2005/06 Support Budget

Support Budget Proposal — Enrollment/Student Fees/ Financial Aid

2005/06 Marginal Cost of Instruction

For each new full-time equivalent student, the state provides the CSU funding at a marginal cost rate to support instruction and student educational and institutional support services. The current marginal cost rate is based on budget methodology negotiated among the CSU, the University of California, the California Department of Finance, and the California Legislative Analyst’s Office 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 a sufficient base 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 below:

Marginal Cost Program Detail table

To calculate the marginal cost of enrollment growth, current year CSU program area budgets for instructional support, academic support, student services, and institutional support are averaged against current enrollments and then discounted by negotiated deflators. The negotiated deflator percentages were designed to adjust for fixed-costs funding included in the average cost per student that typically are not affected by the annual change in CSU enrollment levels. However, the marginal cost calculation does not recognize increased fixed costs with increased enrollment thresholds. Faculty costs are based on a negotiated student/faculty ratio of 18.9 to 1. The faculty salary is intended to reflectthe average cost of hiring a new faculty member. The average new hire rate for a CSU tenure/tenure-track faculty member in 2003/04 was $58,196. This salary is equivalent to an associate professor between steps 7 and 8 on the CSU 2004/05 salary schedule.

Further, the marginal cost calculation includes a component for instructional equipment that is based on the actual depreciation of equipment at campuses. The instructional equipment depreciation model uses the criteria established by the state for the CSU and the University of California. Depreciation on CSU equipment carries an annual cost of approximately $46 million. This marginal cost component recognizes the portion of costs associated with equipment replacement necessitated by the annual increase in student enrollment.

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 2005/06 marginal cost of instruction methodology is presented as follows.

Calculation Methodology table

Enrollment Growth

The 2005/06 budget plan includes enrollment growth of 2.5 percent or 8,103 full-time equivalent students (FTES). Based on this enrollment growth and the 2005/06 state marginal cost of $6,270 per FTES, the correlating General Fund increase is $50.8 million.

The Higher Education Compact calls for 2.5 percent annual enrollment growth at the CSU through fiscal year 2010/11. The level of growth is consistent with enrollment targets projected on the basis of numerous factors including review of the California Department of Finance-Demographic Research Unit’s enrollment projections, consultation with campus presidents, and reviews of K-12 enrollment patterns. The demand for access to the CSU is strong and growing. From 2004 through 2012, the California Department of Finance projected enrollment demand for the CSU to increase over 100,000 students, with fall term headcounts growing from a projected 418,002 students to a 2012 headcount of 518,110 students.

The CSU adjusted enrollment targets over the past two years to reflect the changes in the state’s economic environment. In 2003/04, the CSU was prepared to admit an additional 7 percent of FTES, but the funded target was lowered to slightly over 4 percent due to budget reductions. In 2004/05, Governor’s Budget cuts of over $239 million from the General Fund required enrollment targets to be reduced 5 percent below the 2003/04 final budget target (revised FTES base: 318,167). The state augmented the final budget by $33.8 million to grow CSU enrollments to 324,120 FTES, a 1.87 percent or 5,953 FTES increase. The CSU chose to lower the enrollment base in order to provide matriculated students “authentic access” and preserve the quality of instruction by providing existing students with needed courses, adequate course loads, and efficient paths to graduation.

Fall Enrollment Projection Headcount table

The following table illustrates funded versus actual FTES enrollment targets from 1995/96 through 2005/06:

Funded Targets vs. Actual FTES table

Based on the current Higher Education Compact, CSU funded enrollment growth will increase 2.5 percent each year through 2010/11. The compact serves as a floor from which the CSU can predictably plan for enrollment growth, manage the admissions process effectively, and ensure students have “authentic access” to courses, programs, and services.

CSU Enrollment Growth table

State University Fee Revenue

The 2005/06 budget plan includes adjusted State University Fee (SUF) revenue associated with a 2.5 percent enrollment growth or an additional8,103 full-time equivalent students, an 8 percent increase in undergraduate and teacher credential program SUF fee rates, and a 10 percent increase in graduate/postbaccalaureate SUF fee rates. Based on CSU fee policy, between 20 percent and 33 percent of all new State University Fee revenue associated with enrollment growth and SUF rate changes shall be used to fund CSU financial aid, which includes State University Grants for students with need and state-mandated fee waivers for eligible students. The 2005/06 budget plan applies 25 percent of marginal cost fee revenue associated with enrollment growth and 25 percent of fee revenue generated from SUF rate increases toward CSU financial aid for a total of $23.3 million. The remaining $78 million in State University Fee revenue will be combined with State General Fund support.

State University Fee (SUF) Revenue table

CSU Student Fee Waivers

Under current law, there are three state-mandated fee waiver programs: the CSU Cal Veteran Waiver for children of disabled/deceased veterans (Education Code 32320), the Alan Pattee Waiver for dependents of deceased law enforcement or fire suppression personnel (Education Code 68120), and the newly established fee waiver for California residents who were dependents of victims killed in the September 11, 2001, terrorist attacks (Education Code 68121). In addition to state-mandated fee waiver programs, other fee waiver programs have been established by trustee policy, California statute, and collective bargaining agreements that include programs applicable to high school students, California residents ages 60 years and older, CSU employees and employee dependents, and graduate and teaching assistants.

The state has not provided General Fund support to fund fee wavier programs since fiscal year 1992/93. However, the CSU has used a portion of funds set aside for financial aid from enrollment growth revenue to support increases in the number of students eligible for state-mandated fee waivers.

