Chancellor's Recent Speeches

Auxiliary Organizations Association
Conference - 1/9/00

Good evening, and thank you very much.

I'm glad to see we all survived the Y2K bug and made it here OK. Although I'm not so sure everyone survived the flu bug.

One of my favorite columnists, Dave Barry, made this prediction about New Year's Eve: "Lights will go out; phones will stop working; the banking system will collapse; jukeboxes will play only 'Copacabana;' VCRs will suddenly start displaying the correct time; and -- the ultimate nightmare scenario -- airlines will charge people who are on the same flight the exact same fare."

For better or worse, it looks like none of that has happened. And so the year 2000 begins...

I want to begin by extending my best wishes to all of you for a happy and productive new year and new century. I also want to thank you for inviting me to speak here again. This speech will be my second address to your group, and it marks the beginning of my third year at the CSU. One of the good things about milestones like new years and anniversaries is that they give us an opportunity to look back at where we were and look ahead to where we want to be in the future.

Last year at this time, I gave you a list of my concerns about operations and management of auxiliary organizations. I am very pleased to say that all of you have made a great deal of progress since last year. You have come a long way in just one year in terms of clarifying auxiliary missions and integrating auxiliary operations more closely with campus management. I know that many of you have put a lot of time into these efforts, and for that I am very grateful.

I want to spend the rest of my time tonight describing the work ahead for the CSU, what it will mean for the auxiliaries, and where we need to go from here.

The CSU

The main challenge ahead for the CSU is "Tidal Wave II" -- the massive enrollment growth predicted for our state's universities in the next 10 years. That growth will come from the children of the baby boomers who are now reaching college age, otherwise known as the "baby boom echo."

What this enrollment boom means for the CSU is that we are expecting growth somewhere in the neighborhood of 4 to 4-1/2 percent each year for the next ten years. That's about 12,000 or 13,000 additional students every year. To put it in perspective, that's like putting a new Hayward in place every year.

The challenge for the CSU is that we must provide access to a high-quality education for those students -- it is our mission to do so. We're going to need to operate our campuses more days of the week, more hours of the day, all year round to fulfill that mission. We will also have to support these new students by offering high-quality services -- with more faculty, classrooms and laboratories, bookstores, and so on.

I think you know what I am getting at here: The role of our auxiliaries and the services they provide will become increasingly important as our focus on access increases.

I want to thank you in particular for your attention to the year-round operations issue. This is going to require a big transition for us, and it will not happen overnight. But it must happen if we are to serve these new students.

I know it can work because we did it successfully in Florida. Our students came in the summertime despite the heat, thundershowers, humidity, and hurricanes. So I ask you to join me in finding ways to make this transition successful on our campuses. I also hope that many of you can attend the session on Tuesday in which year-round operations will be discussed in more detail.

Another major priority of mine is to improve our state's public schools.

The vast majority of our students come from California's public K-12 schools. So when we improve the public schools, we ultimately improve ourselves. We have launched a major effort to work more closely with the K-12 schools. This effort will include:

  • Creating faculty-to-faculty partnerships and greater outreach to K-12 schools;

  • Improving teacher preparation programs;

  • Distributing a poster that explains CSU entrance requirements;

  • Working more closely with the 223 California high schools that send us the most students needing remedial education.

Once again, collaborating with and offering assistance to the K-12 schools will be an important ongoing focus. We will continue to look for ways to reach out to local schools and students.

The Auxiliaries

Now -- a few more specific items I want to address about the future for auxiliaries. For many of the issues I discussed last year, such as mission, investments, and management of auxiliaries, we have made progress both on the campus end and at the systemwide level. I want to spend a little time talking about our progress and future direction on a few of these.

First, as to the mission of the auxiliaries: In the past year, as I mentioned, our auxiliaries have done a good job of examining their missions and renewing their student-service focus.

We have tried to do this on a systemwide level as well. A good example is the CSU Institute. After examining its mission and purpose, we made some major changes. We downsized it and reduced its scope to financing mechanisms, and shifted the operational responsibilities to the campuses or the chancellor's office.

