Analysis of the 2007-08 Budget Bill: Education

University of California (6440)

The University of California (UC) consists of nine general campuses and one health science campus. The Governor’s budget includes about $19 billion for UC from all fund sources—including the state General Fund, student fee revenue, federal funds, and other funds. This is an increase of about $831 million, or 4.5 percent, from the revised current-year amount. The budget proposes General Fund spending of about $3.3 billion for the segment in 2007-08. This is an increase of $192 million, or 6.2 percent, from the revised 2006-07 budget.

Major General Fund Proposals

Figure 1 summarizes the Governor’s proposed General Fund changes for the current and budget years. For 2007-08, the Governor proposes $192 million in various General Fund augmentations, a $25.3 million General Fund reduction to UC’s outreach programs (also known as academic preparation programs) and labor research institute, and a $24.9 million net increase for baseline and technical adjustments. We discuss the proposed augmentations in further detail below.

Base Budget Increase. The Governor’s budget provides UC with a 4 percent General Fund base increase of $117 million that is not designated for specific purposes. The university indicates that it would apply most of these funds to support salary and benefit increases for faculty and staff.

Enrollment Growth. In addition to the base increase, the budget includes a $54.4 million General Fund augmentation for enrollment growth at UC. This would fund an increase in state-supported enrollment of 5,000 full-time equivalent (FTE) students, or 2.6 percent, above the current-year level. The proposed augmentation assumes a marginal General Fund cost of $10,876 per additional student, reflecting a new methodology proposed by the Governor for calculating the marginal cost of serving an additional student.

Research Initiative. The Governor’s budget proposes a $20 million General Fund augmentation as part of an overall research initiative on technological innovation. This amount includes (1) $15 million for the expansion of the California Institutes for Science and Innovation and (2) $5 million to support UC’s bid in a national competition to build a new $200 million Petascale computer (named for the high speed at which it can process information) funded by the National Science Foundation.

Other General Fund Augmentations. The Governor’s budget proposal includes $757,000 in new funding to support additional students in UC’s master’s nursing programs. In addition, the budget includes a $570,000 augmentation to expand enrollment in UC’s Program in Medical Education (PRIME), which is intended to train physicians specifically to serve underserved communities. The proposed budget also includes another $14 million in one-time funds (the same as the current year) for start-up costs to support the UC campus in Merced, which opened in fall 2005.

Student Fee Increases

For 2007-08, the Governor’s budget assumes student fee increases of 7 percent for undergraduates, graduate students, and most professional school students and 10 percent for those in certain law and business school programs. (Student fees at UC are established by the UC Board of Regents.) The assumed fee increases are expected to provide an additional $105 million in student fee revenue. The Governor’s proposal would provide UC full discretion in deciding how to spend the additional revenue.

The Governor’s budget also assumes that the university will receive new student fee revenue resulting from two actions recently taken by the UC Board of Regents. Specifically, the Regents approved (1) a 5 percent increase in the tuition surcharge for nonresident undergraduate students and (2) a $60 temporary surcharge for all students to cover a revenue shortfall resulting from a preliminary injunction against the university in a pending student fee lawsuit. Below, we review the various fee levels for the budget year.

Undergraduate and Graduate Systemwide Fees. Figure 2 summarizes the Governor’s proposed increases in undergraduate and graduate systemwide fees. As the figure shows, the budget assumes an increase of 7 percent in the systemwide fee (educational and registration fees) for undergraduate and graduate students. When combined with average campus-based fees and the $60 temporary surcharge discussed above, the proposed total student fee for a full-time student in 2007-08 would be $7,347 for undergraduates and $9,481 for graduates. In addition to paying systemwide and campus-based fees, professional school students and nonresident students also pay supplementary fees, as we discuss below.

Figure 2 UC Systemwide Feesa Resident Full-Time Students 2006-07 Proposed 2007-08b Change From 2006-07 Amount Percent Undergraduate students $6,141 $6,571 $430 7% Graduate students 6,897 7,380 483 7 a Excludes campus-based fees. b Excludes a $60 temporary surcharge recently approved by the Regents to cover a revenue shortfall from a preliminary injunction against the university in a pending student fee lawsuit.

Professional School Fees. The Governor’s budget assumes $4.7 million in additional revenue from a 7 percent increase in most professional schools fees, with certain law and business school fees increasing by 10 percent. Currently, professional school fees vary by program. For 2007-08, the professional school fee is planned to range from a low of $3,444 for students in nursing programs to a high of $19,107 for students enrolled in certain business/management programs.

Nonresident Tuition. The proposed budget assumes a planned 5 percent increase in the tuition surcharge imposed on nonresident undergraduate students, as recently approved by the UC Board of Regents. Specifically, this surcharge would increase from $18,168 to $19,068. This increase in nonresident tuition for undergraduates is expected to provide about $5.5 million in additional fee revenue in the budget year. The budget assumes that nonresident tuition for graduate students would remain at $14,694.

Intersegmental Issues Involving UC

In the “Intersegmental” write-ups earlier in this chapter, we address several issues relating to UC. For each of these issues, we offer an alternative to the Governor’s proposal. We summarize our main findings and recommendations below.

Consider Different Approaches for Funding and Evaluating Outreach Programs. For the fourth year in a row, the Governor’s budget proposes to reduce General Fund support for UC’s outreach programs, for savings of $19.3 million. (The UC’s budget would still contain $12 million for these programs.) In the “UC and CSU Outreach Programs” write-up in this chapter, we withhold recommendation on the proposed reduction, pending our review of the evaluation of the programs to be submitted in the spring. If the Legislature wishes to restore funding for these programs, we recommend requiring an external evaluation of UC’s outreach programs, rather than continue the practice of asking the university to evaluate the effectiveness of its own programs. We also recommend the Legislature consider an alternative approach for funding and delivering outreach services—a College Preparation Block Grant targeted at K-12 schools with very low college participation rates.

