Analysis of the 2006-07 Budget Bill Legislative Analyst's Office February 2006

Intersegmental: Year-Round Operations at UC and CSU

Operating University of California (UC) and California State University (CSU) campuses on a year-round schedule-which more fully utilizes the summer term-is an efficient strategy for serving additional students with existing facilities. In this write-up, we (1) review actions the state has taken to promote summer expansion, (2) provide an update on UC’s and CSU’s efforts to expand summer operations, and (3) identify issues for the Legislature to consider in regard to further summer expansion.

Various state policies and statutes promote year-round operations in higher education. For example, the 1960 Master Plan for Higher Education recommended year-round operations at campuses and state support for summer sessions. More recently, the Legislature has strongly encouraged the University of California (UC) and the California State University (CSU) to serve more students during the summer term by implementing year-round operations. 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 to reduce their time to degree. It also offers faculty greater flexibility because they can select when to work among more terms without increasing their overall workload.

Key State Actions Toward Fully Implementing Year-Round Operations

In a prior report, Year-Round Operation in Higher Education (February 1999), we discussed various state actions concerning the implementation of year-round operations. In recent years, the state has taken three major steps toward the full implementation of year-round operations at UC and CSU. Figure 1 summarizes these steps, which we discuss in further detail below.

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 terms. 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 academic terms. In 1998-99 and 1999-00, the state made a series of decisions consistent with its intent to fund all enrollment growth, regardless of term, at the same funding rate. As we discussed earlier in this chapter, the state funds enrollment growth at UC and CSU based upon the “marginal cost” imposed by each additional full-time equivalent (FTE) student for additional faculty, teaching assistants, equipment, and various support services.

Established Consistent Fee Policy and “Bought Down” Summer Fees. The next action the state took to expand summer enrollment was to reduce the summer fee rate to the regular fee rate charged in other terms. 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. The 2000-01 Budget Act included a total of $33.7 million in ongoing General Fund support-$13.8 million for UC and $19.9 million for CSU-to compensate the universities for revenue they would forgo by reducing summer fees at their campuses. Based on summer enrollments at that time, this gave (1) UC the equivalent of $2,163 per student for 6,381 FTE students and (2) CSU $2,417 per student for 8,232 FTE students. The 2002-03 Budget Act provided an additional $1 million to UC to buy down fees for additional enrollment in the university’s summer sessions.

Provided Supplemental Funding to “Fully Convert” Some Summer Sessions. As a result of Chapter 383, UC and CSU campuses received state funding to “buy down” the fees of existing summer students. However, the resulting funding per student was still less than the marginal cost support provided for regular enrollment growth. The segments asserted that they needed the full marginal cost amount in order to enhance the quality of their summer terms to be comparable to other terms. Providing this additional summer funding to support existing summer students-meaning those students whose summer fees were bought down-at a particular campus is typically known as “fully converting” the campus to year-round operations.

In 2001-02, the state provided a total of $33.1 million in supplemental funding-$20.7 million to UC and $12.4 million to CSU-to fully convert three UC campuses (Berkeley, Los Angeles, and Santa Barbara) and four CSU campuses (Fullerton, Long Beach, San Diego, and San Francisco). (As we discussed in our Analysis of the 2002-03 Budget Bill [page E-190], CSU decided to use fee-buydown monies provided in 2001-02 to fully convert five additional campuses-Dominguez Hills, San Bernardino, San Jose, San Marcos, and Stanislaus-and some existing students at the Sacramento campus.) The supplemental funding was provided in addition to a separate funding allocation provided by the state for enrollment growth (regardless of term) at all campuses. For example, the 2001-02 Budget Act also included $55.7 million in General Fund support for 3 percent enrollment growth at CSU.

In the following year (2002-03), the state provided another special allotment to fully convert additional university campuses to year-round operation. The 2002-03 Budget Act included a total of $8.6 million from the General Fund to support existing summer enrollments at UC Davis ($7.4 million) and CSU Chico ($1.2 million). As was the practice in the previous year, this funding was provided separately from enrollment growth funding to serve additional students at all campuses. Since 2002-03, the state has not provided funding to fully convert additional UC and CSU campuses to year-round operations.

Although supplemental funding for existing students is not strictly necessary for summer enrollments to grow, the state decided to provide it as an incentive to expand summer operations at UC and CSU as rapidly as possible. For example, the 2001-02 Budget Act made the supplemental funding (of $33.1 million) contingent on the campuses’ meeting minimum summer 2001 growth targets (700 additional FTE students at UC and 400 additional FTE students at CSU). Failure to meet these targets would trigger the reversion of a proportionate share of the summer appropriations. The 2001-02 Budget Act required the universities to report to the Legislature on whether they met their enrollment targets. The supplemental funding provided to UC and CSU in 2002-03 for summer operations was similarly linked to growth in summer enrollment.

