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

California State University (6610)

The budget proposes $450 million from general obligation and lease-payment bonds for the California State University's (CSU) capital program. Of this total:

• $259 million is appropriated in the budget bill from the proposed Higher Education Capital Outlay Bond Fund of 2002 for 31 projects.
• $191 million is appropriated from lease-payment bonds for three projects proposed in pending legislation as part of the Governor's economic stimulus package. Of the amount, $6 million is proposed for expenditure in the current year and $185 million in the budget year.

We recommend the Legislature approve $224 million for 30 projects (estimated future cost totals $112 million) in the budget bill and $84 million for two projects in the Governor's economic stimulus package. Our concerns with the remainder of the request are discussed below.

Capital Outlay Plan Should Reflect Fuller Use of Year-Round Operation

The California State University (CSU) has set campus goals for summer term enrollment, and uses them in developing its capital outlay program. It does not indicate an intent to fully utilize facilities in the summer, and this results in overstatement of the need to construct new instructional facilities. We recommend the Legislature direct CSU to base its capital outlay plan on full utilization of campus instructional facilities during the summer.

As discussed in the "University of California" section of this chapter, the Legislature has previously indicated its interest in CSU, as well as UC, operating year-round in order to reduce the need to construct new instructional facilities to accommodate projected enrollment growth. The CSU has set goals for summer enrollment at campuses but they are very low. The CSU's latest report comparing campus capacity and enrollment shows that in 2007-08 (the last year in the report), summer enrollment will range from none to 50 percent of current campus capacity. Of the 21 campuses that we reviewed, CSU's report indicated 17 were planned to have summer enrollment of less than 30 percent of their physical capacity.

Despite the large amount of unused capacity in the summer term at all the campuses, CSU's capital outlay plan includes new projects which add instructional space to address projected enrollment growth.

The most important reason for implementing year-round operation is to reduce the need to construct new instructional facilities. In order to do this, CSU's capital outlay plan must be based on full utilization of classrooms and teaching laboratories in summer. The CSU's current five-year capital outlay plan assumes campus instructional facilities will be used only a fraction of their full capacity in the summer. This may result in a perceived need to construct new classrooms and teaching laboratories in order to accommodate enrollment growth, when the growth can actually be accommodated by full utilization of instructional facilities in the summer. (We would note that not all enrollment growth can be accommodated by better utilizing summer capacity. For example, some campuses may experience needs for certain types of space--such as lab space--that even year-round operation cannot address.) To avoid building unnecessary classrooms and teaching laboratories, we recommend the Legislature direct CSU to base its evaluation of capacity and enrollment, and its capital outlay plan, on full enrollment in summer term.

Information on CSU's Utilization of Facilities Is Needed

Information on how intensively California State University (CSU) uses its existing facilities is essential for the Legislature when it is considering capital outlay proposals. The CSU does not, however, report this information. So that the Legislature can better evaluate proposals to construct new instructional facilities, we recommend the adoption of supplemental report language directing CSU to report biennially on its utilization of campus facilities.

As we discussed in a recently released report (Building Standards in Higher Education, January 2002), it is important for the Legislature to know how intensively CSU and the other segments use their facilities. This information is needed when the Legislature considers proposals to construct new instructional space. In the "Crosscutting Issues" section of this chapter, we note that CSU does not report on its utilization of facilities. This makes it difficult for the Legislature to know if new facilities included in the Governor's budget proposals need to be constructed, or if students could be accommodated more cost-effectively in existing facilities--perhaps with renovations to better suit programmatic needs.

Utilization standards have been used by CSU for years. They provide the Legislature with a benchmark to measure how efficiently CSU is using its classrooms and teaching laboratories. The CSU's standards for station use (the amount of time a classroom desk or laboratory bench space, for example, is occupied) are an average of 35 hours per week for classrooms, and 23.4 hours per week for lower division and 17.6 hours per week for upper division teaching laboratories. These standards, however, are not very useful to the Legislature because CSU does not report its actual utilization of instructional facilities.

