Major Issues

Higher Education

Projected Enrollment Increases Are Not of "Tidal Wave" Proportions

Various reports characterize future enrollment increases in California's higher education system as "Tidal Wave II."

Using college-participation rates from 1996, we project that, by 2005, higher education enrollments will be 98,000, or 4.8 percent, higher than peak levels in 1991.

Even if the higher participation rates assumed by other studies occur, student enrollments will not grow at "tidal wave" proportions.

Enrollments will increase over the next decade. The Legislature, however, has many policy levers that it can use to manage this growth and ensure students receive the best possible service (see page F-15).

Higher Education Enrollment Increases Are Not Justified

All three segments request significant new funds for increases in enrollments.

University of California (UC). The UC requests $20.6 million from the General Fund to increase enrollments by 2,800, or 1.8 percent. We recommend reducing this proposal by $9.4 million because (1) UC has not justified why it needs to increase enrollments above the 1 percent contained in the Governor's compact and approved by the Legislature the past three years and (2) UC already can and should shift its class offerings to reflect changes in student needs (see page F-29).

California State University (CSU). The budget requests $40 million for "extra" growth for CSU. This growth, however, already has taken place. During 1996-97 and 1997-98, CSU has successfully accommodated the extra students, drawing from a $50 million-plus pool of (1) productivity savings promised under the "compact," and (2) unreported student fee revenues. Since resources already exist to teach the extra students, CSU does not need the $40 million augmentation for that purpose.

As an alternative, we suggest redirecting the augmentation to (1) provide new incentives for CSU faculty to increase their teaching commitments and (2) fund a plan adopted by the Legislature in 1996-97 to address CSU's deferred maintenance (see page F- 34).

California Community Colleges (CCC). The budget includes $90 million in enrollment growth. This is significantly above the state's projected level of adult population growth. Providing such high levels of growth, however, creates incentives for colleges to serve lower-priority classes (such as recreation classes). For this reason, we recommend the Legislature delete $18 million budgeted for this purpose, which would align growth funding with the increase in the underlying population served by CCC (see page F-46).

The UC Request for $9.9 Million for the Tenth Campus Lacks Sufficient Detail

The UC received $4.9 million in 1997-98 for activities related to the tenth UC campus in Merced County. The budget requests $9.9 million in 1998-99 to continue these activities. The university indicates that it will need over $80 million in operating funds before it opens the campus in 2005.

The UC has provided only broad descriptions of how it is spending funds for the tenth campus in the current and budget year. We withhold recommendation on the budget-year funds until UC provides the Legislature with details of how it plans to spend them (see page F-30).

Overview

Higher Education

The budget proposes an 8.3 percent increase in General Fund expenditures for higher education in 1998-99. This funds significant enrollment growth and fee reductions for all three segments.

The budget proposes total spending for higher education in California of $21 billion in 1998-99, which is $806 million, or 4 percent, more than estimated expenditures in the current year. This consists of funding from all sources for all activities of the University of California (UC), California State University (CSU), California Community Colleges, Hastings College of the Law, the California Student Aid Commission, and the California Postsecondary Education Commission, and various other costs. The $21 billion includes activities at UC that are not entirely related to instruction, including providing medical care at its hospitals ($2 billion) and managing three major U.S. Department of Energy laboratories ($2.6 billion).

As Figure 1 (see next page) shows, the budget proposes General Fund expenditures of $7.2 billion for higher education in 1998-99. This is $552 million, or 8.3 percent, higher than estimated for the current year. In addition, the budget assumes that local property taxes will contribute $1.4 billion for the community colleges in 1998-99, an increase of $57 million, or 4.1 percent.

Student fee and tuition revenue at all the higher education segments account for $1.8 billion of proposed expenditures, approximately the same as in the current year. While enrollments are projected to increase by 3.1 percent, recent state legislation reduced undergraduate fees and maintained graduate and professional school fees at the 1997-98 level. (Only nonresident fees at UC will increase.) The net effect will be to hold total student-fee revenue constant.

