2006/07 Support Budget

Uses of Revenue

The 2006/07 California State University Trustees’ Support Budget recommends an expenditure plan based on estimated revenue from the compact agreement. The expenditures outlined below address the university’s minimum needs for the 2006/07 fiscal year and includes mandatory costs, enrollment growth, and compensation increases.

  • Mandatory costs ($33,629,000)

    Mandatory costs are expenditures the university must pay regardless of its financial condition. These cost areas include health benefit rate increases, full year costs of negotiated compensation agreements, new space, and energy. Not funding mandatory costs creates a de facto budget reduction wherein funding for these costs must be diverted from other program areas to meet these obligations. In order to preserve the instructional integrity of the CSU’s academic programs, the 2006/07 budget plan supports the following mandatory cost obligations:

    Use Table 1

  • Enrollment Growth ($65,127,000)

    Enrollment for the university is planned to increase by 2.5 percent for 2006/07 or 8,306 FTES. This enrollment will require $65.1 million to meet direct instruction, academic support, student services, and institutional support needs. This enrollment will be funded using the marginal cost of instruction rate of $7,841, which does not include one-third of the student fee portion of the marginal cost rate ($751) that has been set aside for the CSU State University Grant financial aid program.

    In the 2003/04 academic year, the CSU reached an all-time high of 334,914 FTES before the state’s fiscal condition resulted in CSU budget reductions of over $500 million. As a result of these budget cuts and in an effort to maintain educational quality, the CSU could only provide access to the 324,120 FTES that the state was willing to fund in 2004/05.

    In 2006/07, the $65.1 million request to fund a 2.5 percent increase in enrollment will support an additional 8,306 FTES. This increase in enrollment will raise CSU enrollment to 340,529 FTES, which represents a nearly 6,000 FTES increase over the previous high set in 2003/04.

  • Financial Aid ($32,739,000)

    One-third of the revenue from student fees generated from growth enrollment, as calculated from the marginal cost fee revenue component, and State University Fee increases will be used to increase the CSU State University Grant pool. This pool is administered centrally and is allocated to campuses based on student need. In 2006/07, the CSU estimates to award approximately 115,532 State University Grants to needy students, representing an increase over the prior year of 5,086 new grant awards.

    Uses Table 2

  • Compensation Increases ($93,954,000)

    The CSU Board of Trustees recognizes compensation for faculty, staff, and management as a key element of the university’s success. The ability to offer a competitive compensation package is critical to the CSU’s ability to recruit and retain faculty, staff, and management employees who contribute to the CSU’s higher education excellence.

    The CSU plans to use $77.4 million of the Higher Education Compact to fund a 3 percent compensation pool, subject to collective bargaining, for all employees effective July 1, 2006, and $16.5 million to begin to address the persistent salary lag for CSU employees.

    Uses Table 3

    The 2005/06 final budget included a total compensation increase of 3.5 percent, of which 0.5 percent was applied toward faculty and staff salary lags. In 2006/07, the CSU intends to continue to reduce faculty and staff salary lags, whereby an additional 0.64 percent compensation ($16.5 million) increase will be applied for that purpose for an overall compensation increase in 2006/07 of 3.64 percent.

    Further, the CSU is developing a five-year strategic plan beginning in 2006/07 to reduce faculty and staff salary lags to zero.The 2006/07 through 2010/11 fiveyear salary lag plan assumes a 3 percent base compensation increase each year and up to an additional 2.8 percent systemwide compensation increase pool for faculty and staff salary lags during that period. The pool recognizes that there are differential salary lags by employee group. The CSU 2006/07 budget plan includes $16.6 million to address the first year of the salary lag funding plan. The estimated cost to fund the remaining compensation lag in 2007/08 through 2010/11 is $299 million.Assuming annual general compensation pools and successful funding of the five-year strategic plan to close the current salary gap, the CSU will expend $647 million for compensation increases over the five-year period.A key assumption of the five-year strategic plan for compensation is that the 3 percent general base increase keeps the lag at today’s level.

    Uses Table 4

  • Long-Term Need ($10,000,000)

    The budget plan recognizes the CSU’s continued efforts to reduce deficiencies in the university’s long-term budget needs. Long-term budget needs are those areas in which historical deficits prohibit full funding within a single budget year. These areas of need are recognized in the Higher Education Compact agreement. The CSU has allocated some funds for long-term needs in the last two fiscal years, but much more is needed to fully address current deficiencies in technology, libraries, deferred maintenance, and instructional equipment.

    In 2006/07, $5 million will be used to complete financing of equipment costs for the telecommunications infrastructure build-out that will support an integrated computing environment with required client/server applications. Also, $2.5 million will be directed to both libraries and deferred maintenance to reduce deficiencies in these areas of need. This $10 million allocation will help the CSU mitigate continued growth in these areas of need until specific funding from Higher Education Compact resources can be allocated. Beginning in 2008/09, the compact calls for an additional 1 percent General Fund increase to help reduce and eliminate these structural budget shortfalls.

    Deferred Maintenance, Libraries, and Instructional Equipment Backlog:

    • The CSU’s backlog in deferred maintenance currently approaches $400 million. The backlog is exacerbated by annual inflationary cost increases for completing repairs and insufficient budget support that restricts the CSU’s ability to adequately fund special repairs as buildings age.
    • The CSU’s backlog in library volumes, serials, and periodicals has grown to over $100 million since libraries were previously fully funded by the state in 1990/91. The backlog principally affects the CSU’s ability to maintain and grow its core collection of materials needed for student academic research.
    • The annual cost of instructional equipment replacement is roughly $42 million.

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Budget Development
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Last Updated: October 19, 2005