Sources of Revenue

The 2008/09 California State University Trustees’ Support Budget is based on revenue assumptions derived from the Higher Education Compact, a six-year agreement signed in May 2004 with the governor, the University of California, and the CSU. Beginning in fiscal year 2005/06 and through 2010/11, the governor agreed to include in his annual state budget sufficient funds to support scheduled base budget increases for general operations, enrollment, and mandatory cost obligations for debt service and annuitant benefits. The Compact is highly beneficial to the CSU in that it provides a stable financial base to plan for future needs and goals. In exchange for this pledge of funding, the CSU is accountable for addressing state goals for student access, academic program quality, student support services, and effective managerial resources. The CSU provides student and institutional outcome data that addresses operational efficiency, utilization of systemwide resources, and student progress.

Revenue components of the Compact include the following increases for 2008/09:

• 4% for General Operations ($116,960,000)
• 1% for Core Academic Support Needs ($29,240,000)
• 2.5% for Enrollment Growth ($68,825,000)
• 10% Fee Revenue Augmentation ($73,187,000)

General Operations Increase
In 2008/09, the CSU budget will be based on a 4 percent increase for general operations in accordance with the Compact agreement. Each year, the increase for general operating support is calculated using the prior-year General Fund appropriation adjusted for scheduled lease revenue bond payments.

Core Academic Support Needs
Beginning in 2008/09, the Compact also includes an additional 1 percent increase to the prior year’s base to address the annual budgetary shortfalls in state funding for instruction in core areas of the budget critical to maintaining the quality of the academic program—including instructional equipment, instructional technology, and libraries—and for ongoing deferred maintenance.

For 2008/09, the 4 percent increase for general operations and 1 percent increase for core academic support needs are calculated as follows:

Enrollment Funding
The Compact includes a 2.5 percent annual enrollment increase. For 2008/09, a 2.5 percent increase in CSU resident student enrollment yields an additional 8,572 Full-time Equivalent Students (FTES). In total, the CSU will be funded to serve 351,968 resident FTES in 2008/09.

Based on the 2007 Budget Act marginal cost methodology, the gross marginal cost rate for 2008/09 is $10,428. The state share of this rate is $8,029 per FTES, which reflects a $2,399 offset for student fee revenue. The $8,029 state share multiplied by the 8,572 FTES enrollment growth equals $68,825,000. One-third of the marginal cost fee revenue is set aside for financial aid ($800 per FTES).

The marginal cost calculation is estimated based on the updated methodology that began in 2006/07 that included a change in the graduate unit load for a full-time equivalent student from 15 to 12 units per term, including a component to recognize the cost to maintain existing space and open new space to support existing and future enrollment levels, and limits the marginal cost calculation to resident student growth only.

While beneficial marginal cost components were added in 2006/07, the state Department of Finance (DOF), the Legislative Analyst’s Office (LAO), the University of California (UC), and the California State University have yet to agree on a methodology that results in variations of marginal cost funding rates. The CSU will continue to participate in the review of the marginal cost calculation methodology with the DOF, LAO, and UC and strive for a consistent annual methodology that will adequately cover the cost of enrollment growth.

Fee Revenue Augmentation
The 2008/09 budget plan includes a revenue augmentation of $73.2 million to support CSU budget plan expenditures. With no change in CSU fee rates included in the 2008/09 budget request, additional state funding is needed to address critical needs associated with mandatory cost obligations and market-driven competitive salary requirements for the recruitment and retention of professionally trained and highly skilled employees.

Following are the 2008/09 CSU State University Fee rates, with no change from 2007/08:

The CSU continues to maintain the lowest undergraduate fees among the California Postsecondary Education Commission’s (CPEC) 15 higher-education comparison public institutions. (The 15 comparison institutions have historically been referenced for faculty compensation and student fee comparisons.) The average 2007/08 academic year resident, undergraduate student fees at the CSU are $3,521 and, at comparison institutions, $7,122. The average 2007/08 academic year resident, undergraduate student fees include both systemwide and required campus fees. The total CSU 2007/08 systemwide and campus fees average is comprised of $2,772 for the undergraduate SUF (6.1 units or more) and $749 for the average campus-based fees that must be paid to apply to, enroll in, or attend the university.

SUF Revenue From Enrollment Growth ($34,444,000)
Revenue associated with a 2.5 percent increase in resident FTES enrollment (8,572 FTES) is projected to generate $34.4 million in new student fee revenue. The Compact agreement calls for the university to set aside 20 percent to 33 percent of new State University Fee revenue for financial aid. The current 2008/09 budget plan sets aside one-third of the student fee portion of the marginal cost of instruction for financial aid, $6.9 million. The financial aid set-aside will be used to increase the CSU State University Grant (SUG) pool. The $27.6 million balance of enrollment growth revenue will support all other marginal cost areas.