The budget proposes General Fund expenditures for UC of $2.4 billion, which is $175 million, or 8 percent, more than estimated General Fund expenditures in the current year. For CSU, the budget proposes a General Fund increase of $163 million, or 8.6 percent. (After eliminating $14 million in one-time spending in 1997-98, the actual increase in ongoing General Fund support for CSU is $177 million or 9.4 percent.) The combined General Fund, property tax revenue, and other fund amounts for the community colleges total $251 million, or 6.8 percent, above 1997-98 estimated expenditures.
Figure 1
Higher Education Budget Summary
1996-97 Through 1998-99

(Dollars in Millions)



Actual

1996-97

Estimated

1997-98

Proposed

1998-99

 Change From 1997-98
Amount Percent
University of California
General Fund $2,057.3 $2,180.8 $2,355.8 $175.0 8.0%
Student fee revenue 961.3 1,005.8 1,020.0 14.1 1.4
Federal funds 3,643.0 3,718.8 3,793.0 74.2 2.0
Other funds 4,405.7 4,678.9 4,770.3 91.4 2.0
Totals $11,067.2 $11,584.4 $11,939.1 $354.7 3.1%
California State University
General Fund $1,810.1 $1,897.2 $2,060.1 $162.9 8.6%
Student fee revenue 592.0 583.2 578.4 -4.8 -0.8
Federal & other funds 1,321.6 1,367.1 1,370.1 3.0 0.2
Totals $3,723.7 $3,847.5 $4,008.6 $161.1 4.2%
California Community Colleges
General Fund $1,734.0 $1,947.5 $2,116.8 $169.3 8.7%
Local property tax revenue 1,337.3 1,391.3 1,448.2 56.9 4.1
Student fee revenue 163.5 165.5 155.3 -10.1 -6.1
Other funds 160.6 178.7 213.8 35.2 19.7
Totals $3,395.4 $3,683.0 $3,934.2 $251.2 6.8%
Hastings College of the Law
General Fund $12.3 $12.3 $13.2 $1.0 7.8%
Student fee revenue 12.0 12.4 13.1 0.7 5.3
Other funds 6.0 6.9 6.6 -0.4 -5.1
Totals $30.3 $31.6 $32.9 $1.3 4.0%
Student Aid Commission
General Fund $263.9 $294.7 $319.9 $25.2 8.6%
Federal & other funds 525.5 409.3 405.4 -3.9 -0.9
Totals $789.4 $703.9 $725.3 $21.3 3.0%
Other Programsa
General Fund $302.6 $307.1 $325.4 $18.3 5.9%
Federal & other funds 9.1 8.7 6.5 -2.2 -25.5
Totals $311.7 $315.8 $331.9 $16.1

--
Totals, Higher

Education

 $19,317.7 $20,166.3 $20,972.0 $805.7 4.0%
General Fund $6,180.1 $6,639.6 $7,191.2 $551.6 8.3%
Property tax revenue 1,337.3 1,391.3 1,448.2 56.9 4.1
Student fee revenue 1,728.7 1,767.0 1,766.9 -0.1 --
Federal & other funds 10,071.6 10,368.3 10,565.7 197.3 1.9
a Includes California Postsecondary Education Commission, retirement costs for community college faculty, and debt service on higher education general obligation bonds.


State Higher Education Resources Near Historic Highs

Adjusted for inflation, funding from the major state sources to each of the three segments per full-time-equivalent student are near their highest level in the past 26 years. Figure 2 (see next page) shows for each segment per-student spending from the General Fund, systemwide student-fee revenue, lottery funds, and local property tax revenue (for community colleges) since 1972-73. We used the inflation index for state and local services to adjust for the effects of inflation. As the charts show, each segment is near or exceeds the highest historic level of funding per student from these sources.