Fund Enrollment Growth Consistent With Demographic Projections and Legislative Marginal Cost Methodology. The Governor’s budget provides $54.4 million to fund 2.6 percent enrollment growth at a marginal General Fund cost of $10,876 per additional FTE student, based on his proposal for a new marginal cost methodology. The Governor essentially uses the same methodology that he used last year in his 2006-07 budget proposal, which the Legislature rejected. In the “UC and CSU Enrollment Growth and Funding,” write-up, we recommend two modifications to the Governor’s enrollment proposal. First, based on our demographic projections, we recommend the Legislature provide funding for enrollment growth at a rate of 2 percent. Our proposal would allow the university to accommodate enrollment growth next year due to increases in population, as well as modest increases in college participation rates.

Second, we recommend the Legislature once again reject the Governor’s proposed marginal cost methodology. We find the marginal cost methodology that the Legislature developed and approved as part of the 2006-07 budget more appropriately funds the increased costs associated with enrollment growth and preserves legislative prerogatives. Using this legislatively determined marginal cost methodology, we recommend reducing the Governor’s proposed UC student funding rate from $10,876 to $10,586. Accordingly, we recommend a General Fund reduction of $13.4 million to reflect our enrollment growth and marginal cost recommendations for UC.

Assume Lower Fee Increase to Maintain Students’ Share of Cost at Current-Year Levels. The proposed budget assumes student fee increases of 7 percent for undergraduates, graduate students, and most professional school students. (Certain UC law and business program fees would increase by 10 percent.) In the “Student Fees” Intersegmental write-up, we recommend that, absent an explicit student fee policy, the current share of educational costs borne by students through fees be maintained in 2007-08. We estimate that this would entail a modest fee increase of 2.4 percent, which is our projection of inflation for the budget year. For a full-time UC undergraduate, this equates to an annual increase of $147.

Standardize Approach for Funding Enrollment in Nursing Programs. The proposed budget includes provisional language requiring UC to increase nursing program enrollment by 57 FTE students. However, in contrast to how nursing enrollment is treated in the California State University (CSU) and California Community College’s budget, the Governor’s proposal does not include this enrollment as part of UC’s overall enrollment growth of 5,000 FTE students. As a result, the new nursing enrollment would not receive marginal cost funding, and the Governor’s budget instead provides the full cost of serving these students as a separate augmentation beyond the regular enrollment growth. In the “Higher Education Nursing Proposals” write-up, we recommend a standardized approach to funding enrollment growth in nursing programs at all three segments. For UC, we recommend the 57 FTE nursing students be counted as part of UC’s overall enrollment growth. This would allow the segment to allocate marginal cost funding to support these particular students. As a result, a separate augmentation for the full cost of these nursing students would no longer be needed. Accordingly, we recommend reducing UC’s appropriation for these students by $621,000. This would leave $136,000 in recognition of the unusually high costs (above the marginal cost) imposed by nursing enrollment.

General Fund Base Increase

Given our projection of inflation for 2007-08, we recommend the Legislature provide a 2.4 percent General Fund base increase, or cost-of-living adjustment, to the University of California (UC). Given the Governor’s budget funds a 4 percent base increase, we recommend deleting $46.7 million from the $116.7 million General Fund augmentation requested in the budget for UC. (Reduce Item 6440-00-0001 by $46.7 million.)

In order to offset the effects of inflation, which erodes the purchasing power of a fixed appropriation over time, the annual state budget typically includes funding to provide price or cost-of-living adjustments (COLAs) for many state programs. It is from these adjustments that programs generally pay for employee salary and wage increases, as well as increased prices for goods and services. In other words, these adjustments are not intended to fund increased workload (such as the expansion of existing services or the establishment of new services), but rather are meant to help pay for existing workload whose costs have increased due to inflation. Although COLAs have customarily been provided to UC in most years, there is no statutory requirement for these payments.

Governor’s Budget Proposes 4 Percent COLA. For 2007-08, the Governor proposes a 4 percent General Fund base increase (effectively a discretionary COLA) of $117 million for UC. At this time, we project inflation in 2007-08 to be 2.4 percent (based on our estimate of the change in the U.S. state and local deflator from 2006-07 to 2007-08). We therefore believe the Governor’s 4 percent General Fund base increase, combined with increased fee revenue, would provide the university with funding well above what is needed to pay for the higher cost of meeting existing workload. For example, UC plans to use some of the new funding to increase salaries beyond inflation, expand research and aid opportunities for graduate students (such as fellowships and research assistantships), and reduce the student-faculty ratio at campuses (meaning offer smaller classes).

Recommend Funding 2.4 Percent COLA. In view of our estimate of inflation for the budget year, we recommend the Legislature provide a 2.4 percent COLA to UC, rather than the Governor’s proposed 4 percent. An adjustment tied to inflation would cost $70 million. Thus, we recommend the Legislature reduce the Governor’s proposed base increase for UC from $116.7 million to $70 million, resulting in General Fund savings of $46.7 million. Under our proposal, the university would still receive sufficient general purpose funding to compensate for increased costs. At the same time, the Legislature could use our identified General Fund savings of $46.7 million (in addition to the savings from our enrollment growth recommendations) to address the budgetary situation or other priorities in higher education or elsewhere.

PRIME

We withhold recommendation on the proposed $570,000 augmentation for the University of California’s Program in Medical Education pending receipt and review of additional information.

The 2006-07 Budget Act included $480,000 in General Fund support for 32 medical students in PRIME at UC Irvine. The purpose of PRIME is to train physicians specifically to practice in underserved communities. The Governor’s budget proposes a $570,000 General Fund augmentation for the program to enroll an additional 38 medical students at the Irvine, Davis, San Diego, and San Francisco campuses—more than doubling the number of students currently in the program. Effectively, this would provide a $15,000 supplement—above the marginal General Fund cost amount provided for all additional students regardless of education level or academic program—for each additional PRIME student. (We further discuss the issue of marginal cost funding in our “UC and CSU Enrollment Growth and Funding” write-up.) According to the university, this supplement is to account for the higher cost of serving medical students. At the time this analysis was being prepared, neither the university nor the administration could provide adequate information to justify the $15,000 per student amount. As a result, we withhold recommendation on the proposed augmentation pending further detail about the request.

