CSU Budget Office

Presentations and Communications

1999-2000 Response to the Legislative Analyst's Office: Cross Cutting Issues - Education

SUBJECT: Federal Funding

BRIEF OF LEGISLATIVE ANALYST’S COMMENTS: (Page E-11)

The Analyst recommends that the appropriate state agencies (Secretary of Education, Superintendent of Public Instruction, UC, CSU or the California Student Aid Commission) report to the Legislature on efforts they are taking to apply for federal funds and how federal programs will be coordinated with state programs.

CSU RECOMMENDATION:

CSU supports discussions related to these issues during legislative hearings, as the legislature deems appropriate.

CSU Comments:

CSU coordinates its grant activities in accordance with state guidelines and policies established by federal funding agencies. Specifically with regard to the seven initiatives the Analyst has identified, federal language requires that these grants be used to supplement, not replace state and/or local dollars. It is expected that the state will be the principal recipient of funds associated with Class Size Reduction, Gear Up, and Teacher Quality initiatives. Local grants would most likely be made for the Community Service Learning, Technology Training, and Bilingual Education initiatives. Working in partnership with state, K-12 and other appropriate institutions as necessary, to the extent CSU is eligible for and can utilize grant funding every effort would be made to secure these federal grants to supplement state funding. For example, CSU is participating in Intersegmental Coordinating Council efforts to utilize Gear Up funds. Other efforts will be coordinated through the California Education Roundtable.

In addition, the CSU federal governmental affairs office will assist campus presidents identify opportunities that exist to take advantage of these funds. CSU agrees with the Analyst that these funds coupled with state resources can give added benefit to the state’s goals in these important areas.

Departmental Issues – Higher Education: California State University (6610)

SUBJECT: CSU Budget Detail To Be Available in Spring

BRIEF OF LEGISLATIVE ANALYST’S COMMENTS: (Page E-122)

The Analyst states that the Governor’s Budget provides little detail on how CSU will allocate funds among its various programs. The Analyst notes that the majority of the proposed increase in CSU operating support is shown in the Provisions for Allocation program. The Analyst indicates that until CSU and the Department of Finance provide additional details, staff cannot evaluate how the proposed budget will affect various programs. The Analyst has withheld recommendations on the proposed changes in CSU’s budget and has requested that CSU and the Department of Finance provide the legislature with a comprehensive budget as soon as possible.

CSU RECOMMENDATION:

CSU recommends that the state support the 1999/2000 CSU Board of Trustees (BOT) Support Budget request and a supplemental funding request for high cost programs in agriculture, architecture, engineering and nursing.

1999-2000 CSU Response to LAO

SUBJECT: CSU Budget Detail To Be Available in Spring

CSU RECOMMENDATION: Continued

The Board of Trustees presented their budget request to the Department of Finance and the Legislative Analyst following its approval at their October 1998 meeting. CSU needs $121.4 million in addition to the Governor’s Budget proposal to fully fund the October 1998 request. In addition, CSU is seeking state recognition for $15 million in high cost program need at CSU for the disciplines of agriculture, architecture, engineering and nursing. The total CSU funding request for 1999/2000 is $136.2 million above the Governor’s Budget request.

The $121.4 million increased funding support would be used for competitive employee compensation, to make progress on the faculty salary lag, to fully implement the operating budget component of an integrated technology strategy linked to capital outlay infrastructure support, and for special campus applied research, student access and development initiatives. CSU also requests that the state consider continuation of budget deficiencies recognized in the 1998/99 Budget Act for deferred maintenance, instructional equipment, and libraries if additional resources beyond this amount are identified for the fiscal year. In addition, CSU is seeking $15 million as the first installment of a two-year phase in to recognized the differential cost for the more teaching and equipment intensive requirements per students for CSU agriculture, architecture, engineering and nursing programs.

CSU has previously provided a status report comparing the difference between the Governor’s Budget funding proposal with modifications that would be required in the trustees’ budget request the Department of Finance and the Legislative Analyst. Chancellor Reed presented the comprehensive plan identified in this response at Assembly and Senate overview hearings on February 17, 1999. This plan has been subsequently modified to include $15 million in 1999/2000 for CSU high cost programs.

CSU COMMENTS:

CSU has provided the Legislative Analyst and the Department of Finance a detailed spending plan based on CSU’s 1999/2000 budget request. It is important to note that the Analyst is correct that the Governor’s Budget does not specify how CSU should allocate its resources among its various programs. The reason for this budgeting approach has its origins in the state’s decision to move from a formula-driven budgeting process used prior to the 1993/94 fiscal year to a compact-based financing strategy tied to specified outcomes and accountability.

