Introduction

Higher Education

The budget proposes total spending for higher education in California of $22 billion in 1999-00, which is $664 million, or 3.1 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, the California Postsecondary Education Commission, and various other costs. The $22 billion includes activities at UC that are only marginally related to instruction, including providing medical care at its hospitals ($1.7 billion) and managing three major U.S. Department of Energy laboratories ($2.9 billion).

As Figure 1 shows (see next page), the budget proposes General Fund expenditures of $7.7 billion for higher education in 1999-00. This is $265 million, or 3.6 percent, higher than estimated for the current year. In addition, the budget assumes that local property taxes will contribute $1.5 billion for the community colleges in 1999-00, an increase of $75 million, or 5.2 percent.

Figure 1
Higher Education Budget Summary
1997-98 Through 1999-00 (Dollars in Millions)
	Actual 1997-98	Estimated 1998-99	Proposed 1999-00	Change From 1998-99
				Amount	Percent
University of California
General Fund	$2,180.4	$2,519.3	$2,565.3	$46.0	1.8%
Student fee revenue	1,001.6	1,021.1	1,068.7	47.5	4.7
Federal funds	3,904.7	4,055.6	4,185.6	130.1	3.2
Other funds	4,531.2	4,615.1	4,746.4	131.3	2.8
Totals	$11,617.9	$12,211.1	$12,566.0	$354.9	2.9%
California State University
General Fund	$1,872.4	$2,127.6	$2,138.4	$10.8	0.5%
Student fee revenue	606.0	598.7	618.3	19.6	3.3
Federal and other funds	1,457.6	1,547.5	1,547.1	-0.4	--
Totals	$3,936.0	$4,273.8	$4,303.8	$30.0	0.7%
California Community Colleges
General Fund	$1,962.0	$2,174.8	$2,294.2	$119.4	5.5%
Local property tax revenue	1,421.1	1,448.7	1,524.0	75.2	5.2
Student fee revenue	166.5	158.3	162.3	4.0	2.5
Other funds	181.1	213.3	206.0	-7.3	-3.4
Totals	$3,730.6	$3,995.2	$4,186.5	$191.2	4.8%
Hastings College of the Law
General Fund	$12.3	$13.2	$14.4	$1.2	9.0%
Student fee revenue	12.0	12.8	12.6	-0.2	-1.7
Other funds	7.9	7.1	6.0	-1.1	-14.9
Totals	$32.2	$33.1	$33.0	-$0.1	-0.2%
Continued
Student Aid Commission
General Fund	$295.2	$352.1	$386.4	$34.3	9.7%
Federal and other funds	513.8	301.9	302.6	0.6	0.2
Totals	$809.0	$654.0	$688.9	$35.0	5.3%
Other Programsa
General Fund	$302.4	$273.9	$327.2	$53.3	19.5%
Federal and other funds	5.8	6.5	6.5	10.0	0.2
Totals	$308.2	$280.4	$333.7	$53.3	19.0%
Grand totals	$20,433.8	$21,447.6	$22,111.9	$664.3	3.1%
General Fund	$6,624.5	$7,461.0	$7,725.9	$265.0	3.6%
Property tax revenue	1,421.1	1,448.7	1,524.0	75.2	5.2
Student fee revenue	1,786.1	1,790.9	1,861.8	70.9	4.0
Federal and other funds	10,602.1	10,746.9	11,000.2	253.3	2.4
a Includes California Postsecondary Education Commission, retirement costs for community college faculty, and debt service on higher education general obligation bonds. Excludes Council for Private Vocational and Postsecondary Education, the functions of which have been transferred to the Department of Consumer Affairs.

Student fee and tuition revenue at all the higher education segments account for $1.9 billion of proposed expenditures, which is $71 million, or 4 percent, more than in the current year. This increase in student fee revenues results from higher education enrollment growth of 2.7 percent, as well as a 10 percent fee increase for nonresident students at CSU and UC. There are no fee increases proposed for resident students.

The budget proposes General Fund expenditures for UC of $2.6 billion, which is $46 million, or 1.8 percent, more than estimated General Fund expenditures in the current year. (After eliminating $73 million in one-time expenditures in 1998-99, the actual increase in ongoing General Fund support for UC is $119 million, or 4.9 percent.) For CSU, the budget proposes General Fund expenditures of $2.1 billion, an increase of $11 million, or 0.5 percent over the current year. (After eliminating $102 million in one-time spending in 1998-99, the actual increase in General Fund support for CSU is $113 million, or 5.6 percent.) The combined General Fund, property tax revenue, and other fund amounts for the community colleges totals $4.2 billion, which is $191 million, or 4.8 percent, above 1998-99 estimated expenditures.