Research Initiatives on Technological Innovation

The state’s Master Plan for Higher Education specifies that the University of California (UC) is the primary state-supported academic agency for research. In support of this mission, the state provides funding to UC for various research projects undertaken by university faculty. For 2007-08, the Governor’s budget proposes a $20 million General Fund augmentation for new research initiatives focused on technological innovation. Specifically, the budget includes $15 million to expand the California Institutes for Science and Innovation and $5 million to support UC’s bid to build a supercomputer. In this section, we provide an overview of research funding at UC and analyze the Governor’s proposed augmentations.

Overview of UC Research Funding

The UC is designated as the state’s primary research institution. The research undertaken by UC faculty satisfies both academic and societal needs, as well as generates substantial revenue for the university. For example, UC has received more patents for inventions than any other university in the world. The UC’s research programs, which periodically change depending on priorities and available resources, can range from industrial and agricultural productivity to advances in health care. As we discuss below, some areas of research are in part determined by the sponsor of the research (such as the federal government or a private company), while others are based on the state’s or the university’s own priorities.

Each year, the university receives research funding from the state, the federal government, not-for profit institutions, and for-profit companies. In 2006-07, UC received about $3.4 billion for research from all fund sources, as shown in Figure 3. This amount consists of the following:

• General Fund ($283 Million). The 2006-07 budget included $283 million from the General Fund to support UC’s research programs. Most of these funds are considered general purpose research funding that the university can allocate based on its priorities. Only a small amount ($32 million) is restricted by budget act language for certain research institutes (such as the Medical Investigation of Neurodevelopmental Disorders Institute).

• State Special Funds ($30 Million). The state also provides research funding to UC from special fund sources—mainly revenue generated from special taxes on certain goods. For example, the university recently received about $13 million for breast cancer research from the proceeds of a special tax on tobacco products.

• Federal Funds ($1.8 Billion). Federal funds are the university’s single largest source of support for research, which totals $1.8 billion in the current year. About 80 percent of these funds comes from two federal agencies—Health and Human Services and the National Science Foundation (NSF). The $1.8 billion total does not include the operational funding for the three Department of Energy laboratories managed by UC, which currently totals about $2 billion.

• Other Funds ($1.3 Billion). The university also receives a significant amount of funding each year from private individuals, foundations, and private businesses to mainly conduct research in areas of particular interest to the provider of the funds.

Figure 3 UC Research Funding
2006-07 (In Millions)
	Amount
General Fund	$283
State special funds	30
Federal fundsa	1,800
Other funds	1,287
Total	$3,400
a  Does not include funding received for the operation of the three Department of Energy laboratories managed by UC.

In addition to the above $3.4 billion specifically designated for research, a significant portion of funding for instruction (such as equipment and faculty salaries) also supports faculty research activities.

General Fund Supports Numerous Research Programs and Units. As discussed above, the 2006-07 budget provided a total of $283 million from the General Fund for research at UC. Roughly one-third of this funding is allocated to agricultural research that is coordinated through the Division of Agriculture and Natural Resources at the UC Office of the President (UCOP). Most of the remaining funds are used to support a large number of formal research programs and units that operate on either a (1) systemwide or multicampus level (meaning they serve the entire university system and involve faculty from more than one campus) or (2) campus-specific level (meaning they serve the particular campus at which they are located). Figure 4 identifies some of the major systemwide research programs, as well as various multicampus research units at the university. In addition, the figure also includes a select list of about 80 research units at the individual UC campuses. Although this is not a complete list, it does illustrate the vast array of research units at UC. Figure 4 also illustrates that a number of the different research programs and institutes focus on similar topics and areas of study.

UC Often Adjusts Its Research Priorities. According to the university, an inherent difficulty it frequently faces in allocating research funding is balancing the need to accommodate initiatives in new and promising research areas with the need to maintain support for existing research programs that it believes are important. In an attempt to achieve such a balance, UC states that it periodically reviews its existing portfolio of research programs to determine if any adjustments in the allocation of research funding are needed to accommodate changing priorities. This has sometimes resulted in the merger, creation, or elimination of particular research units and programs, as well as the redirection of the research endeavors within an existing unit or program.

Governor’s Research Proposals

The Governor’s budget proposes a $20 million General Fund augmentation as part of an overall research initiative on technological innovation. This amount consists of two General Fund augmentations:

• $15 million for the California Institutes for Science and Innovation.

• $5 million to enhance UC’s chances of winning a national competition for a Petascale supercomputer funded by NSF.

Below, we make recommendations regarding each of these proposals.

California Institutes for Science and Innovation

We recommend the Legislature reject the $15 million proposed augmentation for the California Institutes for Science and Innovation, because (1) neither the administration nor the University of California could provide adequate justification for the additional funds and (2) existing research funds could be redirected to expand these institutes. (Reduce Item 6440-005-0001 by $15 million.)

For the current year, the 2006-07 Budget Act provided a total of $4.8 million in General Fund support to UC for the operation of four California Institutes for Science and Innovation. These institutes enable UC faculty to work directly with private companies on such issues as information technology, biomedical research, nanotechnology, health care, and traffic congestion. For the budget year, the Governor proposes a $15 million increase in base funding for the institutes, for a total of $19.8 million—a quadrupling in the level of funding. According to the administration, the proposed augmentation is intended to fund advanced technology infrastructure, personnel, and “seed money” to build new research teams.

At the time of this analysis was prepared, the administration and the university were unable to provide adequate information to justify the additional funds for the California Institutes for Science and Innovation. The university simply stated that the institutes are currently underfunded and that the proposed augmentation would move each institute toward a more

fully funded operating budget. As a result, we cannot find a compelling rationale for the $15 million augmentation. More importantly, we believe that if UC considers expanding the operations of the institutes to be a high research priority, then the university can redirect funding from existing research programs that its deems are of a lower priority. (The Governor’s budget essentially maintains UC’s base General Fund research budget at its current-year level of about $283 million.) For these reasons, we recommend the Legislature reject the $15 million proposed augmentation for the California Institutes for Science and Innovation.

