• Major Issues
• Overview
• Spending by Major Programs
• Major Budget Changes
• Enrollment
• Student Fees

Major Issues

• The University of California (UC) and California State University (CSU). The budget proposes General Fund support for the UC and the CSU of $3.8 billion in 1996-97. This is the result of an increase of $124 million, or 6.5 percent, for UC and an increase of $96 million, or 5 percent, for CSU compared with estimated current-year expenditures. The proposed General Fund increase is sufficient to eliminate the need for undergraduate student fee increases proposed by both segments for 1996-97. As a result, the budget assumes no undergraduate student fee increase in the budget year. (See page F-6.)
• California Community Colleges (CCC) Funding Options. In both 1995-96 and 1996-97, the options available to the Legislature depend on the projected level of General Fund tax revenues and whether the Governor's proposed tax cut is adopted.
• Budget Revenue Projection, With Tax Cut. To fully fund growth and COLA for categorical programs, we recommend redirecting funding from discretionary spending for enrollment growth.
• LAO Revenue Projection. Under the LAO projections, there would be more than enough Proposition 98 monies to fund all budget proposals for the CCCs. We recommend the Legislature use the remaining funds--up to $78 million in 1996-97--for maintenance and operations, instructional equipment and library materials, additional enrollment growth, and equalizing district funding. (See page F-40.)
• Eliminate Deferred Maintenance Over Several Years. The budget proposes total spending of $45.8 million for deferred maintenance for the UC, CSU, and CCC. We recommend the Legislature, instead, take a more comprehensive approach to the system's maintenance problems--deferred and regular--by initiating a state-segment partnership to:
• Increase Funding for Regular Maintenance. Funding regular maintenance at an adequate level would prevent future deferral of maintenance projects.
• Hold the Segments Accountable for Adequate Spending on Maintenance. This would prohibit the addition of new projects to existing deferred maintenance backlogs.
• Eliminate Deferred Maintenance Backlogs. We recommend the Legislature develop a program to eliminate existing deferred maintenance over a five- to ten-year period. (See page F-13.)
• Cal Grant Increase Proposed. The budget proposes $10 million to increase the maximum Cal Grant award level for recipients who attend non-public postsecondary institutions. The long-term cost of this proposal would reach about $30 million annually by 1999-2000. The $10 million may be needed to backfill federal spending reductions for student financial aid. If federal spending is maintained, and if the Legislature is willing to commit to a long-run cost of about $30 million, we recommend the Legislature spend $5 million to increase the maximum award level for recipients at nonpublic institutions and $5 million to increase the annual number of new Cal Grant awards. (See page F-59.)

Overview

The budget proposes modest increases in state spending for all higher education segments, and no increases in undergraduate student fees.

The budget proposes General Fund expenditures of $5.9 billion for higher education in 1996-97. This is $358 million, or 6.5 percent, more than estimated expenditures in the current year. Including local property tax revenues assumed for community colleges, the budget proposes spending of $7.2 billion, which is $367 million, or 5.4 percent, more than estimated expenditures in the current year.

Figure 1 (see next page) shows that higher education expenditures from the General Fund have increased by $275 million since 1989-90, representing an average annual increase of 0.7 percent. When these expenditures are adjusted for inflation, General Fund spending decreased over this time period by an average of 2.2 percent annually.

The share of General Fund spending allocated to higher education has declined from 14 percent to 13 percent over this period. Including increased student fees (net of financial aid), local property taxes, and loan funds, higher education expenditures have increased by $1.5 billion over the period, an average annual increase of 3 percent. Adjusted for inflation, spending has decreased slightly, by less than 0.5 percent annually.

Spending by Major Programs

Figure 2 shows spending from the General Fund, local taxes, and student fee revenues (net of financial aid) in detail.

For the University of California (UC) and the California State University (CSU), the budget proposes General Fund increases of $124.1 million (6.5 percent) and $95.5 million (5.7 percent), respectively. (The CSU figure understates actual budget-year growth, because 1995-96 expenditures include $20 million in one-time spending.)