Prior to 1993/94, the state funded CSU programs on the basis of over 400 cost formulas principally tied to enrollment growth and building square footage. In addition, the state recognized non-formula budget costs associated with utilities, moving expenses, space rental, public safety, and ancillary support activities such as joint doctoral programs and off-campus centers in its annual appropriation to CSU. State budget increases for CSU were identified specifically by program as a result of the funding formulas and did not reflect nor represent any specific change in CSU programmatic activity other than enrollment growth, new space or increased service costs.

SUBJECT: CSU Budget Detail To Be Available in Spring

CSU COMMENTS: Continued

Specific changes in CSU program activity were funded through a Budget Change Proposal (BCP) which represented program changes tied to priority funding proposals of a one-time or on-going nature each fiscal year such as special repairs/deferred maintenance and instructional equipment replacement. BCP increases were typically displayed in the Provisions for Allocation program.

Since the 1993/94 fiscal year, CSU has been funded through lump-sum appropriations for general operations and has received specific one-time or permanent appropriations for state and/or legislative budget initiatives linked directly with CSU’s Master Plan mission or state higher education priorities. Under the 1995/96 –1998/99 higher education compact, lump sum appropriations were provided for specified outcomes related to student demand, affordable access and improved coordination of activities with K-12, UC, CCC and private institutions. CSU was required to show sustained commitment towards strengthening undergraduate instruction, improving time-to-degree and achieving competitive faculty salaries. CSU was held accountable for these commitments as a condition for continued funding under the compact.

Under the current budget process, it is not possible to provide information in the major budget program format that is displayed in the Governor’s Budget (e.g. Instruction, Academic Support, etc.). Consequently, CSU Governor’s Budget increases are primarily displayed as a lump sum increase to the Provisions for Allocation program as a direct result of the state’s change in budgetary policy and as an indicator of the fluid nature of state budget decisions preceding the enactment of the Final Budget.

Following the Governor’s Budget transmittal to the legislature, CSU has typically provided a detailed plan to illustrate within broad spending categories such as enrollment growth, plant maintenance and mandatory costs how general operation and priority funding support from the state will be utilized during the fiscal year. However, these plans have rarely been presented in Governor’s Budget program detail prior to enactment of the Final Budget or before campuses have been provided the opportunity to address their specific budgetary concerns.

1999/2000 Comprehensive Budget Plan

The 1999/2000 CSU Budget Plan based on the Governor’s Budget appropriations request is $118 million less than the Board of Trustees’ requested. CSU has revised its budget plan to reflect specific changes proposed in the governor’s budget and to allocate all remaining resources among the competing priorities identified in the trustees’ October request. The revised plan based on Governor’s Budget appropriations was presented to the Board of Trustees at its January 1999 meeting as an information item. It reflected authority delegated to the Chancellor at the board’s October 1998 meeting to make budget adjustments as necessary to the 1999/2000 CSU Support Budget request in response to budget action by the governor and legislature.

SUBJECT: CSU Budget Detail To Be Available in Spring

CSU COMMENTS: Continued

The Governor’s Budget specifies the appropriation of $63.4 million for 3% enrollment growth, plant maintenance, annuitant dental benefits, public safety requirements at the Channel Islands off-campus center, and applied agricultural research. In addition, CSU has mandatory cost obligations that require $13.8 million for full-year 1998/99 compensation increases, health and dental benefit rate increases for current employees, and the opening of new building space.

The majority of all remaining Governor’s Budget resources ($45 million) have been used to provide a compensation pool for employee salaries and benefits subject to collective bargaining. This amount is $28.5 million less than the 4% compensation pool the trustees requested to keep employee salaries competitive. Moreover, no funding has been provided to support a 2% supplement compensation pool for faculty to make progress on the CPEC faculty salary lag. This $19.4 million request, when added to the funding shortfall for the general compensation increase creates a $47.9 million deficit in the trustees’ original budget request.

CSU has also identified $7 million for important campus and system initiatives that will require some recognition in the 1999/2000 budget allocations. First, continuing start-up campus requirements for CSU, Monterey Bay ($2.8 million) must be provided to keep planned enrollments on track and complete the successful transition of the former Fort Ord facility into a full-fledged campus. In addition, to plan successfully for utilization of the summer quarter as part of CSU teacher preparation and year-round operation initiatives, CSU will dedicate $2.2 million as forward funding to begin this process for Summer 2000. The extent to which CSU can effectively pilot and evaluate the feasibility of year-round operations at all CSU campuses will require forwarding funding for planning and curricula development activities in the year prior to actual enrollment expectations.