Petascale Supercomputer

We recommend the Legislature reject the proposed $5 million General Fund expenditure to enhance the University of California’s bid for a Petascale supercomputer, due to the lack of adequate justification for the proposal and the availability of existing research funds that could be redirected for this purpose. (Reduce Item 6440-001-0001 by $5 million.)

The NSF has recently launched a national bidding process for the design and management of a Petascale supercomputer, which is named for the high speed at which it can process information. Specifically, the foundation plans to invest $200 million for the development of the supercomputer and an additional $100 million over a five-year period for its operation, which is scheduled to begin in 2011. In response to NSF’s announcement, UC—including the federal energy laboratories that it manages—has formed a consortium with the Georgia Institute of Technology and IBM to prepare and submit a proposal to NSF. This consortium is formally called the National Petascale Applications Resource (NPAR). If NPAR is successful in its bid, the Petascale supercomputer would be located at the Lawrence Livermore National Laboratory. (The UC currently operates a different type of supercomputer at its San Diego campus.) The university expects that the outcome of its proposal will be known sometime this summer or fall.

Although NSF does not require a direct match from states as part of the bidding process for the Petascale supercomputer, the Governor’s budget requests a $5 million General Fund augmentation to UC’s research budget to enhance the NPAR proposal. According to the Department of Finance, the administration intends to provide the university with $5 million each year for the next ten years, for a total of $50 million. Although the language in the proposed budget bill does not specifically state that the funds would revert to the General Fund if the university is unsuccessful in its bid, the administration indicates that this is its intent.

Details of Proposal Not Forthcoming. At the time of this analysis, the administration and the university were unable to provide adequate information to justify the proposed $5 million for the Petascale supercomputer. The UC tells us it is not disclosing details of its NPAR proposal in order to remain competitive. As a result, the Legislature will not have an opportunity to review the details of the project it is being asked to fund. Without a proposal to review, we cannot determine the amount of funds that other NPAR members (such as IBM) will contribute from their own resources towards the operation of the supercomputer. More importantly, we do not know what future state funding would be committed by the proposal. Finally, we do not have adequate information to determine if $5 million is the correct amount of support needed.

Existing Research Funds Could Be Reallocated. As previously discussed, the annual state budget provides general purpose research funding that the university allocates among competing priorities. This approach provides significant flexibility and autonomy for UC to pursue research in areas that it considers promising and competitive. In some instances, this may result in reconfiguring existing research programs. In other instances, this may mean eliminating or consolidating existing programs that focus on similar research areas in order to “free up” funds for new initiatives (such as the proposed Petascale supercomputer). We also note that some research projects operate on a specific time frame (a five-year contract, for example), which periodically frees up funds for other research projects.

Given the lack of justification for the proposal and the availability of existing research funds, we recommend the Legislature reject the proposed $5 million in new funding for UC to enhance the NPAR proposal to build a Petascale supercomputer. This would not prevent UC from going forward with its bid.

Improving UC’s Long Range Development Planning Process

Each campus and medical center of the University of California (UC) periodically develops a Long Range Development Plan (LRDP) that guides its physical development—based on academic goals and projected student enrollment levels—for an established time horizon. In a recent report, A Review of UC’s Long Range Development Planning Process, we reviewed the current process used to prepare LRDPs and proposed steps to make the process more transparent and effective. We present the major findings and recommendations of our report below.

The state’s Master Plan for Higher Education essentially promises eligible students—primarily the top one-eighth of public high school graduates—access to UC. As a result, growth in enrollment demand (due to increases in the number of eligible high school graduates, for example) puts pressure on UC to increase enrollment and expand infrastructure to accommodate the additional students. Each campus plans for growth are identified in its Long Range Development Plan (LRDP), which sets upper limits for broad campus parameters—such as the number of students and employees—for 10 years to 15 years into the future. The LRDP may also identify special infrastructure that might be required, such as parking garages, faculty and student housing, and nature reserves.

In developing LRDPs, campuses consult surrounding communities in an attempt to achieve a mutually agreeable plan. In recent years, such agreement has sometimes been elusive, with differences of opinions over traffic, housing, and other potential impacts of planned campus growth. In view of these disputes, our office analyzed whether UC’s LRDP process adequately addresses the impacts that campus growth has on surrounding communities.

What Is an LRDP?

An LRDP, which requires approval by the UC Board of Regents, is a land use plan that guides the physical development of a UC campus. (Although each UC medical center also has an LRDP, our report focused on campus-level LRDPs.) The initial establishment of a campus is guided by an initial LRDP. Subsequent LRDPs for the campus are essentially updates to this initial plan. Campuses prepare LRDPs based on their academic goals and projected student enrollment levels. Thus, an LRDP is an important policy document that outlines a campus’s priorities.

In order to assist campuses in developing an LRDP, UCOP provides general guidelines regarding the organization and components to be included in such a plan. The plan should (1) provide guidance for future structure placement, (2) identify areas of open space, (3) show how people move through the site, and (4) discuss how campus systems for various utilities will accommodate the projected campus population. Beyond these guidelines, UCOP does not impose specific requirements for the content or longevity of an LRDP. As a result, the organization of an LRDP and the process used to develop it often varies across campuses.

Not Subject to Local Land Use Control. As a state institution, UC is constitutionally exempt from local land use control. This means that local government does not have the jurisdiction to reject or oppose a campus’s LRDP or a specific capital outlay project on the campus. In addition, state agencies typically do not review or approve a UC campus’s LRDP. Currently, the Legislature does not provide any formal guidance or oversight regarding the development or implementation of an LRDP.

LRDPs Are Periodically Updated. Although each LRDP has an established time horizon, it does not automatically expire at the end of that horizon. A campus’s plan remains in effect until the Regents approve an updated LRDP for that campus. Figure 5 summarizes the status of each UC campus and medical center’s LRDP. As indicated in the figure, campuses tend to have different time horizon years based on their particular priorities and objectives. The entire LRDP process (from the time a campus begins to develop an LRDP to when it is approved by the Regents) typically takes two to three years.

