Long-Term Budget Needs, $10,000,000

A constant fiscal challenge at the CSU concerns how to address long-term budget need comprised of expenses that are too costly, or have had historical unfunded deficits that are too large, to finance in a single budget year.The cost of keeping technology current, maintaining relevant library collections, reducing deferred maintenance, and funding instructional equipment replacement are examples of these types of core needs that require a multimilliondollar annual commitment.

In past years, these multiyear commitments were funded as a separate component of the higher education partnership agreement, with 1 percent of the CSU’s budget earmarked for this purpose. The current Compact agreement with the governor calls for restoration of this 1 percent General Fund commitment in the fourth year of the Compact (2008/09). However, it is important that the CSU continues minimum investments in these structurally deficient areas to impede significant growth in funding backlogs and sustain the current quality of services available to students, faculty, and staff.

The total budget investment necessary to address long-term budget need reflects the continuing impact of permanent reductions in state General Fund appropriations to the CSU, such as the permanent base budget reductions that occurred in the early 1990s and reductions that occurred during fiscal years 2001/02 through 2004/05.The amount of the investment required to address the need in the budget year is determined by the annualized cost (over 10 years) of historical budget deficits, such as deferred maintenance, and the yearly cost of ongoing needs, such as replacement of fully depreciated instructional equipment.

The CSU has made some headway in reducing the combined long-term need requirement for four program areas: technology, library inventory, deferred maintenance, and instructional equipment replacement.

In 2005/06, the CSU received $7.9 million to fund long-term need deficiencies. The estimated 2005/06 long-term need deficiencies are $101.3 million. In 2006/07, a total of $10 million will be applied toward long-term need deficiencies as described in the sections that follow.

Technology Network Equipment And Operations ($5 Million)

The build-out of the telecommunications infrastructure to serve students and bring the institution greater efficiency requires financing of 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. The CSU began by identifying a $20 million base need, which was later identified as a $22 million base need, to finance the $69.7 million equipment costs for build-out over a period of years. 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 planned four-year basis to remain current with network technology advances.

The first installment to reach $22 million base need occurred in 2001/02. The 2001/02 CSU support budget included $10 million and was augmented by $2 million of redirected ongoing technology funds for a total base of $12 million. An additional $5 million included in the 2002/03 budget was subsequently deleted as part of one-time reductions required to balance the state’s budget. Due to the continuing budget shortfalls in 2003/04 and 2004/05, no additional funding for this purpose occurred in those fiscal years. However, the need to complete the equipment requirements of the telecommunications infrastructure build-out remained a critical priority for the university.

In 2005/06, there was a $5 million augmentation that moved the CSU closer to meeting the $22 million equipment base need.The allocation of $5 million in 2006/07 will complete the base requirement of $22 million and support the four-year refresh and replacement cycle.

The CSU technology plan was formally presented during the state budget process in 1999/2000 and has received state funding for capital and/or operating implementation in each of the past six fiscal years. This investment recognizes that technology is an essential component of education academic programs.

Libraries (2.5 Million)

Structural budget deficiencies in CSU libraries occurred when state funding was reduced during the economic downturn of the early 1990s, and when CSU budget funding was no longer determined by formula-based cost standards. Based on need-based funding formulas previously recognized by the state, the CSU Budget Office estimates that libraries should maintain one book for every two full-time equivalent students enrolled during the academic year and that periodicals should be maintained at one periodical for roughly every 11 full-time students enrolled during the academic year.

The most important factor critical to both the size of the cumulative backlog of libraries funding since 1990/91 and the continued growth in that backlog is the purchasing power of dollars available to sustain and increase library holdings.According to the Department of Finance Price Letters, the purchasing power of dollars in the CSU base budget has declined by close to 10 percent in recent years for library acquisitions. This decline in purchasing power combined with a decrease in CSU library budgets in 2003/04 and 2004/05 due to CSU General Fund reductions has meant that the CSU’s efforts to reduce the structural deficiency was reversed and the cumulative shortfall has continued to grow since 2002.

In 2005/06, a budget augmentation of $1.445 million helped begin the process of acquiring many of the electronic resources that faculty and students need in order to stay current with the research in scientific and technological fields. In 2006/07, with additional funding restored,more books can be purchased to keep collections current and more electronic resources can be acquired for the system, eventually eliminating the significantly higher cost of acquiring out-of-print books and back issues of journals.

The CSU Council of Library Directors estimates that $13.5 million is needed to permanently update the base budget for libraries and to provide the resources to keep volumes refreshed and to secure new acquisitions on an annual cycle. In 2006/07, the additional $2.5 million will be used to address systemwide programs for electronic information resources, helping to bring the overall shortfall down to $11 million going into the 2007/08 fiscal year. Beginning in 2008/09, the Governor/CSU Higher Education Compact Agreement includes a 1 percent General Fund augmentation to address long-term needs.This central funding will provide resources for expansion of the Electronic Core Collection of bibliographic and full-text resources, for continued growth and enhancement of World Wide Web-based unified information access, and for other projects designed to increase effective use of information resources and eliminate the current funding deficiency.

Deferred Maintainence (2.5 Million)

CSU deferred maintenance remains an area of significant budgetary deficiency. Deferred maintenance occurs when scheduled repairs are delayed to subsequent years due to project cost, timing, and/or lack of available resources. Historically, the CSU has also used the deferred maintenance term to describe or include the delayed replacement of building systems that have exceeded their useful life as part of the funding deficiency.

Between the 1994/95 and 1999/2000 fiscal years, the state and the CSU provided permanent base budget resources for ongoing maintenance support to address funding deficiencies. However, during the six-year period, the state supported only $61 million in one-time funds to address a deferred maintenance backlog that exceeded $350 million. 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 the next four fiscal years (2001/02 through 2004/05). Consequently, not only was further reduction of the backlog halted, but inflation and the continual aging of buildings has caused the long-term maintenance repair and replacement needs to increase. In 2005/06, $1.5 million was used to support further redirection in the backlog of deferred maintenance. The 2006/07 support budget adds another $2.5 million to this effort.

In 1999, the CSU commissioned a study to better define the annual funding needed to replace building components and systems that have exceeded their life cycle. In addition, the purpose was to confirm if the long-term funding sought by the CSU would halt growth in the deferred maintenance backlog consistent with the intent of the Partnership Agreement.

The results of the study indicate that due to the substantial amount of construction of facilities from the late 1950s to the mid 1960s, on average, $100 million per year is needed to replace mechanical, electrical, and plumbing systems that have now exceeded their useful life. The annual need varies around this average as the study model takes into account building age, life cycle of systems, and campus repairs or replacements performed in the building.

To address some of this funding deficiency for buildings and systems beyond their useful life, the CSU received approval by the Department of Finance to include renewal of capital as a component in the CSU Capital Outlay Program beginning in 2005/06. The capital renewal program is envisioned to range from $25 million to $50 million annually, and $26 million was funded in 2005/06. A structured approach that utilizes capital renewal funding with support dollars will reduce deferred maintenance and improve the extended use of CSU capital assets.

Also, the CSU is committed to sustain and increase its maintenance budgets in order to provide safe, functional, and efficiently operating buildings to serve its students, faculty, and staff. However, the ongoing maintenance rate of $8.42 per square foot funded in 2006/07 does not recognize scheduled maintenance at an estimated cost of $1.71 per square foot. Campuses currently use productivity and efficient management of available resources to satisfy a portion of this unfunded need, but they most often have to delay scheduled repairs due to a lack of available funds, which increases the deferred maintenance backlog.

This table shows the CSU estimated deferred maintenance backlog from 1993/94 to present.