The California State University Board of Trustees discussed budget options for the 23-campus system at its board meeting July 17, pending the fate of the governor’s tax initiative (Proposition 30) in November.

University officials will lay out the difficult budget choices if voters don’t approve the measure and the CSU faces an additional $250 million mid-year “trigger” cut. Options include strategies to reduce payroll costs, a “triggered” mid-year tuition fee increase, enrollment reductions and other ideas.

“These are all difficult challenges and choices that the CSU must consider to address our severe budget situation,” said Robert Turnage, assistant vice chancellor for budget.

Facing a nearly $16 billion deficit, the state budget adopted by the Legislature and signed by Gov. Brown keeps the CSU’s budget essentially flat. However, should the Prop. 30 fail, the CSU will face an additional $250 million mid-year “trigger” cut. In that event, the system will have lost nearly $1.2 billion or 39 percent of its state support since 2007-08.

Over the past several months, the CSU has been meeting and holding consultative discussions with its stakeholders to help assess budget options. Trustees on July 17 heard some of the strategies that were developed and is expected to make final decisions on a contingency budget at their Sept. 16 meeting.

Ongoing budget deficit

As a result of drastic state budget cuts and increases in mandatory costs such as employee health care premiums, the CSU has a funding gap of approximately $510 million. Increases in tuition fee revenue of $593 million have only partially filled the hole created by more than $1 billion in state funding reductions.

In addition, the budget just approved has an option for a delayed tuition buy out that appropriates $125 million in next year’s budget, but only if the governor’s tax measure passes and if the CSU board rolls back the tuition increase already in effect for fall 2012.

The CSU had expected to net $132 million in revenue from the tuition increase this fiscal year, and Fresno State and the other CSU campuses have already built their budgets and planned course schedules based on this revenue. The system is working to identify a solution to replace the lost revenue for the current fiscal year.

Although campuses and the Chancellor’s Office have implemented numerous cost-reduction actions – including furloughs and a workforce reduction of more than 3,000 employees – a large portion of the funding gap has been covered by one-time resources and deferrals.

“We are at the point where the use of one-time funds to address ongoing budget cuts is not sustainable,” said CSU Executive Vice Chancellor and Chief Financial Officer Benjamin Quillian. “It is not possible to continue to patch over budget holes. We need to take actions that reduce our costs going forward. That is the only way we will be able to serve students with the classes and support services that they need.”

Alternatives presented

Staff presented two alternative strategies to address the potential $250 million mid-year “trigger” cut, should Prop. 30 fail. Both options share components, including reducing salaries or increasing employees’ share of benefit costs; reducing faculty assigned time and sabbaticals; charging for excess units and using continuing education funds and other one-time resources. One option preserves access by not cutting enrollment while the other relies on larger payroll reductions by maintaining tuition fee levels.

Under the “trigger on a trigger” scenario, trustees would authorize at their September meeting a contingency mid-year tuition fee increase of $150 per semester or about 5 percent, “triggered” by the CSU facing a $250 million cut if the tax initiative fails.

There would be no incremental set aside for financial aid, which would require a larger increase to generate the same net revenue and putting a larger burden on students without significant financial aid. The CSU already provides almost $700 million in tuition subsidies for students with the greatest financial need. There would be no further enrollment reductions under this approach.

Since 85 percent of CSU’s budget is personnel related, options include systemwide reductions that could be achieved through negotiated reductions in employee salaries or through greater cost-sharing of health-benefit premiums.

If the CSU’s budget is cut an additional $250 million and no new tuition fee increase is implemented, the CSU would need to reduce 2013-14 enrollment by 6,000 students and eliminate the associated 750 faculty/staff positions.

Campuses have reduced assigned time, but further prioritization of nonteaching activities could result in savings of up to $25 million.

Third level pricing structure

All of the new pricing strategies would provide more room for incoming students, help students progress to degree and ensure that diminishing state resources are used to effectively serve as many students as possible.

Specifics include:

  • Charging for the full cost of any units over 16 per semester.
  • Charging a “course repeat” fee for any single class taken by a student more than once.
  • Implementing a graduation incentive fee for “super seniors” who have already taken five years worth of academic credit funded by the state.
  • Increasing the tuition supplement for nonresident students by $1,000

Both approaches include a transfer of approximately $75 million from CSU’s Continuing Education Revenue Fund. This would provide significant relief to the “state side” of the university for 2012-13, but would be one-time and restricted to that fiscal year, trustees were informed.

The Board of Trustees also endorsed a resolution supporting the governor’s tax measure.