Major Budget Changes

Base Budget Increase and Enrollment Growth. Figure 2 (see next page) 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 are increases of 4 percent in each segment's General Fund base ($79 million for CSU and $94 million for UC). The Governor directs CSU and UC to accommodate a 1 percent increase in full-time-equivalent (FTE) enrollment from within these base increases. At the marginal cost of instruction estimated by the Department of Finance (DOF), this enrollment growth would cost $14.9 million for CSU and $11.6 million for UC. The balance of the base increases, $63.8 million for CSU and $82.7 million for UC, is not allocated to specific programs within the budgets. The budget contains a statutory cost-of-living-adjustment (COLA) of $62.9 million, or 1.83 percent, for the community colleges.

Figure 2
Higher Education Proposed Major General Fund Changes To Base for 1999-00
	University of California	Requested:	$2.6 billion
		Increasea:	$119 million	(+4.9%)
	+$94.2 million for a 4 percent base increase (includes 1,470 full-time-equivalent [FTE] enrollment growth)
	+$24.6 million for an additional 3,130 FTE enrollment growth
	+$16.6 million in lieu of fee increase
	+$12 million for Reading Professional Development Institutes ($.5 million in 1998-99)
	+$.5 million for Governor's Principal Leadership Academy ($0.1 million in 1998-99)
	+$.5 million for Governor's Teacher Scholars Program ($0.1 million in 1998-99)
	+$2.5 million for expanded substance abuse research
	- $72.5 million to eliminate one-time spending in 1998-99
	- $15 million to reflect a 10 percent increase in nonresident fees
	- $14.6 million to reflect additional contract/grant overhead and income
	- $10 million to adjust for funds typically unexpended at end of year
Continued
	California State University	Requested:	$2.1 billion
		Increasea:	$113 million	(+5.6%)
	+$78.6 million for a 4 percent base increase (includes 2,710 FTE enrollment growth)
	+$31.1 million for an additional 5,671 FTE enrollment growth
	+$13.6 million in lieu of fee increase
	+$2 million to extend teacher recruitment program
	- $102 million to eliminate one-time spending in 1998-99
	- $10 million to adjust for funds typically unexpended at end of year
	- $6 million to reflect a 10 percent increase in nonresident fees
	California Community Colleges, Local Assistance	Requested:	$2.3 billion
		Increase:	$109 million	(+5.5%)
	+$83.8 million for enrollment growth (2.5 percent)
	+$62.9 million for statutory cost-of-living-adjustment (1.83 percent)
	+$20.5 million for lease-payment debt service
	+$10.6 million for High School Report Card program
	+$10 million for Partnership for Excellence
	+$10 million for Teacher and Reading Development
	+$2.5 million for transfer and articulation initiatives
	+$1.8 million for Middle College High Schools
	- $75.2 million offset for property tax revenues and fees
	a From 1998-99 base adjusted for one-time expenditures.

General Fund Increase in Lieu of Fee Increases. Statute precludes an increase in CSU and UC resident student fees during 1999-00. The budget proposes additional General Fund increases ($16.6 million for UC and $13.6 million for CSU) equal to revenues that would have resulted from a 4.15 percent increase in student fees at UC and CSU. The budget assumes that if fees were to rise, they would rise with California per capita income.

K-12 Improvement Initiatives. For all three segments, the budget proposal funds initiatives aimed at improving California's K-12 educational system. The programs, which include teacher preparation and K-12 staff development, have a total cost of $37.4 million. These proposals are discussed in writeups which follow for each segment as well as in the K-12 portion of the education chapter.

Enrollment

As Figure 3 shows (see next page), the budget proposes higher education FTE student enrollments of 1.4 million, or 2.7 percent, over the budgeted enrollments for the current year. The budget provides funds for a 3.1 percent enrollment increase for UC and CSU, and a 2.5 percent increase for the community colleges.

Figure 3
Higher Education Full-Time-Equivalent (FTE) Students
1997-98 Through 1999-00
	Actual 1997-98	Budgeted 1998-99	Proposed 1999-00	Change From 1998-99
University of California
Undergraduate	119,417	120,415	124,019	3.0%
Postbaccalaureate	435	400	612	53.0
Graduate	25,682	26,185	26,969	2.9
UC totals	145,534	147,000	151,600	3.1%
California State Universityb
Undergraduate	228,909	230,649	238,354	3.3%
Postbaccalaureate	17,610	19,654	18,360	-6.6
Graduate	21,465	20,719	22,439	8.3
CSU totals	267,984	271,022	279,403	3.1%
California Community Colleges	921,933	949,951	973,331	2.5%
Hastings College of the Law	1,156	1,146	1,119	-2.4%
Grand totals	1,348,884	1,380,825	1,417,519	2.7%
a The UC FTE student counts in this figure do not include 12,066 FTE students in the health sciences programs in 1998-99 and 1999-00.
b While the FTE totals for CSU accurately reflect proposed enrollment growth, the detail shown by enrollment type is subject to change.

The budget includes $84 million for the community colleges for instruction and other operational costs to accommodate the additional students. Enrollment funding for both UC and CSU is broken into two components. First, the budget proposes that both UC and CSU absorb the costs associated with 1 percent enrollment growth from within the proposed 4 percent General Fund base increase. The budget then provides extra funding ($31 million for UC and $25 million for CSU) for an additional 2.1 percent FTE enrollment growth.

Student Fees

Figure 4 shows student fee levels in public higher education. Chapter 853, Statutes of 1997 (AB 1318, Ducheny), reduced 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 at the 1997-98 level through 1999-00. Chapter 853 reduced community college fees from $13 per credit unit to $12 per credit unit through 1999-00. For a full-time community college student, annual fees fell from $390 to $360.

Figure 5 shows that California's higher education fees are among the lowest in the country. The 1999-00 resident fees for UC undergraduate students will be $4,037, or 21 percent, lower than average current fees at the four public universities in other states that UC uses to compare faculty salaries. The 1999-00 resident fees for CSU undergraduates will be $1,873, or 52 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 1999-00--$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.

Detail Missing on Program Spending

The Governor's budget provides little detail on how CSU and UC will allocate funds among various programs. The budget document instead lumps most of the changes in one item called "provisions for allocation." The Governor's budget states that CSU and UC will develop specific budget plans in the spring. Until UC, CSU, and DOF report this information, we cannot evaluate how the proposed budget will affect UC's and CSU's programs.

Departmental Issues

Higher Education

The University of California (UC) includes eight general campuses and one health science campus. The budget proposes General Fund spending of $2.6 billion. This is an increase of $46 million, or 1.8 percent, over the current year. After adjusting for one-time expenditures in the current year ($73.2 million), however, the increase is $119.2 million, or 4.9 percent, above 1998-99 spending. The bulk of this increase consists of $94.2 million for a general 4 percent increase in the university's base budget. Figure 1 (see next page) summarizes the various changes in UC's budget.

Enrollment Growth of 3.1 Percent. The budget assumes that UC will serve 4,600, or 3.1 percent, more full-time equivalent (FTE) students in 1999-00 than was budgeted for 1998-99. The budget assumes that UC will be able to serve about one-third of these additional students (1,470 FTE students) within the 4 percent general budget increase of $94.2 million. It provides an additional $24.6 million for the balance of projected enrollment growth (3,130 FTE students).

No Increase in Resident Student Fees. The budget includes $16.6 million to offset a 4.15 percent fee increase for resident students that UC says it would have requested in the absence of statutory restrictions. Chapter 853, Statutes of 1997 (AB 1318, Ducheny), directed CSU and asked UC to lower resident undergraduate fees by 5 percent in 1998-99, and to freeze them at that level for 1999-00. That act also directed CSU and asked UC to freeze resident graduate fees at 1997-98 levels through 1999-00. The budget also includes $15 million in increased revenue from raising fees for nonresident students by 10 percent.

Figure 1
Governor's General Fund Proposal for University of California
1999-00 (In Thousands)
1998-99 Initial Budget	$2,518,890
Mid-Year Adjustments
Governor's K-12 initiatives (start-up)--proposed legislation	$700
PERS rate adjustment	-241
1998-99 adjusted budget (revised)	$2,519,349
Delete one-time funding	-73,200
1998-99 adjusted for one-time funding	$2,446,149
New Spending
4 percent base increase (includes 1 percent enrollment growth)	$94,223
Additional enrollment growth (2.1%)	24,639
General Fund in lieu of fee increase	16,603
Annuitant benefit increase for dental	8,523
Substance abuse research	2,500
Governor's principal leadership academy	400
Governor's teacher scholars	400
Reading professional development institutes	5,500
Local assistance for reading institutes (Proposition 98)	6,000
Subtotal	$158,788
Offsets (new income and other)
Additional contract/grant overhead and income	-$14,600
Unexpended funds adjustment	-10,000
10 percent increase in nonresident fees	-15,000
Subtotal	-$39,600
1999-00 (Proposed)	$2,565,337
Change from 1998-99 (revised)
Amount	$45,988
Percent	1.8%
After adjusting for one-time expenditures in current year
Amount	$119,488
Percent	4.9%

