Budget Development Message

The California State University (CSU) is entering the third year of the Higher Education Compact designed with this governor as a first step toward recommitting the state’s resources to educational quality. The Compact, first established over 10 years ago, is built on the recognition that California’s economic growth is dependent on the ability of higher education to produce an educated and technologically prepared workforce to compete in the global marketplace. It acknowledges that investment in higher education guarantees every Californian an opportunity for a bright future and a pathway to success in their lifelong endeavors. The Compact commits a basic level of state resource support for the university that represents a foundation to which additional specific priorities identified for the budget year and beyond can be added to strengthen the core mission of the university and improve the quality of instructional services provided to students.

The third year of funding under the current Compact agreement follows the direction established over the past two years to restore access and services diminished during the state’s economic downturn at the beginning of this decade, which resulted in more than $500 million in budget reductions at the CSU. CSU enrollments will grow during 2007/08 to just under 460,000 students, establishing the CSU as the nation’s preeminent bachelor’s and master’s degree-granting institution. The budget focuses on using base funding support provided under the Compact to meet mandatory cost obligations and to dedicate sufficient resources to retain, recruit, and reward highly qualified faculty and staff for whom the university competes in an increasingly competitive national market.

The budget plan for 2007/08 expands on this Compact commitment and requests additional state funding support to continue the priority commitments established last year to increase the number of skilled nurses in California with graduate degrees and expand the number of mathematics and science teachers with degrees in their field of instruction for California’s K-12 schools. The budget plan also seeks to gain state-funding recognition for the increasing cost of services provided to students with physical disabilities, the statewide need for more special education teachers for students with learning challenges, improved advising, student orientation programs and learning center staff support to increase student services for successful progression to degree, improved understanding of the university’s highly effective Early Assessment Program, and expansion of the Educational Opportunity Program grant to provide financial aid opportunities and increase participation of historically underrepresented groups in college.

The CSU is seeking one-time funding support to increase the investment in the university’s information technology needs that were most impacted by budget reductions: workstations, servers, and smart classrooms. The CSU is also seeking a one-time budget augmentation to help address a substantial backlog in deferred maintenance that, as currently defined, exceeds $400 million.

The 2007/08 budget anticipates revenue increases from the state General Fund ($241.6 million) and student enrollment growth fees ($25.2 million) for a total budget augmentation of $266.8 million. Support from this budget augmentation will increase total CSU state General Fund appropriations to $3.1 billion and fee revenue to $1.3 billion. Projected reimbursements of $183.3 million bring the total Support Budget appropriation to $4.5 billion.

The $266.8 million budget augmentation would support the following increases to the CSU budget:

• $42.0 million to fund mandatory costs for health benefits, new space, energy, and the full-year cost of 2006/07 service-based salary increases.
• $76.6 million to fund an enrollment increase of 2.5 percent (8,351 FTES) to provide access to approximately 11,000 new students.
• $2.5 million to fund a second cohort of 163 full-time students enrolled in Master of Science in Nursing (MSN) programs.
• $6.2 million to increase financial aid to support 115,438 State University Grants.
• $129.5 million to fund a 3 percent ($82.8 million) base salary increase and a 1.7 percent increase ($46.7 million) to fund the second year cost of a five-year strategic plan to reduce employee salary lags.
• $10.0 million to fund CSU long-term need for technology ($5 million), libraries ($2.5 million), and deferred maintenance ($2.5 million).

The 2007/08 Support Budget Documentation provides details for each of these budget requests. This document also outlines nearly $121.7 million in additional CSU budget challenges, representing ongoing and one-time costs that exceed the basic (floor) funding commitment provided by the Higher Education Compact for the 2007/08 fiscal year. With the continued support of the CSU Board of Trustees, CSU constituency groups, the governor, and the legislature, the university will maintain its prominence as the nation’s strongest public system for baccalaureate and master’s level education.

Patrick J. Lenz, Assistant Vice Chancellor of the Budget

Rodney M. Rideau, Director of the Budget