Budget Proposal: Enrollment/Student Fees/Financial Aid
2008/09 Marginal Cost of Instruction
For each additional Full Time Equivalent (FTE) student that the CSU enrolls, the state provides funding at a marginal cost rate to support direct instruction, academic support, student services, institutional support needs, and plant operations. Prior to fiscal year 2006/07, the state’s share of CSU marginal cost was based on a marginal cost methodology for higher education adopted by the governor and the legislature in 1995 that encompassed average CSU program area costs discounted by negotiated deflators. The 1995 methodology did not recognize increased fixed costs associated with enrollment thresholds or actual cost of new faculty hires, in addition to other funding deficiencies. The 2005 Budget Act Supplemental Report Language required the state Department of Finance (DOF) and the Legislative Analyst’s Office (LAO) to convene a working group with the CSU and the University of California (UC) to review the 1995 marginal cost methodology and determine possible modifications.
As a result of this review, there were three changes made in the marginal cost methodology: (1) using the average new hire faculty salary rate, (2) adjusting the unit load associated with full-time graduate study from 15 units to 12 units, and (3) adding a Plant Operations component to recognize the cost of maintaining existing space and opening new space to accommodate enrollment growth.
While beneficial marginal cost components were added to the funding methodology in 2006/07, there has been
no agreement on an official version of the marginal cost methodology for enrollment growth. The legislature
and the Department of Finance have used two different marginal cost methodologies since 2006/07, based on a
hybrid of the working group proposals. The CSU will continue to participate in the review of the marginal cost
methodology with the DOF, LAO, and UC to achieve a consistent methodology that can be used annually to
calculate a sufficient cost for enrollment growth.