2007/08 Support Budget

Uses of Revenue

The 2007/08 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 2007/08 fiscal year and include mandatory costs, enrollment growth, financial aid, compensation, reducing the salary gap, and long-term need.

  • Mandatory costs ($41,968,000)

    Mandatory costs are expenditures the university must pay regardless of its financial condition. These costs include health benefit rate increases, new space, energy, and the full year cost of negotiated compensation agreements. Not funding mandatory costs would require campuses to redirect existing resources from other program areas to meet these obligations. In order to preserve the integrity of CSU programs, the 2007/08 support budget plan provides for the following mandatory cost obligations:

    Health Benefits $28,034,000
    New Space $6,000,000
    Energy $4,000,000
    Full-Year, Service-Based Salary Increases $3,934,000
      $41,968,000


  • Enrollment Growth ($79,146,000)

    Resident enrollment for the university will increase by 2.5 percent or 8,351 FTES and 163 FTES in MSN graduate nursing in 2007/08. This enrollment growth will require $79.2 million to meet direct instruction, academic support, student services, institutional support needs, and plant operations. The 2.5 percent enrollment growth will be funded using a marginal cost of instruction rate of $9,182 per full-time equivalent student, which does not include one-third of the student fee portion of the marginal cost rate ($745) that has been set aside for the CSU State University Grant financial aid program. Estimated funding to support the 2.5 percent enrollment growth is $76,679,000. The remaining $2,467,000 will fund MSN graduate enrollment growth (163 FTES) at a level consistent with support provided for master’s level nursing programs at the University of California.

    The following table summarizes 2007/08 marginal cost funding for the 2.5 percent resident enrollment growth based on the 2006 Budget Act methodology adopted by the legislature:

    ESTIMATED 2007/08 MARGINAL COST PER FULL-TIME EQUIVALENT STUDENT
    Gross Marginal Cost Funding Per FTES1 $9,927
    Less: Student Fee Revenue2 ($2,234)
    Proposed State Funding Rate $7,693
    Gross Marginal Cost Revenue $9,927
    Less: Marginal Cost Funding for Systemwide Financial Aid
    (1/3 of $2,234 Student Fee Revenue)
    ($745)
    Marginal Cost Funding for Campus-Related Enrollment Growth $9,182
    2007/08 Projected Enrollment Growth (FTES) $8,351
    2007/08 Marginal Cost Funding ($9,182 x 8,351) $76,679,000
  • 1 Currently based on fall 2005 rather than fall 2006 average annual salary of all new professors
    2 Based on the average systemwide fee revenue collected from each FTE student, discounted for financial aid

    As the chart below indicates, the 2.5 percent increase from the 2006/07 resident student FTES base of 334,035 results in an 8,351 FTES increase in 2007/08 for a total of 342,386 resident FTES. With the MSN and nonresident student FTES added, the total 2007/08 FTES base will be 355,453.

    FULL-TIME EQUIVALENT STUDENT (FROM 2006/07 REBENCHED LEVELS)
      2006/07 2007/08
    Resident Students 334,035 342,386
    New MSN Graduate Nursing Students 163 326
    Nonresident Students
    (for nonresident tuition fee paying purposes)
    14,064 12,741
    Total FTES 348,262 355,453
    Resident Students Growth   8,351
    New MSN Graduate Nursing Students Growth   163
    Total FTES Growth   8,514


  • Financial Aid from Enrollment Growth ($6,221,000)

    One-third of the revenue from student fees generated from growth enrollment, as calculated from the marginal cost fee revenue component, 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 2007/08, the CSU estimates that it will award approximately 115,438 State University Grants to students with need.

    2007/08 STATE UNIVERSITY GRANT FUNDING INCREASE
    Financial Aid Set-Aside from Student Fee Portion of Marginal Cost Calculation for Enrollment Growth ($745 x 8,351 FTES) $6,221,000


  • Compensation Increase - 3% Increase for all Employee Groups ($82,788,000)

    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 $82,788,000 of the Higher Education Compact to fund a 3 percent compensation pool, subject to collective bargaining, for all employee groups, effective July 1, 2007. The 2007/08 cost of 1 percent compensation increase is based upon campus 2006/07 final budget salaries and salary-related benefits (OASDI, Medicare, and retirement) and is summarized in the following table:

    ESTIMATED 2007/08 COST OF 1 PERCENT COMPENSATION INCREASE
      2006/07 Final Budget
    Compensation (Adjusted1)
    2007/08 Cost of
    1% Increase
    Faculty 1,435,248,000 14,353,000
    Staff 1,324,358,000 13,243,000
    Total 2,759,606,000 27,596,000
    Cost of 3% Increase   82,788,000

