Frustrated by what they say is California State University's arrogance and denial of serious problems within its $662 million computer system, lawmakers said Tuesday they intend to cut even more from the university's budget and will push for more state control over the way the university spends its money.
During a second hearing of the Joint Legislative Audit Committee on the university's Common Management System, lawmakers lambasted top university officials on a host of issues, with one assemblyman urging a resolution calling for the removal of Chancellor Charles Reed.

The legislators said some campuses had been coerced by the chancellor's office to agree to the project, contracts were missing and had been shredded, and student-funded dormitory, parking and extension-learning accounts had been used to help pay for the system.

They added that they were incredulous that CSU recently paid nearly $350,000 for a consulting firm to document the system's benefits -- but continued to ignore requests from the committee to do a cost analysis of the project. It was time, they said, to rein in CSU.

"The arrogance of the CSU is egregious and isn't going to be tolerated," said Assemblywoman Rebecca Cohn, D-Saratoga, the committee chairwoman in an interview after the hearing. "This will impact their budget, absolutely. We want to have the smallest impact on students and the largest on the folks running the CSU."

Reed several times was questioned about the CSU's attitude and tone before the committee. He defended the system's responsiveness to the state's concerns, which were sparked by a state audit that found CSU had understated the costs of the computer system by more than $300 million, routinely entered into consulting contracts without competitive bidding and failed to do a basic cost-benefit analysis.

"We take very seriously the recommendations of the auditor and are committed to fully implementing those recommendations," Reed said.

CSU officials testified that the decision to proceed with the project followed consultation with campuses and that each school decided on its own how to pay for its system. They defended their overall handling of the computer project, saying it was on time and on budget.

University records show that the project is two years behind schedule.

The bottom line, lawmakers said, was that students continued to pay the price for a computer system with questionable functionality, security glitches and escalating costs.

Committee member Sen. Tom McClintock, R-Simi Valley, said CSU was "squandering two-thirds of a billion dollars" and was grossly negligent in its oversight. He called for the committee to push for a legislative resolution to remove Reed.

CSU has opposed a bill by Assemblyman Manny Diaz, D-San Jose, that would give the state authority to approve and oversee the university's large technology projects. Diaz, a member of the committee, said all state agencies have that oversight and wondered why the university believed it should be exempt.

Reed said, "Our accountability procedures are, if not more than, at least equal with the state."

At its last hearing, the committee asked CSU to evaluate how much of the project could be deferred during the state's fiscal crisis. On Tuesday, officials said that of the $92 million the system and its campuses expected to spend in 2004, they could trim $16 million.

That would mean that campuses -- including CSU Sacramento -- would halt rolling out any more phases of the computer system. CSU and its campuses are putting in place three PeopleSoft components: financial, personnel and student administration.

Sen. Richard Alarcón, a member of the committee and one of the lawmakers who requested the audit, said those trims were not enough. The Sun Valley Democrat said that Reed in a private conversation had assured him that $25 million would be trimmed. He said $16 million wasn't sufficient given a budget crisis that is forcing CSU to look at raising fees, increasing class sizes and cutting outreach programs.

"Students need the money more than PeopleSoft," Alarcón said.

Committee members asked Reed whether any employees had been fired or disciplined as a result of the audit findings, and he said they had not. Cohn said the state Attorney General's Office is investigating possible criminal wrongdoing by CSU employees.

CSU officials also updated the committee on its efforts to fix the computer system's security problems, which allow some users access to Social Security numbers and other confidential information.

The university system has tightened security measures and persuaded PeopleSoft to fix the problem for free. Those security measures should be in place by early November.