Environmental Impact Report (EIR) Required for Each LRDP. The California Environmental Quality Act (CEQA) requires that a comprehensive EIR be prepared specifically for the LRDP of a public higher education campus or medical center. The EIR must (1) provide detailed information about a project’s likely effect on the environment (such as traffic), (2) identify measures to mitigate significant environmental effects (such as mitigating traffic impacts by constructing physical improvements like traffic signals or roundabouts), and (3) examine reasonable alternatives to the project. In developing an EIR, CEQA requires UC first to prepare a preliminary EIR for public review and allow at least 30 days for public comment. The UC must evaluate all comments and prepare written responses to them, which must be included in the final EIR. Under CEQA, the Regents—as the “lead agency”—must certify the EIR before approving an LRDP.

Concerns With Growth Levels and Off-Campus Impacts

In recent years, some communities surrounding UC campuses have expressed concern about the impacts of planned enrollment growth. Specifically, they question (1) how much campuses should grow and (2) how much UC should pay for the impacts related to that growth. Below, we examine each of these issues.

How Much Does Each UC Campus Plan to Grow?

Future student enrollment is one of the main drivers of a campus’s LRDP. For example, the number of new academic facilities and housing units depends upon how many additional students enroll at the campus. Thus, a campus will develop an LRDP by first projecting the number of additional students it plans to enroll in future years.

Both Demographic Changes and Policy Choices Affect Campus Growth. Unlike enrollment in compulsory programs such as elementary and secondary schools, which corresponds almost exclusively with changes in the school-age population, enrollment in higher education responds to a variety of factors. Some factors, such as population growth, are largely beyond the control of the state. Others, such as the creation of new graduate education programs, stem directly from policy choices. In general, enrollment growth corresponds to:

• Demographics—Population Growth. Other things being equal, an increase in the state’s college-age population causes a proportionate increase in those who are eligible to enroll in each of the state’s higher education segments. Enrollment projections, particularly for UC, are heavily affected by estimates of growth in the college-age “pool” (18-to 24-year old population). This population has grown modestly in recent years (see Figure 6). Annual growth rates will peak around 2009, and will slow thereafter. In fact, between 2014 and 2020, the state’s college-age population will decline each year.

• Policy Choices and Priorities—Participation Rates. For any subgroup of the general population, the percentage of individuals enrolled in college is that subgroup’s college participation rate. However, projecting future participation rates is difficult because students’ interest in attending college could be influenced by various factors (including availability of financial aid and the attractiveness of job opportunities). In addition, actions to create or expand particular academic programs would increase overall participation.

UC’s Enrollment Plan—Campuses Sometimes Make Their Own Projections. In 1999, UCOP independently developed systemwide enrollment projections through 2010-11 to help guide the university’s academic planning efforts. (The actual enrollment at UC depends largely on particular levels of funding from the Legislature, which may fund a different level of enrollment growth than UC requests.) The UCOP’s 1999 enrollment projections assume that the percentage of recent California high school graduates enrolled at UC will generally remain constant throughout the forecast period. However, the projections also assume that the percentage of adults participating in graduate education programs will increase enough to fulfill the university’s planned expansion of existing and new graduate programs.

Specifically, UC’s plan is that systemwide enrollment—excluding health science students—will increase by 48 percent (or 71,000 additional FTE students) from 1998-99 to 2010-11. Based on these projections, each campus is assigned a long-range enrollment target that forms the basis of its LRDP. However, many of the recently approved campus LRDPs are based on a time horizon that goes beyond the 2010-11 time horizon of the 1999 enrollment plan. For example, UC Riverside’s current LRDP is based on enrollment projections through 2015. For those years after 2010-11, an individual campus—in consultation with UCOP—essentially projects its enrollment based on its own priorities. In other words, the university currently has not made systemwide projections beyond 2010-11. According to UCOP, the university has initiated a process for developing enrollment projections to at least 2015-16.

Year-Round Operations—Accommodating Growth With Existing Facilities. Student enrollment increases do not necessarily require a proportionate expansion of facilities. This is because campuses have unused capacity that can accommodate additional students. For example, operating campuses on a year-round schedule—which more fully utilizes the summer term—is an efficient strategy for serving more students while reducing out-year costs associated with constructing new classrooms. Accordingly, the Legislature has encouraged both UC and CSU to serve more students during the summer term.

In recent years, UC’s summer enrollment has increased. For example, between summer 2000 and summer 2005, summer enrollment at UC campuses almost doubled. However, despite this increase, the summer term at UC serves only 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. Thus, UC could serve tens of thousands of additional students without necessarily expanding its physical development.

Who Pays for Off-Campus Impacts Related to Growth?

When a campus’s enrollment and facilities expand, it can sometimes negatively affect the surrounding environment (such as through increased pollution). Under CEQA, the campus is required to identify and implement measures to mitigate such adverse impacts. As previously mentioned, campuses and their surrounding communities sometimes disagree about the responsibility for impacts occurring outside of the university’s jurisdiction. For example, although a new signal light in the city could manage traffic from campus expansion, the city and campus might disagree about how the cost of that signal light should be shared.

UC’s “Fair Share” Policy. Since 2002, each EIR prepared for an LRDP includes a general statement that the campus will work with the appropriate jurisdiction and contribute its fair share of the improvements needed to mitigate the identified impacts. For example, if the campus is responsible for 80 percent of the traffic on a particular street, then it may decide to contribute 80 percent of the cost for a new traffic signal. However, a campus will only pay its fair share if the responsible jurisdiction (such as a city or county) has (1) established and implemented an appropriate mechanism for identifying and collecting fair share payments from UC and any other developers that contribute to the identified impacts, (2) built the identified improvements, and (3) reached an agreement with UC on a “trigger” point (such as an off-campus intersection reaching a certain level of congestion) when UC will contribute its fair share payment. This means that the responsible jurisdiction must first pay the upfront costs of any such improvements.

Although the university has been including the above fair share payment language in its EIRs since 2002, no UC campus at this time has reached a fair share agreement with a neighboring jurisdiction in accordance to that policy. (This is not to say that campuses have never made any monetary payments to local governments in years past.) As we discuss below, a recent court case increases the need for the state’s public universities to work with local municipalities in paying their share of off-campus impacts.

