The Legislative Analysts Office has released its analysis of the Governor’s May Revise proposal.
The 2017-18 Budget: Analysis of the May Revision Education Proposals
California State University (CSU) Funding Up From January Levels by $121 Million, Primarily Due to Recognizing Tuition Increase. Under the May Revision, combined CSU funding from the two sources is $121 million (2 percent) higher than in the Governor’s January budget. is consists of $135 million in higher tuition revenue offset by a $15 million decline in state General Fund support. As compared with the revised 2016-17 level, CSU funding in 2017-18 is $247 million (4 percent) higher. Under the May Revision, CSU’s combined General Fund and tuition revenue reaches $6.8 billion in 2017-18. Below, we describe and assess the May Revision proposals for CSU.Spending Changes
Revises Base General Fund Increase Downward by $15 Million. …this reduction results from two adjustments. Under the May Revision, CSU receives an unrestricted base increase of $153 million rather than $157 million. ( This $4 million drop could be framed in many ways, including being conveyed as an adjustment to reflect higher Cal Grant costs due to CSU’s tuition increase. The administration, however, links the drop to its proposal to keep private Cal Grant awards at their current level rather than cutting them as previously scheduled.) The May Revision also adjusts CSU’s General Fund support downward by $11 million to reflect recently revised state contribution rates for CSU pensions.
Provides $2 Million From Transportation Special Fund. Pursuant to Chapter 5 of 2017 (SB 1, Beall), the May Revision appropriates $2 million from the State Transportation Fund to CSU for transportation research and transportation-related workforce training and education.
Assessment and Recommendations
Under May Revision, CSU Has Sizeable Unrestricted Base Increase. In March 2017, the CSU Board of Trustees approved a tuition increase for resident and nonresident students. is increase, which is scheduled to take effect in fall 2017, will generate net revenue of about $95 million in 2017-18 ($135 million in gross revenue less about $40 million that CSU intends to use for tuition discounts and waivers for certain students). When combined with the $153 million unallocated ongoing General Fund augmentation included in the May Revision, CSU would have $248 million (4 percent) in additional unrestricted base resources in 2017-18 compared with the current year.
Administration Does Not Earmark Any of Increase for Enrollment Growth. CSU has indicated that it intends to use the additional unrestricted monies to address a number of its priorities, including using (1) $139 million to fund collective bargaining agreements that were approved by the Board of Trustees last spring, (2) $26 million to cover basic cost increases (such as higher health care premiums for employees), and (3) $75 million for the system’s Graduation Initiative (primarily to make available more courses to current students). CSU has indicated that without additional funding from the state (beyond the amount proposed in the May Revision), it does not intend to fund enrollment growth in 2017-18.
Recommend Approving May Revision Funding Level but Setting Expectation for Enrollment Growth. In The 2017-18 Budget: Higher Education Analysis, we note that CSU has reported denying admission in recent years to some eligible transfer students. Given this development, together with statute that requires CSU to prioritize transfer applicants, we continue to recommend the Legislature signal to CSU that increasing transfer enrollment is a priority. Thee Legislature could send this signal by adopting provisional language that sets an enrollment target for new transfer students. An expectation of 2 percent enrollment growth in the budget year would result in about 7,200 more FTE transfer students being served, which we estimate would allow CSU to accommodate all or virtually all transfer applicants in 2017-18. Under our recommendation, costs for CSU to serve these students, which we estimateat about $60 million (after factoring in about $20 million in net tuition revenue generated by the additional students), likely would come at the expense of CSU’s Graduation Initiative. Given the opportunities we have identified for CSU to reform its assessment practices and make available more course slots by reducing excess units, we believe CSU can make significant progress on improving student outcomes without funding set aside for the Graduation Initiative in the budget year.