Uses of Revenue | 2012/2013 CSU Support Budget Executive Summary | Budget | CSU
2012/13 Executive Summary

Uses of Revenue

Students in the library. The 2012/13 California State University Trustees’ Support Budget recommends an expenditure plan based on General Fund and tuition fee revenue increases to cover the cost of expenditure augmentations. The expenditures outlined below address the university’s fundamental priorities for the 2012/13 fiscal year. These include increases for mandatory costs, employee compensation, the CSU Graduation Initiative and Student Success programs, enrollment growth, urgent maintenance needs, information technology infrastructure upgrade and renewal, instructional equipment replacement, and the Center for California Studies.

Mandatory Costs, $26,265,000

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, operations and maintenance of newly constructed space, and energy. Without funding for mandatory cost increases, campuses would be required to redirect existing resources from other program areas to meet these obligations. In order to preserve the integrity of CSU programs, the 2012/13 support budget plan provides for the following increases in mandatory cost obligations.

Mandatory Costs
Health Benefits $15,086,000
New Space (2011/12 & 2012/13) $6,570,000
Energy $4,600,000
Total $26,256,000

The CSU already has absorbed approximately $125 million of mandatory cost increases since 2007/08, in addition to a decline in state appropriation of $868 million. Given this history, each additional dollar of unfunded mandatory cost increase necessarily comes at the expense of vital programs and operations.

Graduation Initiative and Student Success, $58,000,000 (top)

The 2012/13 support budget includes $58 million to facilitate degree completion and student success to close achievement gaps at CSU campuses. The $58 million funding for the CSU Graduation Initiative and Student Success programs will allow the university to begin to restore critical services such as advising, and put in place additional programs focused on student success to build on the CSU’s strong track record for outreach, access, and educational excellence, and focus on bringing every student to successful degree completion.

These funds will be used in three major program areas:

  1. Academic Advising - $13.8 million to provide significant enhancements to the current academic advising structure available to CSU students and clearer pathways to CSU graduation from the community college.
  2. Student Preparation – $35.7 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.
  3. Academic Programs – $8.5 million for academic programs that have a positive impact on improving graduation rates, lowering the cost of textbooks, and closing the achievement gap.

Consideration will be given for campuses to fill vacancies in tenure/tenure-track faculty positions as a means of improving academic advising and academic programs, given the important roles these positions play in these areas.

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 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. Thus, improvements in graduation rates at the CSU have the potential for maximum effect across the state. Relatively modest investments by the state, including this $58 million request, would improve the “degree productivity” of the state’s higher education expenditures and would leverage major dividends for California’s economic future.

3 Percent Compensation Increase Pool, $84,978,000 (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.

At this juncture, there are critical salary-related concerns across CSU employee groups that require attention by CSU leadership and in the collective bargaining process. Lack of funding has prevented the CSU from providing general compensation increases since June 30, 2008, in the case of faculty, and since July 1, 2007, in the case of all other CSU employees. Faculty and staff also experienced over 9 percent salary reductions during 2009/10 corresponding with a furlough program that fiscal year. This initial investment to make progress toward competitive salaries for faculty and staff will place the CSU in a stronger position to fulfill its primary mission of providing accessible higher education that maintains quality, which supports the state’s ability to fill jobs and help the economy recover.

The CSU plans to use approximately $85 million to fund a 3 percent compensation pool, subject to collective bargaining, for all employee groups, effective July 1, 2012. The 2012/13 cost of each 1 percent compensation increase is based on 2011/12 final budget salaries and salary-related benefits (OASDI, Medicare, and retirement) and is summarized in the following table.

Estimated 2012/13 Cost of 1 Percent Compensation Increase
  2011/12 Final Budget
Compensation (Adjusted1)
2012/13 Cost of
1% Increase
Faculty $1,426,473,000 $14,265,000
Staff 1,406,094,000 14,061,000
Total $2,832,567,000 $28,326,000
Cost of 3% Increase $84,978,000

12011/12 Member Category State Miscellaneous-Tier 1 Decrease by .55% from a Composite Rate of 18.725% to 18.175%; Member Category State Peace Officer/Firefighter Decreased by 1.3065% from a composite rate of 28.722% to 27.415%

5 Percent Enrollment Growth, $154,930,000 (top)

The 2012/13 budget plan includes 5 percent enrollment growth of 16,586 California resident FTES from a 2011/12 resident FTES base of 331,716.

2012/13 Full-time Equivalent Students Enrollment Target
2012/13 Resident FTES Base 331,716
2012/13 Resident Student Enrollment Growth (5%) 16,586
2012/13 Total Resident FTES 348,302

This enrollment growth will be funded using a marginal cost rate of $9,341 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 $154.9 million.

Support Budget 2012/13 Marginal Cost Per FTES
General Fund $6,812
Tuition Fee Revenue (net of financial aid) $2,529
Net Marginal Cost Funding per FTES $9,341
x 2012/13 Projected Enrollment Growth 16,586
2012/13 Marginal Cost Funding for Enrollment Growth $154,930,000

In 2010/11, the Department of Finance modified the calculation for funding enrollment growth. This change in methodology resulted in a shift in state General Fund support for enrollment from an average of 77 percent to a modified level of 70 percent. Reductions in CSU General Fund appropriations for all other CSU state-funded programs exacerbate the loss of marginal funding received from the state General Fund based on this modification under the Department of Finance methodology. State funding for the marginal cost of enrollment growth in 2012/13 following CSU General Fund reductions of $650 million in July 2011 has fallen to 64 percent of gross marginal funding need. This critical shift in CSU enrollment funding from the state has increased pressure on student fee rates to meet the CSU’s continuing enrollment demand, and it threatens California’s higher education Master Plan guiding principle that the state bear the preponderance of the cost of student access.