To permit the Legislature to understand how well state-funded instructional facilities are being used, we recommend that the Legislature adopt supplemental report language directing CSU to report biennially on how it is utilizing its classrooms and teaching laboratories. The CSU should provide information on a campus-by-campus basis showing how much of the time instructional stations are being used, and how this compares to its utilization standards.

Projects Recommended for Deletion

Los Angeles: Science Replacement Building

We recommend the Legislature delete $76 million from the Governor's economic stimulus package to develop preliminary plans, working drawings, construction, and equipment for the Science Replacement Building at the California State University, Los Angeles because the project is not justified based on enrollment projections and the alternative of accommodating instructional needs by renovating existing facilities has not been adequately addressed. (Delete $75,773,000 from Section 2(a)(5)(B), Senate Bill 3xxx [Alarcón].)

The Governor's budget proposal includes $76 million in an economic stimulus package (SB 3xxx, Alarcon) for a new 119,965 assignable square feet (asf) (193,493 gross square feet) science building that would provide a total capacity for 1,157 full-time equivalent (FTE) students--551 FTE in teaching laboratories and 606 FTE in classrooms. The current physical capacity of the campus (without year-round operation) is 16,022 FTE and its enrollment is about 13,900 FTE students. The planned occupants for the building are currently housed in several campus facilities, with the majority in the existing 120,322 asf Physical Sciences Building and 76,626 asf Biological Sciences Building. These two buildings are less than 35 years old.

This project replaces one previously approved by the Legislature. The 1999-00 Budget Act provided $655,000to develop preliminary plans for a project to renovate the existing Physical Sciences Building, which has a capacity to accommodate 1,121 FTE students. The total estimated cost of that project was about $33 million. The CSU indicates that after beginning development of the preliminary plans for the renovation project, it decided to cancel it and propose this project in its place. The CSU says it made this decision because the cost to renovate the existing Physical Sciences Building would be too high and a new building was needed to accommodate enrollment growth.

Project Would Commit State to Additional Future Projects. This project is the first of three related projects that CSU plans to undertake. The CSU indicates if the Science Replacement Building is approved, two subsequent projects will also be needed. After construction of the proposed Science Replacement Building, it plans to renovate the existing Biological Sciences Building at an estimated cost of $27 million and to demolish the Physical Sciences Building at an estimated cost of $4 million. The CSU indicates all three of these projects are needed to meet its instructional needs. Thus, the Legislature is being asked to undertake a related group of projects with a total estimated cost of $107 million.

Project Not Justified by Enrollment. Construction of the proposed new Science Replacement Building, renovation of the existing Biological Sciences Building, and demolition of the Physical Sciences Building would reduce the physical campus capacity (without year-round operation) by 153 FTE to 16,175 FTE. However, with year-round operation the campus instructional capacity is about 21,000 FTE per year. Enrollment at CSU Los Angeles has not increased significantly in the past ten years. Figure 1 shows that in the past ten years enrollment has been between 12,000 and 14,000 FTE, which is well within the capacity of the existing facilities at the campus. The CSU projects enrollment growth at the Los Angeles campus up to about 15,000 FTE by 2006.

Earlier Approved Project More Cost-Effective. The 1999-00 Budget Act approved funding for development of preliminary plans for a $33 million total estimated cost project to renovate the existing Physical Sciences Building. As noted earlier, it plans to renovate the existing Biological Sciences Building at an estimated cost of $27 million. These two renovation projects would accommodate the needs of the occupants of the proposed Science Replacement Building at an estimated cost of about $62 million, $45 million less than the cost of the three related projects now planned by CSU. Based on the $296 per asf that CSU estimates it will cost to renovate the Biological Sciences Building, this $47 million savings could renovate about 160,000 asf of other buildings. This means that for the same amount of money as the total estimated cost of this project and the two future projects that CSU is planning, about 350,000 asfof the approximately 1.2 million asf of state-supported space on the Los Angeles campus (29 percent) could be renovated.

Because of this project's high cost, the substantial existing capacity of the campus, and the fact the existing Physical Sciences Building can be renovated to meet programmatic needs, we recommend the Legislature delete funding for this proposal. This will free up $76 million to fund high priority projects elsewhere in the three segments of higher education.

