Executive Summary

CALIFORNIA STATE UNIVERSITY (CSU) AND THE CURRENT FISCAL ENVIRONMENT. Budget planning for 2026-27 is unfolding within a challenging and uncertain fiscal environment, shaped by competing state priorities, unpredictable federal funding, and ongoing economic pressures. The CSU system continues to face substantial financial strain, highlighted by a $143.8 million base budget reduction and compact funding deferral in 2025-26 that has created immediate operational challenges across all universities.

While the compact deferral is well-intended, this action creates disruptions in university planning, forces difficult trade-offs, and constrains the CSU's ability to protect student success, employee support, and institutional stability. The deferral also compounds long-standing concerns about the gap between operating revenues and the rising costs of maintaining quality, access, and strategic growth. A systemwide analysis conducted in 2023 revealed a $1.5 billion structural shortfall between available funding and projected operating needs—excluding the expanding number of unfunded mandates and an $8.6 billion backlog in critical capital renewal projects.

Since then, new mandates, escalating inflationary pressures, and higher personnel and benefit costs have further strained university budgets, making it even more difficult to sustain current service levels, meet obligations, and invest in future priorities. In addition, the $143.8 million base budget reduction and the inability of the state to provide $252.3 million Year 4 Compact funding will grow the CSU budget gap to $2.3 billion as of 2025-26.

In recent years, universities have implemented budget reduction strategies, including reductions of over 1,200 positions, elimination of roughly 1,400 courses, reductions in student support staff, delayed hiring and facility maintenance, restructured programs, and an 8% reduction in the Chancellor's Office budget. Without stable, adequate, and predictable funding, CSU's ability to fulfill its core mission and meet the performance expectations of the multi-year compact is at serious risk.

CSU PLAN. Amid the current fiscal environment, the CSU's 2026-27 budget plan is centered on protecting and strengthening existing commitments rather than pursuing new initiatives. The focus on restoring funding and fulfilling the multi-year compact is critical to ensuring the CSU can meet its current obligations before taking on additional priorities. These include maintaining student access, sustaining progress on equity and graduation goals, and continuing critical investments in core academic operations. Prioritizing these commitments will also support better alignment between revenues and expenditures, contributing to long-term financial sustainability.

FUNDING PRIORITIES: RESTORE FUNDING & FULFILL THE COMPACT. The CSU proposes a $9.1 billion operating budget for 2026-27. This plan includes an increase of $597.1 million (7%) over 2025-26. The plan respectfully requests the state to restore the $143.8 million base budget reduction from 2025-26 and reaffirm its commitment and provide the full $252.3 million Year 4 Compact funding that was previously deferred. Failure to restore this funding in 2026-27 would jeopardize essential student services critical to academic success and well-being.

REQUEST OF THE STATE OF CALIFORNIA IN THE 2026-27 STATE BUDGET.

• Restore the $143.8 million base reduction
• Fund the $252.3 million Year 4 Compact commitment
  

The following illustrates the CSU's proposed Operating Budget for 2026-27: