Legislative Analyst's Office Analysis of the 2001-02 Budget Bill

California State University (6610)

The California State University (CSU) currently consists of 22 campuses. The CSU Channel Islands, located in Camarillo (Ventura County), is scheduled to open in fall 2002 as CSU's 23^rd campus. The Governor's budget proposes General Fund spending of $2.7 billion. This is an increase of $216 million, or 8.8 percent, over the current year. The increase includes funding for compensation increases, other cost increases, core needs such as deferred maintenance, and various Governor's initiatives. Figure 1 (see next page) lists the Governor's General Fund budget proposals.

Base Budget Increases. The Governor's budget provides CSU with a 5 percent base increase totaling $117 million. Of this base increase, the Governor's budget designates 4 percent for compensation increases ($82 million) and other cost increases ($12 million). It designates the remaining 1 percent, or $23 million, for a variety of core needs—including technology equipment ($10 million), network capacity ($5 million), library acquisitions ($4 million), and deferred maintenance projects ($4 million).

Enrollment Growth of 3 Percent. In addition to a 5 percent base increase, the Governor's budget provides CSU with $56 million for enrollment growth. The budget assumes that CSU will serve 8,760 additional full-time-equivalent (FTE) students, or 3 percent more FTE students than budgeted in the current year.

Student Fees Maintained at Current Levels. The Governor proposes to maintain both resident and nonresident fees at CSU at their current levels. The budget provides $17 million to compensate CSU for revenue it would have obtained had it raised fees by 4.91 percent (which reflects a projected increase in per-capita personal income in California). The proposed fee for a full-time resident undergraduate is $1,834, which is $19 less than the fee in 1993-94. The proposed fee for a full-time resident graduate is $1,912, and the proposed fee for nonresidents is $9,214.

After adjusting for the effects of inflation, student fees at CSU have fallen significantly since 1993-94. Expressed in 2001 dollars, proposed resident undergraduate fees are $350 less than in 1993-94. The state has not raised resident graduate or nonresident fees since 1994-95. After adjusting for the effects of inflation, total fees for nonresidents have fallen by $1,800 since 1994-95.

One-Time Appropriations. In the budget year, the Governor provides $20 million in one-time funds for deferred maintenance, instructional equipment, and library materials. This one-time funding supplements the ongoing $23 million the Governor provides for the same "core" purposes. The 2000-01 budget includes $32 million in one-time funds for a variety of purposes (including $10 million for high-cost equipment purchases, $1 million for the CalTeach documentary project, and $21 million for campus-specific projects).

Expansion of Current-Year Initiatives. The budget also augments three recently established initiatives.

• Education Technology Professional Development Program (ETPDP). The budget provides an $18.5 million augmentation for the ETPDP program—bringing total funding to $25 million. This is almost a threefold increase over current-year funding. The ETPDP offers technology training for K-12 teachers. The CSU would serve 12,500 teachers in the budget year, compared to 5,000 teachers in the current year.
• Governor's Teaching Fellowships. The budget provides an additional $17.5 million for the Governor's Teaching Fellowship program—bringing total funding for the program to $21 million. This is a fivefold increase over current-year funding. The program offers $20,000 scholarships to students in teacher preparation programs. It currently provides 250 fellowships. The 2001-02 appropriation would fund 1,000 fellowships.
• Channel Island Campus. The budget provides $3 million for start-up costs at CSU Channel Islands. Over the last two years, the state has provided CSU with $7.2 million in support funds and $11.3 million in capital funds to establish the Channel Islands campus.

General Fund Support Per Student. Figure 2 shows the average and marginal General Fund support per FTE student at CSU from 1999-00 through 2001-02. The budget proposes average General Fund support of $8,822 per FTE student. This is 4.5 percent more than the average General Fund support provided in the current year, and 14 percent more than in 1999-00. For each additional FTE student budgeted in 2001-02, the Governor provides $6,360. This is 9.4 percent more than the marginal General Fund support provided in the current year, and 15 percent more than in 1999-00.

Crosscutting and Intersegmental Issues Involving CSU

We address several issues relating to CSU in other sections of this chapter (see Figure 3). In "Crosscutting Issues," we discuss the Governor's proposal to expand significantly the CSU-administered ETPDP program. We recommend the Legislature approve the augmentation but shift the funding from CSU to the State Department of Education. Also in the "Crosscutting Issues" section, we provide a synopsis of our recent report entitled "Improving Academic Preparation for Higher Education," and recommend approving two budget proposals relating to students' academic preparation for higher education—the $8 million augmentation for the Collaborative Academic Partnership Program and the $1 million to expand the Diagnostic Writing Service. Lastly, in "Intersegmental Issues" within our Higher Education section, we recommend linking the $12.4 million the budget provides for year-round instruction at four CSU campuses to summer enrollment growth.

Delete $10 Million for "Strategic" Academic Programs

We recommend the Legislature delete the $10 million in ongoing funding the budget requests for "strategic" academic programs at the California State University (CSU) because CSU cannot provide adequate justification that it needs additional funding for these programs. (Reduce Item 6610-001-0001 by $10 million.)

The budget requests $10 million in ongoing funding to enhance the quality of CSU's agriculture, computer science, engineering, nursing, biochemistry and biotechnology programs (both undergraduate and graduate). This funding would supplement the $10 million in one-time funding the 2000-01 Budget Act appropriated for these programs.

We recommend the Legislature delete the budget-year request for an additional $10 million in ongoing funds for the following five reasons.

• Already Receive Enrollment Growth Funding. The 2001-02 budget provides CSU with $55.7 million to serve an additional 8,760 FTE students. This funding is based on the marginal-cost formula, which accounts for all instructional-related costs (including both faculty and equipment costs). The budget therefore already provides CSU with sufficient funding to increase enrollment in these five targeted areas and to purchase additional equipment.
• Violates Principles of Marginal-Cost Funding. The marginal-cost formula attempts to simplify the budgetary process by providing funding based on the estimated average cost of educating one additional FTE student. Of course, CSU incurs higher costs to educate some students (for example, those training to be a nurse or biochemist) than others (for example, those training to be a historian or writer). This does not mean that CSU needs additional resources to cover the costs associated with more expensive programs, any more than its budget should be reduced for growth in the number of students in low-cost programs.
• Faculty Recruitment No More Difficult in These Programs. The CSU claims that it has a difficult time recruiting faculty for these programs because the labor market is so competitive. Of all faculty searches in fall 1998 and 1999, the success CSU had in making faculty appointments was not considerably different for strategic programs than for other programs. In fact, several of the strategic programs had a higher-than-average success rate in recruiting faculty.
• Instructional Equipment Generously Funded. The 2000-01 Budget Act provided CSU with $10 million in one-time funds to purchase high-cost instructional equipment. The 2001-02 budget requests an additional $20 million in one-time funds that CSU states it would designate entirely for instructional equipment. These one-time appropriations are a more appropriate strategy for covering one-time needs associated with high-cost purchases.
• Unclear If/Why These Programs Are Strategic. It is unclear why these particular programs are of greater interest to the state than other programs. For example, teacher training, health sciences, mathematics, and economics—all seem to be of interest to the state. It is unclear why the state would provide additional resources for a small, select, and variable set of programs each year.

In sum, we recommend the Legislature delete the $10 million in ongoing funding for these specific programs because CSU has not provided adequate justification that it needs additional funding.