Legislative Analyst's Office

Analysis of the 2002-03 Budget Bill


Student Fee Policy Needed

California lacks a consistent fee policy for postsecondary education. Typically, changes to student fee levels have been influenced more by the availability of state funds in any given year than through an established policy for sharing the cost of higher education between the state and students. This year, changes to student fee levels are under discussion by the segments of higher education and others in response to budgetary concerns. Given these ongoing discussions, as well as the recent expansion of financial aid opportunities, we believe that the Legislature should enact in statute a consistent fee policy that provides for an appropriate sharing of educational costs between students and the state, and which preserves student access to higher education.


Figure 1 displays current annual fees for students at state colleges and universities. For the eighth consecutive year, the budget proposes no increase in resident student fees at the University of California (UC), the California State University (CSU), and the California Community Colleges (CCC).

Figure 1

Higher Education 2002-03 Fees






Educational fee



Registration fee






Miscellaneous fee







Base fee



Nonresident tuition








Systemwide fee



Average campus fee







Base fee



Nonresident tuition












State "Backfill" Compensates for Flat or Declining Fees

When fees are held constant over time and educational costs increase (due to inflation, for example), the proportion of total educational cost covered by fees necessarily shrinks. In order to maintain services at the same level, additional funding must be provided (typically from the General Fund). Since 1995-96, the state has done just that, compensating for inflationary effects by backfilling "foregone" fees with additional General Fund support for UC and CSU. (Because of the way its annual funding level is calculated, there is no need to backfill foregone fee increases for the CCC. Therefore, the following discussion involves UC and CSU only.)

As a matter of practice, fee backfills have been based on the additional revenue the segments would have received if they had raised fees at the rate of increase in California per-capita personal income. As Figure 2 shows, this General Fund backfill has resulted in substantial costs to the state. The amount of the fee backfill since 1995-96 is $279 million for UC and $239 million for CSU. Adjusted for inflation, the cumulative total of the General Fund backfill in UC and CSU's base is $518 million. It is important to note that the backfill has not increased the buying power of total resources for higher education programs; it has merely substituted one funding source (General Fund) for another (student fee revenue).

Figure 2

UC and CSU General Fund “Backfill”
In Lieu of Fee Increases

1995-96 Through 2002-03
(In Millions)


University of


California State University




Cumulative Backfill in Baseb


Cumulative Backfill in Baseb

Cumulative Backfill in Baseb































































a   Amounts shown are provided in Chapter 853 (AB 1318, Ducheny), Chapter 734 (SB 1896, Peace), and budget acts to backfill for reductions or maintenance of resident fees.

b   Total backfill carried in the budget base, including annual base adjusts.

c     Totals may not add due to rounding.


Although the amounts are substantial in the aggregate, the corresponding annual fee increase for an individual student would have been relatively manageable. If the state had allowed fees to rise by per capita income and had not reduced fees over the past seven years, current resident undergraduate mandatory (educational and registration) fees would be $6,666 at UC and $2,780 at CSU. The largest increase would have occurred in 1998-99, when UC fees would have increased by $492 and CSU fees would have increased by $205.

Budget Proposes No Backfill. In a departure from past practice, the Governor's 2002-03 budget proposal does not provide funding for a General Fund "backfill." The budget assumes that the revenue that could have been collected by raising fees by 7.8 percent (the increase in per-capita income, as lagged two years) is $36.1 million for UC and $27.9 million for CSU.

Fees Have Fluctuated Over Time

Figure 3 shows UC and CSU fees since 1980-81, adjusted for the effects of inflation. The figure shows that fee levels at UC and CSU reached their peak in 1994-95. The table also shows that fees grew most rapidly during the recessionary periods in the early 1980s and the early 1990s, again suggesting that the state's fiscal condition has been a key factor in determining fee levels. While student fees adjusted for inflation have decreased over the past several years, General Fund expenditures for UC and CSU since the mid-1990s have increased at rates that have generally exceeded inflation. As a result, student fee revenue as a share of UC and CSU spending has dropped significantly.

UC and CSU Fees in Perspective

Although UC and CSU fees have increased from their levels in the 1980s, the two systems continue to provide undergraduate and graduate instruction at a cost to students well below the national average. The bottom portion of Figure 4 compares student fees at the two segments with the public and private institutions to which UC and CSU are compared when evaluating faculty salaries. Total student fees at UC and CSU are substantially lower than the average of their comparison institutions. The average resident student fee at UC's four public comparison institutions in 2001-02 is $5,585, which is almost one-third greater than the total resident student fee at UC. The UC fee is well below the $26,254 average of fees charged by its four comparison private institutions—Yale, Harvard, Massachusetts Institute of Technology, and Stanford. At CSU's 15 public comparison institutions, the average student fee of $4,168 is more than double CSU's 2001-02 fee of $1,876. The CSU fee is about a twelfth of the $24,258 average of fees at its five private comparison universities.

Moreover, student fees continue to cover a small portion of the costs the state incurs to provide educational services to students. The top portion of Figure 4 shows that student fee revenue comprises only a small portion of all state and local support provided to the two segments. For example, at CSU, total student fee revenue comprises less than 20 percent of all state and student fee funding.

Fee Policy Needed to Promote State Objectives and Facilitate Planning

As previously mentioned, changes to student fees are influenced largely by the availability of state funds in any given year. This practice tends to neglect opportunities to set fees in a way that promotes state objectives in higher education. For instance, the Governor's proposal to hold fees constant and not to provide General Fund support in lieu of a fee increase effectively dilutes the 1.5 percent base increase to approximately 1.2 percent. Viewed differently, for the segments actually to provide a 1.5 percent salary increase and other inflation adjustments as envisioned in the Governor's proposal, they will have to make reductions in spending in other areas.

Past Attempts at a Fee Policy

The state has attempted to develop fee policies in the past. For example, Chapter 1523, Statutes of 1985 (SB 195, Maddy), was meant to establish a long-term student fee policy. This legislation was, in part, a reaction to significant fee increases in the early 1980s. Generally, it required CSU and requested UC to establish specific fee methodologies, limited annual adjustments to student fees to 10 percent, and required a ten-month lead time before a fee change could go into effect. Chapter 572, Statutes of 1990 (SB 1645, Dills), reauthorized major expiring provisions of Chapter 1523 until 1996. Next, Chapter 853, Statutes of 1997 (AB 1318, Ducheny), reduced fees at UC and CSU by 5 percent, and backfilled those reductions from the General Fund. (Chapter 853 also reduced the per unit resident fee at the CCC to $12.) Figure 5 summarizes the provisions of these three bills. Finally, the 1999-00 Budget Act reduced fees at UC and CSU by an additional 5 percent. (In addition, community college fees were reduced from $12 to $11 per unit.)

Figure 5

Student Fee Legislation in California

Chapter 1523, Statutes of 1985 (SB 195, Maddy)

·   States the intent that the state shall bear primary responsibility for the cost of providing postsecondary education, that students shall be responsible for a portion of the total cost of their education, and any increases in fees shall be gradual, moderate, predictable, and equitably borne by students in each segment.

