Health Care Premium Increase, $18,709,000
The California Public Employees’ Retirement System
(CalPERS) administers CSU employee health care
benefits. CalPERS offers a selection of health
maintenance organization (HMO) and preferred
provider organization (PPO) plans to its enrollees.
Health care premiums are shared between the CSU
and employees, with the CSU funding a significant
portion of the premium costs.The 2006/07 CSU
budget plan includes $18.7 million to fund the base
increase in employer-paid health care costs resulting
from January 2006 premium increases. Health care
cost increases are determined by the number of CSU
employee participants and the difference between
the old and new employer-paid contribution rates.
The following chart indicates the Government Code
(employer-paid) health care contribution increases
from 2002 through 2006.
The 2006 percentage increase, while considerable,
represents the smallest overall employer contribution
change in several years. The total increase in CSU
health care costs due to contribution changes during
this five-year period is approximately
The CSU is governed by Government Code Section
22871 that defines how employer-paid health care
contribution rates are calculated. Rates are based on
the weighted average cost of the four largest health
benefit plans. Either through policy or collective
bargaining unit agreement, the CSU covers health
care costs for represented and non-represented
employees up to an amount equivalent to the
established Government Code rates, with the
exception of Unit 6 (Skilled Crafts), which bargained
CSU employer health contribution rates slightly above
Government Code rates.The next chart shows the
Government Code health care monthly employer
contribution rates over the past five years and the
total increase in rates since 2002.
CalPERS offers CSU employees the choice of three
health maintenance organizations (Blue Shield of
California, Kaiser Permanente, and Western Health
Advantage), two preferred provider organizations
(PERSCare and PERS Choice), and one association
plan (PORAC) for peace officers only.
Changes in employee health care monthly deductions
in 2006 are mostly minimal, depending on the health
plan and the number of eligible dependents insured
under the health plan. The 2006 health care
contributions for employees will increase $0 to $4
per month for employees enrolled in the Blue Shield
HMO plan, $0 to $16 per month for employees
enrolled in the Kaiser Permanente HMO plan, $3 to
$15 per month for employees enrolled in PERS
Choice, and $28 to $81 per month for employees
enrolled in PERSCare. The PORAC employee monthly
deductions will decrease.
The overall 2006 HMO employee health care monthly
deductions range from $0 to $70 per month, whereas
the PPO employee health care monthly deductions
range from $7 to $109 for PERS Choice and $280 to
$819 for PERSCare, depending on the number of
eligible dependents insured under the health plan.
In 2005/06, the permanent base costs of the
January 2005 employer health care premium
increases were funded ($19.5 million). In the prior
two years, increases in CSU health benefit costs were
not funded due to state budget shortfalls. Over that
two-year period (2003/04-2004/05), the CSU
absorbed $64.1 million in employer-paid health
premium increases.The lack of funding for employerpaid
health care increases compounded the impact of
the budget reductions that the CSU experienced
during those years.
Also, while the 2006/07 budget request funds
permanent base costs related to January 2006
employer health care premium increases, the CSU
will absorb related one-time health care costs from
premium increases during the six-month period
(January-June 2006) in fiscal year 2005/06 that
exceed $9 million.
Full-Year Service Salary Increases, $4,056,000
Service-based Salary Increases (SSIs) are implemented
on an eligible employee’s anniversary date.
Therefore, costs incurred in the first year of SSI
implementation are less than full-year costs. In
2006/07, $4 million is required to cover the
remaining full-year costs of Service Salary Increases
that took effect in 2005/06 on employee anniversary
dates. Of the $4 million full-year costs requirement,
most ($3.9 million) results from SSIs were included in
the CSU Employee Union (CSUEU) 2005/06
compensation bargaining agreement.
New Space, $6,548,000
The CSU is scheduled to open an estimated
777,678 square feet of new space in 2006/07.
Funding of regular maintenance for this new space
will be provided at the rate of $8.42 per square foot.
This equates to $6.5 million in permanent base
budget support for regular maintenance. Regular
maintenance includes the cost for utilities, building
maintenance, custodial, landscape, and administrative
support. The CSU is also reviewing maintenance
cost for 85,800 square feet of new health services
space scheduled to open in June 2006 at San Diego
As reported in previous Support Budget documents,
the CSU has been reviewing industry standards that
would increase the current rate of funding for new
space. A final methodology has not been established.
The CSU will use the current rate of $8.42 per square
foot for regular maintenance of new space in 2006/07.
Although the CSU will continue to review its regular
maintenance budget to achieve a better
approximation of regular maintenance need, there is
general consensus that the $8.42 per square foot rate
will restore an adequate funding base for opening
and operating a new building and for mitigating
growth in the CSU’s deferred maintenance backlog.
Although CSU efforts to maintain its funded regular
maintenance budget have been successful, the CSU’s
deferred maintenance need continues to grow
because the cost of critical repairs in older buildings
exceeds the average funding provided for regular
maintenance. Consequently, delays in the scheduled
repair of building space five years old or less offset
some of the gains that are made as critical repairs
occur in older buildings. Current analysis of data
under review indicates the $8.42 per square foot cost
standard the CSU recognizes in 2006/07 for ongoing
maintenance (regular maintenance and scheduled
repair) should be more appropriately budgeted at
$10.13 per square foot to recognize the added cost of
scheduled repairs. 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,
which increases the deferred maintenance backlog.
Energy Cost Increases, $4,316,000
Energy costs associated with electricity, natural gas, and water/sewer are increasing.
The current estimate of utilities increases are identified below:
The 2006/07 budget plan currently includes
approximately $4 million to assist with increases in
electricity, natural gas, and water/sewer rate occurring
at campuses, which would cover roughly half of
projected need. This projection is likely to change as
the full impact of hurricanes Katrina and Rita on the
nation’s fuel supplies is known.
There are CSU systemwide energy efficiency and
conservation efforts geared toward reaching two
major goals by 2010: reducing total energy
consumption by 15 percent and increasing the CSU’s
self-generation capacity to 50 megawatts. To meet
these goals, the CSU is holding designers and
engineers to a standard that will exceed the current
California energy efficiency code by 15 percent, and
campuses are replacing inefficient equipment
Although these efforts are underway, utility costs
continue to rise in the short-term due not only to rate
increases but also the increase of energy use intensity
(EUI) with students, faculty, and staff demand for
technology and electronic equipment.