Uses of Revenue | 2009/10 CSU Support Budget Book I | Budget | CSU
2009/10 Support Budget I

Uses of Revenue

Researcher looking into a microscope.The 2009/10 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 2009/10 fiscal year and include mandatory costs, enrollment growth, financial aid, compensation, reducing the salary gap, long-term need, and the Center for California Studies.

Mandatory Costs, $33,549,000

Mandatory costs are expenditures the university must pay regardless of the level of funding appropriated by the state. These costs include health and dental benefit rate increases, new space, and energy. 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 2009/10 support budget plan provides for the following mandatory cost obligations:

Health Benefits $8,484,000
Dental Benefits 2,713,000
New Space 10,152,000
Energy 12,200,000
Total $33,549,000

Enrollment Growth, $83,448,000

Funded resident enrollment for the CSU will increase by 2.5 percent or 8,572 full-time equivalent students (FTES) in 2009/10. This enrollment growth will require $83.4 million to sustain direct instruction, academic support, student services, institutional support needs, and plant operations. The 2.5 percent enrollment growth will be funded using an enrollment funding rate of $9,735 per FTES, which excludes the portion of the student fee marginal cost rate ($791) that has been set aside for the CSU State University Grant financial aid program. The following table summarizes 2009/10 marginal cost funding for the 2.5 percent resident enrollment growth based on the state Department of Finance methodology:

ESTIMATED 2009/10 MARGINAL COST PER FULL-TIME EQUIVALENT STUDENTS
Gross Marginal Cost Funding Per FTES $10,526
Less: Student Fee Revenue ($2,374)
Proposed State Funding Rate $8,152
Gross Marginal Cost Revenue $10,526
Less: Marginal Cost Funding for Systemwide Financial Aid
(One-Third of $2,374 Student Fee Revenue)
($791)
Marginal Cost Funding for Campus-Related Enrollment Growth $9,735
2009/10 Projected Enrollment Growth (FTES) $8,572
2009/10 Marginal Cost Funding (8,572 FTES x $9,735) $83,448,000

A 2.5 percent increase from the 2008/09 resident FTES funded base of 342,893 is 8,572 FTES. This results in a 2009/10 funded base of 351,465 resident FTES. With nonresidents added, the 2009/10 enrollment total is 365,975 FTES.

2009/10 FULL-TIME EQUIVALENT STUDENTS ENROLLMENT TARGET
  2008/09 2009/10
Resident Students 342,893 342,893
2009/10 Resident Student Enrollment Growth (2.5%)   8,572
Total Resident FTES with 2009/10 Student Enrollment Growth 342,893 351,465
Nonresident Students
(for nonresident tuition fee paying purposes)
13,157 14,510
Total FTES   365,975

Financial Aid From Enrollment Growth, $6,780,000 (top)

One-third of the 2009/10 marginal cost revenue from 2.5 percent enrollment growth will be set aside to increase the CSU state University Grant (SUG) pool. The SUG pool is administered centrally and is allocated to campuses based on student need. With the additional of $6.8 million from 2009/10 enrollment growth, the total SUG pool will reach $320.5 million in 2009/10.

2009/10 STATE UNIVERSITY GRANT FUNDING INCREASE
2008/09 Final Budget State University Grants Funded $313,680,800
Financial Aid Set-Aside from Student Fee Portion of Marginal Cost 6,780,000 Calculation for Enrollment Growth (8,572 FTES x $791) 6,780,000
Total 2009/10 State University Grant Funding $320,460,800

Compensation Increases, $173,313,000 (top)

2009/10 Three Percent Compensation Increase, $94,542,000

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 $94,542,000 of the Higher Education Compact to fund a 3 percent compensation pool, subject to collective bargaining, for all employee groups, effective July 1, 2009. The 2009/10 cost of a 1 percent compensation increase is based on campuses' 2008/09 final budget salaries and salary-related benefits (OASDI, Medicare, and retirement) and is summarized in the following table:

ESTIMATED 2009/10 COST OF 1 PERCENT COMPENSATION INCREASE
  2008/09 Final Budget
Compensation (Adjusted1)
2009/10 Cost of
1% Increase
Faculty $1,616,707,000 $16,167,000
Staff 1,534,731,000 15,347,000
Total $3,151,438,000 $31,514,000
Cost of 3% Increase   $94,542,000

1Adjusted for 2008/09 employer-paid retirement rate reduction.

Funding to Reduce Salary Lags, $78,771,000 (top)

The CSU has a long-standing need to reduce salary lags for all CSU employees. Lack of funding for adequate compensation increases between 2001/02 and 2004/05 and in 2008/09 have largely contributed to ongoing compensation deficiencies for all CSU employee groups.

Although increases in budget funding afforded some relief to address faculty and staff compensation in 2005/06 through 2007/08, the need to further address faculty and staff salary lags is compounded by the lack of increased state funding in 2008/09. The 2009/10 support budget request includes additional funding to address salary lags ($78.8 million) above the 3 percent compensation increase identified.

In 2009/10, the total planned compensation pool is 5.5 percent ($173.3 million), with the 3 percent ($94.5 million) general compensation increase for all employee groups and an estimated 2.5 percent ($78.8 million) to reduce faculty and staff salary lags. Actual compensation increases for represented employee groups are determined by collective bargaining agreements.

In addition, there are critical salary-related concerns within a number of CSU classifications that require special attention. With regard to CSU faculty, the 2008/09 California Postsecondary Education Commission's (CPEC) projected faculty salary lag is 18.5 percent. The 2008/09 salary lag for CSU presidents is 46.7 percent. Faculty and president salary lags are based on the CPEC 20 higher-education comparison institutions. Also, CSU Human Resources 2008/09 staff market analyses indicate that many classifications have double-digit salary lags that include physicians, 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, $44,000,000 (top)

The 2009/10 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. In 2009/10, 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 2009/10, $35 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. Expenditures also served to strengthen investments in learning management systems and enhance 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. Because anticipated funding was not available to advance these efforts in 2008/09, gains achieved are at risk.

The funding included for fiscal year 2009/10 will significantly broaden academic technology support across the CSU through expansion of efforts in the target areas of existing and emerging baseline needs, core academic technology needs, and systemwide academic technology initiatives begun in 2007/08. In addition to necessary technological infrastructure, expenditures will support related human resource costs required to achieve initiatives left in abeyance during 2008/09.

The remaining $9 million of the $44 million requested will be directed toward backlogs in library volumes and electronic information resources ($3 million) and deferred maintenance projects ($6 million). These funds will enable the CSU to ensure that required maintenance projects can continue and that progress made toward library and academic technology initiatives to date is sustained.

The current estimated backlog of funds needed to address deficiencies in CSU purchases for library volumes, serials, periodicals, and electronic resources is $6 million. This 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 based on health and safety facility requirements currently totals over $435 million. The annualized cost to fund the defined backlog over a 10-year period would be $43.5 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.