2004/05 Support Budget

Executive Summary

Three-Year Budget Summary

Three-Year Budget Summary by Program

Revenue Calculations

Executive SummarySince 1999, the California State University has developed budget requests based on a Partnership Agreement with the Governor, supported through the legislative budget process, that includes the following funding commitments.

  • Four percent increase to the State General Fund base,
  • Funding for enrollment growth consistent with access under the Master Plan at the agreed-upon marginal cost rate adjusted annually,
  • An additional one percent increase to the State General Fund base to help eliminate the annual budgetary shortfalls for deferred maintenance, instructional equipment, instructional technology and libraries that must be addressed over several fiscal years,
  • Funds for debt service related to capital outlay,
  • Funds for annuitant benefits,
  • One-time funding for high-priority needs, and
  • Funding for new or expanded special initiatives or programs.

CSU commitments under the partnership include the following goals annually assessed by State administration:

  • Improve access and the transition from high school to college,
  • Improve quality of teacher preparation and meeting teacher demand,
  • Improve transfer and articulation,
  • Improve institutional productivity and efficiency, and
  • Improve academic experience.

In 1999/00 and 2000/01, the State was able to meet and exceed Partnership funding commitments. In 2001/02, 2002, and 2003 the State was unable to meet all Partnership funding commitments due to a disastrous economic downturn, which is projected to extend into fiscal year 2004/05. Nevertheless, it is important that the State remain mindful of the financial commitments needed to fulfill the CSU Master Plan mission and the corresponding commitments and accountability measures that were forged in the Partnership Agreement.

Partnership Agreement 2004/05 Funding Calculation

Although economic uncertainty continues, the 2004/05 CSU budget request identifies funding derived from the Partnership Agreement, which translates to a $263.9 million General Fund base increase to support CSU educational programs and services. This increase is comprised of $239.3 million in new state appropriations and $24.7 million in student fee revenue associated with state-supported enrollment growth. Following is a summary of funding sources.

Executive SummaryGeneral Fund Increase, $239.3 million

Four Percent General Fund Increase, $103.3 million

The Partnership Agreement provides an annual increase of 4 percent over prior year General Fund appropriations to the CSU. The prior year General Fund appropriation is adjusted to remove one-time allocations, lease bond payments, and deferred maintenance payments and to add the projected funding required for 2003/04 employer-paid retirement cost increases before the 4 percent calculation is made. Revenue from an annual 4 percent increase in State General Fund support is provided under the Partnership Agreement to sustain the quality of CSU educational programs.

One Percent General Fund Increase for Long Term Need, $25.8 million

A one percent increase in base General Fund appropriations is requested under the Partnership Agreement for long-term budget need. This funding provides for expenses that require funding obligations that cannot be addressed in a single budget year. These include costs for deferred maintenance, technology, and libraries.

State Share of Marginal Cost Funding for Enrollment, $58 million

Executive SummaryThe Partnership Agreement stipulates the State will fund all projected enrollment growth at the marginal cost of instruction per full-time equivalent student (FTES). The CSU budget request identifies a 3 percent increase of 10,047 FTES for fiscal year 2004/05 enrollment growth. The Partnership Agreement funds CSU enrollment growth at the full marginal cost of instruction based on methodology approved by the Legislature in 1996. The $58 million State share of these costs is determined by reducing the total marginal cost rate calculated for the fiscal year by the estimated student contribution of State University Fee revenue. The full marginal cost of instruction for 2004/05 is $7,496 per FTES. The State share of this cost is $5,773 per FTES.

The State’s share of CSU marginal cost is determined by discounting the gross marginal cost per full-time equivalent student (FTES) by the percentage share of State University Fee revenue to the gross General Fund operating budget as appropriated in the Budget Act. The State’s share of marginal cost funding in 2002/03, 2003/04 and 2004/05 are summarized below.

The State’s share of marginal cost funding for 2004/05 has diminished as a result of considerable enrollment growth in 2002/03 and 2003/04, as well as increases in the State University Fee levels during this period. In concert with the reduction in percentage State’s share of marginal cost funding, there has been in increase in the percentage share of marginal cost funding supported from student fee revenue. For each additional student CSU enrolls, the State provides funding at marginal cost to support instruction and student educational and institutional support services. The current marginal cost rate is based on budget methodology the CSU, the University of California, the Department of Finance, and the Legislative Analyst’s Office negotiated at the request of the Legislature. The negotiated marginal cost rate is a reflection of previous budget allocations to the institution and does not reflect a needs-based calculation of the marginal cost of instruction. This negotiated rate is expected to provide funds to sustain enrollment growth at comparable levels of service received by students in the previous fiscal year. The program cost factors included in the marginal cost calculation are presented in detail in this document.

General Fund Buyout of Student Fee Rate Increase, $52,179,000

The Partnership Agreement states the State University Fee can increase annually by the percentage change in California Per Capita Personal Income (CA-PCPI). The California Department of Finance identified the change in the CA-PCPI for fiscal year 2004/05 budget development as 3.4 percent. However, in the past state policy has provided that student fee rates during periods of severe economic distress may be adjusted up to 10 percent, which is the basis for the 2004/05 student fee buyout calculation. The 2004/05 General Fund buyout of State University Fee revenue (in the following table) does not include one-third of total gross fee revenue that would have been used to fund student financial aid as required by CSU fee and financial aid policy.

2004/05 General Fund Buyout of State University FEE (SUF) Revenue

State University Fee Revenue, $24.7 million

Three Percent Enrollment Growth

Revenue associated with 3 percent enrollment growth—10,047 FTES—is included in the budget plan for 2004/05. This enrollment increase is a reflection of instructional demand based on CSU enrollment projections prepared by the Department of Finance. Of the revenue projected from enrollment growth in 2004/05, $5.8 million will be available to increase grant aid to students in accordance with CSU financial aid policy. The remainder is used to satisfy the CSU revenue requirement for marginal cost of enrollment funding and to support CSU educational services.

Other Partnership Commitments

Debt Service Related to Capital Outlay and Dental Benefits for Annuitants

The Partnership Agreement provides separate General Fund appropriations to specifically fund the cost of increases in CSU debt service related to capital outlay (lease revenue bond payments) and dental benefits for CSU annuitants. The California Department of Finance (DOF) uses projections from the State Treasurer’s Office to determine lease bond payment requirements for the fiscal year. CSU provides the number of annuitants eligible for dental benefits and DOF calculates the cost requirements based on expected dental premium rates, which are expected to increase effective January 2004.

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Jo Ann Lumsden
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Technical Contact

Last Updated: December 8, 2003