·   Directs the segments to establish long-term fee policies which prescribe a specific methodology and policies for the expenditure of student fee revenues.

·   Requires fees to be fixed at least ten months prior to the fall term in which they become effective.

·   Limits change in systemwide student fees to 10 percent annually.

·   Requires the state to provide sufficient student financial aid to offset increased fees for students with demonstrated financial need.

·   Prohibits segments from imposing mandatory systemwide fees upon postgraduate students which differ from those charged undergraduate students.

·   Bill in effect from 1986 to 1990 when it sunset.

Chapter 572, Statutes of 1990 (SB 1645, Dills)

·   Extended major provisions of Chapter 1523 through 1995-96.

·   Requires student fees at Hastings College of the Law be identical to fees charged students in UC law schools.

·   Effective from 1991-92 through 1995-96.

Chapter 853, Statutes of 1997 (AB 1318, Ducheny)

·   Reduced the 1998-99 UC and CSU resident undergraduate fee to a level 5 percent below that charged in 1997-98, and maintained that level for 1999-00.

·   Held UC professional school fees at 1997-98 levels for 1998-99 and 1999-00.

·   Appropriated sufficient funds to UC and CSU in 1998-99 and 1999-00 to reimburse the systems for fiscal losses resulting from the fee reductions.


Setting Fee Levels: A Balancing Act

Despite these and other efforts, however, no explicit fee policy has been consistently observed. Even when there has been agreement on a fee policy, the state has tended to ignore the policy and instead has adjusted fees in response to the state's fiscal condition. This can make it difficult for students, their families, and the segments to plan effectively. It also treats students differently over time. As a practical matter, students who attend college in good fiscal times pay less than those who attend in bad fiscal times.

Low Fees Can Hinder Informed Choices and System Accountability. As noted earlier, student fees cover only about one-fifth of the cost of providing UC and CSU educational services. This level of subsidy can distort behavior. For example, fees that are set too low may improperly encourage some students to attend state public universities when other options might be more appropriate (such as attending private universities). Low fees may also result in students' having lower expectations about the quality of their education. Students and their families invest in higher education expecting benefits that justify their investment. When students and their families pay too little for their education (in the form of fees), they may be inclined to tolerate a lower level of service from the segments (such as poor quality instruction or inappropriately large class sizes). As a result, the segments' accountability is diminished.

High Fees Without Financial Aid Can Restrict Access. If fees are set too high, it is possible that access to higher education could be financially restricted. Qualified students could be prevented from attending college if fees are above their ability to pay. The state Master Plan for Higher Education states that in setting fees, the state should consider "whether an increase in the cost to the students can be levied without depriving many able and qualified youth of educational opportunity and in so doing fail to meet the needs of society for trained personnel." The availability of financial aid can ensure that a student's financial circumstances do not limit his or her educational opportunities. Recent changes in the state's Cal Grant program effectively guarantee this.

New Financial Aid Guarantee Changes the Fee Landscape

The new Cal Grant entitlement program, administered by the Student Aid Commission, ensures the availability of financial aid to qualified students from low-income families. Chapter 403, Statutes of 2000 (SB 1644, Ortiz), authorized the expansion of the Cal Grant program. Figure 6 summarizes the purpose, eligibility requirements and awards for Cal Grant A and Cal Grant B. The new Cal Grant entitlement program specifies that all recent high school graduates and community college transfer students (under 24 years of age) who demonstrate need and meet certain other criteria are entitled to an award.

Figure 6

Description of Cal Grant A and B Programs



Cal Grant A

Cal Grant B

Family-Income Ceiling (based on family size)

Six +















Family-Asset Ceiling (excluding principal residence)




Minimum Grade-Point Average (GPA)







Maximum Awarda



Additional Annual Grant for Living Expenses in 2002-03



Up to $1,551

Maximum Number of New Entitlement Awards


No Limit

No Limit

Maximum Number of New Competitive Awards


22,500 total for A and B awards

Proposed Budget for 2002-03


$670 millionb

$670 millionb

Projected Total Recipients for 2002-03




a   Represents maximum  award for students attending private college. For UC and CSU, grants cover systemwide fees.

b     Includes funding for the entitlement program, the competitive program, and the existing Cal Grant A and B programs.

c     Assumes 70 percent of all competitive and entitlement awards are Cal Grant B awards. Assumes 30 percent of all competitive and entitlement awards are Cal Grant A awards.


In addition to establishing an entitlement program, Chapter 403 created a competitive Cal Grant A and competitive Cal Grant B program. These programs serve financially needy students who are not eligible for the entitlement program.

Cal Grant A awards cover systemwide fees at CSU and UC, or up to $9,708 of tuition at private colleges and universities. The Cal Grant B awards cover the same fees as Cal Grant A (excluding fees for the freshman year of college) and provide recipients with a $1,551 stipend for other expenses for four years of college. In light of the new Cal Grant entitlement program, therefore, fees provide little in the way of an obstacle to access to students from lower-income families.

Low Fees Now Help Only Wealthier Families. Given the new Cal Grant entitlement policy, the impact of fee changes is considerably different. Figure 7 displays self-reported parental income for dependent undergraduates at UC and CSU. Virtually all undergraduate students with parental income below $30,000 (and most with income below $60,000) qualify for Cal Grants or other forms of financial aid. Because low-income students effectively do not pay fees (because they receive grants for this purpose) lowering fees tends to benefit students from wealthier families.

Figure 7

Distribution of Students by Parental Income
UC and CSU




Percent of Students With Parental Incomea:

  Below $30,000



  Below $60,000



  Above $90,000



a   Source: 1997-98 survey (most recent available) by the Student Aid Commission [Sears survey]). Dependent undergraduate students (full-time and part-time).


Enact New Fee Policy

We believe the state needs a new, explicit fee policy for its higher education segments. Toward that end, we (1) offer guidelines to serve as the basis of a new fee policy and (2) suggest options for enacting a new fee policy.

Below, we offer some policy guidelines to consider in developing a fee policy for the higher education segments.

Students Should Contribute Towards Their Educational Cost. We believe the state's policy toward student fees should recognize that higher education results in both private and public benefits. Private benefits to the individual student include increased income, personal enrichment, and broader options regarding lifestyle and employment. The public benefits from higher education include a better-informed citizenry, as well as improved economic development and increased tax payments to state and local government.

Avoid Sudden "Sticker Shock." Students should not be faced with a sudden, large fee increase. Instead, fees should change moderately over time.

Fees Should Be Adjusted Annually. After the Legislature and the segments agree on a basis for determining student charges, we recommend that fees be adjusted annually.

One of the most important issues for the Legislature and the segments to resolve is the basis for the fee level. While there are a variety of options from which to choose, we present two possibilities: (1) a fixed percentage of educational costs and (2) the average of relevant comparison schools.

Option 1: Set Fees at a Fixed Percentage of Educational Costs. One option for the Legislature in establishing a long-term fee policy is to set fee levels as a fixed percentage of the "cost of education." This approach recognizes that students receive direct benefits from their education, and therefore should pay a portion of the cost that is proportional to their benefits. Figure 8 shows the hypothetical fees that would be charged students attending UC and CSU in 2002-03 if fees were set equal to various percentages of total segment's costs. Figure 8 shows that if the Legislature set undergraduate student charges at 30 percent of education costs, the fee charged UC undergraduates would be $4,859 in 2002-03, which is $1,000 above the current-year fee. The fee charged CSU undergraduates would be $3,335, which is $1,459 above the current-year fee.

