2004/05 Budget Development

The instructional foundation of a strong K-12 education is realized in the achievements accomplished in the learning-centered educational environment higher education provides. Professional and technical skills are nurtured and developed at the California State University (CSU) and other institutions of public and private higher education with the goal of producing one of the best-educated, highly skilled workforces in the country. With enrollment surpassing 400,000 students, CSU is the largest, most diverse, and one of the most affordable university systems in the country. The university graduates approximately 77,000 students each year into California’s workforce, and it prepares more students than all other state universities in the fields that make California work: engineering, computer science, business, agriculture, nursing, and education.

The budget challenges CSU faces going into the 2004/05 fiscal year are nearly unprecedented in magnitude. As the university reviews options for managing these challenges, it is important to understand the budget policy CSU adopted over ten years ago.

Following a disastrous downturn in the State’s economy, CSU recognized in 1993 that in order to position the university for the demands of the 21st century, careful attention would have to be paid to forecasting a reasonable expectation of revenue and devising a budget plan that maximized resources received from the State and student fee income. The Chancellor’s Office was charged with developing a budget process that would effectively implement this policy objective, and with creating a practical planning framework that included a strong commitment to constituent consultation.

CSU worked closely with the Governor and Department of Finance in developing The Partnership agreement, setting forth a stable and predictable expectation of financial support linked to a reasonable expectation of accountability. The terms of the Agreement established provisions to maintain the quality of the instructional program, accommodate enrollment demand, insure affordability of pricing,address structural budget deficiencies, and promote expansion and improvement of CSU educational programs to meet the economic and societal needs of the state.

Since 1995, the university worked in cooperation with the Governor andLegislature under the Partnership Agreement to create a reliableframework for accommodating change. This framework allowed theuniversity to accommodate change in the number of students it enrolls,in the resources it received from students and their parents, and in theemphasis placed on instructional programs that best serve the State’sneed, such as teacher preparation, nursing, agriculture andbiotechnology. The framework gives CSU the flexibility to managechange in the contracts it negotiates to recruit and retain faculty, skilledtechnicians, building custodians, admission officers, and librarians; andin the costs it faces from year to year, such as the increased cost ofhealth insurance, workers compensation, and opening new and/orrenovated classrooms, laboratories, offices and libraries. CSU makesthe decisions that accommodate change in partnership with theGovernor and Legislature, and in consultation with the manyconstituencies that work for the benefit of the university. Further, theuniversity used the Partnership Agreement to set the parameters bywhich it can make reasonable and predictable expectations of whatthose changes should entail.

Between 1995/96 and 2000/01, CSU used the Partnership Agreement to make progress on several fronts. The university opened its doors to all eligible students who wanted to receive instruction - initially by streamlining CSU processes to reduce the overall cost of operations and generate one-time annual savings; through State funding for total CSU projected enrollment demand. It increased faculty-represented positions by roughly 2,200 and brought in over 1,600 academic professionals, health care workers, custodians, technology experts, and skilled trades workers to support CSU educational services. CSU increased professional administration and management supervision by 430 positions. The university eliminated the structural deficiency in base funding for regular scheduled maintenance of our classrooms and facilities. It expanded teacher preparation enrollments and training, revitalized our aging technology infrastructure, infused funding for academic programs important to the State agriculture, nursing and biotechnology industries, and increased outreach efforts to improve student academic preparation, community college transfer, and technology-based instruction in classrooms. CSU expanded year round operations at our campuses, opened two new campuses, and developed an improved off-campus site in Stockton.

CSU also held student fees constant throughout this period, and at the State’s behest, fees for undergraduate students were reduced by 10 percent and for graduate students by 5 percent.

The university’s first challenge to the Partnership Agreement occurred in fiscal year 2001/02, in response to looming shortfalls projected in the State’s revenues. In response to this challenge, and the ones that quickly followed in 2002/03 and 2003/04, the CSU budget request was reformulated to reflect the sudden reduction in new State resources and emphasized the need for rapid increases in student fee rates. The university focused its attention on the need to preserve quality, while maintaining its commitment to access. Budgets for programs were reduced or eliminated in all areas of university operations – from employee compensation increases to programs designed to increase the number of credentialed teachers in the State and send our best graduates to teach in low-performing schools. Those resources were redirected to mitigate the loss of State dollars and make available the courses needed for students to progress towards degree.

This leads to the challenge CSU confronts as it prepares for the fiscal year 2004/05.

The Partnership Agreement was created with the recognition that without appropriate levels of revenue, CSU cannot fulfill its Master Plan mission for access - either through continued growth in enrollments or the continued availability of courses needed to progress to degree. CSU has been challenged over the past three years to ignore that postulate and grow enrollments in the face of extreme funding shortfalls and the erosion of base levels of State support. Following efforts by the university to curb and streamline costs over the past 10 years, it is a challenge that can no longer be met. In accordance with the budget policy approved by the Board of Trustees in 1993, it is a challenge that the university should not be expected to meet.

CSU looks to 2004/05 with the expectation that increased State revenues should support the mandatory cost obligations that the university is required to pay. At the same time, CSU must remind the state of the agreement that was forged in 1995 and identify the level of support that could be reasonably expected to continue its Master Plan mission. The governor and legislature must receive a clear message that without appropriate resources, CSU enrollments cannot continue to grow. Instructional quality will suffer. Lecturers will be laid off and course availability will diminish. Tenure faculty can be retained but student faculty ratios will have to increase. Skilled workers and professionals will be lost, and student services will decline.

The following pages explain the mandatory cost obligations and identify the resources that are needed to preserve quality without diminishing enrollment growth. Without these resources, the university must be prepared to take steps to preserve the quality of instruction and the educational experience for as many students as it can. Working with the support of the Board of Trustees and the many constituencies CSU serves, the university will find the resolve to continue its prominence as the nation’s strongest public system for baccalaureate and master’s degree education.

Richard P. West, Executive Vice Chancellor for Business and Finance Patrick J. Lenz, Assistant Vice Chancellor for Budget Development Rodney M. Rideau, Director of the Budget