| Appendix
Enrollment Growth
 The
Budget Act of 2003 included budget trailer bill legislation
(AB 1756) indicating the Legislature’s intent to preclude
any state General Fund support to CSU and UC for enrollment
growth in 2004/05. This directive is difficult in an era of
ever increasing enrollment demand. In 2004/05, the Department
of Finance projects enrollment growth for the CSU to be 3%
above current budgeted enrollment levels. To meet this projected
enrollment demand at the marginal funding rate per full-time
equivalent student (FTES) approved by the Legislature, CSU
needs:
- $69.5 million to fund 3% enrollment growth (10,047 FTES)
- 5.8 million to fund the associated increase institutional
financial aid
for needy students
Marginal cost funding for enrollment growth addresses the
following areas of need:
- Instruction
- Instructional Support
- Instructional Equipment
- Academic Support
- Student Services
- Institutional Support
- Financial Aid
Campuses determine, through consultation with constituencies,
how to best direct marginal cost resources within these program
areas to achieve enrollment targets. Year after year, the
impact of Tidal Wave II is felt among the campuses of the
university. According to data compiled by the Department of
Finance in 2002, the CSU is expected to grow to over 513,000
students by 2011.
To accommodate this growth each year, during an academic
admissions process that occurs prior to the enactment of the
state’s budget, an assessment of actual and projected
enrollment data and trends is made in consultation with campus
presidents to establish enrollment targets. As the chart above
indicates, in six of the past seven fiscal years CSU has not
only met, but exceeded its enrollment targets—demonstrating
the great demand by eligible students for enrollment at the
CSU.
In response to state pressures on funding, CSU has already
made provisions to reduce 2003/04 enrollments by over 9,000
FTES by limiting Spring and Winter admissions. The university
recognizes the direction by the state through the trailer
bill language to halt increases in enrollment growth, but
it must be acknowledged that the demand for enrollment access
continues—as demonstrated by the 41,000 more applications
in March 2003 over the number received in March 2002. The
university will take the necessary steps to effectively manage
its current enrollment level, protect the quality of instruction,
and respect the Legislature’s directive; however, the
CSU believes the university and the state will be breaking
their promise to Californians with these actions.
 The
state provides funding for enrollment growth using the marginal
cost funding methodology developed by the CSU, University
of California, Department of Finance, and Legislative Analyst’s
Office in 1996. This methodology takes into account specified
budget factors and funded enrollment growth on an FTES basis
using general fund dollars and student fee revenue.
The marginal cost funding approach serves the university
well as a dependable and predictable source of revenues the
university can use to plan for their burgeoning enrollments
with flexibility and efficiency. The importance of this critical
component of the Partnership Agreement within the overall
funding plan of the university has been magnified in recent
years as the state economy has declined, reductions in base
budget operations have occurred, and student fees have increased
dramatically.
Compensation
 The
Budget Act of 2003 included budget trailer bill legislation
(AB 1756) indicating the Legislature’s intent to preclude
any state General Fund support to CSU and UC for compensation
increases for 2004/05. However, in a competitive statewide
and national marketplace, it is critical that CSU offers salary
and benefit packages that assist efforts to recruit and retain
highly qualified, motivated staff. CSU competes for qualified
employees in local and nationwide private and public sector
employment markets. The ability to offer a competitive compensation
package is critical to CSU’s ability to recruit and
retain faculty, staff, and management employees who contribute
to CSU higher education excellence. The CSU Board of Trustees
recognizes compensation for faculty, staff, and management
as a key element of the university’s success. The CSU
2004/05 Support Budget includes:
- 4 percent ($102.1 million) compensation increase for
faculty and staff effective July 1, 2004. The actual distribution
of the compensation increase would be determined by individual
collective bargaining agreements negotiated with employees.
The cost of a 1 percent increase is based upon salaries and
wages budgeted by campuses for 2003/04, which are then adjusted
by the 2003/04 employer-paid retirement increases of $115.1
million, effective July 1, 2003. The CSU receives a mid-year
appropriations adjustment from the state to cover the cost
of the change in employer-paid retirement rates.
 Over
the past several years, the university has not been able to
address the State-recognized lag in faculty salaries based
on compensation at public comparison institutions, and CSU
did not receive any funds for employee salary increases in
2003/04. Funding for compensation increases in 2004/05 will
enable CSU to offer competitive salaries and retain faculty
and staff in a highly competitive employment market.