Figure 8

Hypothetical Fees Calculated
As Different Percentages of Segmental Cost in 2002-03a


Proposed Fee

Hypothetical Fees in 2002-03 Using Different
Percentages of Segmental Costs














a   Fee based on percentage of average cost per student for 2001-02 as determined by the California Postsecondary Education Commission (CPEC). There are a number of alternative ways to calculate average cost per student. This is for illustrative purposes only.


If the Legislature selects a fixed percentage that results in a fee that is significantly higher than the current fee, it could increase fees gradually over a number of years until they reached the selected percentage of educational costs. Once the target is reached, fees would be adjusted annually to maintain the same percentage. If educational costs increase, fees would increase by a proportional amount. Conversely, if educational costs decreased (for example, from increases in efficiency), then fees would decrease.

Option 2: Set Fees at the Average for Comparison Institutions. As an alternative, student fees could be set at the average fee charged at the segments' national comparison institutions. The average could be limited to public comparison schools or could be a weighted average of pub lic and private comparison schools. For 2002-03, the estimated difference between UC fees and the average of its public comparison institutions is $2,005. For CSU, the estimated difference between its fees and the average of its public comparison institutions is $2,500.

If the Legislature decided to use the average of comparison institutions as a basis for resident fees, it could raise fees gradually to avoid sticker shock. For example, if UC were to increase fees by 10 percent a year, fees would reach their public comparison target by 2009-10. (This assumes that the average of the public comparison institutions increases by 5 percent annually. The actual length of time required would depend on inflation in the intervening years). For CSU, more time would be required because current fee levels are further below CSU's public comparison institutions. If CSU fees increased by 10 percent a year, fees would reach the average of comparison institutions in 2019-20.

In conclusion, there is no one correct fee policy. The Legislature and the segments have many options from which to choose. Controversy about the mechanics of a policy, however, should not prevent the establishment of a long-term fee policy. Accordingly, we recommend that during budget deliberations, the Legislature consider its options regarding a fee policy for higher education and establish such a policy in statute.

Update on Summer Operations at UC and CSU

Since 1998-99, the Legislature has strongly encouraged the University of California (UC) and the California State University (CSU) to serve more students during the summer. Expanding summer operations has the benefit of significantly increasing UC's and CSU's enrollment capacity while reducing out-year costs associated with constructing new classrooms and campuses. Additionally, it increases students' access to high demand campuses and allows students, if they desire, to accelerate their time to degree. It even offers faculty greater flexibility in managing their workload (because they can select the terms they wish to work) without increasing their overall workload.

Expanding summer terms is a cost-effective strategy, however, only if the segments' capital outlay plans reflect year-round utilization. In the "Capital Outlay" chapter of the Analysis, we recommend the state fund additional instructional facilities only when existing facilities have reached their capacities through all academic terms.

In this section, we briefly review the recent actions the state has taken to promote summer expansion. We then provide an update on UC's and CSU's efforts to expand operations during summer 2001. Although both systems served substantially more students in summer 2001 compared to the prior summer, we recommend the Legislature ask the segments to report on some of their summer-expansion efforts during budget deliberations. We conclude by discussing the Governor's budget proposal to expand operations at UC Davis and CSU Chico during summer 2002. We recommend the Legislature fund these expansions to the extent that resources are available, but this funding should be made contingent on the campuses' meeting summer enrollment targets.

Key State Actions Promoting Summer Expansion

The nearby box provides a 35-year timeline of key actions the state has taken to promote year-round operations at UC and CSU. The LAO report, Year-Round Operation in Higher Education, dated February 1999, discusses these prior actions in more detail. In recent years, the state has undertaken four major initiatives to promote the expansion of summer operations at UC and CSU.

Established Consistent Funding Policy for Enrollment Growth. Prior to 1998-99, the state provided General Fund support only for students enrolled in fall, winter, and spring. Summer-session costs were not directly supported by the state. Instead, they were "self-supported" by student fees, which were set higher than the other terms. Between 1998-99 and 1999-00, the state made a series of decisions indicating its intent to fund all enrollment growth, regardless of term, at the same funding rate. For example, in 1998-99, the Legislature and the Governor agreed to provide the same funding rate during all terms and at all UC and CSU campuses for students enrolled in teacher preparation programs. (As we discuss later, the administration has chosen, however, to exclude summer enrollment growth at some campuses from its overall growth calculation.)

The state funds enrollment growth at UC and CSU based upon a "marginal-cost formula," which estimates the cost of educating one additional full-time equivalent (FTE) student. The state covers most of this cost through General Fund support. The remainder is covered by student fees. Based upon this formula, in 2002-03, the state would be providing $8,987 for every additional FTE student at UC and $6,487 for every additional FTE student at CSU.

Established Consistent Fee Policy. The next action the state took to expand summer enrollment was to reduce the summer fee rate to the regular fee rate. Chapter 383, Statutes of 2000 (AB 2409, Migden), prohibited UC and CSU from charging students more in summer than in fall, winter, and spring. Prior to this action, UC campuses charged students approximately 15 percent more (on average) for courses in the summer. At CSU, campuses charged between 120 percent and 160 percent more for summer courses. Thus, Chapter 383 created a consistent, year-round fee policy at all UC and CSU campuses (effective summer 2001). The 2000-01 Budget Act appropriated a total of $33.7 million from the General Fund to UC ($13.8 million) and CSU ($19.9 million) to compensate the universities for revenue they would forego by reducing summer fees at all of their campuses.

Provided Supplemental Summer-Expansion Funding. In 2001-02, the state provided $33.1 million in supplemental funding for the purpose of enhancing summer operations at three UC campuses (Berkeley, Los Angeles, and Santa Barbara) and four CSU campuses (Fullerton, Long Beach, San Diego, and San Francisco). This funding was sufficient to provide the full marginal-cost rate for all existing FTE enrollments in these campuses' self-supported summer sessions.

State-Supported Summer Operations Date Back More Than 35 Years

1965 CSU Hayward is first campus to convert to year-round operations (YRO).

1966 CSU Pomona and CSU San Luis Obispo convert to YRO.

1967 UC Berkeley and CSU Los Angeles convert to YRO.

1968 UC Los Angeles converts to YRO.

1970 Governor proposes to eliminate funding for all existing UC and CSU summer terms. Funding is eliminated for UC campuses.

1998 State begins funding enrollment growth for all terms, including summer.

2000 State enacts Chapter 383 (AB 2409, Migden), lowering summer fees to regular fee levels. CSU Humboldt becomes fifth YRO campus.

2001 UC converts three campuses to YRO (Berkeley, UCLA, Santa Barbara). CSU converts ten additional campuses to YRO: Dominguez Hills, Fullerton, Long Beach, Sacramento, San Bernardino, San Diego, San Francisco, San Jose, San Marcos, and Stanislaus.