San Luis Obispo: Engineering and Architecture Renovation and Replacement, Phase II

We recommend the Legislature delete $35 million for preliminary plans, working drawings and construction of a portion of the Engineering/Architecture Renovation and Replacement, Phase II project at the California State Polytechnic University, San Luis Obispo because the project is not justified under year-round operation and the alternative of accommodating instructional needs by renovating existing facilities would meet the same programmatic needs at lower cost. (Delete $34,948,000 from Item 6610-302-6028[19], with an estimated future saving of $39,018,000.)

The Engineering and Architecture Renovation and Replacement, Phase II project consists of a sequence of new construction and renovation projects proposed for both state and nonstate funding. Total estimated project cost is $83 million$74 million of state funds and $9 million of nonstate funds. The first state-funded increment of this work is in the Governor's budget. This increment provides:

• $34 million for preliminary plans, working drawings, and construction of the Engineering IV Building. This building would provide about 82,000 asf for engineering programs. (This building has a future state cost of $5 million for equipment.)
• $1 million for preliminary plans for construction of a second new building and renovation work in several buildings. (Construction of the second new building and renovation work at existing buildings has a future state cost of $34 million for working drawings, construction, and equipment.)

The net effect of the entire project is to provide an additional capacity of 333 FTE students in classrooms, 368 FTE students in teaching laboratories, and 33 additional faculty offices. The current physical capacity of the campus (without year-round operation) is 15,347 FTE and peak enrollment (fall term) is about 15,600 FTE. The planned occupants for the new and renovated buildings are currently accommodated in several existing buildings on campus.

Project Not Justified Under Year-Round Operation. Even though the current physical capacity of the campus is 15,347 FTE students, if the campus operated year-round at approximately equal enrollments in all terms, the instructional capacity of the campus would be about 20,000 FTE students (see Figure 2). This means the campus could serve about 20,000 FTE students annually without having to increase the physical capacity of the campus. Currently the summer term enrollment at the San Luis Obispo campus is only about 18 percent of that in other terms. If facilities were more fully utilized during summer term, the campus could handle a lot more enrollment growth without additions to its current physical capacity.

Renovation of Existing Facilities Would Be Less Expensive. When Phase I of the Engineering and Architecture Renovation and Replacement project was approved (1999-00), CSU indicated its intent to seek about $13 million for a second phase. This phase, which CSU indicated was integrally linked to Phase I, was to consist of renovation of several buildings and demolition of others. The information previously submitted by CSU clearly indicates that programmatic needs could be met by renovating existing buildings.

Since enrollment growth can be accommodated by year-round operation (as described above), and the campus's programmatic needs can be addressed with a much less costly renovation proposal ($13 million), we see no reason for the state to undertake the proposed $74 million project. The $50 million that would be freed up by renovating buildings as originally proposed could be used to fund other high priority projects at higher education campuses. A recast proposal providing for renovation of existing buildings along the lines of CSU's original Phase II plan would merit legislative consideration.

Projects Recommended for Reduction

Three of the projects proposed for CSU are justified on the basis of instructional needs, but their costs are high. As discussed in the "Crosscutting Issues" section of this chapter, we recommend the Legislature use construction cost guidelines when evaluating capital outlay proposals for higher education. Doing this will provide sufficient funding for high quality facilities for students, but will also contain costs to a reasonable level. This will allow limited state resources to fund other high priority projects in higher education. These three projects are discussed below.

San Francisco: J. Paul Leonard Library, Addition and Renovation, Phases 1 and 2

We recommend the Legislature reduce $29 million from the Governor's economic stimulus package for development of preliminary plans, working drawings, construction, and equipment for the J. Paul Leonard Library, Addition and Renovation, Phases 1 and 2, because the proposed cost of the project is high. (Delete $28,805,000 from Section 2(a)(5)(A), Senate Bill 3xxx [Alarcón].)