Long-Term Budget Need
CSU makes efforts annually to address its long-term budget
needs— areas of expense that are too costly, or that
have historical unfunded deficits that are too large to finance
in a single budget year. The Partnership Agreement identifies
funds equivalent to 1 percent of the CSU General Fund budget
annually to increase support for areas of long-term need.
Unfortunately, Partnership funding support has been eliminated
in the past three budgets enacted by the state and CSU has
been required to reduce existing levels of support previously
dedicated to areas of long-term need. Consequently, deficiencies
in areas such as deferred maintenance, library collections,
and technology support have grown significantly.
 The
total budget investment necessary to address long-term budget
needs far exceeds the modest increase provided by 1 percent
annual growth in CSU General Fund support. The amount of the
total investment required for the budget year is determined
by the annualized cost of the historical budget deficits and
the yearly cost of ongoing needs such as replacement of fully
depreciated instructional equipment.
The 1 percent commitment for 2004/05, $25.8 million, represents
only one-fourth of the total investment required to fund total
budget year long-term need. However, these funds will help
make improvements in the following areas of the university’s
budget:
 Technology:
Network Equipment and Operations The build out of
the telecommunications infrastructure to serve students and
bring the institution greater efficiency requires $69.7 million
for related equipment and media elements that are vital components
for network operations. The media component provides the cabling
in the inter-building duct banks being constructed through
the Capital Outlay Program. The equipment, or network electronics,
facilitates an integrated computing environment with required
client/server applications for our classrooms, laboratories,
and operations.
CSU will use $5 million of its long-term funding to complete
the establishment of a $20 million base to finance the equipment
costs for this build out over four years. The first installment
of $10 million was funded in the 2001/02 CSU Support Budget.
An additional $5 million was proposed in the 2002/03 budget
but subsequently was deleted as part of a one-time reduction.
Once the $5 million for the 2002/03 budget is restored and
an augmentation of $5 million is approved as part of the 2004/05
budget, the total augmentation of $10 million will complete
the $20 million need. After the equipment and media purchases
are complete, these funds will be redirected in subsequent
years for the amortized costs of equipment and infrastructure
refresh and replacement on a three-year basis as identified
in the university’s technology plan to remain current
with network technology advances. The CSU technology infrastructure
plan was formally presented during the state budget process
in 1999/2000 and has received state funding for capital and
operating implementation in each of the past three fiscal
years. This investment recognizes that technology is essential
to CSU’s academic, financial, human resource and student
service programs.
Libraries Structural budget deficiencies
in campus libraries have grown as state funding dropped during
the early 1990’s economic downturn. CSU calculates a
structural deficiency of 132,000 volumes annually for library
books, serials, and periodicals based on standard formulas.
The cumulative cost to remedy this deficiency (since 1990/91)
is estimated at $86 million. The university needs a permanent
base of $12 million in order to halt and close the $86 million
deficit.
 The
“deficit” this funding gap creates is best viewed
from the standpoint of the libraries’ collections. The
inability to purchase the full range of new books deemed basic
to the curriculum creates holes in the collections. When students
go to the stacks to find books on a particular subject, they
often find that the books are too old to be useful. With restored
funding, more current books can be purchased, but the cost
of acquiring out of print books to fill the holes is significantly
more expensive than had they been purchased upon publication.
In fiscal year 2000/01, the CSU used $3 million of its long-term
commitment provided by the Partnership Agreement for systemwide
electronic library resources, reducing the unfunded annual
need to $9 million. No additional funds have been provided
to address this ongoing need. CSU is requesting $9 million
for campus libraries for this purpose.
For 2004/05, of the $9 million being requested,
- $7 million will be allocated to campuses — $6 million
for expansion and update of the collections of books, periodicals,
and serial subscriptions as well as to acquire other non-print
resources, such as sound recordings required to support
academic programs, $1 million for programmatic factors and
special acquisition needs determined on a campus by campus
basis, and
- $2 million will be allocated to systemwide programs for
electronic information resources. This funding will provide
further expansion of the Electronic Core Collection of bibliographic
and full-text resources, for continued growth and enhancement
of systemwide information access through the Pharos system
of World Wide Webbased unified information access, and for
other projects designed to increase effective use of information
resources. With this funding, the annual need for libraries
will be addressed for the first time in a decade.
Deferred Maintenance CSU deferred maintenance
remains an area of significant budgetary deficiency. Deferred
repairs were scheduled for work at one point, but due to project
cost, timing, and/or lack of available resources these scheduled
repairs were deferred to subsequent years. Historically, the
CSU has also used the term to describe or include the delayed
replacement of building systems that have exceeded their useful
life as part of the funding deficiency.
