SACRAMENTO -- Having just turned away more than 5,000 qualified students for the winter and spring terms and faced with the likelihood of a third straight year of severe budget cuts, California State University Chancellor Charles Reed on Monday warned that further reductions will hamper the state's ability to rebound from a stagnant economy.

"By not making education funding a top priority, we will feel the ripple effect of a less educated work force for years to come," Reed told university supporters in his annual State of CSU speech. "Budget cuts in education will continue to be a drag on the state's fiscal recovery."

The 23-campus university, the largest in the nation, turns out 77,000 graduates a year in such disciplines as teaching, engineering, computer sciences and agriculture. If cuts proposed by Gov. Arnold Schwarzenegger are implemented next year, Reed said, the university will have no choice but to limit access and begin to reduce the flow of trained graduates into the work force.

"In previous budget cuts, access was postponed," he said. "But now it is clearly threatened. For the first time ever, the CSU has had to deny access to qualified students. ... This occurs at a time when more and more eligible students want to enter college."

Reed said 15 of the 23 campuses have said no to eligible students applying for enrollment in the fall.

"Every time we turn away a student, we're turning away somebody's opportunity for the future," he said.

Reed spoke to CSU advocates around the state gathered at the Capitol to lobby legislators and the Schwarzenegger administration for support. The group included a six-member team from California State University, Channel Islands, headed by President Richard Rush and student body President Becca Glazier.

The college enrollment pinch -- neither of the state's two four-year higher education systems is slated to get any money for enrollment growth -- is being felt at CSUCI, Rush said, where the start-up campus has had to scale back its growth timetable.

Next academic year, Rush said, the campus will be able to admit only enough new students to replace those who graduate or leave this year. As a result, only "a few hundred" of the 4,000 who applied for admission next fall will be accepted.

Given the depth of the state's budget crisis, university officials are not hopeful of escaping further cutbacks in the coming fiscal year. However, Reed said CSU supporters do want to impress on the new administration that the university took substantial cuts in the previous two years. They also hope to persuade lawmakers not to make any cuts beyond the 8.4 percent reduction in state funding proposed by Schwarzenegger.

To cope with declining revenues, Reed said, CSU will not repeat its mistake of the early 1990s when it accepted more students than it could adequately accommodate. As a result, most students found it impossible to enroll in the classes they needed.

The policy will be to provide what Reed called "authentic access," which means managing enrollment to ensure that students can get the course selections they need to graduate.