Adjustments for changes in the reported number of state-mandated fee waivers have been incorporated in the CSU revenue estimate for 2005/06.

State University Fee Waivers table

Financial Aid-State University Grants, $23,298,000

The 2005/06 Support Budget plan sets aside one-fourth of marginal cost fee revenue from enrollment growth for student financial aid. The CSU uses this revenue to increase the pool of funds available for its State University Grants program. One-fourth of marginal cost revenue associated with the 2.5 percent planned enrollment growth in 2005/06 ($4,319,000) has been earmarked for student assistance.

In addition, one-fourth of the total projected revenue from increases in State University Fee rates will be set aside to address the needs of CSU students with financial need. In addition to increasing the pool of funds in the CSU SUG program, if needed, revenue from this set-aside is also used to fund state-mandated fee waivers for dependents of California veterans, public safety and fire suppression personnel killed in the line of duty, and the newly established fee waiver for California residents who were dependents of victims killed in the September 11, 2001, terrorist attacks (Education Code 68121). For 2005/06, one-fourth of the revenue from an 8 percent increase in fee rates for undergraduates and students seeking teaching credentials and a 10 percent increase in fee rates for graduate and other postbaccalaureate students ($18,979,000) has been earmarked for student assistance.

The proposed 25 percent set-aside of fee revenue from enrollment growth and fee rate increases will be sufficient to accommodate the fee increases encountered by those CSU students who can least afford the cost of attending college. Following is a summary of the total State University Grant need to cover the State University Fee for all eligible students versus Financial Aid-State University Grant funding from 2001/02 through 2005/06:

Financial Aid-State University Grant Funding table

CSU State University Grant Program

The State University Grant program is unique to the CSU and, in recent years, has increased in prominence as a critical source of grant assistance for CSU students who can least afford the cost of attending college. Since its inception in 1982/83, the State University Grant program has provided need-based grants to offset the impact of increased charges for those students with the least resources to cover CSU fees and other educational costs. Student eligibility is determined on the basis of need established in accordance with the federal need analysis methodology. While the State University Grant program funding and the methodology for allocating funds to campuses concentrate on the mandatory systemwide State University Fee, it is important to note that needy students face other increases in mandatory institutional charges and other costs associated with college attendance that are recognized for student financial aid purposes.

Each year campuses supply the CSU Chancellor’s Office with a financial aid database report that is used to document the financial need of CSU students and to determine how limited State University Grant funds are allocated among the CSU campuses. The State University Grant awarding policy was modified effective with the summer 2001 term to provide campuses with greater flexibility to design financial aid strategies that best address the needs of their student population and their enrollment management goals. The metrics for assessing the need for State University Grants and allocating the available fund among campuses remained unchanged.

CSU Historical State University Fee Rates

The CSU systemwide undergraduate, full-time State University Fee per academic year has increased by 47.3 percent over the past 10 years, growing from $1,584 in 1995/96 to $2,520 in 2005/06. The SUF was increased 10 percent at mid-year 2002/03 and an additional 30 percent beginning fall 2003/04. In fall 2004, SUF rates were increased by 14 percent or $288 per academic year. Prior to 2002/03, an increase in SUF had not occurred since 1994/95. Further, SUF reductions of 5 percent occurred in both 1998/99 (for undergraduates) and 1999/2000 (for all students).

The Higher Education Compact calls for fee increases of 8 percent in 2005/06 and 2006/07. Combining these increases with the 14 percent increase in 2004/05, SUF rates for undergraduate students will rise by an average of 10 percent per year over this three-year period. In future years, the compact allows the university to raise fees by up to 10 percent each year. The following graph depicts the CSU State University Fee level changes over the last 10 years:

Undergraduate Fee Levels table

2004/05 CSU and Comparison Institution Student Fees

CSU 2004/05 academic year resident, undergraduate student fees include the systemwide State University Fee and required campus fees. The total systemwide and campus fees average is $2,916. The total is comprised of $2,334 for the undergraduate SUF (6.1 units or more) and $582 for the average campus-based fees that must be paid to apply to, enroll in, or attend the university. The following table lists fee levels by campus:

Resident Undergraduate Fees table

CSU 2004/05 academic year resident, credential, and graduate SUF rates are $2,706 and $2,820 (6.1 units or more), respectively. Nonresident tuition fees are $339 per semester unit and $226 per quarter unit.

The 2004/05 CSU comparison institution academic year resident, undergraduate student fees are provided below. The California Postsecondary Education Commission has historically referenced these institutions for faculty compensation and student fee comparisons. The CSU continues to charge the lowest undergraduate fees among the 15 comparison public institutions. The 2004/05 comparison institutions student fee average is $5,656, and the CSU student fee average is $2,916. The following table and chart list the 2004/05 comparison institution fee levels and the change from 2003/04 fee levels:

Comparison Institution Fee Levels table

Change in Fee Levels chart

The 2004/05 CSU comparison institution graduate and nonresident undergraduate students fees are listed with prior year fee levels in the tables below. CSU average graduatefees are the lowest among comparison institutions. The 2004/05 comparison institutions graduate student fee average is $7,663, and the CSU graduate student fee average is $3,402.

Comparison Resident Graduate Fee Levels table

The CSU 2004/05 nonresidentundergraduate fees are closer to the average of comparison institutions. The 2004/05 comparison institutions nonresident undergraduate student fee average is $14,585, and the CSU nonresident undergraduate student fee average is $13,086, which includes nonresident tuition and CSU systemwide and campus mandatory fees.

Comparison Nonresident Undergraduate Fee Levels table

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Last Updated: January 28, 2005