CSU Marginal Cost Enrollment Funding History
Fiscal Year State GF
Share
Tuition
Fee
Gross
Marginal
Cost per
FTES
State Percentage Share of Gross Marginal Cost
2006/07 $7,225 $2,264 $9,489 76%
2007/08 $7,710 $2,257 $9,967 77%
2008/09 $8,173 $2,152 $10,325 79%
2009/10 $7,964 $2,373 $10,337 77%
2010/11 $7,305 $3,093 $10,398 70%
2011/12 $7,338 $3,181 $10,519 70%
2012/13 $6,812 $3,794 $10,606 64%

Urgent Maintenance Needs, $30,000,000 (top)

The 2012/13 budget plan includes funding to address the CSU’s most urgent maintenance needs. The deferral of CSU maintenance needs has accumulated annually since 2002/03 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 $453.4 million considered priority deferred maintenance. The $30 million funding in the 2012/13 Support Budget is necessary to address the most critical renewal and repair projects that are part of the priority deferred maintenance backlog.

10-Year Deferred Maintenance Backlog
Budget Year Prior Year CA-CPI% Change1 Final Budget Funding Offset Backlog
2002/03 2.90%   $361,185,000
2003/04 2.60%   370,576,000
2004/05 1.90%   377,616,000
2005/06 3.30% $1,500,000 388,578,000
2006/07 4.20% 2,500,000 402,398,000
2007/08 3.40% 2,500,000 413,580,000
2008/09 3.40%   427,642,000
2009/10 1.30%   433,201,000
2010/11 0.70%   436,233,000
2011/12 1.70%   443,649,000
2012/13 Growth 2.20%   $453,409,000
2012/13 Proposed Offset $30,000,000 $423,409,000

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

Funding to address the most critical renewal/repair projects with health and safety concerns at each campus (e.g., fire protection, structural repairs, roofing, electrical distribution, HVAC, and elevators) is necessary to avert building and campus shutdowns. Any facilities shutdowns will interrupt educational 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 renewals will multiply.

Information Technology Infrastructure Upgrade and Renewal,
$20,000,000 (top)

The 2012/13 budget plan includes $20 million for information technology infrastructure to meet the most urgent needs for campus network upgrade and renewal. This includes the need to maintain the campus baseline network infrastructure with advanced technology utilized by students. Over 10 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 by wireless mode, putting exponentially 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 wide-area network infrastructure by over 2,000 percent over the last 10 years.

While student demand has risen, constrained funding has diminished the reliability of the current network infrastructure, reduced system maintenance, and minimized equipment replacement. By 2012/13, an estimated 45 percent of over 4,500 campus network switches will be obsolete. This increases the risk of network outages and security breaches, and typically increases costs.

The $20 million will be used to replace obsolete switches and increase the dependability and capabilities of student connections to networks. This is an ongoing cost as the useful life of network equipment grows shorter due to advances in technologies, changes in security requirements, and student need. 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.

Instructional Equipment Replacement, $22,609,000 (top)

The CSU calculates annually the depreciation costs of its instructional equipment inventory. Based on annual depreciation, the cost for repairing and replacing obsolete and outdated instructional equipment is calculated in accordance with state-recognized standards developed for the University of California and the CSU. Typically, CSU replacement costs average roughly $40 million per year based on recent reports submitted by the 23 CSU campuses.

Recognizing the gap between state support for equipment replacement and CSU need, $22.6 million is included in the 2012/13 budget to begin addressing a $31.4 million equipment replacement need. This investment represents 75 percent of total 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.

In fiscal year 2006/07, the state agreed to address a portion of instructional equipment replacement need within the CSU marginal cost calculation for enrollment growth. This component was added to the marginal cost methodology in recognition of 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 instructional equipment replacement need for continuing students remained a critical long-range challenge for the university.

Instructional Equipment Replacement (IER)
Annual
July IER
Report Year
Reported Replacement Cost Budget
Year
Budgeted Funding Marginal Cost Unmet Equipment Replacement Need
2011 $31,365,000 2012/131 $2,156,000 $29,209,000
2010 33,499,000 2011/12 705,000 32,794,000
2009 34,925,000 2010/11 2,008,000 32,917,000
2008 36,639,000 2009/10 0 36,639,000
2007 43,352,000 2008/09 0 43,352,000
2006 39,817,279 2007/08 994,000 38,823,279
2005 42,471,747 2006/07 1,095,000 41,376,747

1Reflects $2.2 million from 5 percent planned enrollment growth.

Center for California Studies, $489,000 (top)

Included within the 2012/13 Support Budget is an expenditure augmentation of $489,000 for the Center for California Studies. 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 Center operations. 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. The additional funding will allow the Center to maintain minimal operational levels and cover the increases in the fellows’ graduate student fees and their associated operating expenses.