To all CSU employees:
On June 27, Governor Newsom signed California’s Budget Act of 2025. The final budget introduced a number of uncertainties and challenging provisions for the California State University that, unfortunately, have contributed to misunderstanding, particularly among our labor partners, regarding how the budget impacts existing labor agreements.
Please be assured that the Chancellor’s Office team is working closely with state leaders to develop clarity on the bill and to actively counter misinformation so that the CSU community can move forward with common understanding and purpose.
In summary, the final budget represents a significant improvement over earlier proposals. We are especially grateful to have avoided the severe ($375 million or 7.95%) cut outlined in the governor’s original budget proposal in January. However, the final state budget “defers” payment of $144 million (3%) of our current base budget to the 2026-27 state budget. This year’s state budget does offer the CSU a short-term zero-interest loan of up to $144 million to cover the funding that is not being allocated to the CSU this year. The option of a loan – which clearly would have to be repaid—is under review by the Chancellor’s Office. Additionally, 2025-26 compact funding of $252.3 million ongoing (Year 4 of the compact) has also been deferred, with the intent for it to be restored incrementally through 2028-29.
In 2023 and 2024, the CSU reached agreements with all unions that included cumulative raises of 10% or more, new salary steps for certain employees, expanded paid parental leave for faculty and increased pay for lecturers. Agreements with California State University Employees Union (CSUEU), Teamsters Local 2010 and Statewide University Police Association (SUPA) included contingency clauses linking some salary increases or step placements to new, ongoing state funding. For example, the CSUEU agreement states that placing employees on target steps in year three of the contract is “contingent upon the State of California’s final Budget Act of 2025 containing a new, unallocated, ongoing appropriation to the CSU not less than…$227 million.”
Some labor partners are now mistakenly asserting that, with the Budget Act of 2025, the CSU has been “made whole.” In actuality, the budget does not provide any new unallocated, ongoing funding to the CSU—let alone $227 million. While the budget does offer the CSU a short-term, zero-interest loan of up to $144 million—an option that, as noted above, is under review by the Chancellor’s Office—this is not the equivalent of new ongoing funding. Rather, it is an option for the CSU to avoid the impact of the deferral of a portion of our existing base budget. Thus, it does not trigger the salary provisions in the agreements. Our Advocacy and State Relations team has confirmed that the CSU’s budget has been held flat for 2025-26 in the event we accept the $144 million zero-interest General Fund loan. As a result, the Chancellor’s Office has notified the relevant unions that the 2025 funding threshold for step increases has not been met.
The CSU remains proud of the labor agreements reached in 2023 and 2024 and is committed to bargaining in good faith with CSUEU, Teamsters Local 2010 and SUPA under the terms of those agreements.
The Chancellor’s Office team will continue to carefully review the details, context and implications of the final act and will present a detailed report at the upcoming July Board of Trustees meeting.
Sincerely,
Patrick J. Lenz, Interim Executive Vice Chancellor & Chief Financial Officer
Frank Hurtarte, Vice Chancellor for Human Resources & Chief Human Resources Officer