2008/09 Support Budget

Uses of Revenue

The 2008/09 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 2008/09 fiscal year and include mandatory costs, enrollment growth, financial aid, compensation, reducing the salary gap, and long-term need.

Mandatory Costs ($35,957,000)
Mandatory costs are expenditures the university must pay regardless of the level of funding appropriated by the state. These costs include health benefit rate increases, new space, energy, and the full year cost of negotiated compensation agreements. Without funding for mandatory costs, campuses would be required to redirect existing resources from other program areas to meet these obligations. In order to preserve the integrity of CSU programs, the 2008/09 support budget plan provides for the following mandatory cost obligations:

Health Benefits $21,755,000
New Space $6,000,000
Energy $4,000,000
Full-Year, Service-Based Salary Increases $4,202,000
  $35,957,000

Enrollment Growth ($82,531 ,000)
Resident enrollment for the CSU will increase by 2.5 percent or 8,572 FTES in 2008/09. This enrollment growth will require $82.5 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 rate of $9,628 per full-time equivalent student, which does not include the student fee portion of the marginal cost rate ($800) that has been set aside for the CSU State University Grant financial aid program. The following table summarizes 2008/09 marginal cost funding for the 2.5 percent resident enrollment growth based on the 2007 Budget Act methodology adopted by the legislature:

ESTIMATED 2008/09 MARGINAL COST PER FULL-TIME EQUIVALENT STUDENT
Gross Marginal Cost Funding Per FTES1 $10,428
Less: Student Fee Revenue2 ($2,399)
Proposed State Funding Rate $8,029
Gross Marginal Cost Revenue $10,428
Less: Marginal Cost Funding for Systemwide Financial Aid
(1/3 of $2,399 Student Fee Revenue)
($800)
Marginal Cost Funding for Campus-Related Enrollment Growth $9,628
2008/09 Projected Enrollment Growth (FTES) $8,572
2008/09 Marginal Cost Funding ($9,628 x 8,572) $82,531,000

1 Marginal Cost Calculation (MCC) currently includes average new hire assistant professor salary rate in fall 2006 with the average 2007/08 faculty salary increase; by January Governor’s Budget, the MCC will be updated to include fall 2007 average new hire assistant professor salary rate.

2 Based on the average systemwide fee revenue collected from each FTE student, discounted for financial aid

A 2.5 percent increase from the 2007/08 resident FTES base of 342,893 (including BSN and MSN FTES) is 8,572 FTES. This results in a 2008/09 base of 351,465 FTES. With new BSN and MSN and nonresident FTES added, the 2008/09 total is 365,125 FTES.

FULL-TIME EQUIVALENT STUDENT (FROM 2007/08 LEVELS)
  2007/08 2008/09
Resident Students 342,390 351,465
2007/08 New BSN Undergraduate Nursing Students 340 340
2006/07 New MSN Graduate Nursing Students 163 163
Nonresident Students
(for nonresident tuition fee paying purposes)
13,403 13,157
Total FTES 356,296 365,125
Resident Students Growth   8,572

Financial Aid from Enrollment Growth ($6,858,000)
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 2008/09, the CSU estimates that it will award approximately $283,364,800 in State University Grants to students with need.

2008/09 STATE UNIVERSITY GRANT FUNDING INCREASE
Financial Aid Set-Aside from Student Fee Portion of Marginal Cost Calculation for Enrollment Growth ($800 x 8,572 FTES) $6,858,000

Compensation Increases, 3% Increase for All Employee Groups ($91,125,000)
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 mission of excellence. The CSU plans to use $91,125,000 of the Higher Education Compact to fund a 3 percent compensation pool, subject to collective bargaining, for all employee groups, effective July 1, 2008. The 2008/09 cost of a 1 percent compensation increase is based on campuses’ 2007/08 final budget salaries and salary-related benefits (OASDI, Medicare, and retirement) and is summarized in the following table:

ESTIMATED 2008/09 COST OF 1 PERCENT COMPENSATION INCREASE
  2007/08 Final Budget
Compensation (Adjusted1)
2008/09 Cost of
1% Increase
Faculty 1,565,900,000 15,659,000
Staff 1,471,606,000 14,716,000
Total 3,037,506,000 30,375,000
Cost of 3% Increase   91,125,000

1 Adjusted for 2007/08 employer-paid retirement reduction

Funding for Year Three of the Five-Year Salary Lag Plan ($63,185,000)
The CSU developed a five-year strategic plan beginning in 2005/06 to reduce salary lags for all CSU employees. Lack of funding for adequate compensation increases between 2001/02 and 2004/05 largely contributed to ongoing compensation deficiencies for all CSU employee groups. The sum of CSU average compensation increases from 2001/02 to 2005/06 totaled only 7 percent.

