Some of the California State University’s (CSU) current year fiscal stability was contingent on the state of California receiving at least $10 billion of the Federal Stimulus package dollars for general purposes. As of last week, it has been announced that this is not likely to happen and therefore the CSU will likely be faced with an additional $50 million cut for fiscal year 2009-10.

The budget package enacted in February by the Legislature and the Governor included a requirement for the State Treasurer and the Director of the Department of Finance to make a determination, on or before April 1st, as to whether the state would receive at least $10 billion of federal funds by June 30, 2010 that would be available to offset state General Fund expenditures. A determination that this $10 billion would be reached would trigger two budget actions: (1) the State Controller would restore $948 million cut from specific programs (including $50 million from the CSU) and (2) the rate increase on personal income taxes would drop from 0.25 percent to 0.125 percent. Together, these actions would reduce the state’s General Fund balance by about $2.8 billion for the 2009-10 fiscal year.

The State Treasurer and the Finance Director last Friday announced their joint determination that the $10 billion threshold will not be reached. This determination means that the CSU will experience the $50 million “contingent” reduction in its 2009-10 budget.

While this now means that campuses and the system will have to manage further cuts this does leave one less decision be resolved in the uncertainty of what CSU faces for 2009-10. Understandably if the Treasurer and Finance Director had reached the opposite conclusion and not moved forward with the trigger, the state’s General Fund condition would have worsened by $2.8 billion. This, combined with the Legislative Analyst’s recent report of an $8 billion revenue shortfall would have meant a need for the Legislature and Governor to find at least $10.8 billion of new revenues or spending reductions. Under such circumstances, a restoration of our $50 million probably would have been very short-lived for the CSU.

For more information on the $10 billion trigger, visit the Department of Finance’s webpage.