2013/14 Executive Summary

Higher Education Funding and Mission in Crisis

California's near-term and long-run prospects for economic recovery and prosperity, and for social cohesion and harmony, depend on the ability of its higher education institutions to sharply boost the numbers of Californians attaining higher education degrees. Despite the state's fiscal condition, the CSU has legitimate funding needs in order to carry out its critically important missions for California. The 2013/14 support budget is tempered by recognition of the state's ongoing fiscal challenge, yet represents a credible statement of the university's key funding needs.

The 2011/12 Budget Act cut the CSU General Fund appropriation by $750 million to a level of $2.06 billion. As evident in the graph below, "State Appropriation and FTES from 1998/99 to 2012/13," this amount is nearly one-third below the peak level of state support of $2.97 billion in 2007/08. As also shown in the graph, this funding level could fall further to $1.8 billion if Proposition 30 is not enacted at the November election and a mid-year $250 million "trigger" reduction occurs. Even without the trigger cut, the 2012/13 budget act level of funding is less than 1998/99 (14 years earlier) when the CSU General Fund appropriation was $2.16 billion. However, this comparison makes no adjustment for inflation. Moreover, in 2012/13, the CSU is teaching 58,000 more California resident, full-time equivalent students (FTES).

State Appropriation and FTES from 1998/99 to 2012/13

State Appropriation and FTES from 1998/99 to 2011/12

Fiscal Year Full-Time Equivalent Students (FTES) CSU State Allocation
(in billions)
98-99 273,928 $2.16
99-00 281,782 $2.25
00-01 290,554 $2.47
01-02 316,396 $2.61
02-03 331,353 $2.68
03-04 331,704 $2.49
04-05 321,339 $2.45
05-06 334,343 $2.62
06-07 340,394 $2.79
07-08 353,914 $2.97
08-09 357,223 $2.87
09-10 340,303 $2.35
10-11 328,155 $2.79
11-12 341,280 $2.00
12-13 331,716 $2.06

The 2005/06 through 2010/11 Higher Education Compact between the governor, the University of California and the California State University was not fulfilled in the last three years of the compact, nor has any multi-year funding agreement taken its place for subsequent years. As shown in the graph "CSU State Support Versus Higher Education Compact Funding Agreement," this results in a $2.0 billion gap in state funding for the CSU projected out to 2012/13 compared to the needs and funding levels envisioned in that compact, even assuming the enactment of Proposition 30.

CSU State Support Versus Higher Education Compact Funding Agreement

CSU State Support Versus Higher Eduation Compact Funding Agreement

Fiscal Year State General
Fund Allocations
($s in billions)
Higher Education
Compact Funding Agreement
($s in billions)
98-99 $2.16 $2.16
99-00 $2.25 $2.25
00-01 $2.47 $2.47
01-02 $2.61 $2.61
02-03 $2.68 $2.68
03-04 $2.49 $2.49
04-05 $2.45 $2.45
05-06 $2.62 $2.62
06-07 $2.79 $2.79
07-08 $2.97 $2.97
08-09 $2.87 $3.12
09-10 $2.35 $3.35
10-11 $2.79 $3.59
11-12 $2.00 $3.83
12-13 $2.06 $4.09

The prolonged funding crisis has forced the CSU into an increasing reliance on tuition fees. However, increased tuition fee revenues have not fully covered state funding losses. For example, increased tuition fee revenues offset less than half of the $750 million state funding cut for 2011/12.

CSU campuses and the Chancellor's Office have responded to the fiscal crisis with a number of cost-saving measures, building on synergies achieved as a result of the success of recent initiatives such as implementation of the common financial system. This effort saves about $1 million per year by eliminating duplicative technology upgrades and maintenance at 23 campuses, and the consolidation of financial statement information was simplified. A similar merging is underway for the disparate campus personnel and payroll systems currently supporting the CSU. In addition, shared services are being implemented that combine police services, information security, and network and data center operations across multiple campuses. Plans to implement system-wide purchasing and accounts payable shared services are moving forward, as are strategic sourcing efforts that exploit the aggregate purchasing power of the CSU and redirect purchases to less costly, but equally beneficial commodities. Campuses also are consolidating and co-locating administrative offices and functions in an effort to reduce administrative overhead. Cost savings and efficiencies also are being sought through the coordination of campus academic calendars across the CSU. These are just a few examples of appropriate steps being taken to do more with less. In many cases, however, the measures that have been taken to reduce spending cannot be sustained indefinitely without negative impacts to the quality of instruction and services to students. This budget plan is based on continuing those cost-reduction strategies that are sustainable, while restoring resources where they are most needed to provide access and quality programs and services to students.

Studies by the Public Policy Institute of California (PPIC) have projected that California will face a shortage of approximately one million college-educated workers by 2025 unless very strong initiatives are undertaken to boost the production of college graduates. A 2009 PPIC report finds that "...colleges and universities in California would need to increase the production of baccalaureates by almost 60,000 per year (about 40 percent above current levels) to meet projected economic demand by 2025." Any hope of addressing this urgent problem depends on the CSU, which currently awards almost one-half of all baccalaureate degrees in the state and almost one-third of all master's degrees. The PPIC reports identify the critical economic need for state investment in higher education. As the 2009 PPIC reports observed, "as the state's economy has become increasingly reliant on highly skilled workers, a confluence of trends-the retirement of baby boomers, and demographic shifts toward groups with historically low rates of college attendance-makes these investments all the more crucial to the state's continued economic success."

Public Policy Institution of California April 2009 Report on Closing the Gap: Meeting California's Need for College Graduates

Public Policy Institution of California

Projected Supply
of College
Graduates to 2025
  Economic Demand
for College
Graduates to 2025
8,100,000 1.0 Million Gap 9,100,000