The Governor’s 2010 Budget Proposal and the California State University: An Overview
Introduction
When Governor Schwarzenegger released his 2010-11 budget proposal on January 8, he recognized the importance of public higher education to the state of California and proposed to begin restoring the hundreds of millions of general fund support that have been cut over the past few years. This brief report summarizes the major budget proposals affecting the California State University and provides a general overview of the January Governor’s budget to contextualize the severe budget crisis in which the state remains.
The prominence of public higher education in the governor’s initial approach to the budget this year is noteworthy and testament to the importance of all the work by faculty, students, and staff from all sectors to raise awareness of the crisis facing the state’s higher education system. Central to this work has been CFA’s continuous efforts to draw attention to the crisis unfolding in the CSU, including the sponsoring of legislation that would provide dedicated funding for higher education from a tax on oil and natural gas extraction (AB 656 - Torrico). Generating much serious media and public support, AB 656 provided another opportunity to draw attention to the higher education crisis. A Time magazine reporter wrote recently that Gov. Schwarzenegger “does not want his legacy to include a dismantling [of] the world’s most acclaimed public university system.” (See Note 1)
The Governor’s budget is based on a $19.9 billion state budget shortfall over the next 18 months, as estimated by his Department of Finance. In the current year, 2009-10, he expects a $6.6 billion shortfall and a $12.3 billion shortfall is anticipated for 2010-11.
To address this ongoing budget crisis, the Governor’s proposals include massive and draconian cuts targeting, primarily, health and human services (again), Prop 98/K-14 education, and corrections. The budget also relies on California receiving almost $7 billion of additional funding from the federal government and a number of other budget and tax maneuvers – more creative accounting measures, including a complex swap involving sales and excise taxes on gasoline. A proposal for a permanent pay cut for state workers plus an increase to their retirement contributions results in a pay cut of at least 10 percent. Other proposals targeting state employees call for layoffs and could reduce pay even more. (See Note 2)
Please read the California Budget Project’s excellent review of the Governor’s Budget proposals (www.cbp.org) for more information about the cuts to other programs.
The CSU Budget
In total, the Governor’s Budget proposes $2.72 billion in state general funds for the CSU in 2010-11, up from $2.35 billion in the current year (2009-10). If adopted, this budget would provide a much-needed increase in state general fund dollars compared with the past couple of years, but is still more than 8% below what the CSU received in 2007-08.
Specifically, the key components of the budget proposal are:
- $305 million increase in state general funds
- $60.6 million for enrollment growth
- $390 million from a student fee increase of 10%
The $305 million is meant to restore to the CSU’s base budget some of the cuts to the budget in 2009-10. Other cuts, amounting to approximately $266 million were also made in 2009-10, however, and these funds have not been restored in the proposal.
The governor proposes new funding ($60.6 million) to increase enrollment by 2.5%, or about 8,290 full-time equivalent students. This funding, however, would be contingent on the state of California receiving $6.9 billion in new federal funds, starting in the budget year. For many other programs and agencies, the governor proposed even deeper cuts if the federal funding does not materialize. The full list of these “trigger” cuts, to be implemented if the federal funds are not forthcoming, can be found on page 7 of the Governor’s Budget Summary: Click here to view
While the CSU’s Board of Trustees must approve student fee increases, the state budget proposals frequently assume certain student fee rates when budgets are being developed. This year, once again, the Governor’s budget assumes a 10% fee hike for CSU students that would generate approximately $390 million in additional revenue for the CSU system. If adopted, student fees would increase to $4,429 next year, up 210% since 2002 and up 76% in the just five years. Up to now, the CSU Trustees have not approved a fee increase for 2010-11 but the budget request submitted last fall assumed revenue from a fee hike or a “buyout” (See Note 3) of a fee hike.
There are no new federal stimulus funds (from the American Recovery and Reinvestment Act, ARRA) proposed for the CSU in 2010-11. According to a memorandum from CSU Chancellor Reed to the Board of Trustees and campus Presidents, the CSU received $716.5 million in ARRA funds that replaced a $715.5 million cut to the 2008-09 budget. As a result, the absence of additional ARRA funds, Reed says, will not create a new budget deficit for the CSU in 2010-11. (See Note 4)
Constitutional Amendment and Other Proposals
Prisons and Higher Education Funding Amendment: Days prior to releasing his 2010-11 budget proposal, the Governor first revealed his emphasis on higher education with another proposal – a constitutional amendment. The amendment, he suggests, would reverse a spending trend that has resulted in more state funding spent on prisons than on universities. The Governor is calling for a reduction in prison funding, beginning in 2011-12 and an increase in the share of the General Fund that goes to the CSU and UC systems. This year, the CSU and UC, combined, receive about 7.5% of the state’s General Fund. The amendment would aim to increase this to a minimum of 10% by 2014-15. The primary means for achieving this shift in funding priorities would come from a reduction in prison spending spurred by an increase in privatization of prisons and prison services. A constitutional amendment must be passed by a majority of the state’s voters. However, placing an amendment on a statewide ballot requires a two-thirds vote of the Legislature or the collection of signatures to place the issue on the ballot as an initiative. As of this date, no moves for either process have been initiated.
