The CSU Board of Trustees recognizes salary and benefits for faculty, staff and management as a key element to the university’s success. Continued investment in competitive salary and benefits is critical for the CSU to fulfill its primary mission of access to an affordable and high-quality education. A competitive compensation package is essential to the CSU’s ability to recruit and retain the best faculty, staff and management employees.
After careful consideration of the state’s and CSU’s fiscal circumstances, this budget plan does not include a request for funding increases for the 2021-22 compensation pool. As a point of reference, a one percent increase in salary and salary-related benefits (OASDI, Medicare and retirement) for all employee groups would cost $44,952,000.
The COVID-19 economic impacts have forced California employers to furlough or lay off hundreds of thousands of public and private sector employees across the state. Unfortunately, hundreds of hourly employees who worked in bookstores, dining, student recreation centers and other ventures operated by CSU auxiliary organizations could not be retained because the usual volume of foot traffic by students, faculty and staff largely disappeared in March 2020.
The CSU has been proactive in mitigating the impact to faculty and staff in light of the health crisis and the $299 million state budget reduction faced. The CSU quickly implemented several cost-control measures, including implementing a hiring chill and essentially stopping travel, saving millions of dollars for the system. In July 2020, the chancellor conveyed that the CSU would prudently use reserves this year so that there would be no systemwide furloughs or layoffs, allowing campuses to plan for permanent base reductions. Campuses report that they plan to use about 45 percent (or $180.4 million) of their reserves for economic uncertainty in 2020-21. This roughly equates to what would have been a 4.2 percent furlough for the system. Additionally, CSU employees have benefited from multiple programs provided by the CSU during this health crisis. Examples include leave available to employees who need to attend to COVID-related reasons (e.g., childcare, illness, isolation, care of a family member, unable to work remotely, etc.) and employees unable to telecommute due to the nature of their profession and classification.
With the health and fiscal impacts of COVID-19 expected to persist for some time, the CSU cannot guarantee that the mitigation efforts will indefinitely continue. Furloughs and layoffs may be necessary in the future. But clearly, as demonstrated immediately above, the CSU has and will continue to make every attempt to minimize negative impacts on employees.
Beginning with the 2013-14 fiscal year, the annual state budget placed a limit on the state’s obligation to adjust CSU retirement funding due to annual changes in CalPERS rates. While the state’s statutory obligation to adjust retirement funding based on annual rates set by CalPERS continues (Government Code section 20814), the salary base applied to the incremental rate change is annually set to the CSU 2013-14 pensionable payroll level in the state budget. Final 2019-20 pensionable payroll for the CSU was 32 percent above the 2013-14 frozen pensionable payroll level. The retirement increase amount above the frozen payroll level is an unfunded cost for the CSU, and it continues to increase each year when pensionable payroll or retirement contribution rates increase.
CalPERS retirement contribution rates decreased for 2020-21 for the first time in several years, due in part to advanced paydown of unfunded retirement obligations, so there is no request for additional retirement funding in 2021-22. However, use of this budgeting practice by the state is problematic and should be discontinued. Throughout the years that this budget practice has been in effect, the state or students ultimately covered the unfunded liability above frozen pensionable payroll because retirement costs are mandatory and unavoidable. While the rationale of this practice was to help reduce state funding increases and to examine more closely the cost of annual general salary increases and hiring of new employees, that has always been a key consideration. The CSU must balance the need to serve students with the level of funding available to the university, particularly as tuition rates have remained relatively constant since 2011-12 with only a $270 per year increase in 2017-18. The CSU cannot hire additional employees or provide continued investment to ensure competitive salary and benefits without the proper level of state funding.