Spending by Major Program

Figure 3 (see page 9)shows the percentage of total resources that UC and CSU spend on instruction, research, public services, and other programs. We have shown auxiliary enterprises--such as campus stores and dormitories--"below the line" because these enterprises are self-supporting and are only tangentially related to the mission of the universities. We also treat similarly UC's teaching hospitals and the three major energy laboratories it manages in the calculations for the same reasons. The laboratories are funded through a contract with the U.S. Department of Energy. The teaching hospitals obtain most of their funding from payments made by hospital patients and their insurers for medical treatments. We do not include community college spending in the figure because funding for local colleges is based on revenues provided to each school, not support for specific costs.

As the figure shows, UC expects to spend 36 percent of its funding directly on instructional programs. The CSU expects to spend 40 percent of its funding directly on instructional programs. Although difficult to determine precisely, substantial portions of the other activities listed in Figure 3 help support directly or indirectly the instructional mission. That UC expects to spend more on research (25 percent) than CSU (0.5 percent) reflects the fact that the state's Master Plan for Higher Education designates UC as the research university for the state.
Figure 3
UC and CSU

Proposed Spending in 1998-99

By Major Program

(Dollars in Millions)
Program University of California Percent a California State University Percent a
Instruction $2,410.1 36.0% $1,265.0 40.0%
Research 1,670.0 25.0 15.0 0.5
Public services 242.7 3.6 5.2 0.2
Academic support 736.8 11.0 322.1 10.2
Student services 253.3 3.7 243.5 7.7
Institutional support 380.6 5.6 374.6 11.9
Operation and

maintenance of plant

 367.1 5.4 276.8 8.8
Student financial aid 442.9 6.5 316.6 10.0
Other 281.5 4.1 334.2 10.6
Subtotals $6,785.0 100.0% $3,153.0 100.0%
Auxiliary enterprises 511.9

--		 855.6

--
Federal energy

laboratories

 2,640.0

--

--

--
Teaching hospitals 2,002.2

--

--

--
Totals $11,939.1

--		 $4,008.6

--
a Percent of subtotal, excluding self-supporting auxiliary enterprises, major energy laboratories, and hospitals.


Major Budget Changes

Figure 4 describes the major General Fund budget changes proposed by the Governor for UC, CSU, and the community colleges. The largest changes in the UC and CSU budgets reflect increased funding under the final year of the four-year "compact" between the Governor and the universities. The compact called for General Fund increases averaging 4 percent each year for the three-year period starting in 1996-97. The 4 percent increases proposed under the compact are $84 million for UC and $73 million for CSU. The budget also proposed additional funds ($62 million for UC and $51 million for CSU) to offset a statutory 5 percent student-fee reduction instead of a potential 10 percent fee increase for 1998-99.

Enrollment

As Figure 5 (see page 12) shows, the budget proposes higher education full-time-equivalent student enrollments of 1.4 million, or 3.1 percent over the budgeted enrollments for the current year. The budget provides funds for a 1.8 percent increase for UC, a 4 percent increase for CSU, a 3 percent increase for CCC, and a 0.8 percent enrollment decline for Hastings. The budget includes $21 million for UC, $52 million for CSU, and $90 million for the community colleges, for instruction and other operational costs to accommodate the additional students.

Student Fees

Figure 6 (see page 13) shows student fee levels in public higher education. Chapter 853, Statutes of 1997 (AB 1318, Ducheny), reduced the annual resident undergraduate fees by 5 percent at CSU (-$78) and UC (-$190) for 1998-99 and keeps the fees at that lower level for 1999-00. The act also maintains graduate and professional fees for 1998-99 and 1999-00 at the 1997-98 level. Chapter 853 reduced community college fees from $13 per credit unit to $12 per credit unit for 1998-99 and 1999-00. For a full-time student paying fees, annual fees would fall from $390 to $360. (The community colleges waive the fee for low-income students. Currently, 39 percent of students receive waivers.)
Figure 4
Higher Education