Fiscal Emergency - Special Session: The Governor declared a fiscal emergency when he released his budget, calling the Legislature into a special session to address $8.9 billion of the $19.9 billion budget gap. He wants the Legislature to act by late February, to minimize the likelihood that the budget shortfall grows larger still. There are no mid-year cuts proposed for the CSU at this time.
Furloughs: In lieu of a continuation of the furloughs for state workers (three days per month), the Governor’s budget assumes permanent pay cuts of at least five percent for state workers. In addition, he proposed increasing their retirement contribution by another five percent of salary and reducing state contributions by an equal amount. Further still, he wants to issue an executive order for a five percent reduction in personnel costs in all state departments except for constitutional offices.
Conclusion
In its “Overview” analysis of Governor’s Budget, the Legislative Analyst (LAO) generally agrees with the size of the budget shortfalls identified by the Governor. However, while in agreement that California should look to Washington DC for additional funding, the LAO cautions it is not realistic to expect as much as the Gov. Schwarzenegger assumes ($6.9 billion). The report states, “we believe that the likelihood of Washington agreeing to all of the Governor’s requests is almost non-existent” [emphasis in original] (See Note 5).
If the LAO is correct and the Governor’s proposals are adopted by the Legislature, the CSU would not receive the proposed enrollment funding ($60.6 million). Perhaps more critically, even more draconian cuts to the state’s social safety net could be implemented. For instance, if the federal money does not come through, the Governor is proposing complete elimination of both the CalWORKs and the In Home Support Services programs. With each additional proposed cut and no real discussion about using taxes to raise revenue to provide funding crucial programs – including public higher education – will come ever-more difficult budget deliberations. As one of very few general fund augmentations, the funding proposed to restore funds that were cut this year is far from a certainty.
As the long budget process gets underway, the first order of business for the Legislature will be the Special Session in which they are asked to make mid-year cuts to address the immediate budget shortfall in 2009-10. At this point, there are no mid-year cuts on the table for the CSU. CFA is pleased to see the Governor has made higher education a priority and stands ready to continue working hard to make sure the CSU budget proposals are included in the 2010-11 budget when it is finalized later this year.
In the meantime, though, CFA President Lillian Taiz has called for an immediate halt to plans to eliminate academic programs and cut course offerings. CSU campus administrations anxious to “restructure” by cutting programs and courses have been working off assumptions of possible mid-year cuts and probable new cuts in 2010-11. In her own words, “The Governor’s support for these resources means that the efforts underway on campuses around the state to dismantle programs, turn away students, and slash classes can stop. These plans – based on the mistaken assumption that the CSU would be dramatically cut once again – can be set aside allowing the university to recover to doing what it does best, provide quality higher education to California’s working people.” (See Note 6)
For more detaisl about cuts proposed for other agencies, see the Californai Budget Project's analysis of the Gernor's Budet at www.cbp.org
Read more about the proposal for the CSU or Higher Education at www.ebudget.ca.gov/StateAgencyBudgets/6013/agency.html
Notes:
Note 1: O’Leary, K. 2010. “California Deficit: Arnold Has to Make ‘Sophie’s Choice,’” Time Jan. 9. Online at www.time.com
Note 2: The pay cut proposal would not affect CSU employees.
Note 3: A “buyout” would mean the state provides the additional general funds equivalent to the amount of revenue that the fee increase would have generated. The last time there was a “buyout”, the Governor was up for re-election.
Note 4: Memorandum from Charles Reed to CSU Board of Trustees and CSU Presidents re: Governor’s 2010-11 Budget Proposal, 1/12/10.
Note 5: LAO. 2010. “The 2010 Budget: Overview of the Governor’s Budget,” Jan. 12., p.OV-4.
Note 6: President Taiz in CFA Headlines, 1/8/10, http://www.calfac.org/headlines.html
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