Also, CSU has reserved $2 million of the $7 million to continue funding discussions related to its technology initiative, which will require an additional $23 million in new operating budget support to complement the telecommunications infrastructure initiative contained in the capital budget. CSU has provided a detailed description of its technology initiative to the legislative analyst and has conducted a series of staff briefings on the specific funding components of technology plan. In addition, CSU is requiring that $24 million in campus resources be utilized in support of this initiative. Campuses will be required to use productivity savings, redirections, and/or other revenue programs including several types of industry relationships to meet their $24 million financial obligation.

In summary, the CSU budget plan for 1999/2000 based on the Governor’s Budget reflects significant shortfalls in the trustees’ budget request. Of principal concern is $28.5 million needed to restore the compensation increase to 4% for all employees. Also, to make progress on the CPEC faculty salary lag an additional $19.4 million is needed to increase the compensation pool by 2% for faculty, which would result in a 6% compensation pool for faculty. The CPEC salary lag has been identified as 7.2% for the current year (1998/99). CSU also remains committed to its technology initiative and feels this issue and $23 million in state funding support should be

SUBJECT: CSU Budget Detail To Be Available in Spring

CSU COMMENTS: Continued

addressed if our students are to be competently prepared for the workplace and learning environments of the 21st century. CSU is also asking that the state fund trustees’ requests ($5.2 million) related to off-campus center funding standards at Coachella Valley, campus planning and curricula development for CSU Channel Islands, and applied agricultural research — as well as the continuation of $45 million provided in 1998/99 for deferred maintenance, libraries and instructional equipment.

Other additional funding initiatives that should be considered for 1999/2000 include $15 million for high cost program differentials for four CSU programs (agriculture, architecture, engineering and nursing) and the fair and efficient use of Proposition 1A bond financing. This requires that the state phase in the joint library project at CSU, San Jose over a two-year period so that other important projects at Sonoma and Humboldt can proceed without delay in 1999/2000.

Further, initiatives for academic preparation, K-12 partnerships and outreach programs that are not included in the CSU funding request should be supported as part of the state’s higher education policy focus. CSU’s Cornerstones initiative will also require implementation of faculty development incentives to guarantee continued progress on CSU Master Plan requirements for access and quality. In addition, a new testing proposal to reduce the need for remedial instruction will be discussed as part of CSU’s response to state education goals.

CSU has accepted the governor’s call to work with the Secretary for Education and the Department of Finance to identify specific programmatic changes with quantifiable measurements as the principle component of a new funding compact for higher education that guarantees an predictable, stable level of annual support. CSU has long held that the most effective measurement of accountability has been our ability to achieve specific outcomes associated with our Master Plan mission. It has long been our desire to move state budget discussion from the technical details of micro-management to the identification and assessment of measurable outcomes that ensure:

  • our students have received a quality education;
  • that our graduates are equipped to function effectively in the workplace;
  • that our institutions remain relevant in a changing global environment; and,
  • that the CSU has demonstrated the most efficient, cost-effective use of its resources.

Departmental Issues–Higher Education: California State University (6610)

SUBJECT: One-time Carryover Funds – Encourage Spending on Pressing Campus Needs

BRIEF OF LEGISLATIVE ANALYST’S COMMENTS: (Pages E-122 to 124)

The Analyst discusses the history and current authority provided to the CSU in the Budget Act that makes General Fund appropriations unexpended at the end of the fiscal year available for two more years beyond the original year of appropriation. That discussion is a fair representation of the facts. The Analyst then recommends amending the pertinent language in the budget to limit the amount of funds that can be carried forward to $15 million excluding expenditures for deferred maintenance and instructional equipment replacement. This recommendation incorporates two changes in current language. First, it removes the reference to funds generated from systemwide allocations upon which the existing limitation applies and it places a limitation on all funds both campus and systemwide. Second, it makes specific reference to funding for deferred maintenance and instructional equipment replacement.

CSU RECOMMENDATION:

It is unclear to us why the Analyst has made this recommendation and we believe that a change in this authority is unnecessary.