City of Marina v. CSU Board of Trustees. In 1994, CSU agreed to establish a Monterey campus on a portion of the former Fort Ord military base as part of the Fort Ord Reuse Authority (FORA) Act. (The state Legislature created FORA—which includes Monterey County and the Cities of Monterey, Salinas, Carmel, Marina, and Pacific Grove—to manage the transition of the base from military to civilian use.) The CSU Board of Trustees in 1998 certified a master plan for the new campus and an accompanying EIR, which identified significant environmental impacts to various public resources. Although the Trustees agreed to mitigate those impacts that would occur on campus, they asserted that the mitigation of off-campus impacts was not within their jurisdiction, but rather within the jurisdiction of FORA. Accordingly, the Trustees declined to fund off-campus mitigation measures.

In response, FORA and the City of Marina challenged the Trustees’ decision to certify the EIR (despite the unmitigated effects) as a violation of CEQA. In July 2006, the California Supreme Court reversed an earlier Court of Appeal’s decision by concluding that the Trustees had abused their discretion and thus their approval of the EIR was not valid. Specifically, the Supreme Court ruled that:

• Off-Campus Impacts Must Be Mitigated. The CEQA does not limit the CSU Trustees’ obligation to mitigate or void significant environmental effects occurring only on the university’s own property. Rather the Trustees are required to mitigate a project’s significant effects on the environment.

• Voluntary Payments Are a Feasible Form of Mitigation. If the Trustees cannot adequately mitigate off-campus environmental impacts with actions on campus, then a voluntary payment to a third party (such as FORA) to perform the necessary acts off campus is a feasible form of mitigation.

LRDP Process Lacks Accountability, Standardization, and Clarity

In our review of the process used by UC to prepare and implement LRDPs (as well as the accompanying EIRs) for its campuses and medical centers, we generally found a lack of accountability, standardization, and clarity. This creates unnecessary tension between the university and local communities regarding how much campuses should grow and the mitigation of the environmental impacts related to that growth. Figure 7 summarizes our major findings, which we discuss in further detail below.

Lack of State Accountability and Oversight

As previously mentioned, UC is constitutionally exempt from local land use regulations. Unlike the case with private developers and universities, local government does not have any jurisdiction over a UC LRDP. In addition, no other state agency approves an LRDP and EIR, unless it serves as a responsible agency (such as the California Coastal Commission) for environmental compliance. Moreover, the state does not review or monitor UC’s implementation of the LRDP and the mitigation measures identified in the accompanying EIR. As a result there is very little state oversight over the LRDP process and the actual plan, and there is no formal process for ensuring that UC mitigates significant environmental impacts resulting from campus growth.

Although the Legislature considers funding requests for individual capital outlay projects as part of the state’s annual budget process, it does not directly review LRDPs to determine whether they are aligned to its fiscal and policy priorities from a statewide perspective. (As mentioned earlier in this chapter, the Governor’s budget proposes $503 million in bond funds authorized by Proposition 1D (2006) for 26 capital outlay projects at UC. The budget also includes $70 million in lease-revenue bonds for new research facilities.) This is particularly important given that an LRDP serves as an important policy document that outlines the enrollment and academic goals of a UC campus and lays out the framework and rationale for future capital outlay projects.

Lack of Standardization in Public Participation

Since UCOP does not have specific requirements regarding what shall be included in the LRDP process, there is often a lack of standardization in the degree to which local communities are involved in the planning process. For example, while some campuses (such as UC Santa Cruz and UC Riverside) developed an LRDP committee that included community representatives and local government officials, other campuses (such as UC Davis) did not. We also found that the number of public workshops held during the LRDP process can vary across campuses. In the process of updating their respective LRDPs, the Davis campus held 17 public workshops and the Santa Cruz campus held 5 public workshops. These workshops generally allow a campus to inform the local community on its development of an updated LRDP—such as the different land use options that the campus is considering—and to solicit their feedback.

Minimal Systemwide Coordination in Projecting Enrollment for Recent LRDPs

Some UC campuses have recently updated their LRDP based on a time horizon beyond 2010-11 (the time horizon of the university’s most recent systemwide enrollment plan developed in 1999). For those years after 2010-11, an individual campus essentially develops its enrollment projections based on its own academic goals and locally determined demographic trend rather than systemwide needs. As a result, the campus’s enrollment projections beyond 2010-11 are not coordinated with the other campuses. This is particularly important given that the Master Plan provides admission and enrollment guidelines on a statewide basis. For example, the Master Plan calls for UC (as a whole) to draw its students from the top 12.5 percent of public high school graduates in the entire state (not a particular region).

Campuses Want to Primarily Expand Graduate Enrollment

Campuses generally acknowledge that undergraduate enrollment demand will level out in a few years because of an anticipated reduction in the number of California high school graduates. According to the Department of Finance’s Demographic Research Unit, growth in the number of high school graduates in the state will peak in a couple of years, and then rapidly decline to the point of going negative in 2012-13. Much of the projected growth identified in recent LRDPs is based on campus desires to expand and create new graduate and professional school programs. For example, the Santa Cruz campus is considering creating professional schools in the areas of management, education, public policy, and public media. In general, LRDPs do not explain the rationale for the proposed professional school from a statewide perspective and why it must be established at that particular campus (versus establishing it at another UC campus or expanding an existing program at another campus).

Lack of Clarity in CEQA

In our 1997 report CEQA: Making It Work Better, we examined the entire CEQA process and made recommendations to make the process more efficient and therefore less costly and time consuming for both project developers and public agencies. We found a number of provisions in CEQA where definitions and requirements are unclear, and thus subject to conflicting interpretations. For example, an EIR must include an analysis of the environmental impact for a range of reasonable project alternatives. However, CEQA provides few guidelines as to the kinds of alternatives that must be considered and the level of detail required for each alternative. This has led to analyses of alternatives that contribute little to the decision making of public agencies. For instance, an alternative examined may not be feasible, such as the case where the alternative is development on a site not owned (or that cannot practically be purchased) by the developer.