Update on Summer Enrollment

UC Summer Enrollment Has Increased

Figure 2 compares summer 2000 and summer 2005 FTE enrollment at eight general UC campuses (excluding the new campus in Merced). This includes both the four “full conversion” campuses (those that received full marginal cost support for summer enrollment) and the four “partial conversion” campuses (those that received state funding only for the fee buydown).

As Figure 2 shows, total summer enrollment at UC’s four full conversion campuses doubled from summer 2000 to summer 2005, for an increase of almost 12,000 FTE students. Each of these campuses exceeded its respective summer enrollment target that was established when the state provided supplemental funding to the campus as an incentive to serve more students during the summer. Total summer enrollment at the four partial conversion campuses has also grown substantially (by 71 percent). In fact, all partial conversion campuses have increased summer enrollment by a greater percentage than one of the full conversion campuses (Berkeley).

Despite the above increases in summer enrollment at UC, the summer term still serves only a fraction of the fall enrollment level. Figure 3 compares the number of FTE students served in summer 2005 with the number served in fall 2005. As shown in Figure 3, the summer term at UC serves one-fifth the number of students as the fall term. In other words, UC’s campuses operate in summer at only 20 percent of their fall levels.

CSU Summer Enrollment Has Declined

Figure 4 compares FTE enrollment in summer 2001 with summer 2004 at different campuses (excluding Channel Islands and Maritime Academy, which received no fee buydown funding and have no extensive summer program). (Unlike UC, CSU was unable at the time of this analysis to provide complete enrollment data for summer 2000 and summer 2005.) As shown in the figure, summer enrollment at the 15 campuses authorized to receive full funding has actually declined by 37 percent (or about 14,000 FTE students) from summer 2001 to summer 2004. (As we discussed in an earlier write-up, total state-supported enrollment for the entire academic year at CSU declined in 2004-05.) During the same period, however, summer enrollment at campuses which receive partial state funding-only to buy down fees-increased by 44 percent. Put another way, campuses that receive supplemental funding from the state as an incentive to serve more students in the summer are in fact serving fewer students. On the other hand, campuses that do not receive such funding for the summer are serving more students.

Figure 5 summarizes the number of FTE students at CSU served in summer 2004 and fall 2004. As indicated in the figure, the summer term at CSU serves only 9 percent of the number of students as the fall term. There are, however, two full conversion campuses (East Bay-previously known as Hayward-and Los Angeles) whose summer terms serve over two-fifths of the fall enrollment levels.

Issues for Legislative Consideration

As we discussed earlier, the state has taken several critical steps toward implementing year-round operations at all UC and CSU campuses. Despite some of these efforts, summer enrollment at some campuses has not significantly increased. In fact, summer enrollment at most “fully converted” CSU campuses actually declined, with some no longer operating a summer session. At the same time, summer enrollment has increased at most CSU campuses that received no supplemental funding (nonfully converted campuses). In addition, the summer term at many UC and CSU campuses are operating far from full capacity.

In view of the above, we believe that it is an important time for the Legislature to consider whether (1) supplemental funding should be provided to fully convert additional campuses to year-round operations and (2) additional efforts should be made to encourage more students to enroll in the summer. This issue of summer capacity is particularly relevant as the Legislature deliberates the Governor’s education bond proposal to provide $7.9 billion to UC and CSU over the next decade for capital projects.

Should the State Provide Funding to Fully Convert Additional Campuses?

In determining whether to provide additional funding to fully convert additional University of California (UC) and California State University (CSU) campuses to year-round operations, we believe the Legislature should consider (1) recent summer enrollment trends and (2) the effectiveness of earlier supplemental funding provided to UC and CSU in prior-year budgets.

Currently, there are four UC campuses (Irvine, Riverside, San Diego, and Santa Cruz) and six CSU campuses (Bakersfield, Fresno, Monterey Bay, Northridge, Sacramento, and Sonoma) that are not fully converted to year-round operation. In general, full conversion has been interpreted as providing campuses with supplemental funding to enhance summer sessions (for example, hiring more full-time faculty and providing additional student services), with the objective of increasing summer enrollment. When the state fully converted specific UC and CSU campuses in the past, the supplemental amount made up the difference between the fee buydown amount and the full marginal cost rate for existing summer students.

