Executive Summary

The Governor’s budget proposal includes $11.5 billion in General Fund support for higher education in 2009–10. Another $5.7 billion in student fee revenue and local property taxes also provide support for core higher education programs.

Balancing the 2009–10 Budget

Governor’s Proposal

The Governor estimates that his higher education proposal will achieve $1.5 billion of General Fund savings by the end of the budget year. Only about 30 percent of these savings result from actual General Fund reductions to higher education budgets. The majority of the savings come from withholding augmentations that had been built into the administration’s workload estimates and from delaying state payments for some community college costs.

Although not part of his budget solution, the Governor assumes that students fees at the University of California (UC) and the California State University (CSU) will increase by about 10 percent in 2009–10. The Governor proposes no fee increase for the California Community Colleges (CCC).

Concerns With Governor’s Proposal

Fails to Account for New Fee Revenue. The proposed fee increases at UC and CSU would generate almost $300 million in 2009–10. The proposed budget identifies no specific purpose for this revenue, and it is not accounted for in the proposed budget solutions.

Relies Too Heavily on Financial Aid Cuts. The Governor proposes to reduce funding for the state’s Cal Grant financial aid programs by $87.5 million. We think this reduction undermines financial aid expectations that the state has carefully established, and on which students and their families have come to rely.

Continues Disconnect Between Budgeted and Actual Enrollment. The Governor establishes enrollment targets that are many thousands of students lower than the segments’ own enrollment plans. The disconnect between budgeted and expected enrollment makes it impossible to determine how much of the universities’ enrollment is supported by the state, thus undermining accountability.

Recommend a Better Approach for Achieving General Fund Savings

Reduce UC and CSU General Fund Support to Reflect Availability of New Fee Revenue. We recommend that the segments retain enough of the new fee revenue to expand their campus–based financial aid programs in order to cover increased fee costs for aid recipients. The remaining new fee revenue should be used to offset state costs for the universities.

Reject Proposed Cuts to Cal Grant Programs. The General Fund savings made possible by the universities’ fee increases would be more than enough to substitute for the Governor’s proposed financial aid cuts.

Increase University Enrollment. We think the universities should enroll many thousands of students more than is reflected in the Governor’s budget. Increasing these enrollment targets would restore the link between budgeted and actual enrollment levels, lock in substantially higher enrollment levels than those proposed by the Governor, and ensure a level of enrollment capacity that upholds the Master Plan’s promise of access.

Other Issues

Proposed Consolidation of Higher Education Commissions. We generally support the administration’s proposed decentralization of financial aid administration and restructuring of the California Student Aid Commission (CSAC) as an executive department. We, however, recommend against including the California Postsecondary Education Commission (CPEC) in such a consolidation. The CPEC’s role should be reformed, but it should remain independent of the executive branch.

Capital Outlay Proposals. We recommend changes to some of the capital outlay proposals in the Governor’s budget in order to better target resources and ensure legislative oversight.

Community College Nursing Programs. We analyze the implementation of recent legislation, and recommend an additional change that would improve nursing program completion rates.

UC Retirement Program. We raise concerns about a looming shortfall in funding for UC’s Retirement Program and recommend an alternative to the Governor’s proposal.