The UC Budget Detail to Be Available in Spring

We withhold recommendation on the proposed changes to the university's budget, pending receipt of complete details on how it proposes to allocate its budget for 1999-00.

The Governor's budget provides little detail on how UC will allocate funds among its various programs. The budget document instead lumps most of the changes in one item called "provisions for allocations," which increases by over $135 million in the budget year. The Governor's budget says "UC will develop a specific budget plan in the spring." Until UC and the Department of Finance (DOF) provide this additional detail, we cannot evaluate how the proposed budget will affect UC's programs. Consequently, we withhold recommendation on the unallocated proposed changes to the university's budget and recommend that it and the DOF provide the Legislature with a comprehensive budget for the university as soon as possible.

The UC Should Submit Plan for Evaluating Outreach Programs

We recommend deletion of $1.5 million for University of California (UC) to study outreach programs, because UC has already received funding for this activity. We further recommend that UC provide the Legislature with a detailed plan for evaluating the relative cost-effectiveness of the various student-outreach programs before hearings on its 1999-00 budget.

Background

The 1997-98 Budget Act appropriated $1 million from the General Fund to increase student-outreach programs in the university. This increased total university spending on student outreach to over $60 million per year. The 1998-99 Budget Act appropriated another $38.5 million to expand UC's outreach programs. Out of this $38.5 million, the Legislature provided $1.5 million to UC specifically for a "long-term evaluation of the effectiveness of outreach programs, including college graduation rates for pupils who participated in the K-12 programs, regardless of the college attended."

Legislature Has Asked UC to Develop Evaluation Plans. Along with its augmentation of UC outreach programs in 1997-98, the Legislature adopted supplemental report language that directed UC to submit to the Legislature, by March 15, 1998, a proposed methodology and implementation plan for evaluating outreach programs. That language required UC, in consultation with the Legislative Analyst's Office and the DOF, to develop a statistically valid method of comparing the cost and effectiveness of each outreach program in improving student performance.

In response to the report requirement, the university contracted with a private firm to develop a plan for evaluating outreach programs. In spring 1998, UC provided our office with an "Outline for Improving the Evaluation and Assessment of University Outreach Programs." That document fell far short of describing a statistically valid methodology for evaluating outreach programs as called for by the Legislature. Instead, it discussed in only broad generalities what an evaluation should address. The university has acknowledged the inadequacy of the document, but has not provided any new plan.

UC Should Deliver a Detailed Evaluation Plan. By providing UC with $1.5 million in the 1998-99 Budget Act to evaluate outreach programs, the Legislature underscored its desire to evaluate how well the various outreach programs perform. In light of UC's delay in delivering a satisfactory evaluation plan, it is important that it do so quickly. We recommend, therefore, that the Legislature ask UC to present a detailed evaluation plan in time for budget hearings. This will give the Legislature the opportunity to comment on the proposed methodology UC envisions for its studies. In keeping with the Legislature's directive in supplemental report language, UC should consult with our office and the DOF as it develops its evaluation plan.

Additional Funding for Evaluation Is Not Justified. The university has not provided any indication that it would need more than the $1.5 million provided in the 1998-99 Budget Act to evaluate outreach programs. Consequently, we recommend that the $1.5 million be deleted from Item 6440-001-0001.

The UC Should Report at Budget Hearings On Progress Toward a Tenth Campus

We recommend that the University of California report prior to budget hearings on expenditures, progress, and plans for the proposed tenth campus in Merced.

The Governor's budget includes $9.9 million from the General Fund to UC for (1) planning and start-up costs associated with academic programs to be offered in the San Joaquin Valley, and (2) planning, start-up costs, and ongoing support for planning and development of a tenth campus in Merced County. The 1998-99 Budget Act included $9.9 million and the 1997-98 Budget Act included $4.9 million for this purpose. The university indicates that it will need $9.9 million per year to prepare for opening the campus in 2005, with a student enrollment of 2,000. (It plans to expand the campus to 5,000 students.) With its 1998-99 appropriation, the Legislature adopted supplemental report language requiring UC to submit an annual report to the budget committees by February 15, describing past-year expenditures and planned expenditures for the budget year. At the time our Analysis was being published, UC had not yet submitted its report.