The Governor's budget proposals include an economic stimulus package (SB 3xxx, Alarcón) containing $89 million for a 101,726 asf addition to the J. Paul Leonard Library and renovation of 180,366 asf of the existing library building. The project includes an additional 1,000 asf in the addition and 19,505 asf of renovation in the existing library building for the California State Library (CSL). The CSL will provide separate funding for this space. The project is divided into two phases. Phase 1 consists of development of the addition and Phase 2 renovation of the existing building. The proposal in SB 3xxx provides funding for both phases.

As discussed above, we recommend the Legislature use construction cost guidelines in funding capital outlay for higher education. Our recommended construction cost guideline for libraries is based on the guideline used by CSU for the 2001-02 budget, increased for inflation by the California Construction Cost Index.

With these adjustments, we recommend total construction cost of the Phase 1 addition be funded at $220 per asf. The budget's proposed costs for the same work are $335 per asf. We recommend the renovation of buildings be funded at not more than 60 percent of the cost of replacement of buildings, so we recommend the total construction cost of Phase 2 renovation be funded at $132 per asf. This compares to CSU's cost of $198 per asf. (In both cases, our recommended construction costs include escalation to the start of construction.) Using our recommended construction cost guidelines and adding in other costs not directly related to construction, we recommend a total project cost for both phases of $60,205,000, a reduction of $28,805,000. We recommend the Legislature recognize costs for the different phases of the work as shown in Figure 3.

Our recommended reduction would free up over $28 million of limited state resources to fund other high priority projects at campuses of the three segments of higher education.

San Marcos: Academic Hall II, Building 13

We recommend the Legislature reduce $2,713,000 from the Governor's economic stimulus package for preliminary plans, working drawings, and construction of the Academic Hall II, Building 13 at the California State University, San Marcos because the proposed cost of the project is high. (Delete $2,713,000 from Section 2(a)(5)(C), Senate Bill 3xxx [Alarcón].)

The Governor's economic stimulus proposal includes $26,526,000 for development of preliminary plans, working drawings, and construction of a new 47,555 asf (75,765 gsf) classroom and office building for the colleges of business administration, and arts and sciences. It will provide 10,340 asf for 94 faculty offices, 27,461 asf of classrooms that will increase the physical capacity of the campus by 3,064 FTE students, and 9,754 asf of other space.

Construction Cost Should Be Reduced. As discussed above, we recommend the Legislature use construction cost guidelines in funding capital outlay projects for higher education. Figure 4 shows how our recommended construction cost guidelines apply to this project.

When other costs not directly related to construction are included, our recommended funding is shown in Figure 5. This figure also compares our recommendation with the funding proposed in the Governor's economic stimulus package. 

This will reduce the total project cost to $501 per asf, or a total of $2.7 million, and make additional funds available for other high priority capital outlay projects in the three segments of higher education.

Stanislaus: Science II (Seismic)

We recommend the Legislature reduce $180,000 for development of preliminary plans for the Science II (Seismic) building at California State University, Stanislaus and recognize future costs of $45,341,000 because the proposed cost of the project is high. (Delete $180,000 from Item 6610-302-6028[17].)

The budget includes $922,000 for development of preliminary plans for a 66,905 asf science building with future cost of $53,281,000 for working drawings, construction and equipment. The new building is to contain classrooms, teaching laboratories, offices, and other space such as conference rooms, group study areas, and storage rooms. The system indicates this new building needs to be constructed to replace an existing 33,500 asf science building that has been determined to be seismically deficient. It indicates that, after this new science building is constructed, the existing science building will be seismically strengthened and remodeled to provide classrooms and faculty offices.

We recommend the Legislature use construction cost guidelines in funding capital outlay projects for higher education. Figure 6 shows how the space is planned to be used in the new building and how we apply our construction cost guidelines to determine our recommended construction budget for the project. 

When other costs that are not directly related to construction are included, our recommended funding is shown in Figure 7. This figure also compares our recommendation with the funding proposed in the budget.

Applying our construction cost guidelines, we recommend the Legislature reduce the budget proposal for preliminary plans by $180,000 and recognize future costs of $45 million. This will reduce the total project cost to $46 million. This will make about $8 million of additional funds available for other high priority capital outlay projects in the three segments of higher education.