law

$65 Million Total Funding for Hastings in 2018‑19. Of this amount, $43 million (66 percent) is tuition and fee revenue, $20 million (31 percent) is state General Fund, and $1.7 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 general obligation bond debt service on Hastings projects, which is estimated to be $795,000 in 2018‑19.) After accounting for all changes, core funding increases $7.9 million (13.8 percent) over 2017‑18.

General Fund Increases by $7.6 Million. Of this amount, $1.1 million is ongoing and $6.5 million is for three one‑time initiatives. Virtually all of the school’s ongoing increase is unrestricted, with Hastings indicating it likely will use this funding primarily for employee compensation increases. Of the one‑time funds:

• $4.5 million is for a new diversity pipeline initiative.
• $1.5 million is for consultants and various activities intended to assist the school in aligning its administrative processes with the new UCPath system by 2019‑20.
• $500,000 is for deferred maintenance projects at the law school, also part of the state’s larger package of projects.

School Has $2 Million Operating Deficit in 2018‑19. Though Hastings is receiving $65 million in core revenue, it plans to spend $67 million in 2018‑19—reflecting a $2 million operating deficit. The school intends to cover the deficit by drawing down its reserves. The school projects it will end 2018‑19 with general purpose reserves of $11 million—significantly lower than its reserve of $26 million at the end of 2015‑16. The 2018‑19 academic year represents the start of an internal, multiyear plan to eliminate Hastings operating deficit. The plan relies primarily on decreases in financial aid awards (beginning in 2018‑19) and increases in tuition revenue (beginning in 2019‑20). Under the budget plan, Hastings’ operating deficit would be eliminated by 2021‑22.

Student Financial Aid

$2.4 Billion Total Spending on Student Aid Commission‑Run Financial Aid Programs in 2018‑19. As Figure 12 shows, $1.3 billion (54 percent) is state General Fund, $1.1 billion (45 percent) is federal Temporary Assistance for Needy Families (TANF) funding, and $27 million (1 percent) is state special funds and reimbursements. Financial aid spending from these sources increases a net of $72 million (3.1 percent) from the revised 2017‑18 level. Ongoing spending increases $70 million and one‑time spending increases $5.5 million. These increases are offset by $3.5 million in reductions to state operations due to backing out prior‑year one‑time funding. Year over year, General Fund increases by $46 million, TANF funds increases by $23 million, and special funds and reimbursements increase by $4.2 million.

Covers Higher Cal Grant Costs. The budget increases Cal Grant funding by $66 million in 2018‑19. Of this increase, $57 million is for changes in Cal Grant participation. Another $5.2 million is for expanded Cal Grant B eligibility for foster youth, as described below. The budget also assumes UC increases the Student Services Fee by 4.8 percent and provides $4.2 million to cover the higher associated Cal Grant costs. (Following budget enactment, the UC Board of Regents decided not to raise the fee for 2018‑19.)

Expands Cal Grant B Eligibility for Foster Youth. The Cal Grant B provides $1,672 per recipient in aid for living expenses. It also provides tuition coverage at most institutions after the first year of study. Chapter 33 of 2018 (AB 1809, Committee on Budget) makes three Cal Grant B changes for foster youth students. It (1) entitles foster youth to receive a Cal Grant B until they are 26 years of age regardless of when they graduated from high school, (2) increases the amount of time foster youth recipients can renew their grants from four years to eight years of full‑time study, and (3) extends the deadline to apply for a Cal Grant B from March 2 to September 2 for foster youth attending CCC.

Also Expands Chafee Eligibility for Foster Youth. The Chafee program provides foster youth up to $5,000 in aid generally for living expenses. The program is funded from a mix of state and federal funds. Both state and federal funds flow from the Department of Social Services to the California Student Aid Commission (CSAC) through an interagency agreement. Chapter 33 also expands the eligible age a foster youth can receive a Chafee grant to 26 years old. The budget provides the Department of Social Services $4 million General Fund for covering the associated cost. Although the Chafee program is not an entitlement program, staff at CSAC indicate that the intent of the augmentation is to cover all eligible foster youth.

Maintains Cal Grant Award Amount for Nonprofit Schools, With Conditions. The 2012‑13 budget amended state law to lower the Cal Grant from $9,084 to $8,056 starting in 2014‑15 for students attending nonprofit schools, as well as for students attending for‑profit institutions accredited by the Western Association of Schools and Colleges (WASC). Subsequent budget actions have postponed the scheduled reduction. Chapter 33 repeals the scheduled reduction for the nonprofit sector but ties the $1,028 award differential to the sector admitting a specified number of students with an associate degree for transfer each year. If the sector fails to admit the specified number of students each year, the Cal Grant is to be reduced to $8,056 for students attending that sector. In contrast to awards at the nonprofit sector, the budget implements the scheduled reduction for students attending WASC‑accredited for‑profit schools, thereby lowering the award for these students to $8,056.

Covers Slightly Higher Costs for Middle Class Scholarships. The state first funded the Middle Class Scholarship program in 2014‑15. The program covers a portion of systemwide tuition and fees for students who do not qualify for Cal Grants but have household incomes and assets each under $171,000. State law specifies the amount of funding for the program each year, eventually capping total funding for the program at $117 million in 2019‑20. Chapter 33 adjusts the statutory spending levels to reflect updated participation and cost data. Specifically, Chapter 33 authorizes $71.2 million for the program in 2016‑17, $99.8 million in 2017‑18, and $101.4 million in 2018‑19. The slight increase in 2018‑19 spending is due primarily to an increase in projected number of awards and the assumed increase to the UC Student Services Fee.

Increases CSAC State Operations Funding. The budget includes $5.5 million one time for CSAC to continue working on replacing its online grant delivery system. CSAC uses this system to process financial aid applications, make offers, and process payments. The project is in the fourth of the four review stages of the state’s Project Approval Lifecycle. CSAC plans to select a vendor in 2018‑19 to accomplish the first of two phases entailed in building the new system.

California State Library

Provides $63 Million in Total Funding for State Library. Of this amount, $42 million (66 percent) is state General Fund, $18 million (29 percent) is federal funds, and $3 million (4 percent) is special funds. Of state General Fund, $27 million is for assistance to local libraries and $15 million is for state operations and facilities. The budget includes $16 million in new General Fund spending—$14 million for local library assistance and $2 million for state operations. Of the $16 million, about one‑quarter is for ongoing purposes, with three‑quarters for one‑time purposes. Our EdBudget website has a summary of all these augmentations.

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