Proposed Major General Fund Changes for 1998-99

University of California Requested: $2.4 billion
Increase: $175 million (+8%)
+$109 million for employee compensation and price increases
+$62 million to avoid 10 percent student fee increase ($39.5 million) and reduce fees by 5 percent ($22.5 million)
+$14.6 million for 2,000 more full-time equivalent (FTE) enrollments
+$6 million for 800 more FTE enrollments in Computer Sciences and Engineering
-$12.2 to eliminate state funding for Subject Matter Projects and International Studies Project
California State University Requested: $2.1 billion
Increase: $163 million (+8.6%)
+$87 million for employee compensation and price increases
+$52 million for 10,320 more FTE enrollments
+$51 million to avoid 10 percent student fee increase ($31 million) and reduce fees by 5 percent ($19 million)
-$14 million to eliminate one-time spending in 1997-98
California Community Colleges, Local Assistance Requested: $2.1 billion
Increase: $168 million (+8.6%)
+$90 million for 28,211 more FTE enrollments
+$68 million for a 2.22 percent COLA
+$50 million for Partnership for Excellence, linking funding and outcomes
+$21 million offset for reduced student fee revenues
-$78 million offset for property tax revenues and one-time 1997-98 spending
Figure 5
Higher Education

Full-Time Equivalent Students

1996-97 Through 1998-99
Actual

1996-97

 Budgeted

1997-98

 Proposed

1998-99

 Change From 1997-98
University of California
Undergraduate 117,071 114,865 117,305 2.1%
Postbaccalaureate 394 400 400

--
Graduate 25,318 25,735 26,095 1.4
Health sciences 12,604 12,000 12,000 --
UC Totals 155,387 153,000 155,800 1.8%
California State University
Undergraduate 225,624 221,818 230,679 4.0%
Postbaccalaureate 16,001 15,731 16,365 4.0
Graduate 20,803 20,451 21,276 4.0
CSU Totals 262,428 258,000 268,320 4.0%
California Community Colleges 912,967 940,356 968,567 3.0%
Hastings College

of the Law

 1,284 1,179 1,169 -0.8%
Grand Totals 1,343,666 1,352,535 1,393,856 3.1%


California's higher education fees compare favorably with public institutions in other states. The 1998-99 resident fees for UC undergraduate students will be $909, or 18 percent, lower than current fees at the four public universities in other states that UC uses to compare faculty salaries. The 1998-99 resident fees for CSU undergraduates will be $1,625, or 47 percent, lower than the average of fees at the 15 public universities in other states with which CSU compares itself. Community colleges do not have a similar comparison group. However, California community college fees for 1998-99--$360 per year for a full-time student--are the nation's lowest, and about one-fourth of the national average for public two-year institutions.
Figure 6
Higher Education

Annual Student Fees

1996-97 Through 1998-99
1996-97 1997-98 Proposed 1998-99 Change From 1997-98
University of California
Undergraduate $3,799 $3,799 $3,609

- 5.0%

Graduate 3,799 3,799 3,799 --
Professional Students:
Law 10,175 10,175 10,175 --
Business 9,799 9,799 9,799 --
Medicine 8,175 9,175 9,175 --
Dentistry 7,799 8,799 8,799 --
Pharmacy 5,799 6,799 6,799 --
Veterinary medicine 7,799 7,799 7,799 --
Additional fees, all students:
Undergraduate 367 413 413 --
Graduate 868 923 923 --
Additional fee, nonresidents 8,394 8,984 9,384 4.5%
California State University
Undergraduates/graduates $1,584 $1,584 $1,506 - 4.9%
Additional campus fees 351 362 362 --
Additional fee, nonresidents 7,380 7,380 7,380 --
California Community Colleges a $390 $390 $360 - 7.7%
Hastings College of the Law
Education and registration fees $10,175 $10,175 $10,175 --
Other fees b 992 992 992 --
Additional fee nonresidents 8,392 8,392 8,392 --
a Based on two 15-credit semesters at $13 per credit unit for 1996-97 and 1997-98, and $12 per credit unit for 1998-99. Fees waived for 39 percent of students meeting financial aid eligibility requirements.
b Includes an insurance fee of $738 which can be waived with proof of insurance.






 

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