1. The California State University: Politics, Budget and Priorities CSU Financial Officers Association April 9, 2001 Santa Barbara, California

2. Fiscal and Political Challenges

3. The Three ‘R’s of Current California Politics California’s Energy Crisis Has Raised Rates for Californians, and Distracted Legislators. The State’s Once Enormous Budget Surplus Is Dwindling; Slowing Economy and State Energy Crisis Is To Blame. The Legislature Will Soon Be Embroiled In The Process Of Redistricting The State’s Legislative and Congressional Districts. Rates: Revenue: Reapportionment:

4. California Higher Education Finance Trends  California’s fiscal condition is the largest factor in determining funding for Higher Education.  Even when State finances are adequate, Higher Education must compete with other budgetary priorities.  Higher Education funding is routinely burdened by budgetary cuts to augment other State programs during a fiscal crisis.

5. California’s Competing Budgetary Needs K-12 Education- the State’s largest budget expenditure. State Health Care Programs. Entitlement Programs Law Enforcement and Public Safety Infrastructure- including energy and housing initiatives.

6. CSU Share of State General Fund Revenue 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 1985198619871988198919901991199219931994199519961997199819992000  CSU share of annual State revenue has declined from an average of 5% prior to 1990, just 3.8% today.

7. 300,000 290,000 280,000 270,000 260,000 250,000 240,000 230,000 220,000 91/9292/9393/9494/9595/9696/9797/9898/9999/0000/01 Budget Actual Funded Versus Actual Enrollment The Enrollment Tidal Wave

8. Legislative Analyst’s Office: California’s Fiscal Picture  Economy Will Slow Sharply in First Half of Year and Remain Sluggish Throughout 2001  State Faces Most Unusual and Challenging Set of Circumstances in Recent History  Budgetary Decisions Must Be Coordinated With Energy Issues: Costs of Energy Policies Could Easily Surpass Amount Set Aside in Budget

9. The Incredible Shrinking Surplus November 2000: $10.3 Billion (LAO) January 2001: $8 Billion (DOF) February 2001: $6.6 Billion (LAO)

10. The Wild Card: Energy Crisis  State Spending $50 Million Daily on Spot Market  State’s Choice: Raise Consumer Rates, or Find Another Funding Source to Cover Purchase Costs  CSU Issues:  Increased Natural Gas Costs: $40 Million Ongoing Costs  Direct Access  Interruptible Service Contracts

11. Politics and Policy Term Limits Short Term Relationships. Little or No Staff Policy Experience. Limited Institutional Knowledge and Experience. Political Trends Increasing Role of Ballot Initiatives. Stronger Influence Over Policy By Governor Reapportionment

12. CSU 2001-02 Priorities  CSU Support & Capital Outlay Budgets  Need for Public Education Facilities Bond Act in 2002  2001 CSU Sponsored Legislation

13. 2001-02 CSU Support and Capital Outlay Budgets

14. 2001-02 Budget Priorities  Maintain Governor’s Proposed Budget  Additional 2% Compensation for Faculty and Staff  Supplemental Requests: Increased Energy Costs Enhanced Student Services Faculty and Staff Housing Initiative

15. Governor Proposes 12% Increase in CSU Budget  Governor’s Proposal is Consistent with Higher Education Partnership, and Includes Significant Investments Above Partnership  Four Key Areas of Focus Ensuring Student Access Maintaining High Quality Education Improving Student Academic Preparation Contributing to California’s Economy

16. Governor’s Proposed CSU Budget: Ensuring Student Access  3% Enrollment Growth: $62.3 Million  Conversion to Year-Round Operations at Nine Campuses: $16 Million  State University Grant Increase/Fee Waivers: $6 Million  New Campus Costs at CSU Channel Islands: $3 million

17. Ensuring Student Access: Cal Grant Guarantee Program  SB 1644 (Ortiz/Poochigian et al) Authorized Major Expansion of Cal Grant Program  30,000 Additional Students to Receive Cal Grants in 2001/02 Under New Program  Budget Provides General Fund Increase of $138 Million to Student Aid Commission to Cover Costs of New Program

18. Governor’s Proposed CSU Budget: Maintaining High Quality Education  4% Faculty/Staff Compensation Increase: $94.2 Million  Long-Term Budget Need: $23.5 Million  Technology Infrastructure Build-Out: $10 Million  Increased Student/Faculty/Staff Access to Networking Services: $5 Million  Enhancement of Campus Libraries: $4 Million  Deferred Plant Maintenance: $4 Million  One-Time Funding for Critical Instructional Equipment Needs: $20 Million

19. Governor’s Proposed CSU Budget: Student Academic Preparation  Expansion of Successful CSU K-12 Academic Preparation Program: $8 Million  Will Double the Number of Targeted High Schools  Program Assists Schools, Teachers and Students to Achieve High Academic Standards and Prepares Students for College  Diagnostic Writing Service: $1 Million  CSU Request on Behalf of Education Round Table  Program Helps Students and Teachers to Identify Writing and Reading Deficiencies, Allowing Students to Strengthen Skills Necessary to Enroll in College-Level Work

