Legislative Analyst's Office Analysis of the 2002-03 Budget Bill

Funding Higher Education Capital Outlay

As in previous years, we recommend the Legislature provide funding for higher education capital outlay based on statewide priorities and criteria, using reasonable construction cost guidelines, and based on year-round operation. We also recommend the Legislature consider the extent to which existing buildings at a campus are underutilized when making capital outlay funding decisions, and consider UC research revenue as a primary source of funding for UC research facilities.

We have previously recommended the Legislature fund higher education capital outlay based on statewide priorities and criteria, using construction cost guidelines that are reasonable, and based on the segments operating their campuses year round at similar enrollment levels in all terms. This year we looked at how the segments are utilizing their facilities and recommend the Legislature consider underutilization of existing buildings when making funding decisions on projects that increase instructional capacity. This is discussed further below and in our report Building Standards in Higher Education, which we released in January 2002.

As in the past, we also recommend the Legislature focus funding on instructional needs. Toward that end we recommend the Legislature authorize UC to use "Garamendi" bonds to fund research facilities. This will make available more of the state's limited resources to fund high priority instructional facilities projects throughout the three segments.

Priorities and Criteria

In our Analysis of the 1998-99 Budget Bill, we first recommended the Legislature fund higher education capital outlay based on statewide priorities and criteria. We continue to recommend this approach. Implicit in this is a recommendation that projects proposed by the three segments be evaluated as a single group of candidates for funding. Accordingly, we recommend the Legislature not allocate funds among the segments based on a rigid formula (that is, one-third of available funds to each). The priorities we recommend are shown in Figure 1.

We review these priorities annually and update them when necessary in order to provide a more effective tool for making funding decisions. The priorities shown in Figure 1 differ from those recommended in our Analysis of the 2001-02 Budget Bill in one area as discussed below.

Administrative, Research, and Support Facilities. In our Analysis of the 2001-02 Budget Bill we ranked Research and Administrative Facilities fifth priority, Integrity of Operationally Important Facilities sixth, and Support Facilities seventh. We have reordered these priorities as shown in Figure 1 to give higher priority to the Integrity of Operationally Important Facilities. This category is flexible and can accommodate important facilities needs that cannot otherwise be categorized. For example, constructing or expanding a central data processing center to serve the entire campus community might be considered an operationally important facility. Another example might be the expansion of an electrical distribution system to meet future campus needs. This reordering of priorities is also in response to a recognition that UC has a large revenue stream from research contracts and grants that can be used to fund research facilities, reducing the need for state funding.

Construction Cost Guidelines

In the Analysis of the 2000-01 Budget Bill, we reported on our study of the cost of constructing community college, CSU, and UC buildings compared to those of similar buildings elsewhere. We concluded at that time that construction cost guidelines used by the community colleges and CSU were reasonable. The UC does not use construction cost guidelines, and our study revealed that UC construction costs were notably high. We recommended that the Legislature apply CSU's construction cost guidelines to UC buildings where comparable building types existed. The one area where CSU does not have buildings comparable to UC is research facilities. Based on data we maintain of construction costs of 396 comparable public and private research buildings, we recommend specific cost guidelines for UC research facilities. Figure 2 summarizes the construction cost guidelines we recommend the Legislature use in funding the principal building types for the three segments of higher education. 

CSU Proposal to Increase Construction Cost Guidelines. Construction cost guidelines used by CSU and the community colleges are increased annually for inflation based on the California Construction Cost Index (CCCI) calculated each year by the Department of Finance. In June 2001, CSU increased its construction cost guidelines substantially above the CCCI level. We recommend that the Legislature not fund CSU projects based on this higher construction cost guideline, as we believe the system has not justified the higher costs. (For more detail, please see Building Standards in Higher Education.) We recommend the Legislature fund CSU projects based on the CSU construction cost guidelines used in preparation of its 2001-02 capital outlay budget, adjusted for inflation based on the CCCI. This is the approach we used in preparation of our recommendations on specific proposals.

Year-Round Operation

The Legislature has indicated its interest in CSU and UC operating their facilities year round in order to reduce the need to construct new instructional facilities. Progress CSU and UC have made in implementing year-round operation is discussed in the "Education" chapter of this Analysis.

CSU and UC Capital Plans Do Not Fully Reflect Year-Round Operation. The capital outlay plans for CSU and UC, however, do not fully reflect implementation of year-round operation. Both segments have adjusted their capital outlay plans to reflect some enrollment in the summer in future years, but not enrollment at anywhere near full campus capacity. If full use of instructional facilities in the summer is not a basis for developing capital outlay plans, the plans may indicate a need to construct new instructional facilities to accommodate enrollment growth, when there is actually capacity to increase enrollment in the summer and avoid the need to build new instructional facilities. In order to reduce the need to construct new classrooms and teaching laboratories, we recommend the Legislature direct CSU and UC to adjust their capital outlay plans to reflect year-round operation at full summer enrollment as the basis for determining the need to construct new instructional facilities. This will allow the state to focus its limited resources on high priority projects and avoid construction of unnecessary instructional space.

Community Colleges Should Also Base Capital Plans on Full Summer Enrollment. Some community college districts have more instructional capacity than needed even when operating facilities only during regular terms (that is, three quarters or two semesters). If there is insufficient enrollment demand in a district, offering instruction in a summer term may not be necessary. Capital outlay plans, however, should be based on full summer enrollment regardless of current and projected enrollment. This means all districts will accommodate enrollment growth by increasing summer enrollment before constructing new instructional facilities. This will allow the state to focus capital outlay funding for community colleges on high priority projects and avoid inefficient use of state funds to build excess instructional capacity at community college campuses.

Utilization of Facilities

"Utilization" is the amount of time rooms and stations (a seat in a classroom or a work space in a laboratory) are used for instruction. Historically, the Legislature has compared actual utilization at higher education facilities against set standards.

Utilization Standards. The segments have established utilization standards for the number of hours per day and days per week. These are shown in Figure 3.

Although all three segments have established utilization standards, only UC keeps records of how its facilities are actually utilized.

UC Utilization Is Less Than Standards; CSU and CCC Do Not Report Utilization. The UC indicates that systemwide classroom stations were used about 26 hours per week (74 percent of its standard) and teaching laboratory stations about 17 hours per week (87 percent of the standard).

It is not possible to know how efficiently the community colleges and CSU utilize their classroom and teaching laboratory instructional stations because they do not track this information. This type of data is needed for the Legislature to make informed decisions about funding capital improvements at all three segments. Accordingly, we recommend the Legislature direct community colleges and CSU to provide utilization data in time for consideration of the 2003-04 Governor's Budget. We also recommend the Legislature direct UC to utilize its classroom and teaching laboratory instructional stations at least as efficiently as its utilization standards.