2002 UC Davis proposed for YRO conversion. CSU Chico proposed for YRO conversion.

Linked Supplemental Funding to Growth in Summer Enrollments. Although supplemental funding is not strictly necessary for summer enrollments to grow, the state has decided to provide it as an incentive to expand summer operations at UC and CSU as rapidly as possible. The 2001-02 Budget Act made summer-expansion funding (of $33.1 million) contingent on the campuses' meeting minimum summer 2001 growth targets (700 additional FTE enrollments at UC and 400 additional FTE enrollments at CSU). Failure to meet these targets would trigger the reversion of a proportionate share of the summer-expansion appropriations. The 2001-02 Budget Act required the universities to report to the Legislature by December 1, 2001, whether they had met their enrollments targets. The universities were also required to provide the fiscal committees, by January 15, 2001, with a comprehensive five-year plan that included summer enrollment targets for each of their campuses.

Three of Four Required Reports Overdue. As of January 23, 2002, UC had not provided the Legislature with its December 1, 2001 report (though, at our request, UC provided data showing they have met the enrollment growth targets). Prior to the due date, CSU provided summer 2001 enrollment data for ten campuses. However, it cannot yet provide summer enrollment data for its remaining campuses. Moreover, neither UC nor CSU had provided the fiscal committees with their five-year plans.

Update on Summer 2001— All UC Campuses Succeed at Attracting Additional Students

The UC met the summer 2001 enrollment targets specified by the 2001-02 Budget Act. Summer enrollments at UC, however, increased at both the three "full conversion" campuses (those receiving state funding for the fee buydown, existing summer enrollments, and summer enrollment growth) and the five partial conversion campuses (those receiving state funding only for the fee buydown).

The UC Exceeds Summer Enrollment Targets. Figure 9 compares summer 2000 and summer 2001 annualized FTE enrollments at all eight general UC campuses. Total summer 2001 enrollments at the three full conversion campuses increased by more than 2,000 FTE students, or 58 percent, over summer 2000 enrollments. This greatly exceeded the enrollment target of 700 FTE specified in the 2001-02 Budget Act. Total summer 2001 enrollments at the five partial conversion campuses also grew substantially (by 42 percent). Two partial conversion campuses (Riverside and Santa Cruz) actually increased summer enrollments by a greater percentage than one of the full conversion campuses (Berkeley).

Figure 9

Summer Enrollments Grew Significantly at UC

(Matriculated Annualized Full-Time Equivalent Enrollments)




Change from
Summer 2000



Full Conversion Campusesa






Los Angeles





Santa Barbara










Partial Conversion Campusesb
















San Diego





Santa Cruz















a   Full conversion campuses received funding to buy down summer fees as well as fully fund existing summer enrollments and all new summer enrollments.

b   Partial conversion campuses received funding only to buy down summer fees to fall fee levels.


Summer Term at UC Serves About One-Third the Number of Students as Fall Term. Figure 10 compares the numbers (or "headcount") of UC students served in summer 2001 with the number served in fall 2001. There is little difference in the proportion of students served in summer term by the full conversion campuses and the partial conversion campuses—both serve about one-third the students as the fall term. (We note that summer and fall headcount numbers are not fully comparable because of differing courseloads. While fall students average close to a full load, or 15 units, students in the summer average about 9 units. The summer courseload, however, has been increasing.)

Figure 10

Summer Term at UC Serves About
One-Third the Number of Students As Fall Term


Summer 2001

Fall 2001

Summer As Percent of Fall Headcount

Full Conversion Campusesa





Los Angeles




Santa Barbara








Partial Conversion Campusesb













San Diego




Santa Cruz












a   Full conversion campuses received funding to buy down summer fees as well as fully fund existing summer enrollments and all new summer enrollments.

b   Partial conversion campuses received funding only to buy down summer fees to fall fee levels.


Update on Summer 2001— CSU Expands Summer Session At Ten Campuses

As noted earlier, in 2000-01 CSU received funds (on an ongoing basis) to buy down summer fees at all campuses, and in 2001-02 it received supplemental funds (also on an ongoing basis) to expand summer operations at four campuses. Because summer 2000 fees were already set by the time the 2000-01 Budget Act was enacted, CSU (and UC) used the 2000-01 fee-buydown appropriation to lower fees in summer 2001. The CSU then decided to use the 2001-02 fee-buydown monies to expand summer 2001 operations at six additional campuses. (The UC states it will use its 2001-02 fee-buydown monies to buy down fees in summer 2002—as the state intended.)

Six-Campus Expansion Generates Ongoing Unanticipated Costs for the State. This expansion meant that CSU provided full marginal-cost support for a total of 5,115 FTE students at ten campuses in summer 2001. This was 1,977 more FTE enrollments than CSU was funded to serve. These 1,977 FTEs will generate $4.9 million in ongoing costs beyond what the Legislature committed to in the 2001-02 budget. It is unclear how CSU expects to cover these out-year costs. We presume it can absorb this cost because it has not requested and the Governor does not propose providing it with additional funding. (Later in the write-up, we recommend the Legislature require CSU to explain its actions during budget hearings.)

The CSU Exceeds Summer Enrollment Targets. Figure 11 compares estimated FTE enrollments in summer 1999 with actual FTE enrollments in summer 2001 for the ten targeted campuses. Like UC, CSU exceeded the growth targets specified in the 2001-02 Budget Act, growing 91 percent at the four campuses authorized to receive full funding and 88 percent at the six additional campuses it selected to receive full funding.

Figure 11

Summer Enrollments
Also Grew Significantly at CSU

(Matriculated Annualized Full-Time Equivalent Enrollments)


Summer 1999

Summer 2001

Change from
Summer 1999



Campuses Budgeted for
Summer Expansion






Long Beach





San Diego





San Francisco










Additional Campuses CSU
Selected for Summer Expansion

Dominguez Hills










San Bernardino





San Jose





San Marcos





















Unlike UC, CSU cannot provide actual summer 2000 enrollment figures for any of its campuses, nor can it provide summer 2001 enrollment figures for the remaining 11 campuses that operate summer sessions. Thus, it cannot be determined if campuses that did not receive additional funding experienced similar enrollment growth. Moreover, because CSU cannot provide headcount figures, it cannot be determined how many students are being served in summer term compared to fall term. (Later in this write-up, we recommend that CSU provide this data to the fiscal committees during budget hearings.)

Both UC and CSU Manage First Transition Successfully

No UC or CSU campus experienced serious problems in expanding their operations in summer 2001. As noted earlier, both universities attracted more than enough students to meet their enrollment targets. The universities' success is likely to be partly attributable to lower summer fees, coupled with more generous financial aid policies at the full conversion campuses. (In most cases, full conversion campuses expanded financial aid opportunities to be consistent with the fall-spring terms.) Their success is likely also attributable to special summer incentives campuses provided to help attract additional students. (See box "Special Summer Incentives".)

In serving the additional summer students, neither university system reported problems of note in attracting faculty, providing sufficient academic support and student services, or scheduling maintenance projects.