    1 Adjusted for 2006/07 post-final budget employer-paid retirement appropriation

  • Funding for Year 2 of Five-Year Salary Lag Plan ($46,692,000)

    The CSU developed a five-year strategic plan beginning in 2006/07 to reduce the faculty and staff salary lags. The 2006/07 final budget included nearly a .7 percent compensation pool increase to address faculty and staff salary lags in addition to the 3 percent compensation increase for all employee groups. Actual distribution of compensation increases are determined by individual collective bargaining agreements negotiated with represented employees. In 2007/08, the CSU will continue to address faculty and staff salary lags with planned budget funding of $46,692,000, an estimated 1.7 percent compensation increase, in addition to the 3 percent ($82.8 million) general compensation increase for all employee groups.

    Through the duration of the five-year plan to address CSU salary lags, a 3 percent compensation increase for all employee groups is assumed each year along with additional compensation increases to reduce faculty and staff salary lags over the remaining five-year period. The cost to address salary lags over the remaining five-year period is $328 million, and the estimated cost of the 3 percent annual compensation increase for all employee groups is $370 million. Assuming sufficient resources to support the CSU’s budget plan, compensation funding from 2007/08 to 2010/11 will increase by an estimated $698 million.

    Employee salary lags were compounded by a lack of funding for adequate compensation increases between 2001/02 and 2004/05 and have resulted in ongoing compensation deficiencies for all CSU employee groups. Based on U.S. Department of Labor reports, public and private sector average increases in salaries and wages totaled to 14.5 percent from 2001 to 2005, whereas CSU average compensation increases totaled to 7 percent over that five-year period.

    U.S. DEPARTMENT OF LABOR, BUREAU OF LABOR STATISTICS, CHANGES IN EMPLOYMENT COST INDEX WAGES AND SALARIES COMPARISON WITH CSU COMPENSATION FUNDING (2001 THROUGH 2005)
      CALENDAR YEAR
    U.S. Department
    of Labor, Statistics
    2001 2002 2003 2004 2005 5-Year Total
    State and Local Government 3.8% 3.1% 2.2% 2.1% 3.1% 14.3%
    Private Industry 3.8% 2.6% 3.1% 2.6% 2.5% 14.6%
    Average 3.8% 2.9% 2.7% 2.4% 2.8% 14.5%
      FISCAL YEAR
      2001/02 2002/03 2003/04 2004/05 2005/06 5-Year Total
    CSU Final Budget Compensation Funding 2.0% 1.5-1.68% 0% 0% 3.5% 7-7.18%

    Additionally, there are critical salary-related concerns within a number of CSU classifications that require special attention in the bargaining process if the CSU is to hire professional staff in key areas such as accounting and information technology. With regard to CSU faculty, the 2006/07 projected unfunded salary lag is 14 percent. The 2006/07 projected unfunded salary lag for presidents is 42.3 percent. Faculty and president salary lags are based on the California Postsecondary Education Commission’s (CPEC) 20 higher-education comparison institutions. Also, a 2006 CSU staff market study conducted by CSU Human Resources indicates significant lags in employee classifications such as public safety, physicians, health care support (e.g., nurses, pharmacists), and various technical and administrative support groups.

  • 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 during the last three fiscal years, but much more is needed to fully address current deficiencies in technology, libraries, deferred maintenance, and instructional equipment.

    In 2007/08, $5 million will be used to fund improvements in academic technology across the CSU. These funds will start a multi-year initiative to improve online information, testing tools and learning modules for students in mathematics and English; leverage CSU resources to reduce the cost of electronic content and digital instructional media; invest in information technology applications for libraries; and develop and sustain faculty development in academic technology.

    The remaining $5 million will be directed to address backlogs in library volumes ($2.5 million) and deferred maintenance projects ($2.5 million). This $10 million allocation will help the CSU mitigate further growth of deficiencies in these areas until specific funding from Higher Education Compact resources are provided.

    The CSU’s defined backlog of deferred maintenance currently totals $405 million. The backlog is compounded 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 defined backlog is under review to incorporate total physical plant need within CSU.

    The CSU’s backlog in purchases for library volumes, serials, and periodicals is more than $100 million based on funding standards previously used by the state in the CSU budget process. The backlog principally affects the CSU’s ability to maintain and grow its core collection of materials needed for student academic research. Although the CSU is investigating alternative approaches to address deficiencies in its permanent collections, core-funding support is needed to pursue these efforts.

    The annual cost to replace depreciated and obsolete instructional equipment is roughly $43 million.

    Beginning in 2008/09, the Higher Education Compact calls for an additional 1 percent General Fund increase to help reduce and eliminate these structural budget shortfalls.


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Last Updated: November 13, 2006