Between fiscal years 1994/95 and 1999/00, the state and CSU
provided permanent base budget resources for ongoing maintenance
support to address funding deficiencies. However, during the
6-year period, the state supported only $61 million in one-time
funds to address the deferred maintenance backlog. In 2000/01,
the CSU used long-term funding provided by the Partnership
Agreement to reduce the backlog by $2.8 million on an annual
basis. Unfortunately, no funds were available to further reduce
the backlog in 2001/02, 2002/03, or 2003/04. Consequently,
not only has further reduction of the backlog been halted,
but inflation and the continual aging of buildings havecaused
the maintenance repair and replacement need to significantly
increase. The university requests an augmentation of $6.7
million for 2004/05 to renew its effort to address this serious
backlog.
Outreach: Student Academic
Preparation
 Over
60% of the nearly 40,000 first-time freshmen admitted to the
CSU require remedial education in English, mathematics or
both. These 25,000 freshmen all have taken the required college
preparatory curriculum and earned at least a B grade point
average in high school. The cost in time and money to these
students and to the State is substantial. Moreover, these
students, having done the right things in high school, are
confused when they find out after admission to CSU that they
need further preparation. Particularly important to California
is that a disproportionate number of these students needing
remediation are from populations who have been underrepresented
in higher education.
CSU is requesting funding for outreach initiatives that will
address 11th grade early assessment of readiness for college
English and mathematics, bridge the gap between high school
standards and college expectations in order to decrease the
number of incoming college who require remediation in English
and/or mathematics, and identify approaches for helping high
school seniors who need additional preparation to meet CSU
placement standards. In total, this effort will require $12.5
million and principally supports the following activities:
- Early Assessment - $3.2 million
This joint public school/CSU program will provide all college
preparatory high school juniors with an opportunity to get
an early signal about their preparation for college mathematics
and English. For those who are not quite proficient in English
and mathematics, there is the senior year to improve their
skills and knowledge. For others who have taken and completed
the college preparatory curriculum with a B average and
who are assessed as proficient, there will be no need to
take additional admission or placement tests for CSU.
- CSU Campus Early Assessment and Academic Preparation
Program - $2.3 million
CSU has developed an early assessment program, Early Assessment
Program (EAP) for 11th Grade Students, which incorporates
the CSU’s placement standards into existing high school
standards tests in augmented English and mathematics California
Standards Tests (CST). The California State University’s
Early Assessment Program (EAP) is the result of an extraordinary
collaborative effort between the California State University
(CSU), the California Department of Education (CDE), and
the State Board of Education (SBE). CSU is also working
with public school leaders to identify approaches for helping
high school seniors who need additional preparation to meet
CSU placement standards. The Academic Preparation Program
(APP) for 12th Grade Students, a set of senior year programs,
will be based in all California public high schools and
will address directly the college preparation needs of those
seniors assessed as eligible for admission to CSU but not
ready for college-level study.
 In
2003/04, CSU allocated to each campus $100,000 to fund a campus
Early Assessment and Academic Preparation Program coordinator
and administrative costs associated with the 11th grade early
assessment and the 12th grade academic preparation programs.
An additional $100,000 per campus, a total of $2.3 million,
is requested to provide sufficient administrative support
to campuses to ensure adequate coordination of CSU’s
12th grade experience program with California’s 944
comprehensive public high schools.
- CSU Student Tutors - $5.3 million
This request funds CSU student tutors to help middle and
high school students who need assistance in strengthening
precollegiate English and mathematics skills. This level
of funding, an amount equal to the level of support CSU
previously provided in support of this program through 2002/03,
will train approximately 3,000 CSU students to become tutors.
In addition to its emphasis on raising skill levels in English
and mathematics, CSU student tutors will encourage middle
and high school students to take more rigorous courses,
assist them to succeed in those courses, and raise their
educational aspirations.
- High School Faculty Training to Teach High School English
Course - $1.7 million
A task force under the aegis of the CSU English Council
is developing a curriculum and teacher-training materials
for an expository reading and writing course to be offered
to high school students in their senior year. High school
administrators and representatives of the California Department
of Education have indicated that CSU will need to train
high school English teachers to teach the expository reading
and writing course. Therefore $75,000, totaling $1,650,000,
will be allocated to twenty-two CSU campuses (CMA will not
receive funding) to work with their schools of education
and local high schools under the aegis of the CSU English
Council to train high school English teachers to teach the
expository reading and writing course developed by the CSU
English Council.
