Uses of Revenue | 2014/15 CSU Support Budget Executive Summary | Budget | CSU
2014/15 Executive Summary

Uses of Revenue

Students in the library.The 2014/15 California State University Trustees’ Support Budget recommends an expenditure plan based on General Fund and tuition fee revenue increases from higher enrollment to cover the cost of expenditure augmentations. The expenditures outlined below address the university’s fundamental priorities for the 2014/15 fiscal year. These include increases for mandatory costs, employee compensation, the CSU Student Success and Completion programs, enrollment growth, financing maintenance and infrastructure needs, and the Center for California Studies.

Mandatory Costs, $13,663,000

Mandatory costs are expenditures the university must pay regardless of the level of funding appropriated by the state. These costs include increases for employee health benefits and operations and maintenance of newly constructed space. Without funding for mandatory cost increases, campuses must redirect existing resources from other program areas to meet these obligations. In order to preserve the integrity of CSU programs, the 2014/15 support budget plan provides for the following increases in mandatory cost obligations.

Mandatory Costs
Health Benefits $12,066,000
New Space $1,597,000
Total $13,663,000

3 Percent Compensation Increase Pool, $91,605,000 (top)

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 essential to the CSU’s ability to recruit and retain faculty, staff, and management employees who contribute to the CSU’s mission of excellence.

Continued investment to make progress toward competitive salaries for faculty and staff are needed to place the CSU in a stronger position to fulfill its primary mission of providing accessible higher education that maintains quality, and that supports the state’s ability to fill jobs and help the economy recover. There continue to be critical salary-related concerns across CSU employee groups that require attention by CSU leadership and in the collective bargaining process. The first general salary increase in several years for faculty and staff occurred in 2013/14 with $38 million, representing an average increase of 1.34 percent, distributed across employee groups.

The budget plan calls for approximately $91.6 million to fund a 3 percent compensation pool, subject to collective bargaining, for all employee groups, effective July 1, 2014. A 3 percent pool is intended to strike a balance between competing priorities. The 2014/15 cost of each 1 percent compensation increase is based on 2013/14 final budget salaries and salary-related benefits (OASDI, Medicare, and retirement) and is summarized in the following table.

Estimated 2014/15 Cost of 1 Percent Compensation Increase
  2013/14 Final Budget
Compensation (Adjusted1)
2014/15 Cost of
1% Increase
Faculty $1,504,074,000 $15,041,000
Staff 1,549,422,000 15,494,000
Total $3,053,496,000 $30,535,000
     
Cost of 3% Increase $91,605,000

1 The compensation base is adjusted for changes in employer-paid retirement rates. The CalPERS member categories for State Miscellaneous-Tier 1 and State Peace Officer/ Firefighter respectively increased 0.7 percentage points and 1.023 percentage points, respectively, from the 2012/13 composite rates of 20.503 percent and 30.297 percent to 2013/14 rates of 21.203 percent 31.320 percent.

Student Success and Completion, $50,000,000 (top)

The 2014/15 support budget includes $50 million for a variety of efforts and strategies to facilitate degree completion and student success and to close achievement gaps at CSU campuses. The $50 million funding for these Student Success and Completion programs will allow the university to begin to rebuild critical services such as advising, and put in place additional programs for access, success and educational excellence, with a focus on bringing every student to successful degree completion.

These funds will be used in six initiative areas:

  1. Tenure-track Faculty Hiring – $13 million for campuses to hire tenure-track faculty and begin to reverse the long-declining ratio of tenured and tenure-track faculty to lecturers, as well as to improve student/faculty ratios. These funds would augment new state funds and tuition fee revenue associated with enrollment growth to enable campuses to hire more than 500 new full-time, tenure-track faculty systemwide. More tenure-track faculty, added to current faculty numbers, means more sections of high-demand courses taught, more faculty mentoring of students, and more student involvement in applied research projects as part of their education. Tenured and tenure-track faculty bear primary responsibility for student career advising, guiding students in their academic discipline, academic program development and revision, and participation in shared campus governance. Restoring the balance of tenure-track faculty ratios will substantially enhance program quality and student success and completion.
  2. Enhanced Advising – $8 million, with half the funds to hire more professional staff advisors at campuses and half the funds to leverage the work already underway with various e-advising technologies that allow for clear and accurate “real time” information for students and advisors related to graduation requirements, changing majors and efficient scheduling of classes. Professional advisors help students navigate the complex “ecosystem” of student services, campus life, and choices about courses, majors, academic requirements and unit loads. The proposed addition of 70 staff advisors systemwide would greatly assist campuses in meeting student advising needs.
  3. Augment Bottleneck Solutions Initiative – $2.5 million to expand annual initiative to $12.5 million (a 25% increase over the $10 million 2013/14 base). The added funding will support more online concurrent enrollment courses to be offered by both semester and quarter campuses and provide students with more choices for filling their schedules with the courses they need for general education and major requirements.
  4. Student Preparation – $8 million to provide essential support to help incoming freshmen attain college readiness before arriving on a CSU campus, and provide underserved CSU students with resources that greatly increase their likelihood to persist to a college degree.
  5. High-Impact Practices for Student Retention – $12 million to “scale up” a wide range of successful “high-impact” practices, including service learning projects, undergraduate participation in applied research, first-year student learning communities (a cohort or shared academic focus for groups of first-year students), and peer mentoring (upper division students mentoring lower division students).
  6. Data-Driven Decision Making – $6.5 million to accelerate completion of the Data Dashboard project. Implementing “data dashboard” technologies on all the campuses will dramatically improve decision-making and effective implementation of various student success initiatives by providing the tools for quick assessment of the efficacy and success of various programs.