CSU COMMENTS:

The Analyst’s review of the current authority permitting the CSU to make the best use of appropriated dollars is an accurate description of the recent past history of how CSU has expended funds remaining at the end of the fiscal year. In fact, we see no criticism of CSU’s use of the existing authority in that discussion. The Analyst cites a potential "circumvention" of authority regarding the $15 million cap, but has not documented nor even suggested there has been circumvention.

The CSU has regularly reported to the legislature the uses to which year-end unexpended balances have been put as required by the Budget Act. Further, as this issue was discussed before the legislature two years ago, we agreed to the $15 million cap on systemwide funds. Now the Analyst wants to extend that limit to campuses on a notion of a potential abuse. We disagree that there is a need for a diminution of existing authority without demonstrated and compelling reasons.

As the Analyst points out, the CSU has used both planned budget expenditures and carry forward dollars for the high priority of deferred maintenance and instructional equipment, so specific reference to those items would appear to be unnecessary.

We believe the current authority has been refined by the legislature over the past few years to where there is sufficient oversight available, particularly in view of a lack of any demonstrated abuses.

Departmental Issues – Higher Education: California State University (6610)

SUBJECT: The CSU Cannot Document Growth in Teacher Preparation Enrollments

BRIEF OF LEGISLATIVE ANALYST’S COMMENTS: (Pages E-125 to 127)

We recommend that California State University (CSU) report at budget hearings regarding its progress towards meeting the 2,702 full-time equivalent enrollment growth in teacher preparation programs funded in the prior two budget acts. In addition, CSU should report on the methods for tracking teacher teaching enrollments and expenditures and whether these are reliable. If CSU is unable to document this enrollment growth, we recommend permanently shifting $13.8 million from CSU’s base budget to fund an increase in the number of Cal Grant T awards.

CSU RECOMMENDATION:

CSU does not believe a redirection of funds provided for teacher preparation programs is or will be warranted.

CSU COMMENTS:

To be accountable for the increased funding received specifically for CSU teacher preparation activity in the 1997/98 fiscal year, campuses were asked to report by term for the 1997/98 academic year the number of students and the full-time equivalent of student instruction in multiple and single subject teacher preparation programs. CSU has been able to use these reported data to develop an estimate of 1998/99 college year enrollment based on fall 1998 student data. Using these data and data from the California Commission for Teaching Credentials (CCTC), CSU can identify significant achievements in teacher preparation activity.

LAO described CSU system and campus concerns about the historical quality of record keeping about students in teacher preparation programs. There is unevenness in the quality of campus data on students in teacher preparation programs, particularly for the 1996/97 academic year and before. This spring, CSU system and campus personnel will meet on ways to strengthen record keeping for enhanced reporting on teacher preparation. CSU is confident that enrollment levels will increase by the expected levels of growth funded; however, it is projected that the additional 2,702 FTES enrollment growth will be totally achieved by summer 2000.

With the funding that has been received and in response to CSU action to date, the following accomplishments have been achieved:

(1) CSU is on a trajectory to provide 1,181 more FTES of instruction in multiple subject credential programs in 1998-99 – up from the 7,196 FTES of instruction served in 1997-98.

SUBJECT:The CSU Cannot Document Growth in Teacher Preparation Enrollments

CSU COMMENTS: Continued

CY FTES Instruction Taken by Students in Multiple Subject Credential Programs

Annual Annual %

        Year CY FTES Growth Growth

        1997-98 7,196

        1998-99* 8,377 1,181 16%

*Extrapolation from fall 1998 systemwide figures based on 1997/98 reported data.

CSU estimates that cumulative growth since the 1996/97 academic year should approach well over 2,000 additional FTES of instruction in multiple subject programs if data are extrapolated for 1996/97 using academic planning data. Using that extrapolation, CSU has calculated growth of 969 FTES of instruction between 1996/97 and 1997/98.

Because 1997/98 teacher preparation appropriations were not available for campus allocation until after fall 1997, CSU expects that the additional 2,702 FTES enrollment growth funded by the state shall be achieved by summer 2000. Based on the systemwide data currently available, CSU is well on the way to meeting that goal.

(2) CSU increased its credential production from 11,736 as of July 1997 to by 15% to 13,517 fully-credentialed multiple and single subject teachers – as of July 1998, according to almost final CCTC data. This level of credential production takes the CSU half of the way to reaching its internal July 2000 goal of 15,000.

During 1997-98, the year that the class size reduction initiative was first implemented, CSU campuses met the challenge by preparing and recommending more of their students for full-credentials in multiple and single subjects.