ACR 73 Implementation
 In
the California State University and across the country, there
is serious concern about the increasing numbers of temporary
faculty, as opposed to permanent (tenured and tenure-track)
faculty, in institutions of higher education. There is growing
alarm that recent hiring trends in higher education, necessitated
by budget deficiencies, have upset the appropriate balance
between tenured/tenure-track faculty and lecturer faculty.
The trend is important because tenured and tenure-track faculty
bear the primary responsibility for student advising, program
development and revision, and participation in shared governance.
When their proportions decline, the quality of these efforts
also wanes.
In response to legislation passed in May 2001, ACR 73 (Strom-Martin),
the CSU Academic Senate, the California Faculty Association,
and the CSU Office of the Chancellor, developed a plan to
increase the percentage of tenured and tenure-track faculty
over eight years. The final report and implementation plan
contains the following features:
- Sets a goal to achieve 75 percent tenured and tenure-track
faculty to 25 percent lecturer faculty, measured in terms
of Full-Time Equivalent Faculty (FTEF) systemwide,
- Declares that the goal is the joint responsibility of
the CSU administration, faculty, and the state,
- Annual funding requirements for this plan range from
$4.8 million to $35.6 million over the eight year period,
- To achieve this goal, the CSU must conduct between 1,800
and 2,000 annual searches for new tenure-track faculty,
- The state needs to provide expanded funding for recruitment
and hiring, so CSU can compete in the national faculty marketplace
and,
- Provides compensation funding for new positions at least
equivalent to the average of current CSU employment offers.
In response to this trend and concerns raised by the Legislature
in ACR 73 (Strom-Martin), the 2004/05 CSU budget plan includes
a request for $35.6 million to implement the first phase of
an eight-year comprehensive effort to increase the percentage
of tenured and tenuretrack faculty, the plan includes:
Currently, the proportion of permanent faculty has declined
to approximately 63 percent of the total full-time equivalent
faculty (FTEF) positions. (FTEF is the unit of measure most
typically used to express this ratio; it is the standard used
by the California Community Colleges in achieving their target
ratio.) The university’s goal is to achieve a proportion
of 75% over eight years without jeopardizing the employment
status of current lecturers, the CSU will need to add new
tenure-track faculty beyond those required by projected enrollment
growth. Thus the proposed plan requires additional state funding
on an annual basis - starting with an initial phase-one implementation
cost of $35.6 million, and annual increases thereafter ranging
from $4.8 million to $12.4 million. Most of this funding would
cover the compensation costs of new, permanent faculty positions
and the recruitment and hiring costs associated with these
new positions. While the CSU would like to move faster, the
number of individual search processes that can be reasonably
managed in an academic year is limited. In the past year,
the CSU conducted slightly more than 1,150 faculty searches.
The ACR 73 plan would require CSU to conduct between 1,800
and 2,000 annual searches-a significant challenge given the
already heavy workload of CSU faculty and academic administrators.
Off-Campus Centers
 Off-campus
centers are recognized as effective and efficient alternatives
to building whole new campuses to accommodate student growth
statewide and in key regions. Off-campus centers provide regular
academic degree programs in geographic areas that cannot be
served adequately by existing CSU campuses and often reflect
partnerships with other higher education segments, especially
the California Community Colleges. In order to establish new
off-campus centers, compelling evidence must be provided to
demonstrate substantial demand for academic programs that
cannot be met by the regional campus or by other public or
private higher education institutions in the area. As cost
effective alternatives to whole new campuses or restricted
access to higher education, off-campus centers should be a
priority of the state. This budget requests approximately
$3 million to support new fixed cost requirements at three
campus offcampus centers: Bakersfield-Antelope Valley, Fullerton-El
Toro, and San Bernardino-Coachella Valley.
 Public
support for off-campus centers has often been the key impetus
for their development. The financial and civic commitments
communities have made and the support these centers generate
in the community are the core ingredients that ensure enrollments
at these facilities will be sustained over time. Just as the
communities and the universities have made major investments
in the establishment of offcampus centers, the state shares
a responsibility for the continued operation of a permanent
facility once enrollment thresholds have been met. Traditionally,
the state has recognized that there are fixed as well as variable
costs associated with enrollment thresholds at off-campus
centers.
Prior to fiscal year 1993/94, the fixed costs supporting
the operational and facility space needs of the centers were
funded by the state as ancillary support for the CSU academic
program. Since that time, enrollments at CSU campuses have
been growing at a pace that will soon outstrip current system
capacity. CSU has implemented several management policies
and procedures to accommodate all eligible students including
year-round operations, extensive use of evening and weekend
course offerings, as well as the use and development of offcampus
centers. CSU assumes all variable costs for these centers
until they reach the 500 FTES threshold, as outlined in California
Postsecondary Education Commission (CPEC) standards. Once
enrollment exceeds 500 FTES, the centers are eligible for
permanent status and must be funded for associated fixed cost
increases.
