1. Crosscutting Issues
1. The State's Approach to Deferred Maintenance: Round Two
1. Background
1. Community Colleges
2. The Four-Year Universities
2. Recommendations

Crosscutting Issues

Higher Education

The State's Approach to Deferred Maintenance: Round Two

Last year the higher education segments and the Legislature agreed on a multiyear program to resolve (1) existing backlogs in facility maintenance and (2) chronic underfunding of regular maintenance needs. We recommend that the Legislature continue the basic approach it adopted in last year's budget, including General Fund augmentations for the California State University and the University of California.

Background

For the purposes of this discussion, "maintenance" refers to programs to maintain the condition of facilities and infrastructure/utility systems. "Special repair" refers to maintenance projects that are required periodically and are above the level of expenditures needed for routine maintenance. Examples of special repairs include replacing roofs, painting exteriors, and replacing mechanical/electrical equipment.

In the Analysis of the 1996-97 Budget Bill, we discussed the repeated deferral of needed maintenance and repairs of higher education facilities. In response, the systems and the Legislature adopted a plan to (1) reduce the backlog of deferred work and (2) fully meet ongoing maintenance/repair needs over a three- to four-year period and thereby avoid additional backlogs. We discuss these plans below. (For additional detail on the dimensions of the deferred maintenance problems, please see our discussion in the higher education section of the 1996-97 Analysis.)

Community Colleges

The 1997-98 Governor's Budget proposes to continue the augmented level of $39 million ongoing maintenance/repair funding--with local matches of up to $39 million--and to provide additional one-time monies for the deferred backlog as part of a proposed block grant. In view of the above, we believe the Legislature has placed the CCC on a sound fiscal footing regarding maintenance/repair needs.

The Four-Year Universities

The Governor, however, vetoed the legislative augmentations, stating that the segments should address their maintenance needs within the funding levels he has committed to provide under his "compact" with them. In response to the Governor's veto, UC withdrew the $7.5 million it committed as a "match" for the maintenance augmentation. The CSU did increase maintenance funding by $9.6 million in 1996-97 with "compact" funds.

Recommendations

• Additional Funds Will Stop Deterioration of the State's Facilities More Quickly. The state has invested heavily in higher education facilities over the years. The value of this asset--many billions of dollars--demands more rapid action. Both segments estimate that maintenance funding falls short of established need by at least $50 million annually. Matching the proposed budget increases, in a series of cumulative annual augmentations as contemplated in last year's legislative actions, will eliminate the deficits in three to four years. Failure to match will double the time it takes to reach an adequate level of ongoing maintenance. Moreover, each year of delay will increase deferred maintenance backlogs, complicating, rather than aiding, the state's already expensive efforts to solve this related problem.
• It Sends the Right Signals to the Segments. As we pointed out in last year's Analysis, the Legislature, Governor, and the segments share responsibility for the existence of today's serious maintenance problems. By augmenting their maintenance budgets, the Legislature can be a partner in the segments' efforts, and underscore its intent that higher education adequately maintain the public's facilities.

To protect the state's tremendous investment in higher education facilities, we recommend that the Legislature take the following budget actions:

• Match the amounts that CSU and UC have committed from their 1996-97 and 1997-98 "compact" increases for maintenance and special repairs. (Augment General Fund amounts for CSU by $18.1 million and for UC by $7.5 million.)
• Restate (with appropriate updating) last year's supplemental report language outlining the multiyear steps to resolve the deferred maintenance problems.
• Include the following budget bill language in each segment's support item to ensure that the augmentations supplement, rather than supplant, base spending on maintenance/repairs:

Deferred Maintenance Backlog. Last year's supplemental report reflects a commitment by CSU to address its deferred maintenance backlog with a combination of (1) the augmented levels of annual maintenance funding specified in the language and (2) capital outlay projects that involve renovation of existing facilities. We believe this commitment is a responsible approach for which CSU should be commended.

Under last year's supplemental report language, UC is preparing a plan (due to the Legislature in February 1997) for addressing its deferred maintenance backlog. We will comment on the plan, as appropriate, at budget hearings.