So that the Legislature can track expenditures and progress on the proposed tenth campus in Merced, we recommend that the university submit its report to the budget committees prior to hearings on the UC budget. This will give the budget subcommittee an opportunity to review UC's past and planned expenditures for the proposed campus.

K-12 Initiatives at UC Are Misplaced

The Governor's budget requests $58 million in new General Fund resources and $32 million of federal Goals 2000 funds for new programs to enhance K-12 teacher quality. Of these proposed funds, $13 million is for three programs at UC. Earlier in this chapter, we analyze the K-12 initiatives, including the three proposals involving UC. Below, we summarize our analysis of the three UC proposals.

Shift Proposed Funding for Reading Professional Development Institutes

We recommend that the Legislature delete $12 million ($6 million General Fund for support and $6 million Proposition 98 local assistance) requested for Reading Professional Development Institutes because the proposed training can be provided through existing programs. We recommend providing these funds instead to school districts for staff development priorities that they identify.

The budget request includes $6 million for UC to plan, develop, and administer "Reading Professional Development Institutes" to help K-12 teachers and administrators raise reading levels in schools. The budget also requests $6 million in Proposition 98 funds to pay stipends to teachers attending the UC institutes. The budget includes these Proposition 98 funds as local assistance in UC's budget. The university would pass these funds on to districts participating in these institutes so that the districts could pay a stipend to participants.

In our analysis of the Governor's K-12 initiatives, we recommend that the Legislature delete these funds from the UC budget, for two main reasons:

• California Subject Matter Projects Provide Training Already. The budget continues past legislative policy and appropriates $15 million to UC for six subject matter projects (UC and CSU fund another three projects using their own special funds), including one in reading and literature. The proposed Reading Professional Development Institutes are similar in form and content to the reading and literature subject matter project. We do not think it is necessary to create a new training program when an effective and proven program already exists.
• The Proposal Should Give School Districts More Flexibility. Under the Governor's proposal, the $12 million would be available only for UC's reading institutes. If the $12 million were instead provided to school districts for staff development, the districts could choose among those programs that they determine best meet their particular staff-training needs. Districts could choose to send staff to UC for training, if they determined that UC programs best met their needs.

For these reasons, we recommend deleting the $12 million for the proposed Reading Professional Development Institutes. Instead, we recommend providing the $12 million to districts as part of a staff development block grant. (For more discussion about this block grant, please see our write-up on teacher quality earlier in this chapter.)

Shift $1 Million Proposed for Teacher-Scholars and Principal-Leadership Initiatives to Cal Grant T Program

We recommend that the Legislature delete $1 million requested for teacher-scholars and principal leadership institutes at University of California, because providing the funds for Cal Grant T scholarships would give prospective teachers greater flexibility in choosing programs that meet their educational and career objectives.

The Governor's budget requests $500,000 in UC's budget for plans for a program to prepare 400 students for teaching credentials and education masters degrees. The budget requests another $500,000 for plans for a program to assist 400 credentialed teachers in becoming school principals. If UC considers the proposed programs a high priority for improvement of its current teacher and administrator training programs, it may be appropriate for the system to develop these types of programs. However, we believe the state can better use its resources by using the proposed $1 million instead for Cal Grant T scholarships. Additional scholarships would allow prospective teachers to choose among public or private accredited teacher-training programs. We therefore recommend deleting $1 million for the planning of these programs. We recommend using the $1 million instead to expand the Cal Grant T program. This would provide an additional 220 prospective teachers with teacher preparation scholarships.

Accordingly, we recommend shifting the $1 million requested to the Cal Grant program. (Reduce Item 6440-001-0001 by $1 million and increase Item 7980-101-0001 by $1 million.)

California State University (6610)

The California State University (CSU) consists of 22 campuses. The budget proposes General Fund spending of $2.1 billion, an increase of $10.8 million, or half a percent, over the current year. Adjusting for one-time expenditures in 1998-99, the proposed budget increases CSU's General Fund spending by $113 million, or 5.6 percent, in 1999-00. Figure 1 summarizes the sources and uses of this General Fund increase.