Under CEQA, an EIR is required when a lead agency finds that a project may have “significant” adverse environmental impacts. While CEQA guidelines provide some guidance as to the circumstances under which a project would normally have a significant effect on the environment, we found that more detailed guidance is needed to provide greater certainty in the application of this concept. In view of the above, several host communities have filed lawsuits claiming that certain UC campuses have not adequately analyzed all possible alternatives or clarified all mitigation measures. For example, a neighborhood group in West Davis argued that the Davis campus violated CEQA by not considering reasonable alternatives to a proposed housing project.

No UC Campus Has Reached a Fair Share Agreement

The UC’s policy calls for payment of its fair share of costs to implement mitigation measures for off-campus impacts. However, as discussed earlier, no UC campus has made a payment to another public agency based on a fair share agreement developed in accordance to this policy. For example, although the Davis campus is in the process of beginning some of the development projects outlined in its 2004 LRDP, it still has not reached an agreement with the City of Davis for its fair share payments.

LAO Recommendations

Based on our review and findings, we recommend (1) increasing legislative oversight over UC’s LRDPs, (2) developing a more standard approach for soliciting public input, (3) projecting enrollment growth based on statewide goals, (4) making better use of the summer term, (5) clarifying and improving CEQA, and (6) requiring a report on UC’s efforts to reach fair share agreements with neighboring jurisdictions.

Greater Legislative Oversight

We recommend greater legislative oversight over the University of California’s (UC) Long Range Development Plans, in order to ensure that campuses’ long-term goals are aligned with statewide priorities. Specifically, we recommend UC provide copies of draft plans to the Legislature as they are made available for public review.

Given that an LRDP plans for the accommodation of long-term enrollment and academic goals, we recommend greater legislative oversight over the development of UC’s LRDPs. Specifically, we recommend UC provide the Legislature with copies of draft LRDPs that are submitted for public review. (Before the UC Regents can approve an LRDP and accompanying EIR, a campus must allow time for the public to review and comment on these documents.) At its discretion, the Legislature could hold hearings to review certain aspects of these draft plans. Moreover, the Legislature could express any concerns about the draft LRDP before it became final. (This, however, would not preclude the Legislature from expressing concerns in the future when the university requests funding for specific projects related to the LRDP.) This process would allow the university to amend the plan as needed to accommodate any legislative concerns.

Some of the relevant issues that the Legislature could examine in its review are:

• How much is the campus or medical center projected to grow and what type of growth is anticipated (such as in new or expanded graduate and professional school programs)?

• What is the rationale for the expected growth? How did the campus or medical center project the anticipated level of growth? Could the additional students be accommodated through better use of the summer term?

• To what extent were local communities involved in the development of the draft LRDP?

• What significant environmental impacts (if any) will the plan have on nonuniversity property? How does the university plan to mitigate such impacts?

We believe that legislative oversight would help ensure that the university’s long-term goals are aligned with the state’s priorities.

Develop Standard Approach for Soliciting Public Input

We recommend the University of California provide campuses and medical centers with more specific requirements regarding the level of public involvement in the long range development planning process, in order to increase the transparency of the process.

As noted earlier, there is a lack of standardization across UC campuses regarding the degree to which local communities are involved in the LRDP process. This can sometimes make it difficult for certain communities to provide input in the development of a campus’s LRDP. Accordingly, we recommend UC provide more specific requirements and guidance to campuses developing LRDPs. For example, the university could require that a certain number of public workshops be held before the Regents review a final LRDP. Moreover, UC could require that prior to developing the LRDP, each campus or medical center hold a series of public meetings regarding its academic and enrollment goals. Such an approach could increase the relevance of public input in the LRDP decision making process. Finally, the university could require that each LRDP planning committee include a certain number of community representatives and local government officials.

Project Enrollment Growth on Systemwide Basis

We recommend the Legislature require the University of California to use systemwide enrollment projections to determine the enrollment levels assumed in each Long Range Development Plan.

We recommend the Legislature require that the enrollment projections outlined in each LRDP be based on a systemwide enrollment plan, rather than the independent projections of an individual campus. In other words, in any given year the sum of the campus enrollment targets should equal the enrollment target for the entire university system (which in turn should be based on statewide goals and priorities). As noted earlier, UC is currently in the process of developing a new enrollment plan. Accordingly, we recommend the Legislature direct UC to provide systemwide enrollment projections through 2020 at budget hearings this spring. In order for the plan to be a useful planning tool for the Legislature, we believe that it is important for the university to explain and justify the assumptions and data used to calculate the projections.

A systemwide enrollment plan would also assist the Legislature in assessing proposals to fund specific enrollment growth levels at UC as part of the annual state budget process. For example, the Legislature may take issue with parts of UC’s enrollment plan and instead find that growth is needed in different programs in order to meet the state’s research and workforce needs (such as nursing) rather than in areas identified by UC. For example, at its November 2006 meeting, the Regents approved the development of a medical school at UC Riverside and a law school at UC Irvine. These plans may not be aligned with legislative priorities, given limited resources.

Better Use of Summer Term

We recommend the University of California campuses make better use of the summer term as a means to accommodate an anticipated increase in the number of students without having to construct new classrooms.

Given the large unused capacity at UC during the summer term, we believe the Legislature and the university 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. In addition, such a strategy helps reduce the significant environmental impacts associated with the construction of facilities. As we discussed in our Analysis of the 2006-07 Budget Bill, steps that campuses could take to increase summer enrollment include (1) offering financial incentives (such as charging lower fees for the summer term and somewhat higher fees for other terms), (2) requiring some summer enrollment at high-demand campuses, and (3) offering courses in the summer that typically fill up quickly during the other academic terms.

Streamline CEQA Process by Clarifying Guidelines

We recommend the Legislature improve the California Environmental Quality Act by clarifying language, improving definitions, and providing better guidelines on what constitutes feasible mitigation measures and alternatives.