As previously noted, 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. Studies by the Public Policy Institute of California have projected that California will have 1 million fewer college graduates than it needs by 2025, based on recent trends. Any hope of addressing this urgent problem depends largely 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. These six areas of proposed funding are all directed at improving student success and completion. Resulting improvements in graduation rates and the number of successful degree completions at the CSU have the potential for maximum effect across the state. Relatively modest investments by the state, including this $50 million request, would improve the “degree productivity” of the state’s higher education expenditures and would leverage major dividends for California’s economic future.

5 Percent Enrollment Demand/Growth, $163,835,000 (top)

The 2014/15 budget plan includes 5 percent enrollment growth of 16,826 California resident FTES from a 2013/14 California resident FTES base of 336,510.

2014/15 Full-time Equivalent Students Enrollment Target
2014/15 Resident FTES Base 336,510
2014/15 Resident Student Enrollment Growth (5%) 16,826
2014/15 Total Resident FTES 353,336

This enrollment growth will be funded using a marginal cost rate of $9,737 per FTES. The total funding required to sustain direct instruction, academic support, student services, institutional support, and plant operations related to the proposed enrollment growth is $163.8 million. This total would be offset by the $84.6 million of estimated tuition fee revenue (net of financial aid) generated by the additional enrollment, leaving $79.2 million to be funded by the state. The 16,826 FTES translate into more than 20,000 additional students (individuals), representing a requested state investment of less than $4,000 per student.

Financing Maintenance and Infrastructure Needs, $15,000,000 (top)

The 2014/15 budget plan includes $15 million of funding to finance the CSU’s most urgent facility maintenance and utilities infrastructure backlogs, instructional equipment replacement needs and information technology infrastructure upgrade and renewal. The CSU’s backlog of facility maintenance and infrastructure needs, even if restricted to the highest priority needs, is massive and growing. State funding for capital outlay has reached critically low levels in recent years and constrained annual support budgets cannot keep up with maintenance needs. This preliminary plan would attack the problem by building up—with annual increments of $15 million over the three remaining years of the Governor’s multi-year plan—an ongoing “base” of $45 million available for annual debt service on bonds. This option would allow the CSU to finance an estimated $750 million to $800 million, depending on interest rates, of vitally needed work—addressing deferred maintenance priorities, but also upgrading and replacing basic infrastructure (such as campus electrical systems and water systems dating back more than a half century). Such a program could also address key needs in terms of technology infrastructure and instructional equipment replacement.

Deferred Maintenance (top)

The 2014/15 budget plan includes funding to address the CSU’s most urgent maintenance needs. The deferral of CSU priority maintenance needs have further accumulated annually since 2004/05 due to insufficient funding to address scheduled maintenance requirements in CSU final budget appropriations. This lack of funding has resulted in a backlog of systems and facilities past their useful life, with $473.1 million considered priority deferred maintenance. Funding in the 2014/15 support budget is necessary to address the most critical renewal and repair projects that are part of the priority deferred maintenance backlog, including health and safety concerns at each campus (e.g., fire protection, structural repairs, roofing, HVAC, and elevators) to avert building and campus shutdowns. Facilities shutdowns will interrupt education services to students and impede the CSU’s ability to provide a clean and safe work environment for faculty and staff. Without funding to begin addressing this need, emergency failures will continue to drive up deferral costs and CSU critical renewal needs will multiply.

