THE CALIFORNIA STATE UNIVERSITY The California State University Budget

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					                                            THE CALIFORNIA STATE UNIVERSITY




                             The 2002/03 California State University Budget

The 2002/03 Governor’s Budget for the California State University (CSU) makes access to higher education its top
priority. The proposed budget provides a net increase of $82.3 million in the budget year, including full funding for a 4%
increase in enrollment and continued expansion of year-round operations. The budget also includes targeted reductions in
the current year and budget year, and as such must be considered within the context of the state’s overall fiscal condition.


                                            State Faces $12.5 Billion Deficit

Due to rising unemployment, slowing personal income growth, and a significant decline in capital gains and stock
options, state revenues have fallen well short of expectations. The state budget proposed by Governor Davis identifies a
budget shortfall of $12.5 billion, including deficits in the current fiscal year of $3 billion and in the budget-year (2002/03
fiscal year, beginning 7/1/02) of $9 billion.

Faced with this funding gap, the proposed budget uses a variety of strategies to balance revenues and spending, including
spending cuts and deferrals, revenue accelerations, asset sales, and loans from special funds. The budget’s basic strategy
reflects an assumption that the current funding gap is temporary, resulting from a recession that is expected to be mild and
short-lived.

The budget also takes into account the $2.5 billion in mid-year reductions proposed by Governor Davis in November and
adopted by the Legislature in late January.


                                        Proposed CSU Budget Protects Access

Based on the funding provided in the governor’s proposal, the CSU’s budget plan identifies the following priorities:

· $87.9 million (including student fee revenue) to support projections of a 4% enrollment increase, an increase of 12,030
full-time equivalent students (FTES).

· $1.35 million to fully fund year-round instruction at one additional campus, Chico. The proposed budget preserves the
principle of funding state-supported summer operations at the full marginal cost rate.

· $22.38 million for a 1% increase in employee compensation, subject to collective bargaining.

· $21.02 million to allow the system to meet mandatory cost obligations (health benefit premium increases, new space,
and property insurance increases).

· $5 million to support required equipment for the CSU’s Integrated Technology Strategy initiative.
The 2002-03 CSU Budget
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For the eighth year in a row, the budget does not raise student fees. However, unlike recent years, it does not provide the
funding necessary to “buy-out” such an increase ($27.8 million was requested in the Trustees’ budget for this purpose).
The proposal also includes three targeted reductions in CSU’s budget: $6.5 million in the Education Technology
Professional Development Program; $14.5 million in excess financial aid funds provided in prior years when fees were at
a higher level (which amounts to a reduction in the State University Grant); and a $5 million reduction in the Cal-Teach
Teacher Recruitment Program. The budget also continues the $20 million mid-year reduction for natural gas costs and a
$9.5 undesignated reduction, both of which were part of the governor’s November reduction package. In addition to these
budget reductions, CSU expects energy costs to increase by $24 million in 2002-03, leaving the system with a budget year
“hole” of $41 million.


                           Capital Outlay Budget Consistent With Trustee’s Priorities

On the Capital Outlay side, the budget provides $258.8 million from future general obligation bonds, including $110.4
million for the continuation of 20 previously approved projects at 15 campuses, $128.4 million for 10 new projects at 9
campuses, and $20 million for minor projects systemwide. In addition, CSU projects (at San Francisco, San Marcos, and
Los Angeles) are accelerated and included in the governor’s economic stimulus package under consideration by the
Legislature.


                                                      The Message

The CSU appreciates the commitment the Administration has shown in the January budget proposal to access
during this exceedingly difficult year. However, continuing deficiencies exist in the CSU budget, including lags in
faculty and staff compensation; long-term deficiencies in libraries, instructional equipment and deferred maintenance; and
unfunded operational costs – including an estimated increase in electricity costs of $24 million in 2002-03. It is therefore
critical that the current level of funding be maintained, and further cuts not made in CSU’s budget, should the overall state
condition continue to erode.

As the budget proceeds through the subcommittee process towards the release of the May Revise, the CSU’s priorities for
increased funding will be employee compensation and, as needed, increased access through additional funding for
enrollment.




                                                    ACTION ITEMS

                                      · Maintain Governor’s Budget For CSU

                    · Educate Members on Existing Deficiencies and Ongoing Budget Cuts

                                    · Increase Compensation for All Employees

                            · Additional Funding for Enrollment Growth, As Needed