Faculty Given Additional Flexibility, Income. In most cases, full conversion campuses allowed faculty either (1) to work during the summer term as an alternative to another academic term (for example, switching from teaching during the fall and spring term to teaching during the spring and summer term) or (2) to teach extra classes during the summer for extra pay. This latter option was the more common option used by faculty at both full and partial conversion campuses.

Under this option, faculty received additional pay above their academic-year contracts, typically on a per-course basis. Additionally, at UC Santa Barbara and UC Berkeley, faculty's overload-teaching salary rate was increased. At CSU, being paid on a per-course basis meant faculty did not receive compensation for summer activities that occurred outside the classroom (such as committee work and student advising). The CSU states that it will begin to compensate faculty for these other activities as summer term expands and as these other responsibilities are required. Even though CSU faculty did not receive compensation for outside-classroom activities, faculty teaching in the new state-supported summer terms are compensated at a higher rate than they were in the previous self-supported summer terms.

Additional Tenured and Tenure-Track Faculty Teach During Summer. Although information remains limited, tenured and tenure-track faculty apparently comprised at least a slightly greater proportion of total faculty in summer 2001 compared to summer 2000. For example, in its second year of expanded summer operations, CSU Humboldt states that many more tenured and tenure-track faculty expressed a willingness to teach than in past summers. These tenured and tenure-track faculty comprised about 45 percent of all faculty teaching during summer 2001 (compared to approximately 70 percent of all faculty teaching during fall 2001).

Special Summer Incentives

The University of California (UC) and the California State University (CSU) used a variety of incentives to encourage students to enroll during the summer. Below are some of these incentives:

· Fee Incentives. The UC Santa Barbara campus capped its fees at eight units, thereby encouraging students to enroll in more units for no additional cost. Six CSU campuses offered students a per-unit fee option that allowed them to take one course without having to pay the entire part-time fee or three courses without having to pay the entire full-time fee.

· Rebates for Seniors. UC Berkeley (in summer 2000) and UC Los Angeles (in summer 2001) offered rebates of up to $500 to seniors who graduated at the end of the summer rather than returning in the fall.

· Priority Housing and Registration. Several UC and CSU campuses offered students priority housing and priority registration for the fall if they enrolled in the summer. For example, CSU San Francisco, where housing facilities are in great demand, offered both priority housing and registration to new students who started in the summer.

· Expanded Travel and Undergraduate Research Opportunities. The UC made efforts to expand its summer travel-study programs. Additionally, UC sought to expand undergraduate research opportunities by encouraging its faculty to offer unit-bearing activities that corresponded to their summer research projects.


At UC's three full conversion campuses, approximately 150 additional faculty taught in summer 2001 compared to summer 2000, with the growth split about evenly between lecturers and tenured/tenure-track faculty. Tracking changes in faculty composition will become increasingly important because the state expects those campuses that have received supplemental state funds to attract additional tenured and tenure-track faculty to teach during summer.

Support Services. Although neither UC nor CSU reports difficulty attracting sufficient numbers of faculty, most campuses report some difficulty in transitioning their regular 12-month staff to handle the increased workload in summer. Many of these academic-support and student-services staff—responsible for services such as libraries, computer labs, learning centers, and counseling offices—previously vacationed during the summer months. In summer 2001, because campuses attempted to expand support services proportionally with student enrollment, many of these support staff encountered scheduling difficulties. These types of challenges, however, are likely to be temporary because campuses can hire additional staff (with the full marginal-cost funding they receive) and can encourage staff to coordinate vacations and spread them across the year rather than only in summer.

Maintenance Projects Sometimes Rescheduled but Still Completed. Although many maintenance projects at universities are reserved for the summer months, no campus reported serious problems with scheduling these projects. Campuses used a variety of strategies, such as scheduling summer courses in buildings that did not require any major maintenance or rescheduling projects throughout the year to relieve the concentration on the summer term. As with other support activities, full-conversion campuses have received the necessary resources (through marginal-cost funding) to hire additional staff to manage increased workload and new scheduling challenges.

In short, all of the campuses that attempted to expand summer operations were able to attract qualified faculty, expand academic support and student services, and schedule maintenance projects. Moreover, CSU Humboldt (which converted one year earlier than the other campuses) reports that it was able to improve its second-year operations based upon lessons learned during the first year. For example, it was able to address its staffing issues and provide more comprehensive support services in its second-year operations.

UC and CSU Should Account for Summer 2001 Activities

We recommend the Legislature ask the universities to respond to several issues relating to summer 2001 expansion during budget hearings.

Specifically, we recommend the Legislature ask the universities to report on the following issues.

Report on CSU's Summer Expansion. The CSU should explain why it expanded summer operations at six campuses when it had not been funded to do so. The CSU should also explain how it intends to cover the out-year costs associated with its decision to expand summer operations at these campuses. Additionally, CSU should provide summer 2000 and summer 2001 enrollment figures for all of its campuses, such that comparisons can be made between those campuses that did and did not receive supplemental funding to expand summer operations.

Report on Summer 2001 Expenditures. Although UC and CSU exceeded their enrollment targets, it is not yet clear how they expended the $33.8 million the state provided in 2001-02. Accounting for the expenditure of these funds is particularly important given that campuses without additional General Fund support experienced similar growth in summer enrollments. Furthermore, notwithstanding the universities' claims, UC's and CSU's expanded summer terms are likely not to have high initial start-up costs. Unlike the establishing of a new enterprise, the expansion of summer term builds on infrastructure, personnel, and support that are already in place. The systems, however, are now receiving comparable funding year-round even though the services they provide in summer are not yet comparable to the services they provide throughout the rest of the year.

Report on Overdue Five-Year Plans. Neither UC nor CSU provided their five-year plans to the Legislature in accordance with budget bill language. Accordingly, they should provide the Legislature with these plans as soon as possible. The plans should explain the criteria used for determining when additional campuses should expand their summer operations.

Governor Proposes to Expand Summer Operations at UC Davis and CSU Chico

The Governor's budget includes a total of $8.6 million for UC and CSU to continue expanding summer operations. Of this amount, $7.4 million is associated with providing "full" funding for approximately 900 existing FTE enrollments at UC Davis. The remaining $1.2 million is for CSU to provide full funding for 240 existing FTE enrollments at the Chico campus. (Based upon the accepted methodology used last year, we calculate that CSU requires only $977,000 rather than $1.2 million to buy out the 240 existing FTE enrollments at the Chico campus.)

Continue Linking Funding to Summer Enrollment Growth

We recommend that the Legislature approve the $7.4 million and $977,000 to expand summer operations at UC Davis and CSU Chico, respectively, but continue to link the funding to summer enrollment targets and require the universities to report on whether they meet these targets.

We recommend the Legislature approve $7.4 million and $977,000 to promote summer expansion at UC Davis and CSU Chico, respectively. However, we recommend this funding continue to be linked to summer enrollment targets specified in the 2002-03 Budget Act. Given the campuses' recent performance, growth targets of approximately 30 percent—suggesting growth of approximately 300 additional FTE students at UC Davis and 80 additional FTE students at CSU Chico—would be relatively modest. As was done in the 2001-02 Budget Act, the universities should revert a proportionate amount of the summer-related appropriation if the campuses fail to meet those growth targets. Finally, to monitor the newly converted campuses' success in meeting these targets, the Legislature should continue to require UC and CSU to report on summer enrollments at all their campuses by December 1, 2002.