General Fund Base Increase of 4 Percent. The budget includes an increase of 4 percent, or $78.6 million, in CSU's General Fund base. Most of this increase is unallocated, however, CSU is expected to accommodate 1 percent enrollment growth from within these funds.

Enrollment Growth of 3.1 Percent. The budget proposes that CSU serve 8,381, or 3.1 percent, more full-time-equivalent (FTE) students in 1999-00 than the number for which it was budgeted in 1998-99. The budget states that CSU will serve 2,710 of these FTE students from within the 4 percent General Fund base increase. The budget provides an additional $31.1 million to serve the balance of the enrollment growth (5,671 FTE students).

No Increase in Resident Student Fees. The budget includes $13.6 million in lieu of a 4.15 percent student fee increase which CSU says it would have requested in the absence of statutory restrictions. Chapter 853, Statutes of 1997 (AB 1318, Ducheny), directed CSU and asked University of California (UC) to lower resident undergraduate student fees by 5 percent, and to freeze them at that level through 1999-00. The act also directed CSU and asked UC to freeze resident graduate student fees at 1997-98 levels through 1999-00. The budget includes $6 million in increased revenues, resulting from a 10 percent increase in fees for nonresident students.

Figure 1
Governor's General Fund Budget Proposal for California State University
1999-00 (Dollars in Thousands)
1998-99 Initial Budget	$2,164,046
Mid-Year Adjustments
Public Employees' Retirement System rate adjustment	-$60,861
Carryover/reappropriations	24,593
Other adjustments	-182
1998-99 Budget (Revised)	$2,127,596
Baseline Funding Adjustments
Delete one-time funding in 1998-99 budget	-$77,480
Delete one-time carry-over funds in 1998-99 budget	-24,593
1998-99 Adjusted for One-Time Spending	$2,025,523
New Spending
4 percent base increase (includes 1 percent enrollment growth)	$78,630
Additional enrollment growth (2.1 percent)	31,117
General Fund in lieu of fee increase	13,593
Teacher recruitment	2,000
Applied agricultural research	1,000
Channel Islands Campus	1,165
Other	1,352
Subtotal	$128,857
Offsets (New Income and Other)
Unexpended funds adjustment	-$10,000
10 percent increase in nonresident fees	-6,000
Subtotal	-$16,000
1999-00 (proposed)	$2,138,380
Change from 1998-99 (revised)
Amount	$10,784
Percent	0.5%
After adjusting for one-time expenditures in current year
Amount	$112,857
Percent	5.6%

The CSU Budget Detail To Be Available in Spring

We withhold recommendation on the proposed changes to California State University's total budget, pending receipt of complete details on how it proposes to allocate its budget for 1999-00.

The Governor's budget provides little detail on how CSU will allocate funds among its various programs. The budget document instead lumps most of the changes in one item called "provisions for allocation," which increases by over $90 million in the budget year. The Governor's budget says that "CSU will develop a specific budget plan in the spring." Until CSU and the Department of Finance (DOF) provide this additional detail, we cannot evaluate how the proposed budget will affect CSU's programs. Consequently, we withhold recommendation on the proposed changes to CSU's budget and recommend that it and DOF provide the Legislature with a comprehensive budget for CSU as soon as possible.

One-Time Carryover Funds: Encourage Spending on Pressing Campus Needs

We recommend that the Legislature amend budget bill language to exempt planned expenditures for deferred maintenance and instructional equipment replacement from a general $15 million cap on funds California State University carries over from 1998-99 Budget Act appropriations.

Past Guidelines for One-Time Carryover Funds. Past budget acts have reappropriated unexpended General Fund monies provided to CSU in preceding budget acts. These reappropriations allowed CSU to "carry-over" these funds for two years beyond the budget year. In adopting this provision, the Legislature sought to remove an incentive for CSU to rapidly and, potentially, wastefully "spend down" money at the end of the budget year. In some years, the budget act has directed CSU to use the one-time carryover funds for specific purposes but, often the act has given CSU wide latitude in spending the monies. The acts have required CSU to propose an expenditure plan to DOF and the Joint Legislative Budget Committee, by September 30, for the balance of unexpended funds from the prior year.

The budget acts for the last two years limited CSU to $15 million in one-time carryover funds. They called for unexpended funds in excess of this amount to revert back to the General Fund. They also specified that the $15 million cap applied only to funds generated from CSU's "systemwide" allocations. This meant that the cap did not apply to unexpended funds that CSU had allocated to specific campuses or to the Chancellor's Office.

