Chancellor's Report

to the Board of Trustees

January 29, 2003

As Chair Farar said, we are entering into new territory that higher education in this country has not experienced in the past. We have this tremendous enrollment pressure — Tidal Wave II — coming from the high schools of our state. At the same time this country is experiencing very difficult economic problems. AGB call this double-edged challenge the "double whammy."

In our meetings in December and in another specially called meeting with our presidents, we have focused on the budget, the budget, and the budget. We are talking about how to preserve quality in this system. We are talking about putting together a plan to manage the CSU during the "double whammy" in a different way than this board managed the CSU in the early 1990s.

This board made a decision in December to adjust the CSU's fees, and I cannot say how very important that decision was because that was the foundation for this plan. I know that it was done with short notice, but we worked hard to get everyone's input on the decision.

Knowing that that decision had been made was very important because it will allow us to serve all the students that we have right now and we're going to get to June 30th. We don't think that we will have to lay anybody off for the remainder of this year.

Now, the high-risk part is trying to read the tea leaves about what the legislature is going to do, because our presidents have begun the process to send letters to the new students that we will welcome on our campuses this next year.

The governor has made a set of budget recommendations that have a negative component and a positive component. The negative part of the recommendation is that we are facing a gross reduction of $447 million from our budget. On the positive side, the governor put $150 million of enrollment funding into the budget and he has anticipated additional fee increases of 25 percent for undergraduates. The bottom line is we are still essentially looking at a $260 million dollar cut.

Now in order to manage that cut we are going to have to very carefully manage this system. And it is going to be very difficult to manage the instruction and the service side across the entire university. But we're going to count on the governor's budget. We have to count on the governor's budget, including the fee revenue and the enrollment revenue. If we can do that, it will almost be a miracle, but we will be able to continue to provide access with quality for our students. I think that that is very important because this system saw a loss of about 50,000 students in the early 1990s. And I think that was a setback to this state — a setback to our economy and a setback to people.

We can manage this budget if we get the governor's request. The risk side is that we could be in big trouble next fall if we don't get the governor's budget and to try to offer the number of classes and sections to all those students. What doesn't work in universities is to enroll the students and not be able to offer the classes and the sections. It just crams up the system. It takes people longer to graduate. They take courses that they don't need because they can't get courses that they need. And that's the instructional management side that we're going to have to watch very closely.

Now, we're going to ask this board to work even harder. We're going to ask the System Budget Advisory Committee to meet every month. All segments of the CSU are represented on this committee, including labor, academic senate, students, presidents, provosts and vice presidents, business and finance. We're going to ask this board's Finance Committee to meet every month from now until at least May. Thirdly, we're going to have a budget summit. We're going to invite our campus presidents, the Academic Senate chairs of all of our campuses, the Associated Students presidents on each campus, and the executive committees of both the Statewide Academic Senate and the CSSA to come and look at the different choices and advise us on the tough choices, because there is going to be pain, I guarantee you that.

I was in Arizona this past weekend for a meeting. California State University is not the only university system in this country that is going through this. Arizona used to pride itself at having the lowest in fees in the United States. Now the former chairman of the Board of Regents in Arizona, who was just elected Governor of Arizona, has proposed a fee increase of $1000 on a base of $2500. That's pretty significant. My counterpart in Maryland has called an emergency board meeting of the Maryland University System for next week to increase fees retroactive to January 1st by 15% for the Maryland system. Those are some of the kinds of things that are going on around the county. Ohio State is going to be increasing their fees 20%. They increased their fees 34% last year. I think though, the risks are worth taking if we can continue to provide the kind of access that are necessary to meet the Master Plan and the needs of California citizens. So we will keep you informed as we go through this.

Lastly, one very unfortunate situation occurred on one of our campuses, and I have tried to keep you informed through email and fax. We had a terrible incident last week at San Jose State University. We had no information that there was any animosity or problems between the two fraternities. But there was an incident that occurred at a pool hall early in the day, and the participants agreed to meet at midnight out of town at a park to settle it. So we saw upwards of 100 students, not only ours, but from other institutions that came together, and one of our students was killed. President Caret called me right away when it happened and I've tried to keep the Chair and members of the Board informed. The fraternities that were involved have been suspended. President Caret is working with counselors with all of the students there, and working with the inter-fraternity council to make sure that there are no other instances of getting even or those kinds of things. The whole situation is very unfortunate. We have to be very careful about our information because this is a police murder investigation. But if you have any questions, I'm sure Bob will be glad to respond.

Chair Farar, that concludes my remarks.