The budget proposes no undergraduate fee increases for the UC or CSU. Increased fees for UC professional programs and enrollment changes account for the increases in student fee revenues shown in Figure 2. Based on these fee proposals, total revenues would increase by $141 million (5.9 percent) at the UC and by $99 million (4.7 percent) at the CSU.

For the California Community Colleges (CCC), the budget proposes to increase support from the General Fund in 1996-97 by $86.7 million (6.3 percent). Combined support from the General Fund, property tax revenues, and net student fee revenues is proposed to increase by $94.4 million (3.3 percent). (The CCC figure understates actual budget-year growth, because the 1995-96 expenditures include $79 million in one-time expenditures.) The budget proposes to leave CCC fees at their existing level of $13 per credit unit.

Figure 2 Higher Education Budget Summary Selected Funds Sourcesa 1994-95 Through 1996-97 (Dollars in Millions)
	Actual 1994-95	Estimated 1995-96	Proposed 1996-97	Change From 1995-96
				Amount	Percent
University of California
General Fund	$1,825.4	$1,917.7	$2,041.8	$124.1	6.5%
1996 higher education capital outlay bond fund	--	--	10.0	10.0	--b
Student fee revenues	456.6	476.3	483.3	7.0	1.5
Totals	$2,282.0	$2,394.0	$2,535.1	$141.1	5.9%
California State University
General Fund	$1,578.1	$1,673.8	$1,769.3	$95.5	5.7%
Student fee revenues	341.6	343.6	347.2	3.6	1.1
Totals	$1,919.7	$2,017.4	$2,116.5	$99.1	4.7%
California Community Colleges--local assistance
General Fund (Proposition 98)	$1,182.2	$1,373.2	$1,459.9	$86.7	6.3%
General Fund (non-Proposition 98)	3.1	0.2	--	-0.2	-100.0
Local property taxes	1,332.0	1,348.1	1,356.9	8.8	0.7
Student fee revenues	174.9	164.6	163.7	-0.9	-0.5
Totals	$2,692.2	$2,886.1	$2,980.6	$94.4	3.3%
Student Aid Commission --local assistance
General Fund	$222.9	$234.4	$245.9	$11.4	4.9%
a Student fee revenues are net of financial aid. For 1996-97, selected bond funds for UC that are proposed to support deferred maintenance are displayed to allow for comparison with CSU and the community colleges, where deferred maintenance is supported through the General Fund.
b Not a meaningful figure.

Major Budget Changes

Figure 3 presents the major budget changes in General Fund spending for higher education. The budget proposes $270 million for increases in employee compensation and prices ($100 million at UC, $68 million at CSU, and $92 million at the CCCs). An additional $59 million is proposed to increase the level of funded enrollment in the three segments ($9 million at UC, $12 million at CSU, and $48 million at CCCs). Funding for debt service costs on previously authorized lease-payment bonds also accounts for a significant portion of the General Fund increase--$42 million ($13 million at UC, $11 million at CSU, and $18 million at CCCs).

The budget proposes increased deferred maintenance funding for all three segments. However, Figure 3 shows only the proposed General Fund expenditures in 1996-97--$9.6 million for CSU. The budget also proposes to allocate other funds for deferred maintenance, as follows:

• UC: $10 million of the $150 million in proposed general obligation bonds for UC capital outlay projects.
• CCC: $17.5 million in one-time 1995-96 Proposition 98 funds. Finally, the budget proposes a $10 million increase in Cal Grant funding to raise the maximum grant level for new students at nonpublic institutions from $5,250 to $7,200. This proposal has a long-run annual cost of about $40 million.

Enrollment

Figure 4 (see page 10) shows student enrollment at each of the segments. It shows that the UC's full-time-equivalent (FTE) enrollment will remain essentially steady from 1993-94 through 1995-96. The CSU's FTE enrollment is expected to increase from 247,866 in 1993-94 to an estimated 253,100 in 1995-96, growing by 5,234 students, or 2.1 percent. The CCCs' resident FTE enrollment declined from 864,014 in 1993-94 to an estimated 854,138 in 1995-96, a decrease of 9,876 students, or 1.1 percent. This decline is probably due to a number of factors, including fee increases and efforts to limit enrollment in response to the fiscal uncertainties of 1993-94 and 1994-95.