One-Time Carryover Fund Amounts and Uses in Recent Years. For multiple reasons, including the size of CSU's overall appropriation and CSU's spending choices, the amount of funds that CSU has carried forward has varied considerably from year to year (see Figure 2). In recent years, the amount carried forward has ranged from $10.8 million to $39.2 million. Typically, the larger share of these funds is carried forward in the systemwide allocation.

Figure 2
One-Time Carryover Funds
1995-96 Through 1997-98 (In Millions)
	Carryover From Budget Act
	1995-96	1996-97	1997-98
Systemwide	$22.6	$8.9	$14.2
Campuses and Chancellor's Office	16.6	1.9	5.6
Totals	$39.2	$10.8	$19.8

The CSU has used one-time carryover funds for a variety of purposes. Systemwide funds have been used for technology initiatives, special repairs, new campus start-up costs, unexpected needs, and other purposes. Carryover funds allocated to campuses and the Chancellor's Office have been used for campus-initiated projects, technology upgrades, and acquisition of library books and materials.

The Proposed Language for the 1999-00 Budget Bill Follows Recent Trends. Consistent with recent budgets, the Governor proposes language for the 1999-00 Budget Bill that would allow CSU to carry forward up to $15 million in unexpended systemwide funds from the 1998-99 Budget Act. The proposed language does not direct CSU to spend the one-time carryover funds for specific purposes. As in past years, the proposed language imposes reporting standards and time frames similar to those described above.

Changes to Budget Bill Language Needed. In order to impose a meaningful cap on one-time carryover funds and to ensure that leftover resources are directed toward pressing campus needs, we recommend the following changes in the budget bill language.

• Eliminate the Distinction Between Systemwide and Campus/Chancellor's Office Balances. Because CSU is able to move funds freely between the systemwide and the campus/Chancellor's Office allocations, distinctions between these allocations are not meaningful. The CSU can easily circumvent a cap by allocating amounts over $15 million to the campuses and the Chancellor's Office. By counting all unexpended allocations toward the $15 million cap, the Legislature would create a meaningful limit on carryover funds that CSU could spend without legislative direction.
• Encourage Spending on Pressing Campus Needs. By exempting from the cap funds designated for deferred maintenance and instructional equipment replacement, the Legislature can provide an incentive for CSU to economize in its programs and invest in these pressing campus needs. Over the past several years, the Legislature has provided funding for deferred maintenance and instructional equipment replacement at CSU. The CSU has also recognized these critical needs and sought additional resources to address them. In their 1999-00 Trustees' Budget, CSU reported a deferred maintenance backlog of $331 million and requested $20 million in General Fund appropriations to reduce this amount. In the same document, CSU requested $15 million in General Fund appropriations to help fill an ongoing shortfall in funding for instructional equipment replacement.

Given the importance of maintaining CSU's capital and instructional equipment assets, we recommend that expenditures for these purposes be exempt from the cap on reappropriation of carryover funds. We therefore recommend amending Item 6610-490 in the budget bill to include the following provision:

Of the funds reappropriated by this item from Item 6610-001-0001 of the 1998-99 Budget Act, up to $15 million shall be available for the general support of the California State University. As of June 30, 1999, the balance in excess of $15 million shall revert to the General Fund. Unexpended funds which the California State University designates for the purposes of reducing the backlog of deferred maintenance and replacing worn or outdated instructional equipment shall not be counted toward this limit.

The CSU Cannot Document Growth in Teacher Preparation Enrollments

We recommend that California State University (CSU) report at budget hearings regarding its progress toward meeting the 2,702 full-time equivalent enrollment growth in teacher preparation programs funded in the prior two budget acts. In addition, CSU should report on its methods for tracking teacher training enrollments and expenditures and whether these are reliable. If CSU is unable to document this enrollment growth, we recommend permanently shifting $13.8 million from CSU's base budget to fund an increase in the number of Cal Grant T awards.

As one method of addressing the demand for K-12 teachers, the state provided CSU over the last two years $13.8 million specifically to increase CSU's teacher preparation enrollments by 2,702 FTE students. The 1997-98 Budget Act appropriated $4.5 million under the Economic Improvement Initiative for the purpose of expanding teacher training enrollments by 881 FTE students. The 1998-99 Budget Act appropriated another $9.3 million to expand these enrollments by an additional 1,821 FTE students.

Has CSU Increased Teacher Preparation Enrollments as Promised?

