2006/07 Support Budget

2006/07 Marginal Cost of Instruction

Following is the 2006/07 marginal cost calculation (MCC) that is based on the current budget methodology that was negotiated in 1996 between the CSU, the University of California, the Department of Finance, and the Legislative Analystís Office at the request of the legislature:

2006/07 Marginal Cost of Instruction Calculation Methodology

2006/07 Marginal Cost Program Detail

For each additional student that the CSU enrolls, the state provides funding at marginal cost to support instruction and student educational and institutional support services. The stateís 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 2006/07 stateís share of marginal cost based on current methodology is $6,340 per FTES, or a total of $52.7 million to support enrollment growth of 8,306 FTES.

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 sustains enrollment growth at comparable levels of service received by students in the previous fiscal year.

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 is not affected by the annual change in CSU enrollment levels. However, the marginal cost calculation does not recognize increased fixed costs associated with increased enrollment thresholds.

Faculty costs are based on a negotiated student/faculty ratio of 18.9 to 1. The average new hire rate for a CSU tenure/tenure-track faculty member in fall 2004 was $59,649. The faculty salary is intended to reflect the average cost of hiring a new faculty member.

The marginal cost calculation also 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. The cost of depreciation on CSU equipment is $42.5 million. The marginal cost component recognizes the portion of depreciated costs associated with equipment replacement necessitated by the annual increase in student enrollment.

The marginal cost methodology is currently under review with the CSU, the University of California, the Department of Finance, and the Legislative Analystís Office.The CSU proposal is discussed in a subsequent section.

Content Contact:
Budget Development
Chris Canfield
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Last Updated: November 10, 2005