The 2007/08 compensation pool was 5.72 percent, which included a 3 percent compensation increase for all employee groups and a 2.72 percent increase to address faculty and staff salary lags. Of the total 5.72 percent compensation increase, 4.62 percent was funded within the Higher Education Compact and CSU systemwide allocations, whereas the 1.1 percent balance must be funded by campuses without additional allocation.

In 2008/09, the CSU will continue to address faculty and staff salary lags with a total planned 2008/09 compensation pool of 5.83 percent that includes the 3 percent ($91.1 million) general compensation increase for all employee groups and an estimated 2.83 percent ($86 million) to address salary lags. An estimated 2.08 percent, $63,185,000, of salary lag compensation increases will be funded in 2008/09 systemwide final budget allocations with the remaining 0.75 percent or $22,823,000 funded by campuses. Actual compensation increases for represented employee groups are determined by individual collective bargaining agreements.

Through the duration of the five-year plan to address salary lags, a 3 percent compensation increase for all employee groups is assumed each year along with additional compensation increases to reduce salary lags. The estimated cost between 2008/09 and 2010/11 to address salary lags is $245 million and to fund the 3 percent annual compensation increase for all employee groups is $296 million, resulting in total compensation costs of $541 million. Based on Higher Education Compact funding levels to support the CSU’s budget plan between 2008/09 through 2010/11, an estimated $490 million will be available to fund compensation during that period.

Additionally, there are critical salary-related concerns within a number of CSU classifications that require special attention. With regard to CSU faculty, the 2007/08 CPEC-projected faculty salary lag is 19.1 percent. After adjustment for the 2007/08 faculty compensation increases, the unfunded projected faculty salary lag is 12.9 percent. The 2006/07 actual salary lag for CSU presidents was 46 percent. While the 2007/08 CPEC-projected presidents salary lag is not yet known, it is estimated to lower to approximately 37 percent after 2007/08 salary increases. Faculty and president salary lags are based on the California Postsecondary Education Commission’s (CPEC) 20 higher-education comparison institutions. Also, CSU Human Resources preliminary 2006/07 staff market analyses indicate that many classifications have double-digit salary lags that include physician, health care support, and various technical and administrative support groups. The CSU is making a concerted effort to address the salary inequity of these employee groups.

Long-Term Need ($43,000,000)
The 2008/09 budget plan includes greater funding to reduce deficiencies in the CSU’s long-term budget needs than in prior years. 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 Compact. Beginning in 2008/09, the Compact includes an additional 1 percent increase to the prior year’s base to address the annual budgetary shortfalls in state funding for core areas of the budget critical to maintaining the quality of the academic program—including instructional equipment, instructional technology, libraries, and deferred maintenance.

In 2008/09, $33.5 million will be used to fund improvements in academic technology across the CSU. A study completed in summer 2005 found that there has been chronic underfunding of academic technology. Major cost areas were identified by campus representatives as falling below minimum baseline targets under even the most conservative assumptions and definitions, which address existing and emerging baseline needs, core academic technology needs, and systemwide academic technology initiatives.

This study identified the need to increase academic technology funding by $116.5 million over a five-year period. The CSU began to address this need through a permanent allocation of $5 million in fiscal year 2007/08. Expenditures in 2007/08 were focused on the development of the necessary structural foundation to address these needs and to begin development of the digital marketplace initiative that serves to strengthen investments in learning management systems and enhances faculty development in academic technology. The CSU continued its focus on improving student success by providing online information, testing tools, and learning modules to allow students to be “college-ready” in mathematics and English.

The $33.5 million included for fiscal year 2008/09 will significantly broaden academic technology support across the CSU through further development and maintenance of the initiatives begun in 2007/08 and expansion of efforts in the target areas of existing and emerging baseline needs, core academic technology needs, and systemwide academic technology initiatives. Expenditures will be in direct support of these initiatives and will also provide the necessary technological infrastructure and related human resources required to achieve these technology initiatives.

The remaining $9.5 million will be directed to address backlogs in library volumes ($3 million) and deferred maintenance projects ($6.5 million). This $9.5 million allocation will help the CSU mitigate further growth of deficiencies in these areas until more funding can be provided specifically for them.

The current estimated backlog in CSU purchases for library volumes, serials, and periodicals is $6 million. 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 CSU’s defined backlog of deferred maintenance currently totals $423 million. The annualized cost to fund deferred maintenance over a 10-year period would be $42.3 million. The deferred maintenance 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.


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Last Updated: October 30, 2007