Budget Detail Indicates a Decline in CSU Postbaccalaureate Enrollments. At CSU, most students at the postbaccalaureate level are students in "fifth-year" teacher preparation programs. It is, therefore, disturbing that the 1999-00 Governor's Budget indicates a decrease of 1,294 FTE postbaccalaureate students, or 6.6 percent, from the number budgeted for 1998-99. A footnote in the Governor's budget indicates that the FTE enrollment numbers by level are "for display purposes only, and do not constitute an enrollment plan." When we asked DOF to provide information regarding the proposed distribution of FTE enrollment growth by level, they told us that they set aggregate growth levels but give CSU the flexibility to allocate that growth across levels of study during the budget year.

The CSU Has No Reliable Enrollment Data for Teacher Preparation Programs. When we asked the Chancellor's Office to provide head count and FTE student counts for its teacher preparation programs, we were told that this information was not available. The CSU officials described a systemwide record-keeping failure in which Schools of Education did not report full or timely information regarding teacher preparation students to their campus' admissions and records departments. In turn, campuses apparently reported inaccurate information to the Chancellor's Office. This failure, according to CSU, has existed for many years, rendering unusable most data collected on teacher preparation program enrollments.

Without Data, the Legislature Cannot Measure Increase. Determining whether CSU increased its teacher training enrollments by 2,702 FTE students requires two pieces of information: the number of teacher training FTE enrollments before and after the state made that investment. Without accurate enrollment data, it is impossible to determine whether CSU achieved an increase of 2,702 FTE enrollments in its teacher preparation programs as it promised when asking for the $13.8 million. This lack of information regarding CSU's teacher preparation programs undermines the Legislature's ability to (1) monitor the effects of teacher training policies and (2) hold CSU accountable for properly spending its General Fund appropriation.

Record-Keeping Reforms Implemented, CSU Reports

The CSU officials with whom we spoke acknowledged the problem in tracking enrollments and described changes that CSU is implementing. The CSU reports that the Chancellor's Office has worked with Schools of Education and campus admissions and records offices to improve reporting methods. Under the new procedures, all enrollment-data files that campuses send to the Chancellor's Office will include a marker identifying whether a student is enrolled in a teacher preparation program. According to CSU, the new reporting procedures will also identify whether a student is pursuing a multiple subject, single subject, or special teaching credential. The CSU estimates that it will take up to a year to phase-in these reforms and produce more reliable data.

Despite this explanation, it is difficult to understand why CSU cannot determine how many students it has enrolled in the past or is enrolling today. When CSU committed to the Legislature that it would increase teacher preparation enrollments by 2,702 FTE students, how did it intend to measure results?

If No Proof, Shift $13.8 million From CSU to Cal Grant T Program

If CSU cannot provide valid evidence that it has increased teacher preparation enrollments by 2,702 FTE students, we recommend the Legislature permanently shift the $13.8 million in CSU's base budget for this purpose to the Cal Grant T Program to increase the number of Cal Grant T awards.

Background on Cal Grant T Awards. These awards provide financial aid to students who have been admitted to teacher preparation programs accredited by the Commission on Teacher Credentialing. Because these awards are distributed only to students enrolled in teacher training programs, the Legislature will be assured that the investment is resulting in increased enrollments.

Cal Grant T awards, which are administered by the Student Aid Commission, were established under Chapter 336, Statutes of 1998 (SB 2064, O'Connell). The 1998-99 Budget Act appropriated $10 million for awards in the first year. During 1998-99, the commission has issued 2,044 awards totaling $9.4 million. The students used the awards at both public and private teacher training programs. Of students receiving awards, 51 percent (1,046) enrolled at CSU, 38 percent (771) enrolled at independent institutions, and 11 percent (227) enrolled at the University of California. According to Student Aid Commission officials, it received between 6,000 and 7,000 applications during the seven-week application period. This high number of students applied for grants even though the grants became available only after the start of the fall term. (Late passage of the budget prevented the commission from issuing them sooner.) Based on this strong initial response, it seems likely that there is ample demand to expand the number of available awards. Additional funding of $13.8 million would increase the number of Cal Grant T awards from 2,044 to over 5,000.

So that the Legislature can determine whether CSU has met the conditions tied to the $13.8 million appropriated by the last two budget acts, we recommend that CSU provide detail at budget hearings on its progress toward achieving a 2,702 FTE student increase in its teacher preparation enrollments. If CSU is unable to document this enrollment growth, we recommend redirecting $13.8 million from CSU to the Cal Grant T Program to increase the number of Cal Grant T awards.