Support Consistent Enrollment-Growth Policy

We recommend the University of California (UC) and the California State University (CSU) use enrollment-growth funding to support additional summer students at all campuses. Because UC and CSU have resisted including additional summer students in their budgeted enrollment-growth figures until they receive funding for existing summer enrollments, we further recommend the Legislature state its intent to fund remaining summer enrollments over the next several years.

In addition to providing funds to expand summer operations at UC Davis and CSU Chico, the Governor's budget includes $1 million to buy down fees for additional enrollments in UC summer sessions that do not yet receive full funding. (The Governor's budget does not include fee-buydown monies for the six CSU campuses that also have not received full funding for summer session.) We recommend a different approach. The Legislature should adopt a consistent enrollment-growth policy, thereby making the proposed $1 million augmentation for the fee buydown unnecessary.

Support Consistent Enrollment-Growth Policy. Instead of providing fee-buydown monies for UC campuses that have not yet received full funding for summer session, we recommend the Legislature direct both UC and CSU to support additional summer students at all campuses with enrollment-growth funds. This would enable all campuses to receive full funding for additional summer students, thereby increasing the incentive for all campuses (even those that have not yet received funding for existing summer students) to expand summer operations. It would therefore create a consistent enrollment-growth funding policy—providing full funding for all additional student in all terms at all campuses. It would also greatly simplify the transition process at remaining campuses.

Declare Intent to Fund Existing Summer Enrollments Over Next Several Years. In the past, UC and CSU have resisted including additional summer students in their budgeted enrollment-growth figures because they have been concerned that the state would decide to fund summer enrollment growth without ever funding existing summer enrollments. The UC and CSU stated they would not be able to offer comparable services during the summer without funding for these existing enrollments. We believe the state's considerable investments in summer operations over the past two years, as well as in the budget year, demonstrate its commitment to provide funding for existing summer enrollments. To respond directly to the systems' concerns, however, we recommend the Legislature state its intent in budget bill language to fund the remaining summer enrollments over the next several years.

In conclusion, both UC and CSU exceeded targets in summer 2001—enrolling many more students, attracting more tenured and tenure-track faculty to teach, offering a greater number and breadth of courses—and doing so without any notable problems. Despite their success, we recommend the Legislature continue its oversight of some outstanding summer-related issues during budget deliberations. In 2002-03, the Governor proposes to provide additional General Fund support for UC Davis and CSU Chico to expand summer operations. We recommend the Legislature approve the requested funding, but link it to summer enrollment targets and require the universities to report on whether they meet these targets. We further recommend the state implement a consistent enrollment-growth funding policy—using enrollment-growth funding to support all additional students in all academic terms at all campuses.

Reexamining the Role of Colleges and Universities In Providing State-Funded Financial Aid

Financial assistance for higher education comes in many forms and is offered by many entities. The major forms of financial assistance for higher education include grants (scholarships and fellowships), loans, work study, and investment accounts. The major providers of financial assistance are the federal government, state government, universities, and private benefactors.

California provides financial assistance for students in higher education in several ways. Major efforts include the following programs.

Cal Grant Programs. The Student Aid Commission administers the Cal Grant Entitlement program and several competitive Cal Grant programs (the new Competitive Cal Grant A and Cal Grant B programs, the longstanding Cal Grant C program for vocational-education students, and the Cal Grant T program for students enrolled in teacher-education programs). These statewide programs provide needs-based financial aid.

Institutional Aid. In addition, the higher education systems administer the following needs-based financial aid programs.

Merit Scholarships. The Governor's Scholars program provides $1,000 college scholarships to students in grades 9 through 11 who obtain high scores on state assessment tests. The Governor's Distinguished Mathematics and Science Scholars program provides supplemental $2,500 college scholarships for students who also obtain high scores on Advanced Placement examinations in both calculus and science (biology, chemistry, or physics).

In addition to these programs, the state provides incentives for families to save for higher education expenses by allowing them to make tax-deferred investments through the Golden State Scholarshare Trust program. The state also offers several more specialized forms of financial assistance, including loan forgiveness, internships, and work study.

Governor Proposes Reduced Funding for Institutional Financial Aid Programs

The Governor's budget would reduce UC's and CSU's needs-based institutional financial aid programs by $17 million and $14.5 million, respectively. The administration states that the reduction responds to the existence of "excess" funds that remain in UC's and CSU's financial aid base budgets from prior years. In both 1998-99 and 1999-00, the state reduced student fees by 5 percent (for a total reduction of 10 percent) and compensated UC and CSU for revenue they would lose as a result of the fee reduction. During these years, the state could have reduced UC's and CSU's financial aid budgets on the assumption that lower fees resulted in less annual need, but it chose not to do so. The Governor's budget now proposes making this adjustment.

Proposal Raises Broader Financial Aid Issues. The Governor's budget proposal raises important questions regarding (1) the total amount of state funding that should be designated for financial aid, (2) the criteria for determining who receives financial assistance, and (3) the agency or agencies that should administer state-funded financial aid programs. Currently, the state funds both statewide and institutional aid programs, which operate independently under different rules. Below, we discuss several concerns we have with this dual financial aid system. We recommend the Legislature redirect resources currently designated for needs-based financial aid and use them to expand the competitive Cal Grant programs.

Expand Competitive Cal Grant Programs by Pooling State Funds

We recommend the Legislature expand competitive Cal Grant programs by redirecting state funds currently provided for institutional financial aid programs. This would help create a statewide financial aid policy that is consistent and objective. It would entail the shifting of a total of $294 million from the University of California's and California State University's institutional aid programs to competitive Cal Grant programs. (Augment Item 7980-101-0001 by $294 million and reduce Items 6440-001-0001 by $172 million and 6610-001-0001 by $122 million.)

The Governor's budget includes $294 million for institutional financial aid programs at UC and CSU. Of this amount, $172 million is for UC's USAP program and $122 million is for CSU's SUG and EOP programs. The USAP and SUG programs are funded partially by state General Fund and partially by student fee revenue. The EOP program is funded entirely by the General Fund. All three programs provide needs-based aid to undergraduate and graduate students.

We recommend the Legislature redirect the monies currently designated for these institutional financial aid programs to expand the competitive Cal Grant programs because (1) the state can directly offset increases in student fees through the Cal Grant program, (2) statewide programs have shown better performance, (3) the competitive Cal Grant programs can assist only about one in four qualified applicants, and (4) the state—not the systems—should determine how state resources designated for financial aid are distributed across financially needy students.

Rationale for State-Funded Institutional Financial Aid Unclear. Initially, the state funded UC's and CSU's financial aid programs to mitigate the effect of increases in student fees. This objective is appropriate because financially needy students require additional resources when fees increase. However, the state can provide this same assistance directly to students through the Cal Grant program—as it currently does for more than 75,000 new students each year. Given this, we see no compelling rationale for continuing institutional financial aid programs.