 Upon
achieving permanent status at the 500 FTES threshold, there
is general recognition by the CSU and the state that fixed
costs related to satisfying the additional academic, student
services, and facilities requirements—including additional
personnel—must be funded. CPEC must review these costs
as well as the core instructional value of the permanent center.
Additionally, there is generally strong community support
from local civic and governmental agencies associated with
these permanent centers, and the fixed cost requirements typically
include economic development and joint-use projects that benefit
the academic mission of the center and the region it serves.
In January 2000, the CSU Board of Trustees adopted policies
for the establishment of CSU off-campus centers with an enrollment
threshold of 500 FTES and the expansion of existing centers
above the 500 FTES threshold (REP 05-99-04). These policies
included the expectation that campuses would be responsible
for the fixed and variable cost enrollment needs of up to
500 FTES. These costs are borne by the campus through enrollment
growth funding and academic and administrative staffing assigned
from the home campus for program support. The additional fixed
cost need at the 500 FTES threshold, including outlays for
acquisition, operations, and maintenance of facility space,
cannot be supported through the enrollment growth funding
received from the state on the margin. Marginal cost funding
from the state for enrollment growth discounts the fixed cost
support needed to provide educational services above existing
patterns of enrollment. Absent funding for these fixed costs
above the 500 FES threshold from the General Fund, campuses
would be forced to redirect resources from students at the
main campus to these centers. In an era of tight budgets,
this would be yet another cut in academic programs at our
main campuses and a clear disincentive to explore partnerships
and off-site locations to serve students.
Quality of Education
 This
budget plan contains the restoration of the net funds that
were reduced during the 2003/04 budget year. This plan outlines
the restoration of the following:
- 2003/04 Net Fiscal Impact of $304 million, less $122.9
million that is being requested as other specific restorations
for a total of $181.1 million in 2004/05.
For fiscal year 2003/04, the CSU was funded for a 4.3% increase
in enrollment or 13,782 full-time equivalent students (FTES).
Under the Partnership Agreement this funding amounted to a
General Fund augmentation of $90.9 million or $6,594 per FTES.
At the same time the university was assessed a net General
Fund reduction of $394.4 million, consisting of a $326.1 million
reduction from the Governor’s January Budget and a subsequent
reduction by the Legislature in the final budget of an additional
$69.5 million. These General Fund cuts included significant
reductions to specific program areas, such as student services
(-$53.2 million), academic and institutional support (-$58.1
million), student outreach (-$12.6 million), and an increase
to the student-faculty ratio (-$53.5 million). To mitigate
some of these reductions, student fees were raised by 30%
in July 2003. This additional fee revenue amounted to $167.0
million, net the set aside of one-third of all new fee revenue
for financial aid purposes.
 The
compounding of these factors and existing budget deficiencies
have begun to affect the university’s ability to provide
the high quality, and affordable education to the citizens
of California. Looking at CSU’s budget in terms of funding
per FTES, as in the following chart, over the past three fiscal
years CSU has received less funding per FTES while enrollments
continue to soar and operating costs increase. Also, the funding
components for enrollment growth are shifting dramatically,
with a higher dependence on student fees as the General Fund
contribution is reduced.
To help mitigate these reductions in General Fund dollars,
the CSU has been forced to raise fees. Student fee increases
cannot match General Fund reductions dollar for dollar. Given
the unique nature of our mission and the composition of the
university’s student body, students cannot be asked
in good conscience to pay more and receive less. Thus, it
is essential CSU receives additional General Fund dollars
to fund enrollment at a level that is commensurate with the
demand placed upon the university.
 When
looking beyond the pure economics of General Fund reductions
and increased student fees, the quality of education is at
issue. As resources are removed from the budget, greater demands
for service and access are added, and operating costs such
as health benefits, workers’ compensation and energy
costs increase, the quality of the education provided by the
university begins to suffer. As funds are reduced and costs
go up, services must be reduced, lecturers and professors
are asked to teach more, equipment is used beyond its usual
lifespan, class sizes increase, course sections are eliminated,
time to degree increases, and there is diminished access to
educational opportunity. Restoring 2003/04 budget cuts in
areas of critical importance to quality will enable the university
to continue its role as a leader in student-focused higher
education and as the leading source of California’s
skilled and professionally trained workforce. |