In the coming year, I ask you to continue to assess your missions to make sure that you are serving students in the most effective way. Similarly, I ask you to continue examining your purpose, especially to make sure you are not duplicating other efforts.

Second, last year I talked about some concerns about auxiliary investments. I want to thank you again for the progress that has been made in the past year. One of the unique capabilities, among many, that the auxiliaries bring to the CSU is the ability to make equity investments--investments that the California Constitution prohibits for state funds invested by the university.

Recently, we have established several fixed income investment pools for state funds and -- as a service to auxiliaries -- we have also negotiated an equity investment program that will be available as a convenience. We hope that this program, which is voluntary, will be attractive as a very low-fee alternative.

As a footnote on this topic, I also ask you to continue to be prudent about your investment strategies. As we enter another year in the longest bull market in US history, we need to remember that the double-digit returns we have experienced over the past several years will not continue indefinitely.

Third, last year I talked about challenging ourselves to continue to improve. This year, I have a new challenge for you -- To keep asking how we can be more competitive, especially given the growth of the e-commerce marketplace. In other words, what are we doing to prepare ourselves for the changing economy?

For instance, what are we doing to compete with companies that sell textbooks over the Web? What will it take to create electronic CSU bookstores? And what roles will we need to re-think? For instance, should our bookstores re-examine their role in supplying personal computers to students?

Similarly, let us think about how we can develop more partnerships with local merchants, for e-commerce or regular commerce. Let's team up with local restaurants, for example, so that students can flash a CSU card and get a discount on a meal. They can use our CSU card to pay and we get a few cents back.

I know there are already many innovative partnerships underway throughout the CSU system, and I am pleased that so many of you are thinking "outside the box."

The San Francisco Centennial Square project combining housing and student services is a good example of a public-private partnership facilitated by an auxiliary organization. And here in San Diego, the College Community Redevelopment Project is another exciting example. I want to urge all of you to continue this kind of innovative thinking throughout the coming year.

Last, I want to mention one final issue -- the CABO report. We have concluded our meetings with the small group of presidents, during which we discussed the recommendations from CABO as well as the existing statutory and policy requirements that apply to CSU auxiliary organizations.

We have concluded from these discussions that the CABO report is helpful in understanding the very complex and lengthy requirements for auxiliaries. However, the report does not encompass the wide variety of organizational models that exist at the 22 campuses. Therefore, in lieu of issuing the CABO report as system policy, we have decided to simply reinforce existing law and policy.

I will also require each campus president to designate a chief fiscal officer to be responsible for fiduciary matters. These would include statutes applicable to auxiliaries. I assume that in each case the president will designate the business vice president. There may be circumstances, however, where more than one designee is appropriate. I will leave that determination up to the presidents.

Also, it became apparent to us that the campus-based compliance reviews were not being conducted. This year we are initiating, through our internal audit staff, audits of our auxiliaries. The first audits are underway now. We are developing a schedule that will, over a period of years, allow for review of all of our auxiliaries to ensure that our practices conform with legal policies and requirements.

Every time we have had a state review, our practices have been criticized. While we differ with some of these conclusions, many of their findings have substance. The public does not know the difference between the university and the auxiliary when poor judgment is used in the expenditure of university funds. I can assure you that the state auditor believes that the campus has a fiduciary role.

It is in the interest of our students and the mission of the CSU -- as well as good business practice -- to make sure that our performance measures up to our standards.

With that said, I want to close by thanking you again for all of your hard work in the past year. It is critically important for all of us to be a part of the same team. In fact, given the demands that the CSU will face in the next 10 years with "Tidal Wave II," it will be more important than ever for the auxiliary organizations and the campuses to work in tandem.

As our campuses gear up to provide better access and more services, we will need the full support of our auxiliary organizations -- every day, and all year round.

I want to thank you again for inviting me to speak, and I wish you a productive and prosperous new year.


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