Statewide Aid Programs Have Shown Better Performance. Although data are limited, some evidence suggests that statewide aid programs can yield better results than institutional aid programs. For example, according to CSU, only 7 percent of the students receiving SUG grants and entering teacher-education programs in 1998-99 had received their teaching credential by October 1999. By comparison, almost one-third of the students receiving Cal Grant awards and entering teacher-education programs in 1998-99 had received their teaching credentials by October 1999. It is unclear why the statewide programs produce better results, but it is possible that subtle differences in award criteria produce noticeable differences in programmatic outcomes.

Low-Income Students Now Guaranteed Financial Aid. The use of state-funded institutional financial aid is especially unclear now that the state has established the Cal Grant Entitlement program. When the state first began funding institutional financial aid programs, the Cal Grant program was much smaller than it is today and the number of grants the commission awarded each year depended upon available funding. The award process was also entirely competitive. In 2000, the state enacted Chapter 403 (SB 1644, Ortiz), which significantly expanded the existing Cal Grant program by creating a new entitlement program. Today, all financially needy applicants are assured of receiving a Cal Grant award if they are either (1) recent high school graduates with a minimum grade point average (GPA) of 2.0, or (2) community college students transferring to a four-year university who are less than 24 years old with a minimum GPA of 2.4.

Many Students Do Not Receive Competitive Cal Grant Awards. Students who do not qualify for Cal Grant entitlement awards may apply for competitive awards. Chapter 403 limited the number of competitive awards (Cal Grant A and Cal Grant B awards) to 22,500. Half of these awards are distributed in March and the other half are distributed in September and reserved exclusively for community college students. Data released by the commission show that more than 41,000 financially needy and academically qualified students did not receive competitive awards in the March cycle alone. The number of Cal Grant C and Cal Grant T awards are also capped, with the number of eligible applicants exceeding the number of available awards. Thus, many more students could benefit from statewide financial aid if resources were available. Moreover, in the competitive programs, students with the greatest financial need benefit regardless of which higher education institution they choose to attend.

Entitlement Program Spurred Significant Policy Changes in Institutional Financial Aid. The state has not yet undertaken an exhaustive review of how institutional financial aid policies have changed in the aftermath of Chapter 403, but available evidence suggests that the purpose of institutional aid has changed. For example, prior to Chapter 403, CSU allowed SUG grants to be used only to cover educational fees. The maximum award therefore equaled the State University Fee, which was $1,428 in 2000-01. In 2001-02, CSU made three important policy changes. It (1) provided awards to students with less financial need, (2) increased its maximum grant amount, and (3) allowed grants to be used for living expenses. In 2001-02, the maximum award increased to $3,600 for a student enrolled full-time for an academic year, which is more than a 150 percent increase in a single year.

State-Funded Institutional Aid Takes Important Decisions Out of Legislative Arena. Whereas the Legislature scrutinizes policy changes related to the statewide Cal Grant program, it cannot exercise the same level of scrutiny for institutional financial aid programs. Yet these institutions are making significant policy decisions—such as altering the amount and coverage of financial aid grants—that affect numerous students. Moreover, these choices can affect different types of students in very different ways.

LAO Recommendation. For these reasons, we recommend the Legislature expand the competitive Cal Grant programs by redirecting $294 million from existing institutional aid programs. This would enable the state to directly offset increases in student fees and assist more financially needy students who currently are not receiving Cal Grant awards. It would also allow the state to guide key policy decisions more directly and with greater transparency.

Key Policy Options. If the Legislature redirects these resources, it would have several issues to consider when designating the additional state funds for financial aid. For instance, the Legislature could redirect General Fund monies to increase:

In assessing its options, the Legislature should consider students' financial need rather than the particular needs of a higher education institution. A statewide financial aid policy would promote consistency and objectivity in helping financially needy students cover higher education costs.

Other Budget-Savings Options Might Have Less Adverse Consequences

Our recommendation above is based on the amount of funding provided in the Governor's budget for institutional financial aid programs. As mentioned earlier, the Governor's budget reflects a total reduction of $31.5 million for these programs. If the Legislature did not want to reduce funding for financial aid, it could consider alternative budget-savings options that would have less adverse consequences for students. For example, in the student fees write-up in the "Intersegmental" section of the Analysis, we recommend the Legislature adopt a consistent, fair, and predictable fee policy, which could yield budget-year savings. The Legislature also could examine relative growth in various portions of UC's and CSU's total budgets over the last several years to determine if more appropriate cuts might be made elsewhere. Finally, in Options for Addressing the State's Fiscal Problem (a companion publication to this Analysis), we suggest several other options for achieving savings in higher education.

Update on UC's and CSU's Efforts to Expand Joint Education Doctoral Programs

During the 2001 legislative session, the Legislature considered a bill—SB 713 (Alpert)—which declared the importance of educational leadership in K-12 schools, colleges, and universities and stated the intent to ensure that a sufficient number of affordable, high-quality opportunities were available for individuals interested in obtaining a doctor of education (Ed.D.) degree. The Ed.D. is one of several types of training programs for K-12 and community college administrators—including superintendents, principals, vice principals, and other central administrative officers, such as budget directors. Although expert opinion varies greatly, the California State University (CSU) maintains that Ed.D. programs can produce more effective K-12 and community college administrators.

During fall 2001, CSU and the University of California (UC) agreed to establish additional joint Ed.D. programs—believing they could address the Legislature's concerns without the need for the enactment of SB 713. In recent months, CSU and UC have established a Joint Ed.D. Board and developed a new set of policies to govern their joint Ed.D. programs. (See box for a description of CSU's and UC's current Ed.D. program capacity.)

Report on New Policies

We recommend the Legislature ask the California State University (CSU) and the University of California (UC) to report during budget hearings on their policies for creating new joint doctor of education (Ed.D.) programs. Specifically, we recommend the Legislature ask CSU and UC to: (1) identify what reductions or funding shifts were required to fund $4 million in planning costs, (2) provide an update on their expectations regarding the number of new programs they would establish and the number of students they would serve, (3) explain why their joint Ed.D. programs require a higher per-student funding level and fee level compared to existing joint doctoral programs, and (4) discuss their efforts to align their new programs to the revised Administrative Services Credential requirements.

The new policies CSU and UC have established for their joint Ed.D. programs represent a noticeable departure from prior policies governing joint doctoral programs. Moreover, these new policies would generate out-year costs that might be greater than the Legislature anticipates. Furthermore, the projected cost of the new joint Ed.D. programs is considerably greater than the costs associated with other major administrator-training initiatives. We recommend the Legislature ask CSU and UC during budget hearings to discuss their recent planning efforts and justify the specific changes made to the policies governing their joint Ed.D. programs. Below we discuss these proposed changes and our concerns with them.

Existing CSU and UC Joint Ed.D. Programs

Currently, CSU and UC offer three joint Ed.D. programs and one joint Ph.D. program in education. They estimate that the three joint Ed.D. programs serve between 45 and 65 full-time equivalent (FTE) enrollments each year. Of these three programs, the largest is the Joint Doctoral Program in Educational Leadership, which serves 35 to 45 FTE students each year and is operated by CSU Fresno and UC Davis. The other two joint Ed.D. programs—one operated by CSU Los Angeles and UC Los Angeles and the other by CSU San Francisco and UC Berkeley—are considerably smaller.