The budget estimates that actual FTE enrollment levels at the UC and the CSU will increase slightly in 1996-97--less than 1 percent in both cases. These budget estimates are somewhat lower than recent enrollment projections by the demographics unit of the Department of Finance (DOF), which show headcount enrollments increasing by about 1.2 percent for UC and by about 1.4 percent for CSU from fall 1995 to fall 1996. However, given recent variations in enrollment at the two systems (particularly in the proportions of full-time and part-time students at CSU, which are important in comparing headcount to FTE enrollment), it appears that the budget estimates of 1996-97 FTE enrollments for the two systems are within a reasonable range.

Figure 4 Higher Education Full-Time Equivalent Studentsa 1993-94 Through 1996-97
	1993-94	1994-95	Estimated 1995-96	Proposed 1996-97
University of California
Undergraduate	112,970	113,356	114,700	114,900
Postbaccalaureate	578	513	400	400
Graduate	25,930	25,546	25,400	25,700
Health sciences	12,823	12,635	12,500	12,500
Totals	152,301	152,050	153,000	153,500
California State University
Undergraduate	213,632	213,389	220,640	221,786
Postbaccalaureate	14,357	13,563	12,276	12,338
Graduate	19,877	20,160	20,184	20,276
Totals	247,866	247,112	253,100	254,400
California Community Colleges
Resident	864,014	854,628	854,138	878,439
Nonresident	27,246	25,738	25,717	26,448
Totals	891,203	880,581	879,855	904,887
Hastings College of the Law	1,268	1,257	1,220	1,220
a Total enrollments including nonresidents for all segments. Nonresidents are separately identified for community colleges to allow comparison with the Governor's Budget, which identifies resident students only.

For the CCCs, the budget proposes enrollments of 878,439 resident FTE in 1996-97, an increase of 24,301 students, or 2.9 percent. This is the cumulative effect of three proposals: (1) an increase of 12,428 students due to adult population growth of 1.46 percent, (2) an increase of 3,332 students at recently constructed CCC education centers, and (3) an increase of 8,541 students funded from 1995-96 growth funding that will not be allocated to colleges until 1996-97. We provide a detailed discussion of CCC growth funding in our analysis of the CCC budget.

Student Fees

Figure 5 presents student fee levels from 1993-94 through 1996-97. The budget proposes to provide increased General Fund support in lieu of the revenues that UC and CSU proposed to raise through 1996-97 undergraduate fee increases ($27 million for UC and $30.2 million for CSU). Accordingly, Figure 5 shows no increase in undergraduate fees for UC and CSU in 1996-97. Fee increases are proposed for UC professional programs--$2,000 per student for Law and Business, and $1,000 per student for Medicine, Dentistry, and Veterinary Medicine. These increases are consistent with legislative intent, as expressed in the Supplemental Report of the 1994 Budget Act, that the UC increase fees for students enrolled in selected professional programs over a five-year period to the average of fees charged by comparable public universities. The budget proposes no increase in CCC fees.

Figure 5 Higher Education Student Fees Per Full-Time Student 1993-94 Through 1996-97
	1993-94	1994-95	1995-96	Proposed 1996-97
University of California
Undergraduate/graduate	$3,454	$3,799	$3,799	$3,799
Lawa	3,830	6,175	8,175	10,175
Businessa	3,454	5,799	7,799	9,799
Medicinea	3,830	6,175	7,175	8,175
Dentistry/Veterinary medicine	3,454	5,799	6,799	7,799
California State University	1,440	1,584	1,584	1,584
California Community Collegesb	390	390	390	390
Hastings College of the Lawa	3,830	6,175	8,175	10,175
a Fees charged to new students. Special phasing arrangements have been made for selected business schools.
b Excludes BA degree holders, who were charged $50 per credit unit until January 1, 1996.

Despite large increases in fees since 1989-90, the budget estimates that proposed 1996-97 UC undergraduate resident student fees are $624 less than the current average student fees of the four public universities with which the UC compares itself on faculty salaries. The budget estimates that proposed 1996-97 CSU fees are $1,208 lower than the current average fee of the 15 public universities with which the CSU compares itself on faculty salaries. The budget also shows that California's current community college fees are still the lowest in the nation.

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