20. Governor’s Proposed CSU Budget: Student Academic Preparation  Governor’s Teacher Fellowship Program:  $17.5 Million  Program Provides Fellowships to Attend Teacher Education Programs and Teach in Underperforming schools  Governor’s Education Technology Professional Development Program: $18.5 Million  Amount Will Fully Fund Program, Which Provides Teacher and Administrator Training in Use of Technology in the Classroom and Curriculum

21. Governor’s Proposed CSU Budget: Contributing to California’s Economy  $10 Million to Improve Access to Strategic Academic Programs: Engineering, Computer Science, Agriculture, Nursing, Biotechnology, Biosciences  $1 Million Each for Three Areas of Applied Research Activities  Agricultural Research Initiative  CSUPERB (Education and Research in Biotechnology)  Marine Studies  Central Valley Economic Incubator at CSU, Fresno: $650,000

22. Unfunded CSU Requests in Governor’s January Budget  2 Percent Compensation Supplement for Faculty and Staff: $40 Million  Student Services Enhancement: $12 Million  Investment in Faculty and Staff Housing: $5 Million

23. Additional CSU Budget Objectives  $40.8 Million for Additional 2 percent Faculty and Staff Salary Increase  Allows Attraction/Retention of High Quality Employees  Helps Preserve Quality of Instructional Offerings  Reduces Faculty Salary Lag to 1.9 Percent (Was 11.1 Percent in 1999/2000)  Allows Development/Maintenance of Competitive Staff Salary Structures

24. Additional CSU Budget Objectives  Student Services Improvement: $12 Million  Augmentation of Academic Counseling  Online Checking of Admission Status  Electronic Access to Financial Aid Information  Permanent Funding for CSUMentor, CSU’s Internet-Based Information System for Students/Families  Faculty and Staff Housing Initiative: $5 Million  Affordable Housing Crucial to Recruitment  Initiative Would Provide Incentives Targeted to Faculty and Staff Recruitment

25. CSU Capital Outlay Budget  Governor’s Budget Proposes $201.5 Million to fund 27 major Capital Outlay Projects; $5.5 Million for minor Capital Outlay  LAO Withholds Recommendation on three major projects: Fresno Science Replacement Building; Sacramento Academic Resource Information Center; San Bernardino Science Building Renovation/Addition  LAO Recommends Deletion of two major projects: Channel Islands Science Laboratory; Fullerton Auditorium/Fine Arts Instructional Facility

26. Action Items: CSU Budget  PROTECT GOVERNOR’S CSU BUDGET  2 PERCENT FACULTY/STAFF SALARY SUPPLEMENT  $19 MILLION ONE-TIME IN CURRENT YEAR, $21 PERMANENT FUNDING FOR ENERGY COSTS  $12 MILLION TO ENHANCE STUDENT SERVICES  $5 MILLION FOR HOUSING INITIATIVE

27. Need for Public Education Facilities Bond Act in 2002

28.  Tidal Wave II Has Begun: CPEC Estimates CSU Will Add 130,000 Students by 2010  Aging Infrastructure, Past Funding Shortfalls Have Created Multi-Million Dollar Maintenance Backlog  Unlike K-12 Schools and Community Colleges, CSU Relies Entirely on Statewide Bonds to Fund Program  Proposition 1A Provided Stable Funding Source for 4 Years; Funding Ends With 2001/02 Cycle Planning for Progress: The Challenge of the Future

29. Tidal Wave II Arrives: Projected Enrollment at CSU 2001-10

30. CSU’s Aging Infrastructure Age of Campus Buildings 0-20 Years:23024% 21-40 Years:35438% 41-60 Years:31834% Over 60 Yrs.: 40 4%

31. CSU’s Capital Outlay Needs  2001/02:$555 Million  2002/03:$834 Million  2003/04:$836 Million  2004/05:$347 Million  2005/06:$419 Million  TOTAL NEED: $3 BILLION OVER NEXT FIVE YEARS

32. CSU Higher Education Bond  4 Year Period Covered by Bond Act  Bond Act Worth $1 Billion Per Year  Joint K-12/Higher Education Bond  Split Between Higher Education Segments  Placed on Ballot March 2002

33. CSU Legislative Program  Senate Bill 277 (Chesbro) Public Employee Health Care Benefits: Rural Areas: State University Employees  Senate Bill 323 (O’Connell) California State University: Real Property Exchange CSU Channel Islands  Senate Bill 593 (Alarcon) California State University: Real Property Exchange CSU Northridge  Assembly Bill 1689 (Assembly Committee on Jobs) California State University: Vendors: Payment  Assembly Bill 1719 (Assembly Committee on Higher Education) California State University Omnibus Proposals  Senate Bill 713 (Alpert) Authority to Offer Doctorate of Education Degree

34. 2001 CSU Priorities  2001/02 CSU Budget  Higher Education Bond  2001 CSU Legislative Program