Report on $4 Million CSU and UC Have Designated for Planning. The CSU and UC propose to designate a total of $4 million during the next two years (2002-03 and 2003-04) for the planning of additional joint Ed.D. programs. Of this amount, each system proposes to contribute an equal amount ($2 million). The systems state that the $4 million will be one-time funding provided for planning, program development, and initial start-up costs. During budget hearings, the systems should identify what reductions or funding shifts would be required to obtain the $4 million in planning monies. This information will help the Legislature identify the programmatic implications of shifting the $4 million from current programs to new joint Ed.D. programs.

Report on Systems' Future Expectations. The CSU and UC have not yet decided exactly how many new joint Ed.D. programs they will establish. During preliminary discussions, they proposed creating at least four additional programs. They project that each program would serve approximately 12 new students each year and would be three to four years in length. If they were to establish four new three-year programs, at full capacity they could serve a total of 144 students annually. If they were established as four-year programs, they could serve a total of 192 students annually. The total annual enrollment-related cost for these programs would range from $1.3 million to $1.7 million (based upon 2002-03 marginal cost funding rates). The systems state that most ongoing expenses could be covered through budgeted enrollment-growth funding. During budget hearings, the systems should provide an update on their expectations regarding the number of new programs they would establish and the number of students they would serve. They should also clarify whether they will require any state funding for these programs over the next several years beyond enrollment-growth funding.

Report on New Policy to Fund All Students at UC Rate. Under the new arrangements proposed by UC and CSU, all students in joint Ed.D. programs would be counted as UC FTE enrollments regardless of whether they are taking courses at UC or CSU. Therefore, all students in the program would generate state revenue at the UC funding rate. This revenue would presumably be shared by the systems to cover their joint expenses.

In 2002-03, the proposed UC per-student funding rate exceeds the proposed CSU per-student funding rate by $2,500, or almost 40 percent. Under previous joint Ed.D. arrangements, students were subsidized at the CSU funding rate when they were enrolled in CSU courses and subsi dized at the UC funding rate when they were enrolled in UC courses. The new funding policy deviates from the previous funding policy governing the three existing CSU and UC joint Ed.D. programs as well as joint doctoral programs in other disciplines. The systems state that "the UC funding level was needed to provide an adequate incentive for CSU and UC campuses to collaborate in making these programs a high priority and to ensure appropriate quality." During budget hearings, the systems should justify why they are adopting the UC funding rate for all students, why they are deviating from existing policies, and why such a significant funding change is needed to provide "adequate incentive."

Report on New Policy to Charge All Students UC Fee Rate. Under the new arrangements, joint Ed.D. programs would charge students the UC fee rate for all of their courses. In 2002-03, the total resident fees for UC graduate students exceed the total resident fees for CSU graduate students by almost $3,000, or 50 percent. Under previous arrangements, joint Ed.D. programs typically charged students the UC fee rate for courses taught at (or provided by) the UC campus and the CSU fee rate for courses taught at the CSU campus. Similar to the change in funding policy, the change in fee policy deviates not only from previous joint Ed.D. arrangements but also from current arrangements for other joint doctoral programs. During budget hearings, the systems should explain why they have changed their fee policy to charge students the UC fee rate for all their courses. They should also report on the impact the change in fee policy would have on student access.

Placing Administrator Training in Broader Context— Other Options, Lower Costs

As noted earlier, an Ed.D. program is only one of several training programs designed to improve the preparation and skills of K-12 and community college administrators. Given other training options exist, the Legislature should examine the cost-effectiveness of creating additional Ed.D. programs. For instance, to fund a single student in a three-year Ed.D. program at the proposed rates, the state would incur a marginal cost of approximately $27,000 and the student would be required to pay almost $15,000 in fees. By comparison, the Legislature has recently supported several major new administrator-training programs, which have the potential to benefit many more individuals at much less cost (to both the state and the individual). In addition to these recent efforts, the state has provided ongoing funding since the mid-1980s to support comprehensive administrator-training programs. These too are much less costly than Ed.D. programs.

Established New Training Program for All Principals and Vice Principals. Last year, the Legislature enacted Chapter 697, Statutes of 2001 (AB 75, Steinberg), which established a program to train all 15,000 principals and vice principals serving in public K-12 schools in California. The program is designed to provide K-12 administrators with training, over a two-year period, in six core areas—including school financial and personnel management, instructional leadership and technology, and core academic standards and student assessment. The state has agreed to appropriate a total of $45 million (providing $3,000 per administrator) between 2001-02 and 2003-04. Chapter 697 requires a local match of $1,000 per administrator. California has received $18 million from the Gates Foundation, which will be used to cover the local match. (The Gates Foundation monies will cover the costs associated with training superintendents as well as principals and vice principals.)

Established the Principal Leadership Institute. During the 1999 Extraordinary Legislative Session, the Legislature enacted Chapter 2x, Statutes of 1999 (AB 2x, Mazzoni), which established a new Principal Leadership Institute at the UC Berkeley and the UC Los Angeles campuses. In summer 2000, these two campuses launched a two-year administrator-preparation program designed for highly talented individuals who wanted to become school principals. When fully implemented, the program is to serve 400 students. Each student: (1) receives a scholarship (funded from private donations) to cover all educational fees and (2) must agree to serve four years as an administrator in a California public K-12 school. The program annually receives $500,000 in state funds. In 2000, it also received $7.5 million from a private donation.

In addition to the above UC programs, Center X, based at UC Los Angeles, provides leadership training for K-12 and community college administrators. Also, the New Teacher Center, based at UC Santa Cruz, began a pilot program in 1998 to support beginning principals.

Existing Programs Also Support Administrator Training. In addition to these new programs, the state provides ongoing funding for several longstanding administrator-training programs. In 2002-03, the Governor proposes to provide a total of $7.2 million to support these existing programs—including the California School Leadership Academy and regional School Leadership Centers, both of which provide ongoing, comprehensive support and training for K-12 administrators.

Requirements for Administrative Services Credential Under Review

In examining the systems' new policies, the Legislature should also keep in mind that the Commission on Teacher Credentialing (CTC) is in the process of formally reviewing the requirements for the Administrative Services Credential. The CTC-assembled Administrative Services Credential Task Force is currently reexamining the content and structure of professional preparation programs, placing greater emphasis on an induction program for new principals (and therefore presumably less emphasis on formal theory-based preparation). Given the changes CTC is likely to make to the Administrative Services Credential, the systems should discuss during budget hearings their efforts to align their new programs to the new credential requirements.

In sum, we recommend the Legislature ask CSU and UC to report during budget hearings on their policies for creating new joint Ed.D. programs. These new policies deviate significantly from existing policies governing joint CSU and UC doctoral programs. Most notably, the new policies provide joint Ed.D. programs with a higher funding rate and a higher fee rate compared to previous joint Ed.D. programs and other existing joint doctoral programs. Moreover, the proposed new joint Ed.D. programs would serve fewer students at much higher cost compared to the new administrator-training options the state has recently established and the longstanding administrator-training programs the state already funds.

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