As concluded above, CEQA currently provides lead agencies (such as UC) considerable discretion in the EIR process when it fails to provide clear definitions and requirements. For example, the act does not specify the kinds of alternatives that must be considered and the level of detail required for each alternative. Consequently, we recommend the Legislature clarify the terms and requirements of CEQA. For example, we recommend clarifying the scope of the alternative analyses in EIRs, including the reasonable number of alternatives to be considered and the level of detail in the analysis. We also recommend the Legislature provide better guidelines on what constitutes a significant impact and a feasible mitigation measure. (We originally made these recommendations—along with many others—in our 1997 CEQA report in order to make the CEQA process less costly and time-consuming to project developers and public agencies.) Such clarification would help ease some of the tension between UC campuses and their surrounding communities.

Report on Fair Share Agreements

In view of the recent court decision in City of Marina v. California State University Board of Trustees, we recommend the University of California report to the Legislature on what steps it will take to reach agreements with local public agencies regarding the mitigation of its fair share of environmental impacts.

The most contentious issue between campuses and their surrounding communities concerns the mitigation of off-campus impacts. Although UC’s current policy is to work with communities in reaching an agreement for paying its fair share contribution, no campus currently has entered into such an agreement in accordance to this policy. In view of the recent court decision in City of Marina v. CSU Board of Trustees, however, the university has an obligation to negotiate with local public agencies regarding the mitigation of its fair share of environmental impacts. Thus, we recommend the Legislature require UC to report on what additional steps it will take, including changes to the current three-step policy, to ensure that fair share agreements are in fact developed with the appropriate jurisdictions.

We believe it is important for the Legislature to have assurance that there is resolution on the mitigation of off-campus impacts prior to considering related UC capital outlay projects. Depending on the outcome of UC’s report, the Legislature could decide not to approve funding for a UC capital outlay project until the appropriate campus has entered into a memorandum of understanding with the appropriate jurisdictions regarding the mitigation of off-campus impacts associated with that project.

UC Capital Outlay

The budget proposes to spend $573.2 million in bond funds on UC capital projects in the budget year. (Almost all this amount—$503.2 million—would be from Proposition 1D, the bond approved by voters in November 2006.) Proposed spending would support new phases of 15 projects previously funded by the state, at a cost of $216.9 million. (These projects have future costs to complete them of $158.1 million.) The budget also proposes 13 new projects, costing $356.3 million in 2007-08 and $95.5 million in future costs.

Proposition 1D allocated $890 million in funds to UC. After accounting for the monies appropriated in the current year and proposed to be spent in the budget year, there would be $46.9 million remaining. This amount is not adequate to cover the future costs of all projects already authorized and those proposed by the Governor in the budget.

New Projects. Of the 13 new projects, the costliest are for telemedicine/medical education facilities and two energy research facilities, which we discuss later.

Telemedicine Facilities

We recommend deletion of $59 million from the administration’s telemedicine proposal as: (1) the university has not yet presented a specific facility proposal to the Legislature for the Los Angeles campus and (2) the budget includes an unneeded contingency reserve of $24 million. (Reduce Item 6440-304-6048 by $59 million.) We further recommend that the remaining four projects be scheduled and that accompanying provisional language be amended similar to other items.

Proposition 1D, approved by the voters in November 2006, provided $200 million to UC for telemedicine/medical education facilities. The budget proposes to spend virtually all this amount ($199 million) in 2007-08 for five projects—one at each of the system’s five medical schools (Davis, Irvine, Los Angeles, San Diego, and San Francisco). The state would contribute $35 million to each project, with the campuses supplementing these funds in some cases.

As required by Proposition 1D, the proposed projects would “expand and enhance medical education programs with an emphasis on telemedicine.” (Telemedicine basically involves teleconferencing so that medical diagnostic services—particularly by specialists—can be provided to underserved areas.) The budget proposes to expand PRIME, currently at the Irvine campus, to three of the other four campuses with medical schools. The program is geared primarily towards training primary care physicians to work in underserved areas of the state.

The facilities request would renovate existing space and add new space to permit the expansion of the state’s medical education programs and telemedicine capability. The segment has provided specific proposals for four of the campuses, and we recommend approval of those four projects. For Los Angeles, however, there is no proposal. The university has indicated that a proposal may be coming later this spring or early summer. Without a specific capital outlay proposal, the Legislature has no idea what it is buying in terms of the scope or cost of the project. Furthermore, the segment was unable to offer any reason for the project needing to go forward at this time that justified bypassing the normal capital outlay process. For these reasons, we recommend deletion of $35 million proposed for the Los Angeles campus.

In addition, the item which appropriates the $199 million for these projects: (1) includes $24 million in contingency funding, (2) does not schedule the individual projects, and (3) provides the university with more authority over changes to projects than is the case with all its other projects. We recommend the deletion of $24 million in contingency funding and that the four projects be scheduled in the item. We further recommend that the proposed budget bill language be modified to limit the university’s authority over project changes, similar to language included for other higher education capital outlay items.

Alternative Energy Research Proposals

We recommend deletion of the Governor’s request for $70 million in lease-revenue bond proceeds to fund two alternative energy research projects, as the administration has not yet presented specific capital facilities proposals. (Eliminate Item 6440-301-0660.)

The budget proposal includes funding for two alternative energy research projects that would be funded with $70 million in lease-revenue bond proceeds:

• Helios Project. The Helios Project would receive $30 million as the state’s share toward construction of a new, $100 million energy building at the Berkeley campus. (The remaining funding would come from the federal government and private sources.) The Helios project seeks to develop new solar energy technologies.

• Energy Biosciences Institute. The Governor’s budget seeks another $40 million in funding from lease-revenue bonds toward the development and operation of an Energy Biosciences Institute at UC Berkeley. This funding would supplement a $500 million grant that was awarded to the university in January 2007. The Institute would focus on converting biomass materials into fuels and developing other alternative energy technologies. Budget bill language specifies that the scope and cost of this project would be defined by the State Public Works Board.

Recommend Deletion of Funds. While the administration has requested funds for those two projects, it has not presented the Legislature with specific facility requests. That is, the university has not prepared capital outlay budget change proposals which define the scope and costs of the project. As such, the request for funds is premature and we therefore recommend deletion of the funds.

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