10-Year Priority Deferred Maintenance Backlog
Budget Year Prior Year CA-CPI % Change1 Final Budget Funding Offset
(in millions)
Backlog
(in millions)
2004/05 1.9%   $377.6
2005/06 3.3% $1.5 388.6
2006/07 4.2% 2.5 402.4
2007/08 3.4% 2.5 413.6
2008/09 3.4%   427.6
2009/10 1.3%   433.2
2010/11 0.7%   436.2
2011/12 1.7%   443.7
2012/13 2.4%   454.3
2013/14 2.1%   463.8
2014/15 Growth 2.0%   $473.1

1 CA-CPI % source: CA Department of Finance, Planning Estimate Forecast, July-June (calculated using a formula developed by the CA Dept. of Industrial Relations)

Utilities Infrastructure (top)

At many CSU campuses, the utilities infrastructure is obsolescent, dating back more than a half century and in need of upgrade or replacement. The cost of repairing this infrastructure is high as electrical, gas and water systems continue to age. Because the utilities infrastructure is a core system to the CSU and its ability to educate its students at functioning, reliable campuses, funding included in the 2014/15 support budget is imperative to address the most critical projects that are part of the infrastructure backlog, including electrical distribution, utility system retrofit, natural gas piping, storm/sewer drain line, and plumbing and water system. Power or water service interruptions and failures impede the CSU’s ability to provide education services in a safe environment for students, faculty and staff. Without funding, failures and potential building and campus shutdowns will occur producing additional costs and potentially further damaging systems and infrastructure.

Information Technology Infrastructure Upgrade and Renewal (top)

Under the 2014/15 budget plan a portion of financing proceeds would be prioritized for information technology infrastructure to meet the most urgent needs for campus network upgrade and renewal. The basic need is to maintain the campus baseline network infrastructure with advanced technology utilized by students. More than 12 years ago when the CSU network infrastructure was instituted, students accessed campus networks from a few wired locations such as libraries and computer labs. Today students access networks wirelessly and the amount of access has increased exponentially, thereby placing higher demands on the network infrastructure. Further, CSU network resources for learning management systems, online courses, and smart classrooms have become standard, and a shift to Internet-based resources has increased traffic on the network infrastructure by more than 2,000 percent over the last 12 years.

While student demand has risen, constrained funding has diminished the reliability of the current network infrastructure by minimizing equipment replacement. For example, by last July 2013, an estimated 83 percent of the mission critical core network devices and 23 percent of the non-core network switches were obsolete. The inability to replace needed equipment increases the risk of network outages and security breaches, and typically increases costs.

The requested funds will be used to replace obsolete equipment and increase the dependability and capabilities of student connections to networks. Funding the upgrade and renewal of the network infrastructure will ensure that connectivity and access to library resources, educationally related video content, cohort conferencing tools, online courses, learning management systems, and other classroom technologies are available to CSU students. Note that there is an ongoing cost element—the useful life of network equipment grows shorter with advances in technologies, changes in security requirements, and increasing student need.

Instructional Equipment Replacement (top)

The CSU calculates annually the depreciation costs of its instructional equipment inventory. Based on annual depreciation, the cost for repairing and replacing obsolete instructional equipment is calculated in accordance with state-recognized standards developed for the University of California and the CSU.

Recognizing the gap between state support for equipment replacement and CSU need, funding is included in the 2014/15 budget to address the needs of the institution. This investment represents a fraction of need and will assist campus efforts to provide essential equipment upgrades and purchases required for direct instruction, smart classroom interface, and instructional-related and educational support services.

A portion of instructional equipment replacement need is funded within the CSU marginal cost calculation for enrollment growth. This component in the marginal cost methodology recognizes the need to sustain and upgrade instructional equipment for new enrollment. However, marginal cost funding was designed to provide only a small fraction of equipment replacement need associated with the change in need as students graduated and new students matriculated. Most of the instructional equipment replacement need for continuing students remains a critical long-range challenge for the university.

Instructional Equipment Replacement (IER)
Annual
July IER
Report Year
Reported Replacement Cost Budget
Year
Anticipated Marginal Cost Funding Unmet Equipment Replacement Need
2013 $31,233,000 2014/15 $1,565,000 $29,668,000

Center for California Studies, $152,000 (top)

The Center for California Studies is a state-funded program within the CSU that promotes understanding of and effective participation in the political and policy processes that govern California. Included within the 2014/15 support budget is a 5 percent augmentation of $152,000 for the Center. The Center’s General Fund appropriation—a stand-alone appropriation in the state’s annual budget bill (currently $3 million)—funds direct costs and administrative expenses for the Assembly, Senate, Executive, and Judicial Fellows programs and other programs consistent with the Center’s mission. The proposed augmentation would be the Center’s first General Fund increase since 2007/08, and would help to alleviate mounting cost pressures that continue even after implementing efficiencies and cost saving measures. The proposed augmentation would be used to (1) cover anticipated increases in personnel costs due to systemwide collective bargaining agreements, (2) maintain financial access to the Fellows and other programs by modestly increasing financial aid and stipends, and (3) fund other inflationary increases.