As shown by the increase in summer enrollment at nonfully converted campuses, supplemental funding is not required for summer enrollment to grow. In other words, recent enrollment trends cast doubt on the effectiveness of such funding. However, past practice has been to provide the supplemental funding to UC and CSU as an incentive for them to expand their summer sessions. We estimate the cost of converting the remaining campuses using the above methodology would be roughly $20 million for UC and $7 million for CSU.

However, summer enrollment data for 2004 suggests that CSU has roughly $7 million in its base budget that the state provided specifically for summer operations that is not being used for that purpose. These funds should be considered available to support the conversion of the university’s remaining nonfully converted campuses. Specifically, the state provided (1) about $5 million in 2001-02 to expand summer enrollment at CSU Fullerton and (2) about $2 million in 2002-03 to expand summer enrollment at CSU Chico, for a combined total of $7 million. As shown earlier in Figure 4, however, neither campus served any students in a state-supported summer program in 2004. (As previously mentioned, at the time this Analysis was being prepared in early February, CSU was unable to provide enrollment data for summer 2005.) This suggests that CSU has sufficient funding in its base budget to fully convert all its campuses (excluding Channel Islands and Maritime Academy, which do not operate extensive summer sessions) and does not need additional funding for the conversion. In addition, we have identified General Fund savings throughout this chapter relative to the Governor’s budget proposal that could also be redirected to support the expansion of year-round operations at the remaining UC campuses.

If the Legislature decides to provide supplemental funding to fully convert additional campuses to year-round operations, we recommend it adopt similar accountability provisions as in the past. Such provisions would protect the Legislature’s priority to expand summer enrollments. For example, funding for any conversion should be provided separately from enrollment growth appropriations. We also recommend making summer-expansion funding contingent on campuses meeting minimum summer enrollment growth targets. Moreover, the existing summer FTE students at the campuses proposed for full conversion should not be counted towards meeting the segments’ state-supported budgeted enrollment target. Rather, the enrollment targets should be “rebenched” to account for these students.

How to Encourage Better Utilization of the Summer Term?

We believe that the University of California and California State University should continue to take steps to increase enrollment during the summer term, including providing financial incentives to students and requiring some summer enrollment at high-demand campuses.

Given the large unused capacity at both UC and CSU during the summer term, we believe the Legislature and the segments should continue to explore ways to increase enrollment during the summer term. This is because better utilization of the summer term is a more cost-effective strategy for accommodating new enrollment growth than building new facilities. Below, we discuss steps that campuses could implement to encourage students to enroll during the summer:

• Offer Financial Incentives. Financial incentives can encourage students to enroll in the summer term. For example, campuses could charge lower fees for the summer term, which could be offset by somewhat higher fees for the other terms. Another incentive could be to cap summer fees at a particular number of units, thereby encouraging students to enroll in more units during the summer at no additional cost. In addition, campuses could offer fee rebates to seniors who graduate at the end of the summer rather than returning in the fall. The UC Berkeley campus did this in summer 2000.

• Require Some Summer Enrollment at High-Demand Campuses. As we discussed most recently in our report, Promoting Access to Higher Education: A Review of the State’s Transfer Process (January 2006), some campuses do not have the capacity and resources to admit all eligible applicants that apply to them. For example, many UC campuses (such as Los Angeles and Berkeley) and some CSU campuses (such as San Luis Obispo) are unable to accept all eligible applicants. If such high-demand campuses required students to attend some summer terms, they could accommodate more students. Summer terms, then, would essentially “free up” more enrollment spaces and increase access to high-demand campuses.

• Increase Access to High-Demand Courses. According to UC, the primary reason why many students enroll in summer courses is to complete required courses that they were unable to enroll in during the fall, winter, or spring term due to limited space. Campuses should view the summer term as an opportunity to offer courses that typically fill up quickly during the other academic term. Increasing access in this way can reduce a student’s time to degree.

• Offer Priority Housing and Registration. Some CSU campuses offer students priority housing and priority registration for the fall term if they enroll in the summer term. For example, CSU San Francisco, where housing facilities are in great demand, offers priority housing and priority registration to new students who start in the summer (rather than the fall).

In conclusion, we believe that the Legislature should continue to take steps to encourage UC and CSU to serve more students during the summer by implementing year-round operations. At the same time, the segments should be held accountable for increasing their summer enrollments as envisioned by the Legislature. More importantly, summer sessions should be maximized to full capacity before the authorization to construct new classrooms and teaching laboratories for the purpose of accommodating anticipated enrollment growth.